<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1996
REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
RYKOFF-SEXTON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 5141 95-21346693
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR RYKOFF-SEXTON, INC.
ORGANIZATION) 1050 WARRENVILLE ROAD
LISLE, ILLINOIS 60532-5201
(708) 964-1414
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
RICHARD J. MARTIN
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
RYKOFF-SEXTON, INC.
1050 WARRENVILLE ROAD
LISLE, ILLINOIS 60532-5201
(708) 964-1414
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JONES, DAY, REAVIS & US FOODSERVICE INC. MORGAN LEWIS & BOCKIUS
POGUE CROSS CREEK POINTE LLP
77 WEST WACKER 1065 HIGHWAY 315, SUITE 101 PARK AVENUE
CHICAGO, ILLINOIS 60601- 101 NEW YORK, NEW YORK 10178
1692 WILKES-BARRE, (212) 309-6000
(312) 782-3939 PENNSYLVANIA 18702-6980 ATTN: PHILIP H. WERNER,
ATTN: GARY T. JOHNSON, (717) 831-7500 ESQ.
ESQ. ATTN: ANN B. CIANFLONE,
ESQ.
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and the
effective time of the merger (the "Merger") of a subsidiary of Rykoff-Sexton,
Inc. and US Foodservice Inc., as described in the Agreement and Plan of
Merger, dated February 2, 1996 (the "Merger Agreement") attached as Appendix A
to the Proxy Statement/Prospectus forming a part of this Registration
Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.10
per share.................. 13,964,962(1) N.A. $30,791,000(2) $10,618(3)(4)
- ----------------------------------------------------------------------------------------------------
Warrants to purchase Common
Stock, par value $.10 per
share...................... (5) $10.54 $3,496,761(6) $1,206(3)(4)
- ----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(Footnotes on next page)
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
(1) Includes the maximum number of shares of Common Stock to be registered
hereunder that may be issuable pursuant to the Merger as described herein.
Based upon the product of (a) 9,584,737, the number of outstanding shares
of Class A Common Stock, par value $.01 per share, and Class B Common
Stock, par value $.01 per share, of US Foodservice (collectively, the "US
Foodservice Common Stock"), assuming the exercise of all US Foodservice
stock options (whether or not currently exercisable), and (b) 1.457, the
maximum Exchange Ratio (as defined in the Merger Agreement) permitted by
the Merger Agreement. Also includes, pursuant to Rule 416 under the
Securities Act of 1933, as amended (the "Securities Act"), such
indeterminate number of shares of Common Stock as may be issuable upon
exercise of the Warrants.
(2) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(f)(2) of the Securities Act. Pursuant to Rule
457(f)(2), $30,791,000 represents the book value of the US Foodservice
Common Stock as of December 31, 1995.
(3) The filing fee was computed by dividing the Proposed Maximum Aggregate
Offering Price by 2900.
(4) In accordance with Section 14(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and Rule 0-11 promulgated under the
Exchange Act and Rule 457(b) under the Securities Act, the amount of the
registration fee was reduced by $5,791, which is the amount of the fee
paid by Rykoff-Sexton, Inc. on February 22, 1996 in connection with the
filing of preliminary proxy material, Commission File No. 1-08105.
Accordingly, the fee payable upon the filing of this Registration
Statement is $6,033.
(5) Reflects Warrants to purchase an aggregate of 331,761 shares of Common
Stock. Pursuant to Rule 416 under the Securities Act, an indeterminate
number of shares of Common Stock is being registered to cover any
adjustments in the number of shares issuable upon exercise of the
Warrants.
(6) Reflects a Warrant exercise purchase price of $10.54 for 331,761 shares of
Common Stock.
2
<PAGE>
RYKOFF-SEXTON, INC.
SHARES OF COMMON STOCK
TO BE ISSUED IN CONNECTION WITH THE MERGER
OF RYKOFF-SEXTON, INC.
AND
A SUBSIDIARY OF RYKOFF-SEXTON, INC.
----------------
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K Showing the Location in the
Prospectus of the Information Required by Part I of Form S-4
<TABLE>
<CAPTION>
LOCATION OR CAPTION IN PROXY
ITEM OF FORM S-4 STATEMENT/PROSPECTUS
---------------- ----------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement
and Outside Front Cover Page of Facing Page of the Registration Statement;
Prospectus............................... Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; The Merger
4. Terms of the Transaction................. Summary; The Merger; The Merger Agreement;
Other Agreements; Description of Rykoff-
Sexton Capital Stock; Comparative Rights
of Rykoff-Sexton Stockholders and US
Foodservice Stockholders
5. Pro Forma Financial Information.......... Summary; Unaudited Pro Forma Combined
Financial Statements
6. Material Contacts with the Company Being
Acquired................................. Summary; The Merger; The Merger Agreement;
Other Agreements
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not Applicable
8. Interests of Named Experts and Counsel... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act Comparative Rights of Rykoff-Sexton
Liabilities.............................. Stockholders and US Foodservice
Stockholders
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Available Information; Incorporation of
Registrants.............................. Certain Documents by Reference; Management
of Rykoff- Sexton after the Merger;
Description of Rykoff- Sexton; Description
of Rykoff-Sexton Capital Stock;
Comparative Rights of Rykoff-Sexton and US
Foodservice Shareholders
11. Incorporation of Certain Information by Available Information; Incorporation of
Reference................................... Certain Documents by Reference
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OR CAPTION IN PROXY
ITEM OF FORM S-4 STATEMENT/PROSPECTUS
---------------- ----------------------------
<S> <C>
12. Information with Respect to S-2 or S-3
Registrants.............................. Not Applicable
13. Incorporation of Certain Information by Not Applicable
Reference................................
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants........ Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3 Not Applicable
Companies................................
16. Information with Respect to S-2 or S-3
Companies................................ Not Applicable
17. Information with Respect to Companies
Other than S-2 or S-3 Companies.......... Description of US Foodservice; Description
of US Foodservice Capital Stock;
Comparative Rights of Rykoff-Sexton
Stockholders and US Foodservice
Stockholders; Index to Consolidated
Financial Statements of US Foodservice
D.VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... Outside Front Cover Page of Proxy
Statement/Prospectus; Available
Information; Incorporation of Certain
Documents by Reference; The Special
Meeting; The Merger
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited or
in an Exchange Offer..................... Not Applicable
</TABLE>
<PAGE>
[Name of Company and Logo]
April , 1996
Dear Fellow Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Rykoff-Sexton, Inc. ("Rykoff-Sexton"), which will be
held on Wednesday, May 8, 1996 at 10:00 a.m., local time, at Rykoff-Sexton's
facility at One Sexton Drive, Glendale Heights, Illinois.
At this important meeting, you will be asked to approve the issuance of
Rykoff-Sexton Common Stock in connection with an Agreement and Plan of Merger
described herein (the "Merger Agreement") pursuant to which US Foodservice
Inc. ("US Foodservice") will be merged with and into a wholly-owned subsidiary
of Rykoff-Sexton (the "Merger") and will become a wholly-owned subsidiary of
Rykoff-Sexton. As discussed in the accompanying Proxy Statement/Prospectus, in
the Merger each outstanding share of Class A Common Stock and Class B Common
Stock of US Foodservice (together, the "US Foodservice Common Stock") will be
converted into a number of shares of Rykoff-Sexton Common Stock derived by
dividing $25 by the Closing Date Market Price (as defined in the Merger
Agreement) of one share of Rykoff-Sexton Common Stock (the "Exchange Ratio"),
with a maximum Exchange Ratio of 1.457 and a minimum Exchange Ratio of 1.244.
The maximum and minimum Exchange Ratios correspond to a Closing Date Market
Price range of $17.16 to $20.10. Holders of US Foodservice Common Stock will
receive cash in lieu of any fractional shares.
US Foodservice is a highly-regarded distributor of food and related non-food
products. Through its 17 distribution centers, the company serves more than
40,000 customers in over 30 states, primarily in the Southeastern,
Southwestern and Mid-Atlantic regions.
We believe that the strategic combination of Rykoff-Sexton and US
Foodservice offers a significant opportunity for our stockholders, customers
and employees, as it will enhance Rykoff-Sexton's position as a leading
broadline distributor of high-quality food and related non-food products for
the foodservice industry. As a result of the Merger, we expect to be able to
expand into new geographic markets, lower our cost of goods through enhanced
purchasing leverage, capitalize on opportunities to increase sales of our
self-manufactured and private label, branded products, imported specialty food
products, equipment and supplies and contract and design services, and achieve
meaningful annual cost savings from inherent synergies. Following the Merger,
I will continue to hold the positions of Chairman and Chief Executive Officer.
Frank H. Bevevino, currently Chairman and Chief Executive Officer of US
Foodservice, and a 25-year veteran of the foodservice industry, will become
President and a Director of Rykoff-Sexton.
The accompanying Notice of Special Meeting of Stockholders and Proxy
Statement/Prospectus contain information about the Merger and the Special
Meeting. The Proxy Statement/Prospectus also provides a detailed description
of the business, operations and recent financial results of US Foodservice, a
privately-held company, which I am sure you, as stockholders of a public
company, will appreciate. We urge you to give this material your complete
attention.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS DETERMINED THE
MERGER TO BE IN THE BEST INTERESTS OF RYKOFF-SEXTON AND ITS STOCKHOLDERS.
ACCORDINGLY, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND DECLARED
ADVISABLE THE MERGER AGREEMENT AND THE MERGER BY ALL DIRECTORS PRESENT AND
RECOMMENDS THAT ALL RYKOFF-SEXTON STOCKHOLDERS VOTE TO APPROVE THE ISSUANCE OF
RYKOFF-SEXTON COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.
<PAGE>
It is important that your shares be represented at the Special Meeting.
Therefore, whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed postage prepaid envelope. If you attend the Special Meeting, you may
vote in person if you wish, even though you previously have returned your
proxy card.
We hope you will find it possible to attend the Special Meeting. We look
forward to the successful combination of Rykoff-Sexton and US Foodservice, and
to your continued support as a stockholder of Rykoff-Sexton.
Sincerely yours,
Mark Van Stekelenburg
Chairman, President and Chief
Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
RYKOFF-SEXTON, INC.
1050 WARRENVILLE ROAD
LISLE, ILLINOIS 60532-5201
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 1996
TO THE STOCKHOLDERS OF RYKOFF-SEXTON, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Rykoff-
Sexton, Inc., a Delaware corporation ("Rykoff-Sexton"), will be held at One
Sexton Drive, Glendale Heights, Illinois, on Wednesday, May 8, 1996 at 10:00
a.m. local time (the "Special Meeting"), or at any adjournment or postponement
thereof, for the following purposes:
1. To approve the issuance of shares of Rykoff-Sexton Common Stock, par
value $.10 per share ("Rykoff-Sexton Common Shares"), in connection with an
Agreement and Plan of Merger, dated February 2, 1996 (the "Merger
Agreement"), among Rykoff-Sexton, US Foodservice Inc., a Delaware
corporation ("US Foodservice"), and USF Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Rykoff-Sexton ("Merger Sub"),
pursuant to which (i) US Foodservice will be merged into Merger Sub (the
"Merger"), (ii) each outstanding share of Class A Common Stock, par value
$.01 per share, and Class B Common Stock, par value $.01 per share, of US
Foodservice (together, the "US Foodservice Common Stock") (other than
shares, if any, held by Rykoff-Sexton, Merger Sub or any other subsidiary
of Rykoff-Sexton, shares held in treasury by US Foodservice and shares held
by holders who have properly perfected their appraisal rights under
Delaware law) will be converted into that number of Rykoff-Sexton Common
Shares (subject to rounding) equal to the quotient (the "Exchange Ratio")
derived by dividing $25 by the Closing Date Market Price (as defined in the
Merger Agreement) of one Rykoff-Sexton Common Share; provided, however,
that (x) if the foregoing would result in an Exchange Ratio greater than
1.457, the Exchange Ratio will be 1.457, and (y) if the foregoing would
result in an Exchange Ratio less than 1.244, the Exchange Ratio will be
1.244 and (iii) all outstanding options and warrants to purchase US
Foodservice Common Stock will be assumed by Rykoff-Sexton and converted
into options and warrants to purchase Rykoff-Sexton Common Shares. THE
MERGER IS MORE COMPLETELY DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND THE APPENDICES THERETO WHICH FORM A PART OF THIS
NOTICE, AND A COPY OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A
THERETO.
2. To transact such other matters as may arise relating to the conduct of
the Special Meeting or any one or more adjournments or postponements
thereof.
Only holders of record of Rykoff-Sexton Common Shares at the close of
business on April 2, 1996, the record date for the Special Meeting, are
entitled to notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof.
The affirmative vote of the holders of Rykoff-Sexton Common Shares
representing a majority of the votes cast at the Special Meeting, assuming a
quorum of at least a majority of the Rykoff-Sexton Common Shares outstanding
are present at the Special Meeting, is necessary to approve the issuance of
Rykoff-Sexton Common Shares in connection with the Merger Agreement.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW THE PROXY AND VOTE IN
PERSON.
By Order of the Board of Directors
Robert J. Harter, Jr.
Secretary
Lisle, Illinois
April , 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 2
SUMMARY.................................................................... 4
The Companies............................................................ 4
The Special Meeting...................................................... 4
Matters to be Considered at Special Meeting.............................. 4
The Merger............................................................... 5
Rykoff-Sexton Summary Historical Consolidated Financial Data............. 13
US Foodservice Summary Historical Consolidated Financial Data............ 14
Unaudited Pro Forma Combined Summary Financial Data...................... 16
COMPARATIVE PER SHARE DATA................................................. 18
DIVIDENDS AND MARKET PRICES OF RYKOFF-SEXTON COMMON SHARES................. 19
CAPITALIZATION............................................................. 20
THE SPECIAL MEETING........................................................ 22
General.................................................................. 22
Matters to be Considered at the Special Meeting.......................... 22
Voting at the Meeting; Record Date....................................... 22
Vote Required............................................................ 23
THE MERGER................................................................. 23
General.................................................................. 23
Effective Time........................................................... 23
Conversion of Shares; Exchange of Certificates........................... 24
Background of the Merger................................................. 24
Effect of the Merger..................................................... 30
Recommendation of the Rykoff-Sexton Board of Directors; Reasons for the
Merger.................................................................. 30
Potential Cost Savings and Operating Synergies........................... 32
Opinion of Financial Advisor to Rykoff-Sexton............................ 33
Redemption or Purchase of Preferred Stock................................ 38
Rykoff-Sexton Financing and Receivables Securitization................... 39
Resale of Rykoff-Sexton Common Shares.................................... 40
Risk Factors............................................................. 41
Interests of Certain Persons in the Merger............................... 44
Listing of the Rykoff-Sexton Common Shares on the NYSE................... 47
Certain Federal Income Tax Consequences.................................. 47
Amendments to Rights Agreement........................................... 48
Regulatory Matters....................................................... 48
Accounting Treatment..................................................... 48
Appraisal Rights......................................................... 48
THE MERGER AGREEMENT....................................................... 50
General.................................................................. 51
Effective Time of the Merger............................................. 52
Representations and Warranties........................................... 53
Business of US Foodservice Pending the Merger............................ 54
Business of Rykoff-Sexton Pending the Merger............................. 55
No Solicitation.......................................................... 56
Certain Other Covenants.................................................. 57
Conditions; Waivers...................................................... 58
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Amendment; Termination................................................... 60
Expenses; Termination Fee................................................ 62
OTHER AGREEMENTS........................................................... 62
The ML Agreement......................................................... 62
The Standstill Agreement................................................. 63
The Registration Rights Agreement........................................ 67
The Tax Agreement........................................................ 68
OWNERSHIP OF RYKOFF-SEXTON COMMON SHARES................................... 71
MANAGEMENT OF RYKOFF-SEXTON AFTER THE MERGER............................... 73
Directors and Executive Officers After the Merger........................ 73
Executive Compensation................................................... 75
DESCRIPTION OF RYKOFF-SEXTON............................................... 81
General.................................................................. 81
Litigation............................................................... 81
DESCRIPTION OF US FOODSERVICE.............................................. 82
General.................................................................. 82
Business................................................................. 83
Products................................................................. 85
Customers................................................................ 85
Sales and Marketing...................................................... 86
Vendors.................................................................. 86
Distribution............................................................. 87
Properties............................................................... 87
Competition.............................................................. 88
Employees................................................................ 88
Legal Proceedings........................................................ 88
DESCRIPTION OF MERGER SUB.................................................. 89
US FOODSERVICE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 89
US Foodservice Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 92
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION......................... 97
DESCRIPTION OF RYKOFF-SEXTON CAPITAL STOCK................................. 107
General.................................................................. 107
Common Shares, Rights and Series A Preferred Stock....................... 107
Preferred Stock.......................................................... 110
THE WARRANTS............................................................... 111
DESCRIPTION OF US FOODSERVICE CAPITAL STOCK................................ 111
Common Stock............................................................. 111
Preferred Stock.......................................................... 112
Directors' Liability..................................................... 112
COMPARATIVE RIGHTS OF RYKOFF-SEXTON STOCKHOLDERS AND US FOODSERVICE
STOCKHOLDERS.............................................................. 113
Authorized Shares of Capital Stock; Dividend Rights...................... 113
Redemption and Repurchase of Capital Stock............................... 114
Liquidation Rights....................................................... 114
Voting Rights............................................................ 114
Supermajority Voting Requirements; Business Combinations................. 115
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Preemptive Rights......................................................... 116
Appraisal Rights.......................................................... 116
Special Meetings of Stockholders.......................................... 117
Stockholder Action Without a Meeting...................................... 117
Stockholder Proposal Procedures........................................... 117
Stockholder Rights Plan................................................... 117
Classified Board of Directors............................................. 117
Nominations of Directors.................................................. 117
Removal of Directors...................................................... 118
Vacancies in the Board of Directors....................................... 118
Indemnification........................................................... 118
Limitation of Personal Liability of Directors............................. 118
Amendment of Charter Documents............................................ 119
Amendment of By-Laws...................................................... 119
VALIDITY OF COMMON SHARES................................................... 119
EXPERTS..................................................................... 120
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING............................... 120
OTHER BUSINESS.............................................................. 120
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF US FOODSERVICE................ F-1
</TABLE>
<TABLE>
<S> <C> <C>
APPENDICES
Appendix A Agreement and Plan of Merger
Appendix B Opinion of Goldman, Sachs & Co.
Appendix C Excerpt from the Delaware General Corporation Law Relating to Appraisal Rights
</TABLE>
iii
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 2, 1996
PRELIMINARY PROSPECTUS/PROXY STATEMENT
RYKOFF-SEXTON, INC.
PROXY STATEMENT/PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS OF RYKOFF-SEXTON, INC.
TO BE HELD ON MAY 8, 1996
This Proxy Statement/Prospectus is furnished in connection with the
solicitation on behalf of the Board of Directors of Rykoff-Sexton, Inc., a
Delaware corporation ("Rykoff-Sexton"), of proxies for use at a Special Meeting
of Stockholders (including any adjournments or postponements thereof, the
"Special Meeting") to be held at One Sexton Drive, Glendale Heights, Illinois,
on Wednesday, May 8, 1996, at 10:00 a.m., local time, for the purposes set
forth in the accompanying Notice.
This Proxy Statement/Prospectus also constitutes the prospectus of Rykoff-
Sexton relating to 14,296,723 shares of its Common Stock, par value $.10 per
share (the "Rykoff-Sexton Common Shares"), and Common Stock Purchase Warrants
evidencing the right to purchase 331,761 Rykoff-Sexton Common Shares to be
issued by Rykoff-Sexton in accordance with the terms of the Agreement and Plan
of Merger, dated February 2, 1996 (the "Merger Agreement"), described in this
Proxy Statement/Prospectus and attached hereto as Appendix A, by and among
Rykoff-Sexton, USF Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of the Rykoff-Sexton ("Merger Sub"), and US Foodservice
Inc., a Delaware corporation ("US Foodservice"). Pursuant to the Merger
Agreement, US Foodservice will merge with and into Merger Sub (the "Merger"),
and Merger Sub will be renamed US Foodservice Inc.
SEE "THE MERGER--RISK FACTORS" ON PAGE 41 FOR A DISCUSSION OF CERTAIN RISKS.
This Proxy Statement/Prospectus and the accompanying proxy card are first
being mailed on or about April , 1996, to all stockholders of Rykoff-Sexton.
Only holders of record of Rykoff-Sexton Common Shares at the close of business
on April 2, 1996 (the "Record Date") will be entitled to vote at the Special
Meeting.
This Proxy Statement/Prospectus does not cover any resales of Rykoff-Sexton
Common Shares to be received by US Foodservice stockholders upon consummation
of the Merger, and no person is authorized to make use of this Proxy
Statement/Prospectus in connection with any such resale. This Proxy
Statement/Prospectus does not constitute the solicitation of any proxy or
written consent of US Foodservice stockholders.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS- SION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------
The date of this Proxy Statement/Prospectus is April , 1996.
<PAGE>
AVAILABLE INFORMATION
Rykoff-Sexton is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Copies of such reports, proxy
statements and other information filed by Rykoff-Sexton can be inspected and
copied, at prescribed rates, at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices located at Citicorp Center, 500 West Madison, 14th Floor,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York,
New York 10048. In addition, material filed by Rykoff-Sexton can be inspected
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005, on which the Rykoff-Sexton Common Shares are listed. US
Foodservice is not subject to the informational requirements of the Exchange
Act.
Rykoff-Sexton has filed with the SEC a registration statement on Form S-4
(herein, together with any amendments, supplements and exhibits, referred to
as the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Rykoff-Sexton Common Shares to be
issued in connection with the transactions contemplated by the Merger
Agreement. This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the SEC. For
further information, reference is hereby made to the Registration Statement.
Such additional information may be obtained from the SEC's principal office in
Washington, D.C. Statements contained in this Proxy Statement/Prospectus as to
the contents of any contract or other document referred to herein are
necessarily summaries of such documents, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS,
OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED
BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER OF RYKOFF-SEXTON COMMON SHARES, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO RYKOFF-
SEXTON, INC., 1050 WARRENVILLE ROAD, LISLE, ILLINOIS 60532-5201, (708) 964-
1414, ATTENTION: RICHARD J. MARTIN, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER. TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE
MADE BEFORE APRIL 19, 1996.
The following documents previously filed by Rykoff-Sexton with the SEC
pursuant to the Exchange Act are incorporated herein by this reference:
1. Rykoff-Sexton's Annual Report on Form 10-K for the year ended April 29,
1995, including the information incorporated by reference from Rykoff-
Sexton's 1995 Annual Report to Stockholders (the "Annual Report on Form
10-K");
2. Rykoff-Sexton's Quarterly Reports on Form 10-Q for the quarterly periods
ended July 29, 1995, October 28, 1995 and January 27, 1996 ("Quarterly
Reports on Form 10-Q");
3. Rykoff-Sexton's Current Reports on Form 8-K dated February 21, 1995, as
amended by Form 8-K/A dated February 21, 1995 and Form 8-K/A-2 dated
February 21, 1995; November 1, 1995, as amended by Form 8-K/A-1 dated
November 1, 1995; and February 5, 1996; and
4. That portion of Rykoff-Sexton's Proxy Statement for the Annual Meeting
held September 15, 1995 incorporated by reference from the Annual Report
on Form 10-K.
All documents filed by Rykoff-Sexton pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date hereof and prior to the
date of the Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date any such document is filed.
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Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Statements herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained in any subsequently filed document that is incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except
as so modified or superseded. All information appearing in this Proxy
Statement/Prospectus is qualified in its entirety by the information and
financial statements (including notes thereto) appearing in the documents
incorporated herein by reference, except to the extent set forth in the
immediately preceding statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH
RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY RYKOFF-SEXTON. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF RYKOFF-SEXTON OR US FOODSERVICE SINCE THE DATE HEREOF OR
THAT THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THEREOF. ALL INFORMATION REGARDING RYKOFF-SEXTON AND MERGER SUB
IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN SUPPLIED BY RYKOFF-SEXTON, AND ALL
INFORMATION REGARDING US FOODSERVICE HAS BEEN SUPPLIED BY US FOODSERVICE.
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SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement/Prospectus and the Appendices hereto. This summary is
not intended to be complete and is qualified in its entirety by reference to
more detailed information contained elsewhere in this Proxy
Statement/Prospectus, the Appendices and the documents incorporated herein by
reference. Unless the context otherwise requires, the information in this Proxy
Statement/Prospectus has been adjusted to reflect the .396-for-1 reverse stock
split of the outstanding shares of Class A Common Stock, par value $.01 per
share ("Class A Common Stock"), and Class B Common Stock, par value $.01 per
share ("Class B Common Stock" and together with the Class A Common Stock, the
"US Foodservice Common Stock"), of US Foodservice effective as of January 31,
1996. References to US Foodservice after the Effective Time (as defined below)
refer to Merger Sub, which will be renamed US Foodservice Inc. Stockholders of
Rykoff-Sexton and US Foodservice are urged to read this Proxy
Statement/Prospectus and the Appendices hereto in their entirety.
THE COMPANIES
Rykoff-Sexton is a leading broadline distributor of high-quality food and
related non-food products for the foodservice industry throughout the United
States. Rykoff-Sexton distributes its product line of approximately 41,000
items to restaurants, industrial cafeterias, healthcare facilities, hotels,
schools and colleges, supermarket service delicatessen departments and other
establishments where food is prepared or consumed away from home. It also
offers design and engineering services for all types of foodservice operations
through its contract/design group. Established in 1911, Rykoff-Sexton has grown
from a regional distributor to its present position as the fourth largest
broadline foodservice distributor in the nation. The principal executive
offices of Rykoff-Sexton are located at 1050 Warrenville Road, Lisle, Illinois
60532-5201, and its principal telephone number is (708) 964-1414. See
"DESCRIPTION OF RYKOFF-SEXTON."
US Foodservice is a leading provider of high-quality food and related non-
food products throughout its marketing regions and is the fifth largest
broadline foodservice distributor in the United States. US Foodservice serves
more than 40,000 customers in over 30 states, primarily in the Southeastern,
Southwestern and Mid-Atlantic regions of the United States. The principal
executive offices of US Foodservice are located at 1065 Highway 315, Cross
Creek Pointe, Wilkes-Barre, Pennsylvania 18702, and its principal telephone
number is (717) 831-7500. US Foodservice is currently owned by institutional
investors (including investment partnerships and an investment corporation (the
"ML Investors") managed by affiliates of Merrill Lynch & Co., Inc. ("ML &
Co.")), management and employees of US Foodservice, and other stockholders. The
ML Investors currently own approximately 78.2% of the outstanding US
Foodservice Common Stock. See "DESCRIPTION OF US FOODSERVICE."
Merger Sub, a wholly-owned subsidiary of Rykoff-Sexton, was formed by Rykoff-
Sexton solely for the purpose of effecting the Merger. The mailing address of
Merger Sub's principal executive offices is c/o Rykoff-Sexton, Inc., 1050
Warrenville Road, Lisle, Illinois 60532-5201, and its telephone number is (708)
964-1414.
THE SPECIAL MEETING
The Special Meeting of Stockholders of Rykoff-Sexton will be held on May 8,
1996, at 10 a.m., local time, at One Sexton Drive, Glendale Heights, Illinois.
MATTERS TO BE CONSIDERED AT SPECIAL MEETING
The purpose of the Special Meeting will be to (i) consider and vote on the
proposal to approve the issuance of Rykoff-Sexton Common Shares in connection
with the Merger Agreement and (ii) transact such other matters as may arise
relating to the conduct of the Special Meeting. See "THE SPECIAL MEETING--
Matters To Be Considered at the Special Meeting."
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Record Date; Stockholders Entitled To Vote
Only holders of record of Rykoff-Sexton Common Shares at the close of
business on the Record Date, April 2, 1996, will be entitled to notice of, and
to vote at, the Special Meeting. On March 31, 1996, there were 14,798,820
Rykoff-Sexton Common Shares outstanding, each of which will be entitled to one
vote on each matter properly submitted for vote to Rykoff-Sexton stockholders
at the Special Meeting. See "THE SPECIAL MEETING--Voting at the Meeting; Record
Date."
Vote Required
The consummation of the Merger is conditioned on, among other things, the
approval of the issuance of Rykoff-Sexton Common Shares in connection therewith
by stockholders of Rykoff-Sexton at the Special Meeting. Rykoff-Sexton
stockholders must approve the issuance of the Rykoff-Sexton Common Shares in
connection with the Merger in order to comply with requirements of the New York
Stock Exchange, Inc. (the "NYSE"), on which Rykoff-Sexton Common Shares are
listed. Stockholder approval is required if a listed company issues common
stock in an amount equal to or greater than 20% of the number of shares of
common stock outstanding prior to such issuance. Assuming the maximum number of
Rykoff-Sexton Common Shares are issued in the Merger, such shares would
constitute approximately 87% of the Rykoff-Sexton Common Shares outstanding
prior to such issuance.
The issuance of Rykoff-Sexton Common Shares will be approved upon receipt of
the affirmative vote of the holders of at least a majority of the votes cast at
the Special Meeting, assuming a quorum consisting of at least a majority of all
outstanding Rykoff-Sexton Common Shares are present at the Special Meeting. See
"THE SPECIAL MEETING--Vote Required." On March 31, 1996, directors and
executive officers of Rykoff-Sexton, together with their affiliates as a group,
owned 6.1% of the issued and outstanding Rykoff-Sexton Common Shares. See
"OWNERSHIP OF RYKOFF-SEXTON COMMON SHARES."
THE MERGER
Terms of the Merger
Pursuant to the terms of the Merger Agreement, US Foodservice will be merged
with and into Merger Sub, and Merger Sub will be renamed US Foodservice Inc.
The Merger Agreement provides that, upon the terms and subject to the
conditions thereof, at the Effective Time (as defined below) of the Merger,
each share of US Foodservice Common Stock issued and outstanding immediately
prior to the Merger (other than shares of US Foodservice Common Stock, if any,
held by Rykoff-Sexton, Merger Sub or any other subsidiary of Rykoff-Sexton,
shares held in treasury by US Foodservice and shares held by holders who have
properly perfected their appraisal rights under Delaware law) will be converted
into that number of Rykoff-Sexton Common Shares, rounded to the nearest
thousandth of a share, or if there is not a nearest thousandth of a share, to
the next higher thousandth of a share, equal to the quotient (the "Exchange
Ratio") derived by dividing $25 by the Closing Date Market Price (as defined
below) of one Rykoff-Sexton Common Share; provided, however, that (i) if the
foregoing would result in an Exchange Ratio greater than 1.457 (which would
occur if the Closing Date Market Price is less than $17.16), the Exchange Ratio
will be deemed to be 1.457, and (ii) if the foregoing would result in an
Exchange Ratio less than 1.244 (which would occur if the Closing Date Market
Price is greater than $20.10), the Exchange Ratio will be deemed to be 1.244.
The Exchange Ratio will be appropriately adjusted to reflect any split,
reclassification, combination, dividend (other than normal cash dividends) or
other distribution or change in the Rykoff-Sexton Common Shares as provided in
the Merger Agreement. "Effective Time" means the date and time of the filing of
a certificate of merger to be filed pursuant to the Delaware General
Corporation Law (the "DGCL") relating to the Merger with the Secretary of State
of the State of Delaware (or such later date and time as may be specified in
such certificate as permitted by such Secretary of State). "Closing Date Market
Price" means the arithmetic average of the last reported sales price of one
Rykoff-Sexton Common Share
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on the NYSE, as reported in the NYSE Composite Tape, during the period of the
20 most recent trading days ending on the third business day prior to the date
of the closing of the Merger (the "Closing Date"). See "THE MERGER--Conversion
of Shares; Exchange of Certificates."
A copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated herein by reference. See "THE MERGER AGREEMENT."
The consummation of the Merger is conditioned on, among other things, the
approval by Rykoff-Sexton's stockholders at the Special Meeting of the issuance
of the Rykoff-Sexton Common Shares in connection with the Merger Agreement. The
Merger Agreement and the Merger must also be approved by the affirmative vote
of the holders of 66 2/3% of the outstanding US Foodservice Class A Common
Stock and by the affirmative vote of a majority of the votes represented by
holders of the outstanding US Foodservice Common Stock and $15 Cumulative
Redeemable Exchangeable Preferred Stock (the "Exchangeable Preferred Stock"),
voting as a class. However, the ML Investors collectively own approximately
78.2% of the outstanding US Foodservice Common Stock and 86.2% of the
outstanding US Foodservice Class A Common Stock, and certain affiliates of ML &
Co. own 100% of the outstanding Exchangeable Preferred Stock. The ML Investors
have agreed to vote their shares of the US Foodservice Common Stock in favor of
the Merger Agreement and the Merger. See "OTHER AGREEMENTS--The ML Agreement."
The vote of such shares of US Foodservice Common Stock is sufficient to ensure
that all requisite US Foodservice stockholder approvals will be obtained.
Stock Options and Warrants
As of March 31, 1996, US Foodservice had outstanding stock options to
purchase up to 744,275 shares of US Foodservice Class A Common Stock under
certain stock option plans. Under the Merger Agreement, Rykoff-Sexton has
agreed to assume such options (the "Assumed Options"), on the terms set forth
therein, whether or not such options are vested or exercisable. Upon the
consummation of the Merger, the Assumed Options will constitute options to
acquire, on the same terms and conditions as were applicable to such US
Foodservice options (subject to certain adjustments), an adjusted number of
Rykoff-Sexton Common Shares based on the Exchange Ratio (presently estimated to
be 1,084,410 Rykoff-Sexton Common Shares in the aggregate assuming the maximum
Exchange Ratio). For those Assumed Options that by their terms vest according
to performance criteria ("performance options") and which are not vested in
accordance with their terms at the Effective Time (as defined below), the
performance criteria will be deemed satisfied on the first anniversary of the
Effective Time. Under the Merger Agreement, Rykoff-Sexton has agreed to file a
registration statement on Form S-8 with respect to the Rykoff-Sexton Common
Shares subject to the Assumed Options. See "THE MERGER AGREEMENT--General--
Conversion of US Foodservice Common Stock in the Merger."
US Foodservice has outstanding warrants to purchase 227,700 shares of US
Foodservice Class A Common Stock (the "Warrants"). Under the Merger Agreement,
Rykoff-Sexton has agreed to assume the Warrants (the "Assumed Warrants"). Upon
the consummation of the Merger, the Assumed Warrants will constitute warrants
to acquire, on the same terms and conditions as were applicable under the
Warrants, an adjusted number of Rykoff-Sexton Common Shares based on the
Exchange Ratio (presently estimated to be 331,761 Rykoff-Sexton Common Shares
in the aggregate, assuming the maximum Exchange Ratio). See "THE MERGER
AGREEMENT--General--Conversion of US Foodservice Common Stock in the Merger"
and "THE WARRANTS."
Effect of the Merger
In connection with the Merger, the holders of US Foodservice Common Stock
will receive an aggregate of up to 12,880,552 Rykoff-Sexton Common Shares
(assuming the maximum Exchange Ratio), representing approximately 46.5% of the
voting power of Rykoff-Sexton after the Merger. In addition, up to 1,416,171
Rykoff-Sexton Common Shares will be reserved for issuance upon the exercise of
the Assumed Options and
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Assumed Warrants. Assuming the maximum number of Rykoff-Sexton Common Shares
are issued in the Merger, the ML Investors will receive an aggregate of up to
10,076,010 Rykoff-Sexton Common Shares representing approximately 36.4% of the
voting power of Rykoff-Sexton after the Merger prior to the exercise of any
Assumed Options or Assumed Warrants or approximately 34.6% after the exercise
of all Assumed Options and Assumed Warrants.
As described under "THE MERGER--Resale of Rykoff-Sexton Common Shares," the
resale of the Rykoff-Sexton Common Shares received in the Merger by the ML
Investors and any other "affiliates" (as such term is used in Rules 144 and 145
under the Securities Act) of US Foodservice prior to the Merger will be
restricted. Rykoff-Sexton Common Shares received in the Merger by persons other
than "affiliates" will be freely transferable and will not be restricted except
as contemplated by arrangements entered into by certain US Foodservice
employees in connection with the forgiveness of certain management loans, and
except as provided in the Tax Agreement that the ML Investors and certain other
stockholders of US Foodservice will enter into with Rykoff-Sexton at the
Effective Time. See "THE MERGER--Effect of the Merger" and "--Interests of
Certain Persons in the Merger--US Foodservice Management Loans," and "OTHER
AGREEMENTS--The Tax Agreement." The ML Investors will have the right to require
Rykoff-Sexton to register all or a portion of their Rykoff-Sexton Common Shares
for sale under the Securities Act, which would permit the sale of such Rykoff-
Sexton Common Shares to the general public in the circumstances and subject to
the conditions and restrictions set forth in the Registration Rights Agreement
(as defined below). See "OTHER AGREEMENTS--The Registration Rights Agreement."
No predictions can be made as to the effect, if any, that market sales of such
shares, or the availability of such shares for future sales, will have on the
market price of Rykoff-Sexton Common Shares prevailing from time to time. Sales
of substantial amounts of Rykoff-Sexton Common Shares, or the perception that
such sales could occur, could adversely affect prevailing market prices for the
Rykoff-Sexton Common Shares and could impair Rykoff-Sexton's future ability to
raise capital through an offering of its equity securities. See "THE MERGER--
Risk Factors--Sale of Shares By ML Investors."
To provide assurances in connection with the qualification of the Merger as a
tax-free reorganization for federal income tax purposes, certain stockholders
of US Foodservice, including all of the ML Investors, will enter into the Tax
Agreement (as defined below) with Rykoff-Sexton at the Effective Time, pursuant
to which each such stockholder will be prohibited from selling, exchanging,
distributing or otherwise disposing of in any manner, during the two-year
period following the Effective Time, more than a certain percentage of the
Rykoff-Sexton Common Shares received in the Merger by such stockholder, with
such percentage to be determined by a formula at the Effective Time. For
purposes, however, of applying the transfer restrictions in the Tax Agreement
to the ML Investors, all of the Rykoff-Sexton Common Shares received in the
Merger by the ML Investors will be aggregated, and the ML Investors will be
treated as a single stockholder. See "OTHER AGREEMENTS--The Tax Agreement."
Pursuant to the Standstill Agreement (as defined below), the ML Investors and
Merrill Lynch Capital Partners, Inc., the general partner of certain of the ML
Investors ("MLCP" and, together with the ML Investors, the "ML Entities"), will
agree, among other things, to vote their Rykoff-Sexton Common Shares in favor
of Rykoff-Sexton's nominees for the Board of Directors. The ML Entities will
also be entitled to designate four nominees to the Rykoff-Sexton Board of
Directors, which is expected to have twelve members at the Effective Time, with
such number of nominees and Board members decreasing if the percentage of
outstanding Rykoff-Sexton Common Shares held by ML Entities falls below certain
levels. As a result of their ownership interest in Rykoff-Sexton, the ML
Entities may also influence the outcome of other matters submitted to Rykoff-
Sexton stockholders. See "THE MERGER--Effect of the Merger" and "--Risk
Factors" and "OTHER AGREEMENTS--The Standstill Agreement."
Recommendation of the Rykoff-Sexton Board of Directors; Reasons for the Merger
On February 2, 1996, the Rykoff-Sexton Board of Directors, by the unanimous
vote of all directors present at the meeting, approved the Merger Agreement and
the Merger and the issuance of the Rykoff-Sexton Common
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Shares in the Merger, determined that the Merger is in the best interests of
Rykoff-Sexton and its stockholders and recommended that the stockholders of
Rykoff-Sexton vote FOR the approval of the issuance of the Rykoff-Sexton Common
Shares in connection with the Merger. See "THE MERGER--Background of the
Merger." Prior to making this recommendation, the Rykoff-Sexton Board of
Directors carefully analyzed, with the assistance of its financial advisors,
the value of US Foodservice's business and the consideration proposed to be
paid by Rykoff-Sexton. See "THE MERGER--Recommendation of the Rykoff-Sexton
Board of Directors; Reasons for the Merger" and "--Opinion of Financial Advisor
to Rykoff-Sexton."
Opinion of Financial Advisor to Rykoff-Sexton
At the request of Rykoff-Sexton, on February 2, 1996, Goldman, Sachs & Co.
("Goldman Sachs") delivered an oral opinion to the Rykoff-Sexton Board of
Directors, which was subsequently confirmed in a written opinion dated February
2, 1996, to the effect that as of such date, the aggregate number of Rykoff-
Sexton Common Shares to be paid by Rykoff-Sexton for the outstanding US
Foodservice Common Stock pursuant to the Merger Agreement is fair to Rykoff-
Sexton. Goldman Sachs has confirmed such opinion by delivery of a written
opinion dated as of the date of this Proxy Statement/Prospectus. The full text
of the written opinion of Goldman Sachs dated as of the date of this Proxy
Statement/Prospectus is set forth as Appendix B to this Proxy
Statement/Prospectus and describes the assumptions made, matters considered and
limits on the review undertaken. Rykoff-Sexton stockholders are urged to read
the opinion in its entirety. See "THE MERGER--Opinion of Financial Advisor to
Rykoff-Sexton."
Rykoff-Sexton also retained BA Partners to act as a financial advisor in
connection with the Merger. BA Partners was not requested to, and did not,
provide a fairness opinion to the Rykoff-Sexton Board of Directors.
Redemption or Purchase of Preferred Stock
It is a condition precedent to the Merger that (i) all shares of the
Exchangeable Preferred Stock shall have been purchased by Rykoff-Sexton or
Merger Sub pursuant to the terms of a Redemption Agreement dated as of
September 8, 1995, as amended (the "ML Redemption Agreement"), among US
Foodservice, ML IBK Positions, Inc. ("ML IBK") and Merchant Banking L.P. No. IV
("MBIV") or otherwise in accordance with the terms of the Merger Agreement, and
(ii) all shares of US Foodservice's 10.0% Preferred Stock, par value $.01 per
share (the "10% Preferred Stock" and, together with the Exchangeable Preferred
Stock, the "Preferred Stock"), shall have been redeemed pursuant to the terms
of a Redemption Agreement dated as of September 26, 1995, as amended (the "Sara
Lee Redemption Agreement" and, together with the ML Redemption Agreement, the
"Stock Redemption Agreements"), between US Foodservice and Sara Lee Corporation
("Sara Lee") or otherwise in accordance with the terms of the Merger Agreement.
US Foodservice redeemed the 10% Preferred Stock pursuant to the Sara Lee
Redemption Agreement on March 1, 1996 for an aggregate redemption price of
approximately $21.3 million. See "THE MERGER--Redemption or Purchase of
Preferred Stock."
Rykoff-Sexton Financing and Receivables Securitization
Pursuant to the Commitment Letter dated February 2, 1996 (the "Commitment
Letter") from Bank of America National Trust and Savings Association ("BofA"),
BA Securities, Inc. ("BA Securities"), The Chase Manhattan Bank, N.A. ("Chase")
and Chase Securities, Inc. ("Chase Securities"), BofA and Chase have each
committed severally to provide Rykoff-Sexton funding of (i) up to $242.5
million toward a new bank credit facility (the "New Credit Facility") and (ii)
up to $55 million toward an accounts receivable securitization (the
"Receivables Securitization"), subject to the terms and conditions of the
Commitment Letter.
There can be no assurance as to whether, or the definitive terms on which,
the New Credit Facility or the Receivables Securitization actually will be
available to Rykoff-Sexton. BofA will act as administrative agent, BA
Securities will act as syndication agent and Chase will serve as an agent under
the New Credit Facility. In
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addition, BA Securities and Chase Securities will act as co-arrangers in the
syndication of the New Credit Facility to other financial institutions
acceptable to BofA, Chase and Rykoff-Sexton. The Commitment Letter contemplates
that the New Credit Facility will be comprised of three term loan facilities in
an aggregate principal amount of $335 million and a revolving credit facility
(the "Revolver") for up to $150 million that includes a letter of credit
sublimit of $45 million and a swingline facility of up to $15 million. The
Receivables Securitization will consist of a $110 million program pursuant to
which Rykoff-Sexton will sell certain of its trade accounts receivables on an
ongoing basis for cash or cash equivalents. US Foodservice intends to
restructure or refinance the present US Foodservice receivables facility. In
connection with such restructuring or refinancing, BofA may acquire part of the
existing facility, or BofA and Chase will consider increasing the size of the
Receivables Securitization to $200 million, but Chase and BofA have made no
commitment to do so in the Commitment Letter.
The net proceeds from the New Credit Facility and the Receivables
Securitization will equal approximately $595 million. These proceeds will be
used to make the payments to redeem the Exchangeable Preferred Stock, to
refinance indebtedness incurred by US Foodservice in connection with the
redemption in March 1996 of the 10% Preferred Stock, refinance US Foodservice's
currently outstanding debt, refinance Rykoff-Sexton's currently outstanding
debt under the Credit Agreement dated as of October 23, 1993 between Rykoff-
Sexton and BofA, as amended, provide financing for on-going working capital
needs and pay related fees and expenses, including certain prepayment premiums
payable in connection with the restructuring of US Foodservice's $90 million
receivables securitization program. See "THE MERGER--Rykoff-Sexton Financing
and Receivables Securitization" and "UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION."
The Commitment Letter provides that the obligations of Rykoff-Sexton, Merger
Sub and US Foodservice to effect the Merger are subject to the condition that
all conditions precedent to the closing of the financing described in the
Commitment Letter shall have been satisfied and that the transactions
contemplated by the Commitment Letter shall have been consummated.
The New Credit Facility and the Receivables Securitization will result in a
substantial increase in the level of long-term indebtedness of Rykoff-Sexton
after the Merger. This increase will have several important effects on the
operations of Rykoff-Sexton following the Merger, including the following: (i)
Rykoff-Sexton will have significant cash requirements to service debt, reducing
funds available to operations and future business opportunities and increasing
Rykoff-Sexton's vulnerability to adverse general economic and industry
conditions; (ii) the financial covenants and other restrictions contained in
the New Credit Facility and other agreements relating to the indebtedness of
Rykoff-Sexton will require it to meet certain financial tests and will restrict
its ability to borrow additional funds, to dispose of assets and to pay cash
dividends; (iii) the failure to comply with such financial covenants and other
restrictions may result in an event of default under the New Credit Facility
which, if not cured or waived, could have a material adverse effect on Rykoff-
Sexton and on the market value of Rykoff-Sexton Common Shares; (iv) funds
available for working capital, capital expenditures, acquisitions and general
corporate purposes may be limited, which could increase Rykoff-Sexton's
vulnerability to competitive pressures and adversely affect Rykoff-Sexton's
ability to expand; and (v) certain of Rykoff-Sexton's borrowings will be at
variable rates of interest, which could result in higher interest expense if
interest rates increase generally. See "THE MERGER--Risk Factors--Leverage and
Debt Service."
Certain Other Agreements
The ML Agreement. Under an agreement (the "ML Agreement") among Rykoff-Sexton
and the ML Entities entered into simultaneously with the Merger Agreement, the
ML Entities agreed that prior to the earlier of the Effective Time of the
Merger and the termination of the Merger Agreement they will not (i) dispose of
any US Foodservice Common Stock owned by them, (ii) acquire any additional US
Foodservice Common Stock without the prior written consent of Rykoff-Sexton,
(iii) enter into any voting agreement (other than the Standstill Agreement)
with respect to US Foodservice Common Stock owned by them or (iv) engage in
certain activities
9
<PAGE>
relating to business combinations involving US Foodservice other than the
Merger. In addition, the ML Entities agree that prior to the Effective Time
they will vote their shares of US Foodservice Common Stock in favor of the
Merger. See "OTHER AGREEMENTS--The ML Agreement."
The Standstill Agreement. The ML Agreement provides that, at the Effective
Time, Rykoff-Sexton and the ML Entities will enter into an agreement (the
"Standstill Agreement") providing, among other things, (i) for the designation
by the ML Entities of four nominees to the Rykoff-Sexton Board of Directors,
which is expected to have twelve members, with such number of nominees and
Board members decreasing if the percentage of outstanding Rykoff-Sexton Common
Shares held by the ML Entities falls below certain levels, (ii) that, for a
period of ten years, the ML Entities will not acquire beneficial ownership of
additional voting securities of Rykoff-Sexton representing voting power in
excess of 36.4% of the outstanding voting securities of Rykoff-Sexton and will
not take certain other actions relating to the control of Rykoff-Sexton, (iii)
that the ML Entities will vote in favor of Rykoff-Sexton's nominees for the
Rykoff-Sexton Board of Directors, (iv) for certain restrictions on transfer of
Rykoff-Sexton voting securities held by the ML Entities and (v) for a right of
first refusal, under specified circumstances, for Rykoff-Sexton in respect of
certain transfers by the ML Entities of Rykoff-Sexton Common Shares.
Notwithstanding the foregoing, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") and its affiliates (other than the ML Entities) may
effect or recommend transactions in the ordinary course of its or their
business provided that they do not acquire beneficial ownership of more than 2%
of the outstanding voting securities of Rykoff-Sexton (with such percentage
increasing up to 5% if the percentage of outstanding Rykoff-Sexton voting
securities held by the ML Entities falls below certain levels). See "OTHER
AGREEMENTS--The Standstill Agreement."
The Registration Rights Agreement. The ML Agreement provides that at the
Effective Time, Rykoff-Sexton and the ML Investors will enter into an agreement
(the "Registration Rights Agreement") which will provide the ML Investors with
certain "demand" and "piggyback" registration rights and certain other parties
with "piggyback" registration rights, subject to certain conditions, requiring
Rykoff-Sexton to register for sale under the Securities Act all or a portion of
Rykoff-Sexton Common Shares owned by them. See "OTHER AGREEMENTS--The
Registration Rights Agreement."
The Tax Agreement. The ML Agreement provides that at the Effective Time,
Rykoff-Sexton and certain stockholders of US Foodservice, including all of the
ML Investors, will enter into an agreement (the "Tax Agreement") to provide
assurances in connection with the qualification of the Merger as a tax-free
reorganization for federal income tax purposes. Each stockholder of US
Foodservice that is a party to the Tax Agreement will agree, for the two-year
period following the Effective Time, not to sell, exchange, distribute or
otherwise dispose of in any manner more than a certain percentage of the
Rykoff-Sexton Common Shares received in the Merger by such stockholder, with
such percentage to be determined by a formula at the Effective Time. For
purposes, however, of applying the transfer restrictions in the Tax Agreement
to the ML Investors, all of the Rykoff-Sexton Common Shares received in the
Merger by the ML Investors will be aggregated, and the ML Investors will be
treated as a single stockholder. Provided that a stockholder of US Foodservice
that is a party to the Tax Agreement complies with the transfer restrictions
contained therein and satisfies certain other conditions, Rykoff-Sexton and
each other stockholder of US Foodservice that is a party to the Tax Agreement
will waive and release any claims that any of them might have against such
stockholder under the Tax Agreement or otherwise resulting from the failure of
the Merger to qualify as a tax-free reorganization for federal income tax
purposes. See "OTHER AGREEMENTS--The Tax Agreement."
Risk Factors
In deciding whether to approve the issuance of Rykoff-Sexton Common Shares in
connection with the Merger, Rykoff-Sexton stockholders should carefully
evaluate the matters set forth under "THE MERGER--Risk Factors."
10
<PAGE>
Regulatory Matters
The Merger is subject to the applicable provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (collectively, the "HSR Act"), which provides that certain
acquisition transactions (including the Merger) may not be consummated until
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and certain waiting period requirements have been
satisfied. Rykoff-Sexton and US Foodservice filed the required information and
material with respect to the Merger with the Antitrust Division and the FTC on
or about December 22, 1995. ML & Co. and certain of its affiliates filed the
required information with the Antitrust Division and the FTC on January 17,
1996 and January 25, 1996. The required waiting periods under the HSR Act for
Rykoff-Sexton and US Foodservice expired on January 21, 1996. Early termination
of the waiting periods for ML & Co. and such of its affiliates was granted on
January 29, 1996 and February 7, 1996. See "THE MERGER--Regulatory Matters."
Effective Time of the Merger
Following receipt of all required governmental approvals and satisfaction or
waiver (where permissible) of the other conditions to the Merger, the Merger
will be consummated and become effective at the time at which the certificate
of merger to be filed pursuant to the DGCL is accepted for filing by the
Secretary of State of the State of Delaware (or such later date and time as may
be specified in such certificate as may be permitted by such Secretary of
State). See "THE MERGER AGREEMENT--Effective Time of the Merger."
Exchange of Certificates in the Merger
Promptly after the Effective Time, Chemical/Mellon Shareholder Services,
L.L.C. (the "Exchange Agent") will mail a transmittal form and instructions to
each holder of record (other than Rykoff-Sexton, Merger Sub or any other
subsidiary of Rykoff-Sexton) of certificates which immediately prior to the
Effective Time represented outstanding shares of US Foodservice Common Stock,
which form and instructions are to be used in forwarding such certificates for
surrender and exchange for (i) certificates representing that number of whole
Rykoff-Sexton Common Shares that such holder has the right to receive pursuant
to the Merger and (ii) cash for any fractional Rykoff-Sexton Common Shares to
which such holder otherwise would be entitled. US FOODSERVICE STOCKHOLDERS ARE
REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL SUCH
TRANSMITTAL FORM AND INSTRUCTIONS ARE RECEIVED. Holders of certificates
formerly representing shares of US Foodservice Common Stock will not be
entitled to receive dividends or any other distributions from Rykoff-Sexton
until such certificates are so surrendered. Persons entitled to receive
dividends or other distributions in respect of the certificates surrendered in
connection with the Merger will not be entitled to receive interest on such
dividends or other distributions. See "THE MERGER--Conversion of Shares;
Exchange of Certificates."
Listing of the Rykoff-Sexton Common Shares on the NYSE
Rykoff-Sexton has agreed to use its reasonable best efforts to cause the
Rykoff-Sexton Common Shares that are to be issued pursuant to the Merger
Agreement and upon exercise of the Assumed Options and Assumed Warrants to be
listed for trading on the NYSE. Such authorization for listing is a condition
to the obligations of Rykoff-Sexton, Merger Sub and US Foodservice to
consummate the Merger. See "THE MERGER--Listing of the Rykoff-Sexton Common
Shares on the NYSE."
Business of US Foodservice and Rykoff-Sexton Pending the Merger
Each of US Foodservice and Rykoff-Sexton has agreed that, prior to the
Effective Time or earlier termination of the Merger Agreement, except as
contemplated by the Merger Agreement, it and its subsidiaries
11
<PAGE>
will each conduct its operations according to its ordinary course of business
consistent with past practice with certain exceptions permitted by the Merger
Agreement. In addition, unless the other party agrees in writing or except as
otherwise permitted pursuant to the Merger Agreement or as previously disclosed
to the other party, prior to the Effective Time neither US Foodservice, Rykoff-
Sexton nor any of their respective subsidiaries is permitted to engage in any
of a number of actions specified in the Merger Agreement. See "THE MERGER
AGREEMENT--Business of US Foodservice Pending the Merger" and "--Business of
Rykoff-Sexton Pending the Merger."
Interests of Certain Persons in the Merger; Management and Operations of US
Foodservice After the Merger
Certain stockholders and members of the management and Board of Directors of
US Foodservice have certain interests in the Merger that are different from, or
in addition to, the interests of stockholders of US Foodservice generally. See
"THE MERGER--Interests of Certain Persons in the Merger." As a condition to US
Foodservice's obligation to effect the Merger, Rykoff-Sexton is required to
execute a Registration Rights Agreement with certain "affiliates" (within the
meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act) of US Foodservice (including the ML Investors and Frank H.
Bevevino), which Registration Rights Agreement provides the ML Investors with
"demand" and "piggyback," and such other affiliates with "piggyback,"
registration rights requiring Rykoff-Sexton to register all or a portion of
Rykoff-Sexton Common Shares received by them. See "OTHER AGREEMENTS--The
Registration Rights Agreement."
In addition, pursuant to the Standstill Agreement, Rykoff-Sexton has agreed
to use its best efforts to cause to be appointed to the Rykoff-Sexton Board of
Directors four additional directors to be designated by the ML Entities
effective as of the Effective Time. See "OTHER AGREEMENTS--The Standstill
Agreement."
After the Merger, Merger Sub, as the surviving corporation in the Merger,
will be renamed US Foodservice Inc. US Foodservice will operate as the
distribution division of Rykoff-Sexton and will include the current Rykoff-
Sexton distribution operations. Mark Van Stekelenburg, the current Chairman,
President and Chief Executive Officer of Rykoff-Sexton, will continue to be
Chairman and Chief Executive Officer of Rykoff-Sexton following the Merger.
Frank H. Bevevino, the current Chairman of the Board of Directors and Chief
Executive Officer of US Foodservice, will be a member of the Rykoff-Sexton
Board of Directors and President of Rykoff-Sexton effective as of the Effective
Time. In addition, Mr. Bevevino will be Chief Executive Officer of US
Foodservice and in that capacity will be responsible for all Rykoff-Sexton
distribution operations. See "MANAGEMENT OF RYKOFF-SEXTON AFTER THE MERGER."
Conditions of the Merger; Termination
The consummation of the Merger is conditioned upon the fulfillment or waiver
(where permissible) of certain conditions set forth in the Merger Agreement.
The Merger Agreement may be terminated (i) by mutual consent of Rykoff-Sexton
and US Foodservice, (ii) by either Rykoff-Sexton or US Foodservice if the
Merger has not been consummated by July 31, 1996, and (iii) under certain other
circumstances. See "THE MERGER AGREEMENT--Conditions; Waivers" and "--
Amendment; Termination."
Expenses
Each of Rykoff-Sexton and US Foodservice will bear their own expenses
incurred in connection with the transactions contemplated by the Merger
Agreement, except that in the event of a dispute concerning the terms or
enforcement of the Merger Agreement, the prevailing party will be entitled to
reimbursement of reasonable legal fees and disbursements from the other party
or parties to such dispute. The Merger Agreement requires Rykoff-Sexton to pay
to US Foodservice a fee of $4,500,000 plus expenses of up to $1,000,000 if (i)
an RSI Alternative Proposal (as defined below) is publicly announced or sent to
holders of Rykoff-Sexton Common
12
<PAGE>
Shares prior to the Special Meeting, (ii) the issuance of the Rykoff-Sexton
Common Shares in connection with the Merger is not approved by the requisite
holders of Rykoff-Sexton Common Shares at the Special Meeting, and (iii) within
twelve months of the date on which the Special Meeting is held a definitive
agreement with respect to such RSI Alternative Proposal is executed by Rykoff-
Sexton. An "RSI Alternative Proposal" means a bona fide written offer submitted
to Rykoff-Sexton or the holders of Rykoff-Sexton Common Shares by any person
(other than US Foodservice or any affiliate of US Foodservice), unsolicited by
Rykoff-Sexton, for the acquisition or purchase of all or a material amount of
the assets or securities of, or any merger, consolidation or business
combination with, Rykoff-Sexton or any of its subsidiaries. See "THE MERGER
AGREEMENT--Expenses; Termination Fee."
Appraisal Rights
Under Delaware law, holders of US Foodservice Common Stock who comply with
the requirements of Section 262 of the DGCL will be entitled to appraisal
rights in connection with the Merger. A copy of Section 262 is attached to this
Proxy Statement/Prospectus as Appendix C. Holders of Rykoff-Sexton Common
Shares will not be entitled to appraisal rights in connection with the Merger.
See "THE MERGER--Appraisal Rights."
Certain Federal Income Tax Consequences
The consummation of the Merger is conditioned, among other things, upon the
receipt by Rykoff-Sexton of an opinion of Jones, Day, Reavis & Pogue, special
counsel for Rykoff-Sexton, to the effect that the Merger should be treated for
federal income tax purposes as a tax-free reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"). Such opinion
will be dated the date of the closing of the Merger, will be based upon certain
customary representations, and will be subject to certain assumptions and
limitations set forth therein. No ruling will be sought from the Internal
Revenue Service (the "IRS") regarding the Merger, and the IRS may disagree with
the conclusions expressed in such opinion of counsel.
In accordance with such opinion, (i) neither Rykoff-Sexton nor the existing
stockholders of Rykoff-Sexton will recognize any gain or loss as a result of
the Merger, (ii) neither Merger Sub nor US Foodservice should recognize any
gain or loss as a result of the Merger, and (iii) no gain or loss should be
recognized by holders of US Foodservice Common Stock upon the conversion of
their shares of US Foodservice Common Stock into Rykoff-Sexton Common Shares
pursuant to the Merger. See "THE MERGER--Certain Federal Income Tax
Consequences."
EACH HOLDER OF US FOODSERVICE COMMON STOCK IS ADVISED TO CONSULT SUCH
HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF
THE MERGER UNDER FEDERAL, STATE, LOCAL, FOREIGN OR ANY OTHER APPLICABLE LAW.
Accounting Treatment
The Merger will be accounted for by Rykoff-Sexton under the purchase method
of accounting in accordance with generally accepted accounting principles.
RYKOFF-SEXTON SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated financial data as of and for
the five fiscal years ended April 29, 1995 have been derived from Rykoff-
Sexton's Annual Report on Form 10-K, which has been incorporated by reference
herein. The summary historical financial data as of January 28, 1995 and
January 27, 1996 and for the thirty-nine weeks then ended, respectively, have
been derived from unaudited condensed consolidated financial statements and
notes thereto included in the Quarterly Report on Form 10-Q for the period
ended January 27, 1996, which has been incorporated by reference herein. Such
unaudited condensed consolidated
13
<PAGE>
financial statements have been prepared on the same basis as Rykoff-Sexton's
audited consolidated financial statements, and Rykoff-Sexton's management
believes that such unaudited condensed consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial information presented.
Interim results are not necessarily indicative of results for the full fiscal
year. The summary historical consolidated financial data should be read in
conjunction with Rykoff-Sexton's consolidated financial statements and notes
thereto incorporated by reference herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------------------------------- -----------------------
APRIL 27, MAY 2, MAY 1, APRIL 30, APRIL 29,
1991(1) 1992(1) 1993(1)(2) 1994(1) 1995(1) JANUARY 28, JANUARY 27,
(52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) 1995(1) 1996(1)(2)
---------- ---------- ---------- ---------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $1,404,770 $1,447,305 $1,412,943 $1,444,226 $1,569,019 $1,152,727 $1,314,695
Income (loss) from
continuing operations
before extraordinary
item and change in
accounting............. 12,882 7,930 (24,150) 4,121 9,376 7,006 6,066
Income (loss) per share
from continuing
operations before
extraordinary item and
change in accounting... 0.89 0.55 (1.66) 0.28 0.64 0.48 0.41
Cash dividends per
share.................. 0.48 0.48 0.26 -- 0.03 -- 0.06
BALANCE SHEET DATA (AT
PERIOD END):
Total assets............ $ 397,536 $ 471,879 $ 448,411 $ 470,018 $ 524,068 $ 479,353 $ 631,731
Long-term debt.......... 91,028 139,333 144,669 151,227 146,536 130,089 137,891
Stockholders' equity.... 185,863 189,703 166,704 173,307 206,540 204,389 215,012
</TABLE>
- --------
(1) Statement of operations data for the fifty-two weeks ended April 29, 1995
include the results of Continental Foods, Inc. ("Continental") from
February 21, 1995, the date of its acquisition. Income statement data for
the thirty-nine weeks ended January 27, 1996 include the results of
Continental for the entire period. Statement of operations data for the
thirty-nine weeks ended January 27, 1996 include the results of operations
of H&O Foods, Inc. ("H&O Foods") from November 1, 1995, the date of its
acquisition. Statement of operations data and balance sheet data for all
periods presented exclude the results of Tone Brothers, Inc. ("Tone
Brothers"), which was disposed of by Rykoff-Sexton in October 1994 and
accounted for as a discontinued operation.
(2) During the fifty-two weeks ended May 1, 1993, Rykoff-Sexton recorded a
restructuring charge of $31 million to cover costs associated with a
planned business reorganization. This reorganization was completed during
the thirty-nine weeks ended January 27, 1996. With the completion of the
reorganization program, Rykoff-Sexton reversed the remaining unused portion
of the original $31 million charge. This unused portion, totalling $6.4
million, related primarily to over-estimates of facility closures, and
partly offsets expenses associated with the relocation of the Los Angeles
distribution center included in warehouse, selling, general and
administrative expenses.
US FOODSERVICE SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated financial data as of December
31, 1994 and December 30, 1995 and for the fiscal years ended January 1, 1994,
December 31, 1994 and December 30, 1995, respectively, have been derived from
the consolidated financial statements of US Foodservice audited by Arthur
Andersen LLP, independent public accountants, included elsewhere herein.
The financial data for periods prior to January 3, 1993 are presented as set
forth due to the circumstances of the September 1993 merger of WS Holdings
Corporation ("WS Holdings"), the parent company of White Swan Inc. ("White
Swan"), with a wholly-owned subsidiary of US Foodservice (the "1993 Foodservice
Merger"). See "DESCRIPTION OF US FOODSERVICE--General." The 1993 Foodservice
Merger has been accounted for as a combination of companies under common
control. As such, the assets and liabilities of the merged entities have been
reflected at their historical carrying values in the consolidated financial
statements of US
14
<PAGE>
Foodservice. The results of operations have been presented as if the 1993
Foodservice Merger had occurred as of September 4, 1992, the date both US
Foodservice (then named Unifax Holdings, Inc. ("Unifax Holdings")) and WS
Holdings came under the common control of ML & Co. Prior to September 4, 1992,
the results of operations represent those of WS Holdings only. In addition,
effective January 2, 1993, WS Holdings changed its fiscal year end from the
last Saturday in June to the Saturday following the Friday nearest to December
31 to conform to US Foodservice's fiscal year end. As a result, the financial
data as set forth below include (i) data as of and for the fifty-two week
periods ended June 29, 1991 and June 27, 1992, respectively, which have been
derived from the audited consolidated financial statements of WS Holdings, not
included herein, (ii) data as of and for the twenty-seven week period ended
January 2, 1993 (which includes the results of WS Holdings for the entire
twenty-seven week period and the results of Unifax Holdings from September 4,
1992 through January 2, 1993), which have been derived from the audited
consolidated financial statements of US Foodservice, not included herein and
(iii) data as of January 1, 1994, which have been derived from the audited
consolidated financial statements of US Foodservice, not included herein.
The summary historical consolidated financial data should be read in
conjunction with the US Foodservice consolidated financial statements and notes
thereto and "US FOODSERVICE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA"
and "--US Foodservice Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
JANUARY 1, 1994(1) DECEMBER 31, 1994(1)(2) DECEMBER 30, 1995(3)
(52 WEEKS) (52 WEEKS) (52 WEEKS)
------------------ ----------------------- --------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $1,439,409 $1,470,061 $1,676,007
Income (loss) before
extraordinary item... (45,982) 12,911 7,797
Income (loss) per
share before
extraordinary item
attributable to
common stockholders.. (6.81) 0.68 0.02
Cash dividends per
share................ -- -- --
BALANCE SHEET DATA (AT
PERIOD END):
Total assets.......... $ 516,835 $ 554,509 $ 610,535
Long-term debt........ 294,102 294,388 343,334
Mandatory redeemable
preferred stock...... 54,772 57,137 53,196
Stockholders' equity
(deficit)............ (2,564) 28,678 30,791
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
JUNE 29, 1991 JUNE 27, 1992 27 WEEKS ENDED
(52 WEEKS) (52 WEEKS) JANUARY 2, 1993
------------------ ----------------------- --------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $ 650,984 $ 697,983 $ 627,955
Income (loss) before
extraordinary item... (1,802) (1,576) (2,024)
Income (loss) per
share before
extraordinary item
attributable to
common stockholders.. (2.68) (2.33) (0.81)
Cash dividends per
share................ -- -- --
BALANCE SHEET DATA (AT
PERIOD END):
Total assets.......... $ 243,530 $ 247,664 $ 553,425
Long-term debt........ 159,816 158,006 290,100
Mandatory redeemable
preferred stock...... 22,338 25,882 49,388
Stockholders' equity
(deficit)............ (10,344) (15,511) 58,018
</TABLE>
- --------
(1) Income (loss) before extraordinary item includes nonrecurring charges of
approximately $50.9 million in the fiscal year ended January 1, 1994 and
nonrecurring credits of $3.4 million in the fiscal year ended
15
<PAGE>
December 31, 1994. The charges and credits relate to nonrecurring
transactions including the write-off of unamortized goodwill and related
intangible assets attributable to three distribution centers and
restructuring and other charges. See "US FOODSERVICE SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA" and "--US Foodservice Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Note 14
to US Foodservice's consolidated financial statements included elsewhere
herein for a further explanation of such charges and credits.
(2) Statement of operations data for the fiscal year ended December 31, 1994
include the results of the Atlanta Distribution Center from September 9,
1994, the date of its acquisition, and of the Fort Myers, Orlando and
Riviera Beach Distribution Centers from September 16, 1994, the date of
their acquisition.
(3) Statement of operations data for the fiscal year ended December 30, 1995
include the results of the Fort Myers Meat & Seafood Distribution Center
from January 20, 1995, the date of its acquisition, and of the CP
Distribution Center from April 1, 1995, the date of its acquisition.
UNAUDITED PRO FORMA COMBINED SUMMARY FINANCIAL DATA
The following Unaudited Pro Forma Combined Summary Financial Data give pro
forma effect to the Merger and the other transactions described in "UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION." The Unaudited Pro Forma Combined
Summary Financial Data are derived from, are qualified in their entirety by,
and should be read in conjunction with the Unaudited Pro Forma Combined
Financial Information included elsewhere herein. The Unaudited Pro Forma
Combined Summary Financial Data and accompanying notes should also be read in
conjunction with Rykoff-Sexton's consolidated financial statements and notes
thereto which are incorporated by reference herein and with US Foodservice's
consolidated financial statements and notes thereto included elsewhere herein.
The pro forma data do not purport to represent what Rykoff-Sexton's results of
operations actually would have been had the Merger or such other transactions
occurred at the beginning of the period or as of the dates indicated or the
results of operations for any future period. The pro forma financial data is
based on estimates of financial effects that may not prove to be accurate over
time.
<TABLE>
<CAPTION>
52 WEEKS ENDED 39 WEEKS ENDED
APRIL 29, 1995 JANUARY 27, 1996
-------------- ----------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA: (1) (2)
Net sales..................................... $3,281,413 $2,666,428
Income from continuing operations............. 12,726 9,460
Earnings per share
Income from continuing operations--Minimum
Shares (3)................................. 0.49 0.36
Income from continuing operations--Maximum
Shares (3)................................. 0.45 0.33
Cash dividends per share (4).................... 0.03 0.06
</TABLE>
<TABLE>
<CAPTION>
AS OF
JANUARY 27, 1996
----------------
<S> <C>
BALANCE SHEET DATA: (1) (2)
Total assets................................................. $1,265,101
Long-term debt............................................... 487,729
Stockholders' equity......................................... 445,685
</TABLE>
- -------
(1) The unaudited pro forma income statement data for the fifty-two weeks
ended April 29, 1995 are comprised of the results of Rykoff-Sexton for the
fifty-two weeks ended April 29, 1995, the results of Continental for the
period May 1, 1994 to February 20, 1995, the results of H&O Foods for the
year ended April 29, 1995, and the results of US Foodservice for the
fifty-two weeks ended April 1, 1995. The unaudited pro forma
16
<PAGE>
income statement data for the thirty-nine weeks ended January 27, 1996 are
comprised of the results of Rykoff-Sexton for the thirty-nine weeks ended
January 27, 1996, the results of H&O Foods for the six months ended October
31, 1995 and the results of US Foodservice for the thirty-nine weeks ended
December 30, 1995. The unaudited pro forma balance sheet data has been
prepared by combining the consolidated balance sheet of Rykoff-Sexton as of
January 27, 1996 and the balance sheet of US Foodservice as of December 30,
1995.
(2) The pro forma income statement data and the balance sheet data give effect
to the Merger, the acquisitions of Continental and H&O Foods, the New
Credit Facility, the Receivables Securitization and other transactions as
more fully described in "UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION" contained elsewhere herein.
(3) As part of the Merger, Rykoff-Sexton will issue Rykoff-Sexton Common
Shares to US Foodservice stockholders based on the Exchange Ratio as
described in "THE MERGER--Conversion of Shares; Exchange of Certificates,"
and will assume the Assumed Options and the Assumed Warrants as described
in "THE MERGER AGREEMENT--General--Conversion of US Foodservice Common
Stock in the Merger." The income from continuing operations per share has
been computed using both the minimum possible number of shares issuable in
the Merger and the maximum possible number of shares issuable in the
Merger. The minimum number of shares represents Rykoff-Sexton's historical
weighted average shares plus 10,997,534 shares issued as part of the
Merger plus the dilutive effect of shares issuable pursuant to the Assumed
Options and the Assumed Warrants, assuming the minimum Exchange Ratio. The
maximum number of shares represents Rykoff-Sexton's historical weighted
average shares plus 12,880,552 shares issued as part of the Merger plus
the dilutive effect of shares issuable pursuant to the Assumed Options and
the Assumed Warrants, assuming the maximum Exchange Ratio.
(4) Cash dividends per share is calculated based on historical cash dividends
paid by Rykoff-Sexton. Financial covenants and other restrictions
contained in the New Credit Facility and other agreements relating to
Rykoff-Sexton's indebtedness will require it to meet certain financial
tests and may restrict its ability to pay dividends after the Merger. See
"DIVIDENDS AND MARKET PRICES OF RYKOFF-SEXTON COMMON SHARES."
17
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents Rykoff-Sexton's and US Foodservice's historical
per share data, unaudited pro forma combined per share data of Rykoff-Sexton
and pro forma equivalent per share data of US Foodservice. The unaudited pro
forma combined information is not necessarily indicative of actual or future
operating results or financial position that would have occurred or will occur
upon consummation of the Merger. The data set forth below should be read in
conjunction with Rykoff-Sexton's consolidated financial statements and notes
thereto which are incorporated by reference herein, and the consolidated
financial statements of US Foodservice and notes thereto which are included
elsewhere herein. The data should also be read in conjunction with the
information described in "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION"
included elsewhere herein.
<TABLE>
<CAPTION>
RYKOFF-SEXTON US FOODSERVICE
------------------------------- -----------------------------------
52 WEEKS 39 WEEKS 52 WEEKS 52 WEEKS
ENDED OR AS OF ENDED OR AS OF ENDED OR AS OF ENDED OR AS OF
APRIL 29, 1995 JANUARY 27, 1996 DECEMBER 31, 1994 DECEMBER 30, 1995
-------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
HISTORICAL:
Book value per share.... $14.15 $14.53 $ 3.23 $ 3.47
Earnings per share:
Income from continuing
operations............. 0.64 0.41 N/A N/A
Net income.............. 2.24 0.41 N/A N/A
Net income (loss)
attributable to common
stockholders........... N/A N/A 0.68 0.02
Cash dividends per
share.................. 0.03 0.06 -- --
<CAPTION>
MINIMUM SHARES MAXIMUM SHARES
------------------------------- -----------------------------------
52 WEEKS 39 WEEKS 52 WEEKS 39 WEEKS
ENDED OR AS OF ENDED OR AS OF ENDED OR AS OF ENDED OR AS OF
APRIL 29, 1995 JANUARY 27, 1996 APRIL 29, 1995 JANUARY 27, 1996
-------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
PRO FORMA COMBINED:
Book value per share
(1).................. $17.09 $17.28 $15.92 $16.10
Earnings per share
(1).................. 0.49 0.36 0.45 0.33
Cash dividends per
share (2)............ 0.03 0.06 0.03 0.06
US FOODSERVICE PRO FORMA
EQUIVALENTS (3):
Book value per share.. 21.26 21.50 23.20 23.46
Earnings per share.... 0.61 0.45 0.66 0.48
Cash dividends per
share................ 0.04 0.08 0.04 0.09
</TABLE>
- --------
(1) As part of the Merger, Rykoff-Sexton will issue Rykoff-Sexton Common
Shares to holders of US Foodservice Common Stock based on the Exchange
Ratio as described in "THE MERGER--Conversion of Shares; Exchange of
Certificates," and will assume the Assumed Options and the Assumed
Warrants as described in "THE MERGER AGREEMENT--General--Conversion of US
Foodservice Common Stock in the Merger." The earnings per share, cash
dividends per share and book value per share have been computed using both
the minimum possible number of shares issuable in the Merger and the
maximum possible number of shares issuable in the Merger. The minimum
number of shares used to compute earnings per share represents Rykoff-
Sexton's historical weighted average shares plus 10,997,534 shares issued
as part of the Merger plus the dilutive effect of shares issuable pursuant
to the Assumed Options and the Assumed Warrants, assuming the minimum
Exchange Ratio. The maximum number of shares used to compute earnings per
share represents Rykoff-Sexton's historical weighted average shares plus
12,880,552 shares issued as part of the Merger plus the dilutive effect of
shares issuable pursuant to the Assumed Options and the Assumed Warrants,
assuming the maximum Exchange Ratio. The minimum number of shares to
compute book value per share represents Rykoff-Sexton's historical
outstanding shares plus 10,997,534 shares issued as part of the Merger.
The maximum number of shares to compute book value per
18
<PAGE>
share represents Rykoff-Sexton's historical outstanding shares plus
12,880,552 shares issued as part of the Merger.
(2) Cash dividends per share is calculated based on historical cash dividends
paid by Rykoff-Sexton. Financial covenants and other restrictions
contained in the New Credit Facility and other agreements relating to
Rykoff-Sexton's indebtedness will require it to meet certain financial
tests and may restrict its ability to pay dividends after the Merger. See
"DIVIDENDS AND MARKET PRICES OF RYKOFF-SEXTON COMMON SHARES."
(3) Represents the pro forma equivalent of one share of US Foodservice Common
Stock calculated by multiplying the pro forma information by the Exchange
Ratio of 1.244 of Rykoff-Sexton Common Shares for each share of US
Foodservice Common Stock (for minimum shares) and by the Exchange Ratio of
1.457 of Rykoff-Sexton Common Shares for each share of US Foodservice
Common Stock (for maximum shares).
DIVIDENDS AND MARKET PRICES OF RYKOFF-SEXTON COMMON SHARES
Rykoff-Sexton Common Shares are listed on the NYSE. The table below sets
forth, for the periods indicated, the reported high and low sale prices of
Rykoff-Sexton Common Shares on the NYSE Composite Tape and the semi-annual
cash dividends per share paid by Rykoff-Sexton on such shares. In December
1994, the Rykoff-Sexton Board of Directors declared a five-for-four stock
split, payable January 24, 1995, to stockholders of record on December 21,
1994. Share prices shown below have been adjusted to give effect to this stock
split.
<TABLE>
<CAPTION>
RYKOFF-SEXTON
----------------------------
COMMON SHARES CASH DIVIDENDS
------------- --------------
HIGH LOW PER SHARE
------ ------ --------------
<S> <C> <C> <C>
FISCAL YEAR ENDED APRIL 30, 1994
First Quarter.................................... $12.88 $11.00 --
Second Quarter................................... 14.88 12.50 --
Third Quarter.................................... 17.75 14.63 --
Fourth Quarter................................... 17.63 14.75 --
FISCAL YEAR ENDED APRIL 29, 1995
First Quarter.................................... $16.88 $14.38 --
Second Quarter................................... 17.88 15.00 --
Third Quarter.................................... 16.75 15.88 --
Fourth Quarter................................... 17.88 14.88 $0.03
FISCAL YEAR ENDING APRIL 27, 1996
First Quarter.................................... $20.63 $17.25 $0.03
Second Quarter................................... 24.63 19.63 --
Third Quarter.................................... 22.50 15.63 0.03
Fourth Quarter (through April 1, 1996)........... 16.00 13.75 --
</TABLE>
On December 4, 1995, the last full trading day prior to the public
announcement of the execution of a letter of intent with respect to the Merger
and on February 2, 1996, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the closing price of
one Rykoff-Sexton Common Share as reported by the NYSE Composite Tape was
$19.38 and $15.75, respectively.
On April 1, 1996, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus for which sales price information was
obtainable, the last sale price of one Rykoff-Sexton Common Share as reported
by the NYSE Composite Tape was $15.88.
Because the market price of Rykoff-Sexton Common Shares is subject to
fluctuation, the market value of Rykoff-Sexton Common Shares that holders of
US Foodservice Common Stock will receive in the Merger may increase or
decrease prior to the Merger and the number of shares to be received based on
the Exchange Ratio may vary subject to the maximum and minimum specified in
the Merger Agreement and described herein. STOCKHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE RYKOFF-SEXTON COMMON SHARES.
19
<PAGE>
On March 31, 1996, there were approximately 1,075 holders of record of
Rykoff-Sexton Common Shares.
US Foodservice is privately-held and there is, therefore, no established
public trading market for US Foodservice Common Stock. For information
regarding the US Foodservice Common Stock, see "COMPARATIVE PER SHARE DATA"
and "US FOODSERVICE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA."
Rykoff-Sexton's dividend policy following the Merger will be a decision to
be made by the Rykoff-Sexton Board of Directors from time to time based upon
the results of operations and financial condition of Rykoff-Sexton, the terms
of debt instruments and such other factors as the Rykoff-Sexton Board of
Directors considers relevant. Financial covenants and other restrictions
contained in the New Credit Facility and other agreements relating to Rykoff-
Sexton's indebtedness will require it to meet certain financial tests and may
restrict its ability to pay dividends.
CAPITALIZATION
The following table sets forth the capitalization of Rykoff-Sexton as of
January 27, 1996 and as adjusted at such date to give effect to the Merger,
the New Credit Facility, the Receivables Securitization and other transactions
as more fully described in "UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION." See "THE MERGER--Rykoff-Sexton Financing and Receivables
Securitization." This table should be read in conjunction with "UNAUDITED PRO
FORMA COMBINED FINANCIAL INFORMATION," and the consolidated financial
statements of Rykoff-Sexton and the related notes thereto incorporated by
reference herein.
<TABLE>
<CAPTION>
AS OF JANUARY 27,
1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Short-term debt (1)(2)(3)................................ $115,888 $ 19,260
-------- --------
Long-term debt, excluding current maturities (1)
8 7/8% Senior Subordinated Notes, due in 2003.......... $129,129 $129,129
Tranche A Term Loan (2)................................ -- 150,000
Tranche B Term Loan (2)................................ -- 125,000
Tranche C Term Loan (2)................................ -- 60,000
Promissory notes from acquisitions (3)................. 7,730 7,730
Other debt and obligations under capital leases........ 1,032 15,870
-------- --------
Total long-term debt................................. $137,891 $487,729
-------- --------
Stockholders' equity
Preferred stock, $.10 par value per share
Authorized--10,000,000 shares; outstanding--none..... -- --
Common stock, $.10 par value per share (4)
Authorized--40,000,000 shares; outstanding--
14,799,601 on an actual basis and 27,679,835 on an
as adjusted basis................................... 1,513 2,801
Additional paid-in capital (4)......................... 95,136 323,721
Retained earnings (5).................................. 122,343 123,143
Treasury stock......................................... (3,980) (3,980)
-------- --------
Total stockholders' equity........................... 215,012 445,685
-------- --------
Total capitalization................................. $468,791 $952,867
======== ========
</TABLE>
- --------
(1) See Note 5 to the consolidated financial statements of Rykoff-Sexton
incorporated by reference herein for further information with respect to
the indebtedness of Rykoff-Sexton.
20
<PAGE>
(2) See "THE MERGER--Rykoff-Sexton Financing and Receivables Securitization"
for description of the indebtedness to be incurred by Rykoff-Sexton in
connection with the Merger.
(3) See Note 2 to Unaudited Pro Forma Combined Balance Sheet as set forth in
"UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION" for description of
the promissory notes issued in connection with the H&O Foods and
Continental acquisitions.
(4) Common stock and additional paid-in capital were computed using the number
of Rykoff-Sexton Common Shares that would be issued assuming an Exchange
Ratio of 1.457 (the number which results in the maximum number of Rykoff-
Sexton Common Shares that may be issued in connection with the Merger).
See "THE MERGER--Conversion of Shares; Exchange of Certificates."
(5) Change in retained earnings represents fees relating to the Receivables
Securitization, net of applicable income taxes, of $(1.2) million and the
forgiveness of notes receivable from the sale of stock to management, net
of applicable income taxes, of $2.0 million.
21
<PAGE>
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is furnished to Rykoff-Sexton's stockholders
in connection with the solicitation on behalf of the Rykoff-Sexton Board of
Directors of proxies for use at a Special Meeting to be held at One Sexton
Drive, Glendale Heights, Illinois, on Wednesday, May 8, 1996, at 10 a.m.,
local time. This Proxy Statement/Prospectus and the accompanying form of proxy
were first mailed to stockholders of Rykoff-Sexton on or about April , 1996.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, stockholders of Rykoff-Sexton will be asked (i) to
consider and vote upon a proposal to approve the issuance of Rykoff-Sexton
Common Shares in connection with the Merger Agreement and (ii) to transact
such other matters as may arise relating to the conduct of the Special Meeting
or any adjournments or postponements thereof. Pursuant to the Merger
Agreement, (a) each share of US Foodservice Common Stock issued and
outstanding immediately prior to the Merger (other than shares held by Rykoff-
Sexton, Merger Sub or any other subsidiary of Rykoff-Sexton, shares held in
treasury by US Foodservice and shares held by holders who have properly
perfected their appraisal rights under Delaware law) will be converted into
that number of shares of Rykoff-Sexton Common Shares (subject to rounding to
the nearest thousandth of a share) equal to the Exchange Ratio, with a maximum
Exchange Ratio of 1.457 (which corresponds to a Closing Date Market Price of
less than $17.16) and a minimum Exchange Ratio of 1.244 (which corresponds to
a Closing Date Market Price of more than $20.10), and (b) all outstanding
options and warrants to purchase US Foodservice Common Stock will be assumed
by Rykoff-Sexton.
VOTING AT THE MEETING; RECORD DATE
Only holders of record of Rykoff-Sexton's Common Shares at the close of
business on the Record Date will be entitled to vote at the Special Meeting.
As of March 31, 1996, there were 14,798,820 Rykoff-Sexton Common Shares
outstanding. Each Rykoff-Sexton Common Share entitles the holder to one vote.
There is no cumulative voting. There are no other voting securities of Rykoff-
Sexton outstanding.
The holders of a majority of the Rykoff-Sexton Common Shares issued and
outstanding and entitled to vote at the Special Meeting, present in person or
by proxy, shall constitute a quorum at the Special Meeting.
Votes cast in person or by proxy at the Special Meeting will be tabulated by
the inspectors of election appointed for the Special Meeting, who will
determine whether or not a quorum is present. With respect to approval of the
issuance of Rykoff-Sexton Common Shares, votes may be cast for, against or as
abstentions. Abstentions will be counted for purposes of determining the total
votes cast on the matter for which such abstention is noted. Abstentions will
have the effect of a negative vote on the issuance of Rykoff-Sexton Common
Shares in connection with the Merger Agreement. Broker/dealers who hold their
customers' shares in street name, may, under the applicable rules of the
exchange and other self-regulatory organizations of which the broker/dealers
are members, sign and submit proxies for such shares and may vote such shares
on routine matters, which, under such rules, typically include the election of
directors, but broker/dealers may not vote such shares on other matters, which
typically include transactions related to mergers, including the issuance of
shares in connection therewith, without specific instructions from the
customer who owns such shares. Proxies signed and submitted by broker/dealers
which have not been voted on certain matters as described in the previous
sentence, which includes the proposal to approve the issuance of Rykoff-Sexton
Common Shares in connection with the Merger Agreement, are referred to as
broker non-votes. Broker non-votes on a particular matter are not deemed to be
shares present and entitled to vote on such matter and, assuming presence of a
quorum, will not affect whether the issuance of Rykoff-Sexton Common Shares is
approved.
Each stockholder who signs and returns a proxy in the form enclosed with
this Proxy Statement/Prospectus may revoke the same at any time prior to its
use by giving notice of such revocation to Rykoff-Sexton in writing to the
Secretary of Rykoff-Sexton, by signing and returning a later dated proxy, or
by voting in person at the
22
<PAGE>
Special Meeting. Unless so revoked, the Rykoff-Sexton Common Shares
represented by each such proxy will be voted at the meeting and any
adjournment thereof. Presence at the meeting of a stockholder who has signed a
proxy does not alone revoke that proxy.
Rykoff-Sexton will bear the cost of soliciting proxies for the Special
Meeting. Rykoff-Sexton will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses in
forwarding the soliciting material to beneficial owners of stock. Proxies are
being solicited primarily by mail, but officers and regular employees of
Rykoff-Sexton may also solicit proxies personally, by telephone or by special
letter. Rykoff-Sexton will also use the services of Morrow & Co., Inc. to aid
in the solicitation of proxies at an anticipated fee of $6,000, plus
reasonable out-of-pocket expenses.
If the accompanying proxy card is properly signed and returned to Rykoff-
Sexton prior to the Special Meeting and not revoked, it will be voted in
accordance with the instructions contained therein. IF NO INSTRUCTIONS ARE
GIVEN, THE PERSONS DESIGNATED AS PROXIES IN THE ACCOMPANYING PROXY CARD WILL
VOTE FOR APPROVAL OF THE ISSUANCE OF RYKOFF-SEXTON COMMON SHARES IN CONNECTION
WITH THE MERGER AGREEMENT.
The Rykoff-Sexton Board of Directors is not currently aware of any matters
other than those referred to herein which will come before the Special
Meeting. If any other matter arising from the conduct of the meeting should be
properly presented at the Special Meeting for action, the persons named in the
accompanying proxy card will vote the proxy in their own discretion unless
such authorization is withheld.
VOTE REQUIRED
The consummation of the Merger is conditioned on, among other things, the
approval of the issuance of Rykoff-Sexton Common Shares in connection
therewith by stockholders of Rykoff-Sexton at the Special Meeting. Although
Delaware law and Rykoff-Sexton's Restated Certificate of Incorporation, as
amended (the "Rykoff-Sexton Charter"), do not require Rykoff-Sexton to obtain
stockholder approval of the Merger or the issuance of Rykoff-Sexton Common
Shares in connection therewith, Rykoff-Sexton stockholders must approve such
issuance in order to comply with requirements of the NYSE (on which Rykoff-
Sexton Common Shares are listed) due to the number of Rykoff-Sexton Common
Shares to be issued in connection with the Merger. The NYSE rules require
stockholder approval if a listed company issues common stock in an amount
equal to or greater than 20% of the number of shares of common stock
outstanding prior to such issuance. The Rykoff-Sexton Common Shares to be
issued will constitute approximately 87% of the Rykoff-Sexton Common Shares
outstanding prior to such issuance (assuming the maximum number of Rykoff-
Sexton Common Shares are issued in the Merger). Such issuance will be approved
upon receipt of at least a majority of the votes cast at the Special Meeting,
assuming a quorum consisting of at least a majority of all outstanding Rykoff-
Sexton Common Shares are present at the Special Meeting. As of March 31, 1996,
directors and executive officers of Rykoff-Sexton, together with their
affiliates as a group, owned 6.1% of the issued and outstanding Rykoff-Sexton
Common Shares. See "OWNERSHIP OF RYKOFF-SEXTON COMMON SHARES."
THE BOARD OF DIRECTORS OF RYKOFF-SEXTON HAS ADOPTED THE MERGER AGREEMENT AND
RECOMMENDS A VOTE FOR THE ISSUANCE OF RYKOFF-SEXTON COMMON SHARES PURSUANT
THERETO.
THE MERGER
GENERAL
The discussion in this Proxy Statement/Prospectus of the Merger and the
Merger Agreement's principal terms is qualified in its entirety by reference
to the Merger Agreement, which is attached to this Proxy Statement/Prospectus
as Appendix A and incorporated herein by reference.
EFFECTIVE TIME
Following receipt of all required governmental approvals and satisfaction or
waiver (where permissible) of the other conditions to the Merger, the Merger
will be consummated and become effective at the Effective Time.
23
<PAGE>
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
At the Effective Time, each issued and outstanding share of US Foodservice
Common Stock (other than shares, if any, owned by Rykoff-Sexton, Merger Sub or
any other subsidiary of Rykoff-Sexton, shares held in treasury by US
Foodservice and shares held by holders who have properly perfected their
appraisal rights under Delaware law) will be converted into that number of
Rykoff-Sexton Common Shares equal to the Exchange Ratio, with a maximum
Exchange Ratio of 1.457 (which corresponds to a Closing Date Market Price of
less than $17.16) and a minimum Exchange Ratio of 1.244 (which corresponds to
a Closing Date Market Price of more than $20.10). If, prior to the Effective
Time, Rykoff-Sexton should split, reclassify or combine the Rykoff-Sexton
Common Shares, pay a stock dividend or other stock distribution in Rykoff-
Sexton Common Shares, otherwise change the Rykoff-Sexton Common Shares into
any other securities, or make any other dividend or distribution on the
Rykoff-Sexton Common Shares (other than normal cash dividends), or if a record
date with respect to any of the foregoing is set, then the Exchange Ratio will
be appropriately adjusted to reflect such split, reclassification,
combination, dividend or other distribution or change. Based upon the number
of shares of US Foodservice Common Stock outstanding on March 31, 1996,
assuming the exercise of all outstanding Assumed Options and Assumed Warrants
(whether or not currently exercisable), and based upon the maximum Exchange
Ratio permitted by the Merger Agreement, a maximum of 14,296,723 Rykoff-Sexton
Common Shares may be issued in connection with the Merger.
Promptly after the Effective Time, the Exchange Agent will mail a
transmittal form and instructions to each holder of record (other than Rykoff-
Sexton, Merger Sub or any other subsidiary of Rykoff-Sexton) of certificates
that immediately prior to the Effective Time represented outstanding shares of
US Foodservice Common Stock (the "Certificates"), which form and instructions
are to be used in forwarding the Certificates for surrender and exchange for
(i) certificates representing that number of whole Rykoff-Sexton Common Shares
that such holder has the right to receive pursuant to the Merger and (ii) cash
for any fractional Rykoff-Sexton Common Shares to which such holder otherwise
would be entitled. US FOODSERVICE STOCKHOLDERS ARE REQUESTED NOT TO SURRENDER
THEIR CERTIFICATES FOR EXCHANGE UNTIL SUCH TRANSMITTAL FORM AND INSTRUCTIONS
ARE RECEIVED. At and after the Effective Time and until surrendered as
provided above, Certificates will represent solely the right to receive
certificates representing that number of whole Rykoff-Sexton Common Shares
into which the shares of US Foodservice Common Stock formerly represented by
such Certificates were converted in the Merger and a cash payment in lieu of
any fractional shares, and the holders of Certificates will not be entitled to
receive dividends or any other distributions from Rykoff-Sexton until such
Certificates are so surrendered. Upon surrender of a Certificate, there will
be paid to the person in whose name such Rykoff-Sexton Common Shares are
issued any dividends or other distributions which have a record date after the
Effective Time and that became payable prior to such surrender with respect to
such Rykoff-Sexton Common Shares. After such surrender, there will be paid to
the person in whose name the Rykoff-Sexton Common Shares are issued any
dividends or other distributions on such shares that have a record date after
the Effective Time and prior to such surrender and a payment date after such
surrender, and such payment will be made on such payment date. In no event
shall the persons entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions.
BACKGROUND OF THE MERGER
Foodservice Industry Trends
The foodservice distribution business has been characterized in recent years
by stable growth. In 1995, the industry had aggregate sales of approximately
$129 billion, which represented an increase in sales from 1994 of
approximately 4.9% and was generally consistent with growth in previous years.
The foodservice distribution industry is extremely fragmented, with the 50
largest broadline and the 20 largest system and specialty distributors
accounting for less than 40% of the industry's total 1995 sales. The remaining
60%, or $78 billion, of the industry's sales were divided among approximately
3,000 distributors. The broadline distribution business is primarily organized
on a regional or local basis, with national broadline distributors accounting
for only 15% of industry sales.
24
<PAGE>
The foodservice distribution industry, while fragmented, has experienced
substantial consolidation as larger distributors have acquired smaller local
and regional distributors. Consolidation permits large foodservice
distributors to benefit from various economies of scale, increased purchasing
power, and the elimination of redundant management and overhead expenses.
Larger distributors have also been able to take advantage of more
sophisticated management techniques, such as management information systems
specifically designed to enhance customer service, lower costs and increase
operating efficiency.
In response to these trends, Rykoff-Sexton has pursued a strategy of
expanding its foodservice distribution operations, including expansion through
the acquisition of other foodservice companies, and of refocusing its business
from being a niche distributor to a "full-line" distributor offering new
product categories, including center-of-the-plate items such as meat, poultry
and seafood, as well as produce and other perishables. During fiscal 1995 and
the first nine months of fiscal 1996, Rykoff-Sexton completed a number of
strategic acquisitions in new and existing markets, including the purchase of
Baltimore-based Continental in February 1995, the specialty foods division of
Minneapolis-based Olfisco, Inc. in July 1995, and Las Vegas-based H&O Foods in
November 1995. In addition, in October 1994, Rykoff-Sexton sold Tone Brothers,
a spice blending operation, as part of its strategy of focusing on its core
foodservice distribution and private brand manufacturing operations. In the
last several years, Rykoff-Sexton has also built or significantly expanded a
number of facilities, including facilities in Chicago, Philadelphia, Phoenix,
Orlando, Greensboro, North Carolina, St. Louis, Detroit, Cincinnati and Los
Angeles, and expects to commence construction in 1996 of a new distribution
facility in Reno. Rykoff-Sexton has also closed a number of distribution
operations, including operations in Albuquerque, Rochester and Kansas City,
that did not meet Rykoff-Sexton's profit and market share objectives.
US Foodservice is the successor to the 1993 Foodservice Merger which
combined two regional broadline foodservice distributors, Unifax, Inc.
("Unifax") and White Swan. Since the 1993 Foodservice Merger, US Foodservice
has completed a number of strategic acquisitions in new and existing markets,
including the acquisition in 1994 of the assets of four distribution centers,
one in Georgia and three in Florida, and the 1995 acquisitions of the assets
of Fort Myers Meat & Seafood Co. in Fort Myers, Florida and the assets of City
Provisioners, Inc. in Ormond Beach, Florida. At present, US Foodservice serves
more than 40,000 customers in over 30 states, primarily in the Southeastern,
Southwestern and Mid-Atlantic regions of the United States. See "DESCRIPTION
OF US FOODSERVICE."
Rykoff-Sexton's objective is to become a premier broadline foodservice
distributor by generating additional sales to existing customers, establishing
relationships with new customers and providing superior customer service at
the lowest possible cost. Rykoff-Sexton's management believes that the
combination of its business with that of US Foodservice in the Merger will
further Rykoff-Sexton's strategic objective based upon its view that
consolidation in the foodservice distribution industry will continue, and that
sales growth and expansion in existing and into new markets will be essential
to compete as a low cost, high quality distributor in the foodservice
industry. See "--Recommendation of the Rykoff-Sexton Board of Directors;
Reasons for the Merger," "--Potential Cost Savings and Operating Synergies"
and "DESCRIPTION OF US FOODSERVICE."
Chronology of Events Leading up to the Merger
On September 8, 1995, US Foodservice filed a Registration Statement on Form
S-1 for a proposed initial public offering through underwriters (including
MLPF&S) of $170,000,000 in principal amount of debt securities (the "S-1
Registration Statement"). The S-1 Registration Statement was subsequently
amended to reduce the debt offering to $100,000,000 and include up to
approximately 7.2 million shares of US Foodservice Common Stock.
On September 26 and 27, 1995, Mark Van Stekelenburg, President and Chief
Executive Officer of Rykoff-Sexton, and Richard Martin, Senior Vice President
and Chief Financial Officer of Rykoff-Sexton, met with representatives of a
potential equity investor, Arthur Andersen LLP and MLPF&S (who was then
serving as Rykoff-Sexton's general advisor in connection with strategic
acquisitions) to discuss a number of possible acquisition candidates,
including US Foodservice. These discussions did not give rise to a proposal
with respect to a transaction.
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In early October 1995, Mr. Van Stekelenburg and representatives of MLPF&S
met again in Los Angeles to discuss a number of possible acquisition
candidates, including US Foodservice. Later that month, on October 23, 1995,
Mr. Van Stekelenburg asked MLPF&S to put Rykoff-Sexton in contact with US
Foodservice. MLPF&S agreed to do so and advised Mr. Van Stekelenburg that, in
view of the ownership interest of the ML Investors in US Foodservice, MLPF&S
would be unable to advise Rykoff-Sexton regarding any acquisition of US
Foodservice.
Late in October, in light of market conditions and other factors and after
discussions with MLCP and MLPF&S, US Foodservice began pursuing alternatives
to its primary strategy of an initial public offering, including a possible
sale of the company. On October 26, 1995, Mr. Van Stekelenburg received a call
from Frank Bevevino, the Chairman of the Board and Chief Executive Officer of
US Foodservice, to set a date on which they could meet to discuss a possible
business combination involving Rykoff-Sexton and US Foodservice.
On October 30, 1995, US Foodservice filed an amendment to the S-1
Registration Statement.
On November 1, 1995, Messrs. Van Stekelenburg and Bevevino met in
Pittsburgh, Pennsylvania to discuss a possible business combination involving
US Foodservice and Rykoff-Sexton. Messrs. Van Stekelenburg and Bevevino agreed
to continue discussions but the meeting did not otherwise result in a proposal
with respect to a transaction.
On November 2, 1995, Mr. Van Stekelenburg informed the Rykoff-Sexton Board
of Directors of his interest in pursuing a possible business combination with
US Foodservice and his discussions with representatives of US Foodservice.
Rykoff-Sexton's Board authorized management of Rykoff-Sexton to pursue further
discussions with US Foodservice regarding a possible business combination.
On November 9, 1995, Rykoff-Sexton, together with two potential equity
investors, submitted a preliminary proposal to representatives of MLCP, in its
capacity as general partner of majority stockholders of US Foodservice, to
acquire US Foodservice, indicating a value in the range of $16 to $18 per
share. This proposal, which offered the consideration in the form of cash or a
combination of cash and securities, was subject to customary conditions,
including due diligence and receipt of necessary approvals, including approval
of the Rykoff-Sexton Board of Directors. MLCP and US Foodservice had received
and were then evaluating a proposal from another party to acquire US
Foodservice.
On November 20, 1995, Rykoff-Sexton engaged BA Partners of Chicago, Illinois
to provide financial advisory services and to act as Rykoff-Sexton's financial
advisor in connection with a possible business combination involving US
Foodservice. Rykoff-Sexton also agreed to provide certain confidential
information to US Foodservice for the purpose of enabling US Foodservice to
evaluate a possible business combination. US Foodservice entered into a
confidentiality agreement on that date pursuant to which US Foodservice and
its stockholders agreed to maintain confidential information received from
Rykoff-Sexton and not to solicit to employ Rykoff-Sexton officers or employees
for a two-year period. In addition, for a period of three years, US
Foodservice and its stockholders agreed not to acquire Rykoff-Sexton voting
securities or to engage in the solicitation of proxies with regard to Rykoff-
Sexton voting securities or to form any "group" within the meaning of the
Exchange Act relating to Rykoff-Sexton voting securities without Rykoff-
Sexton's written consent.
On November 21, 1995, US Foodservice filed a further amendment to the S-1
Registration Statement and in the following days began preparing for the
marketing of the offering.
On November 21, 1995, Messrs. Van Stekelenburg and Martin, and
representatives of Rykoff-Sexton's potential equity investors who participated
in the November 9th proposal, met with Mr. Bevevino and David McAnally, Chief
Financial Officer of US Foodservice, in Chicago. At the November 21 meeting,
US Foodservice provided information, including financial information, to
enable Rykoff-Sexton to revise Rykoff-Sexton's November 9th proposal.
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On November 28, 1995, Rykoff-Sexton submitted a revised proposal to
representatives of MLCP to acquire all of the outstanding US Foodservice
Common Stock and approximately one million common stock equivalents held by
non-management owners for $22.50 in cash per share (or in Rykoff-Sexton Common
Shares, if desired by such stockholders) and to exchange shares of US
Foodservice Common Stock and common stock equivalents held by management for
Rykoff-Sexton Common Shares valued at $22.50. This proposal assumed redemption
of the Preferred Stock then outstanding for $50.5 million. This proposal was
also subject to customary conditions, including due diligence and receipt of
necessary approvals. MLCP and US Foodservice had received and were then
evaluating a revised proposal from the party that had previously made a
proposal to acquire US Foodservice.
Between November 28 and November 30, 1995, Mr. Van Stekelenburg continued
discussions with Mr. Bevevino of US Foodservice and representatives of MLCP
and MLPF&S regarding several possible variations on the structure for the
acquisition of US Foodservice set forth in the November 28th proposal,
including the possibility of an all stock transaction.
On December 1, 1995, Mr. Van Stekelenburg and a representative of BA
Partners met with representatives of MLCP and MLPF&S to discuss the principal
issues relating to the proposed acquisition by Rykoff-Sexton of US
Foodservice, including the terms of an all stock transaction. At that meeting,
a preliminary agreement was reached for a proposed strategic combination of US
Foodservice and Rykoff-Sexton on the terms described below, as well as an
exclusivity agreement among the parties, and the parties agreed to proceed
with negotiations regarding a letter of intent.
On December 2, 1995, Rykoff-Sexton submitted a proposed letter of intent to
MLCP and US Foodservice relating to a proposed strategic combination of US
Foodservice and Rykoff-Sexton in which each share of US Foodservice Common
Stock would be converted into the right to receive a number of shares of
Rykoff-Sexton Common Shares with a value of $25 per share, and the redemption
of all outstanding Preferred Stock for an aggregate of approximately $50.5
million, together with accrued interest from October 15, 1995 to the date of
redemption. MLCP and US Foodservice had again received and were then
evaluating a revised proposal from the third party that had previously made a
proposal to acquire US Foodservice. From December 2 through December 5, 1995,
members of senior management of US Foodservice, Rykoff-Sexton and MLCP and
their respective advisors engaged in further negotiations with respect to the
terms of the proposed letter of intent.
On December 4, 1995, the Rykoff-Sexton Board of Directors met in a regularly
scheduled meeting. At this meeting, Rykoff-Sexton's senior management made a
presentation on US Foodservice and its business, and discussed with members of
the Board the proposed business combination. Jones, Day, Reavis & Pogue,
Rykoff-Sexton's legal advisor, and BA Partners made presentations to the
Rykoff-Sexton Board of Directors regarding the proposed terms of the letter of
intent and discussed with the Rykoff-Sexton Board of Directors their views and
analyses of the proposed transaction. After discussion and consideration, the
Rykoff-Sexton Board of Directors authorized the execution by Rykoff-Sexton of
the letter of intent.
On December 5, 1995, Rykoff-Sexton, US Foodservice and MLCP, on behalf of
Merrill Lynch Capital Appreciation Partnership No. B-XVIII, L.P., ML Offshore
LBO Partnership No. B-XVIII, Merrill Lynch Capital Appreciation Partnership
No. XIII, L.P. and ML Offshore LBO Partnership No. XIII, executed a letter of
intent (the "Letter of Intent") confirming the parties' agreement to proceed
with negotiations for a proposed strategic combination of Rykoff-Sexton and US
Foodservice pursuant to which the outstanding US Foodservice Common Stock
would be converted into Rykoff-Sexton Common Shares at the Exchange Ratio. The
Letter of Intent also contemplated the redemption of the outstanding Preferred
Stock for approximately $50.5 million in cash (plus accrued and unpaid
interest from October 15, 1995), financing by Rykoff-Sexton of the
transaction, including the restructuring of the indebtedness of the combined
companies, the representation by the ML Entities on the Rykoff-Sexton Board of
Directors, and registration rights for the ML Entities on terms to be
negotiated. The Letter of Intent also contained an agreement that, through
January 19, 1996, US Foodservice, its stockholders and certain other
affiliates would not solicit alternative merger or business combination
proposals from third parties and would, subject to the fiduciary obligations
of US Foodservice and MLCP, negotiate exclusively with Rykoff-Sexton. US
Foodservice and MLCP agreed to pay Rykoff-Sexton an aggregate of $1,000,000 to
cover
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costs and expenses in the event of a termination of the exclusivity provisions
of the Letter of Intent, as permitted by the terms thereof in response to
certain unsolicited proposals. The Letter of Intent did not constitute a
legally binding obligation of the signatories thereto, other than with respect
to the exclusivity provision and a provision requiring joint approval by
Rykoff-Sexton and US Foodservice of press releases regarding the Letter of
Intent or the Merger. The Letter of Intent was otherwise subject to customary
conditions, including the preparation of definitive legal documentation for
the transaction, favorable completion of due diligence, board approvals and
the obtaining of commitments for sufficient financing for the restructuring of
the combined indebtedness of Rykoff-Sexton and US Foodservice. US Foodservice
agreed to postpone its efforts regarding the completion of the initial public
offering although the S-1 Registration Statement remained on file with the SEC
and the bank group that had committed to provide financing in connection with
the initial public offering remained so committed.
Pursuant to an engagement letter dated December 5, 1995, US Foodservice
confirmed its retention of MLPF&S to act as its financial advisor in
connection with the transaction.
On December 6, 1995, Rykoff-Sexton engaged Goldman Sachs to act as financial
co-advisor, along with BA Partners, to Rykoff-Sexton. See "--Opinion of
Financial Advisor to Rykoff-Sexton."
From December 7 through December 9, 1995, Messrs. Van Stekelenburg and
Bevevino met in Florida to discuss general business issues and due diligence
procedures for the transaction.
On December 11, 1995, Rykoff-Sexton and US Foodservice entered into a
confidentiality agreement pursuant to which Rykoff-Sexton agreed to maintain
confidential information received from US Foodservice in connection with the
transaction. From December 11 through December 12, 1995, Mr. Van Stekelenburg
and members of Rykoff-Sexton's senior management team met in Wilkes-Barre,
Pennsylvania with Mr. Bevevino, Thomas McMullen, President of US Foodservice,
Mr. McAnally and other senior management of US Foodservice to discuss in more
detail due diligence and other business issues to be pursued in the coming
weeks. During the balance of December 1995, the parties undertook extensive
financial, business and legal due diligence and representatives of Rykoff-
Sexton met with financing sources and Rykoff-Sexton's legal and financial
advisors. Financial and legal advisors of Rykoff-Sexton also met with advisors
and representatives of US Foodservice.
On December 28, 1995, Rykoff-Sexton's Board of Directors met via a telephone
conference with Rykoff-Sexton's senior management and Rykoff-Sexton's legal
and financial advisors to review with the Board the status of Rykoff-Sexton's
due diligence, negotiations on the definitive transaction documentation, and
discussions with Rykoff-Sexton's lenders regarding the proposed terms of the
Commitment Letter.
In late December 1995 and throughout January 1996, members of senior
management of Rykoff-Sexton and US Foodservice, as well as representatives of
the ML Entities, together with their financial and legal advisors, negotiated
the terms of the Merger Agreement. During this period, representatives of the
ML Entities and Rykoff-Sexton, together with their financial and legal
advisors, negotiated the terms of the ML Agreement, the Standstill Agreement,
the Registration Rights Agreement and the Tax Agreement. During this time, the
parties also continued to exchange financial, business and legal due diligence
materials, conducted additional due diligence and negotiated the terms of the
Commitment Letter.
On January 15, 1996, the Rykoff-Sexton Board of Directors met in a
regularly-scheduled meeting. At this meeting, members of Rykoff-Sexton's
senior management, together with Jones, Day, Reavis & Pogue, Rykoff-Sexton's
legal advisor, BA Partners and Goldman Sachs reviewed with the Rykoff-Sexton
Board, among other things, the background of the proposed Merger, financial
and legal aspects of the transaction, due diligence and synergy analyses
relating to the proposed Merger, valuation analyses relating to the Merger,
the terms of the Merger Agreement, the Standstill Agreement, the ML Agreement
and the Registration Rights Agreement, terms of the proposed refinancing and
the Commitment Letter, issues remaining to be negotiated, and other matters
described below under "--Recommendation of the Rykoff-Sexton Board of
Directors; Reasons for the Merger." Members of Rykoff-Sexton's senior
management and representatives of Jones, Day, Reavis & Pogue and
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Goldman Sachs made presentations to the Rykoff-Sexton Board of Directors and
discussed with the Rykoff-Sexton Board of Directors their views and analyses,
and related issues.
By a letter agreement dated January 18, 1996, MLCP, on behalf of the ML
Entities, and US Foodservice granted an extension of the exclusive negotiating
period under the Letter of Intent from January 19, 1996 to January 25, 1996.
This period was later extended to January 31, 1996, February 1, 1996 and
February 2, 1996 by subsequent letter agreements.
On January 31, 1996, the Rykoff-Sexton Board of Directors met again in a
special meeting. At this meeting, members of Rykoff-Sexton's senior
management, together with Jones, Day, Reavis & Pogue, BA Partners and Goldman
Sachs, reviewed with the Rykoff-Sexton Board, among other things, the current
status of the negotiations on the Merger Agreement and related agreements, as
well as the then current terms of such agreements, financial and legal aspects
of the transaction, valuation analyses relating to the transaction and other
matters described below under "--Recommendation of the Rykoff-Sexton Board of
Directors; Reasons for the Merger." Representatives of Jones, Day, Reavis &
Pogue and Goldman Sachs made presentations to the Rykoff-Sexton Board of
Directors and discussed with the Rykoff-Sexton Board their views and analyses,
and related issues.
On January 31, 1996, the US Foodservice Board of Directors met in a special
meeting. After discussion and consideration, the US Foodservice Board of
Directors approved the Merger Agreement and related agreements by the
unanimous vote of all directors, authorized the execution of such agreements
and recommended that the Merger Agreement be submitted for approval to
stockholders of US Foodservice. In addition, at the January 31st Board
meeting, the US Foodservice Board approved a .396 reverse stock split of the
US Foodservice Common Stock.
On February 2, 1996, the Rykoff-Sexton Board reconvened via telephone
conference for further consideration of the Merger Agreement and related
agreements. At this meeting, members of Rykoff-Sexton's senior management,
together with Jones, Day, Reavis & Pogue, BA Partners and Goldman Sachs
reviewed with the Rykoff-Sexton Board, among other things, the final terms of
the Merger Agreement and related agreements and other matters described below
under "--Recommendation of the Rykoff-Sexton Board of Directors; Reasons for
the Merger." Goldman Sachs delivered its oral opinion to Rykoff-Sexton Board
of Directors, which was subsequently confirmed in a written opinion dated
February 2, 1996 to the effect that as of such date, the number of Rykoff-
Sexton Common Shares to be paid by Rykoff-Sexton for the outstanding US
Foodservice Common Stock pursuant to the Merger Agreement is fair to Rykoff-
Sexton. After discussion and consideration, the Rykoff-Sexton Board approved
the Merger Agreement and the related agreements by the affirmative vote of all
directors present, authorized the execution of such agreements and recommended
that the issuance of shares pursuant to the Merger be submitted for approval
to the stockholders of Rykoff-Sexton. The Rykoff-Sexton Board also approved,
among other things, the draft Commitment Letter presented to it and authorized
officers of Rykoff-Sexton to negotiate, finalize and execute the Commitment
Letter. In addition, on February 2, by unanimous written consent, the Board of
Directors of Merger Sub, approved and adopted the Merger Agreement, and
Rykoff-Sexton, as sole stockholder of Merger Sub, approved and adopted the
Merger Agreement.
On February 2, 1996, the Merger Agreement was executed by Rykoff-Sexton,
Merger Sub and US Foodservice, and the ML Agreement was executed by Rykoff-
Sexton and the ML Entities. In addition, Rykoff-Sexton, BA Securities, Chase
and Chase Securities executed the Commitment Letter and ML IBK, MBIV and US
Foodservice executed an amendment to the ML Redemption Agreement to, among
other things, extend the period for redemption thereunder to (i) the earlier
to occur of (a) the closing of the Merger and (b) July 31, 1996 or (ii) if the
Merger Agreement is earlier terminated, at any time after the later of (a) May
31, 1996 and (b) the date of such termination.
On February 5, 1996, US Foodservice formally applied to the SEC for
withdrawal of the S-1 Registration Statement and all amendments filed with
respect thereto and terminated its commitment from the syndicate of financial
institutions which had committed to provide financing necessary in connection
with the initial public offering.
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EFFECT OF THE MERGER
In connection with the Merger, assuming the maximum number of Rykoff-Sexton
Common Shares are issued in the Merger, the persons who were holders of US
Foodservice Common Stock immediately before the Merger will receive an
aggregate of up to 12,880,552 Rykoff-Sexton Common Shares, representing
approximately 46.5% of the aggregate voting power of the Rykoff-Sexton Common
Shares after the Merger. In addition, up to 1,416,171 Rykoff-Sexton Common
Shares will be reserved for issuance upon the exercise of the Assumed Options
and the Assumed Warrants. Assuming the maximum number of Rykoff-Sexton Common
Shares are issued in the Merger, the ML Investors will receive an aggregate of
up to 10,076,010 Rykoff-Sexton Common Shares, representing approximately 36.4%
of the aggregate voting power of the Rykoff-Sexton Common Shares after the
Merger prior to the exercise of any Assumed Options or Assumed Warrants or any
other outstanding options to acquire Rykoff-Sexton Common Shares.
The resale of the Rykoff-Sexton Common Shares received in the Merger by the
ML Investors and any other "affiliates" (as such term is used in Rules 144 and
145 under the Securities Act) of US Foodservice prior to the Merger will be
restricted. See "--Resale of Rykoff-Sexton Common Shares." Rykoff-Sexton
Common Shares received in the Merger by persons other than "affiliates" will
be freely transferable and will not be restricted except as contemplated by
arrangements entered into by certain US Foodservice employees in connection
with the forgiveness of certain management loans, and except as provided in
the Tax Agreement that the ML Investors and certain other stockholders of US
Foodservice will enter into with Rykoff-Sexton at the Effective Time of the
Merger. See "--Interests of Certain Persons in the Merger--US Foodservice
Management Loans" and "OTHER AGREEMENTS--The Tax Agreement." The ML Investors
will have the right to require Rykoff-Sexton to register all or a portion of
their Rykoff-Sexton Common Shares for sale under the Securities Act, thus
permitting the sale of such Rykoff-Sexton Common Shares to the general public
in the circumstances and subject to the conditions and restrictions set forth
in the Registration Rights Agreement. See "OTHER AGREEMENTS--The Registration
Rights Agreement" and "--Risk Factors--Sale of Shares by ML Investors."
To provide assurances in connection with the qualification of the Merger as
a tax-free reorganization for federal income tax purposes, certain
stockholders of US Foodservice, including all of the ML Investors, will enter
into the Tax Agreement with Rykoff-Sexton at the Effective Time, pursuant to
which each such stockholder will be prohibited from selling, exchanging,
distributing or otherwise disposing of in any manner, during the two-year
period following the Effective Time, more than a certain percentage of the
Rykoff-Sexton Common Shares received in the Merger by such stockholder, with
such percentage to be determined by a formula at the Effective Time. For
purposes, however, of applying the transfer restrictions in the Tax Agreement
to the ML Investors, all of the Rykoff-Sexton Common Shares received in the
Merger by the ML Investors will be aggregated, and the ML Investors will be
treated as a single stockholder. See "OTHER AGREEMENTS--The Tax Agreement."
Pursuant to the Standstill Agreement, the ML Entities will agree, among
other things, to vote their Rykoff-Sexton Common Shares in favor of Rykoff-
Sexton's nominees for the Board of Directors. The ML Entities will also be
entitled to designate four nominees to the Rykoff-Sexton Board of Directors,
which will have twelve members, with such number of nominees and Board members
decreasing if the percentage of outstanding Rykoff-Sexton Common Shares held
by the ML Entities falls below certain levels. As a result of their ownership
interest in Rykoff-Sexton, the ML Entities may also influence the outcome of
other matters submitted to Rykoff-Sexton stockholders. See "--Risk Factors--
Concentration of Ownership" and "OTHER AGREEMENTS--The Standstill Agreement."
RECOMMENDATION OF THE RYKOFF-SEXTON BOARD OF DIRECTORS; REASONS FOR THE MERGER
The Rykoff-Sexton Board of Directors believes that the Merger and the
transactions contemplated thereby are in the best interests of Rykoff-Sexton
and its stockholders. Accordingly, the Board of Directors of Rykoff-Sexton has
approved the Merger Agreement and the Merger, the issuance of the Rykoff-
Sexton Common Shares in the Merger and the reservation of Rykoff-Sexton Common
Shares for issuance under the Assumed Options and the Assumed Warrants, and
recommends that the Rykoff-Sexton stockholders vote FOR the approval of the
issuance of the Rykoff-Sexton Common Shares in connection with the Merger
Agreement.
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In reaching its determination to approve the Merger Agreement and the
transactions contemplated thereby, the Rykoff-Sexton Board of Directors
considered a number of factors, including, without limitation, the factors
listed below. In view of the wide variety of factors considered in connection
with its evaluation of the Merger, the Rykoff-Sexton Board of Directors did
not consider it practicable to, nor did it attempt to, quantify or otherwise
assign relative weights to the specific factors it considered in reaching its
determination.
(i) Management's Recommendation. The Rykoff-Sexton Board of Directors
reviewed presentations from, and discussed the terms and conditions of the
Merger Agreement and the Merger with, senior executive officers of Rykoff-
Sexton, representatives of Rykoff-Sexton's legal counsel and
representatives of Goldman Sachs and BA Partners, Rykoff-Sexton's financial
advisors. The Rykoff-Sexton Board considered management's view of recent
trends in the United States foodservice industry. In particular, the
Rykoff-Sexton Board of Directors considered management's view that a
combination of Rykoff-Sexton's Distribution Division with US Foodservice,
the fifth largest broadline food distribution company in the United States
with a strong local and regional presence, would create an even stronger
competitor in the foodservice distribution industry. Rykoff-Sexton's
management noted that US Foodservice has been successful in integrating a
number of significant, regional acquisitions into an integrated foodservice
distribution business. In making its determination, the Rykoff-Sexton Board
also considered the view expressed by Rykoff-Sexton's management that the
Merger with US Foodservice would further Rykoff-Sexton's strategic
objectives. Rykoff-Sexton's management's view is based on its belief that
the pattern of consolidation in the foodservice industry will continue, and
that sales growth and expansion in existing and into new markets through
acquisitions will be essential to compete as a low-cost, high-quality
national distributor in the foodservice industry. The Rykoff-Sexton Board
also considered management's view that, if Rykoff-Sexton were not to enter
into the Merger Agreement, US Foodservice might well enter into a
combination transaction with another large foodservice distribution company
(an event that might result in gains that Rykoff-Sexton anticipated from
the Merger being realized by a competitor of Rykoff-Sexton) and the
importance of a transaction with US Foodservice in creating a larger
organization in order to maintain historical growth rates in an
increasingly consolidating industry and competitive environment.
(ii) US Foodservice's Business, Condition, Prospects and Management. In
evaluating the terms of the Merger, the Rykoff-Sexton Board of Directors
considered, among other things, the value of US Foodservice's business and
information with respect to the financial condition, results of operations
and businesses of US Foodservice, on both a historical and prospective
basis, and current industry, economic and market conditions. The Rykoff-
Sexton Board of Directors also considered the quality, experience and
breadth of US Foodservice's senior management team, distribution center
management and sales force, and the entrepreneurial, decentralized
corporate culture of US Foodservice. In evaluating US Foodservice's
prospects, the Rykoff-Sexton Board of Directors considered, among other
things, the strengths of US Foodservice's food distribution businesses,
including its strong market share in each of its local and regional markets
in which Rykoff-Sexton has less of a presence, its longstanding customer
relationships, and the challenges facing the foodservice distribution
business, including competition from traditional broadline foodservice
distribution competitors (such as Sysco Corporation and Alliant
Foodservice, Inc.) and specialized system distributors (such as Prosource
Distribution Services, Inc. and AmeriServ Food Company).
(iii) Strategic Benefits. In reviewing the Merger and US Foodservice's
assets and operations, the Rykoff-Sexton Board of Directors reviewed the
complementary nature of the businesses of the two companies, which have
little geographic overlap. The Rykoff-Sexton Board of Directors also
considered the potential of the combined entity to increase sales by
offering complementary product lines and services to customers now only
partially served by Rykoff-Sexton and/or US Foodservice, the economies of
scale, cost savings and synergies that management of Rykoff-Sexton believes
over time may result from the combination of Rykoff-Sexton and US
Foodservice as discussed below under "--Potential Cost Savings and
Operating Synergies," and the availability of experienced management to
address the challenges associated with successfully integrating the
businesses of the two corporations.
(iv) Comparable Transactions. The Rykoff-Sexton Board of Directors also
reviewed comparable transactions in the foodservice industry in considering
the strategic and financial rationale for the Merger.
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The Rykoff-Sexton Board of Directors reviewed a financial comparison of
Rykoff-Sexton and US Foodservice and studied the potential impact of the
Merger on the balance sheet and earnings per share of Rykoff-Sexton, and
the dilution arising from the Merger. The Rykoff-Sexton Board of Directors
also took into account Goldman Sachs' analysis that the aggregate
consideration to be paid pursuant to the Merger Agreement (considered as a
multiple of the latest twelve month sales, earnings before interest, taxes,
depreciation and amortization ("EBITDA") and earnings before interest and
taxes ("EBIT")) was within the range of multiples paid in other selected
merger and acquisition transactions in the foodservice industry. See "--
Opinion of Financial Advisor to Rykoff-Sexton."
(v) Terms and Conditions of the Merger Agreement. The Rykoff-Sexton Board
of Directors considered the terms and conditions of the Merger Agreement,
together with the terms of the ML Agreement, Standstill Agreement,
Registration Rights Agreement, and Tax Agreement, and the amount and form
of consideration to be paid to the stockholders of US Foodservice. The
Rykoff-Sexton Board of Directors also considered provisions of the Merger
Agreement that would require Rykoff-Sexton to pay to US Foodservice a fee
of $4,500,000 plus expenses up to $1,000,000 if the issuance of the Rykoff-
Sexton Common Shares in connection with the Merger is not approved by
Rykoff-Sexton stockholders at a Rykoff-Sexton stockholders meeting
following the public announcement of an RSI Alternative Proposal, and a
definitive agreement with respect to such RSI Alternative Proposal is
executed by Rykoff-Sexton within twelve months of the date on which the
Special Meeting is held. See "THE MERGER AGREEMENT--Expenses; Termination
Fee."
(vi) Opinion of Goldman, Sachs & Co. The Rykoff-Sexton Board of Directors
considered as favorable to its determination the oral opinion delivered by
Goldman Sachs on February 2, 1996, which was subsequently confirmed in a
written opinion to the Rykoff-Sexton Board of Directors dated February 2,
1996, to the effect that as of such date, the aggregate number of Rykoff-
Sexton Common Shares to be paid by Rykoff-Sexton for the outstanding US
Foodservice Common Stock pursuant to the Merger Agreement is fair to
Rykoff-Sexton. The Rykoff-Sexton Board of Directors also considered the
oral and written presentations made to it by Goldman Sachs. See "--Opinion
of Financial Advisor to Rykoff-Sexton." A copy of Goldman Sachs' written
opinion to the Rykoff-Sexton Board of Directors, dated as of the date of
this Proxy Statement/Prospectus, is attached as Appendix B to this Proxy
Statement/Prospectus and is incorporated herein by reference.
(vii) Terms of the Refinancing. The Rykoff-Sexton Board of Directors
considered the terms and conditions of the proposed refinancing of the debt
of Rykoff-Sexton and US Foodservice in connection with the Merger,
including the proposed terms of the New Credit Facility and Receivables
Securitization. The Rykoff-Sexton Board of Directors also evaluated the
effect of such refinancing, including the additional indebtedness of US
Foodservice to be refinanced pursuant to the New Credit Facility, in light
of the potential synergies and cost savings which management believes could
result from the transaction, as well as the effect on Rykoff-Sexton of
increased indebtedness resulting from the Merger.
POTENTIAL COST SAVINGS AND OPERATING SYNERGIES
In evaluating the terms of the Merger, the Rykoff-Sexton Board of Directors
considered management's view that the Merger could create opportunities for
cost savings of approximately $10 million during the first twelve-month period
following the Effective Time, $20 million during the second twelve-month
period following the Effective Time, and $30 million annually thereafter.
These estimates were based on preliminary evaluations of opportunities for the
combined foodservice businesses of Rykoff-Sexton and US Foodservice to benefit
from cost savings and other synergies associated with various economies of
scale (both in manufacturing and in distribution), increased purchasing power,
and the elimination of redundant management and overhead expenses. Rykoff-
Sexton's management believes that the bulk of these cost savings should be
derived from the following opportunities:
(i) Enhanced purchasing leverage (resulting in a lower cost of goods) and
more favorable sales and marketing allowances from suppliers resulting from
the increased purchasing power of the combined companies;
(ii) Opportunities to increase Rykoff-Sexton's sales volume for self-
manufactured items;
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(iii) The combination of Rykoff-Sexton's and US Foodservice's management
and administrative functions, and the elimination of costs associated with
redundant departments and functions;
(iv) Opportunities to achieve operating efficiencies and synergies,
including (a) the consolidation of overlapping distribution centers and
related management teams, and reduction of redundant facility costs, and
(b) consolidation of transportation, routing and service logistics for
facilities with overlapping service areas, including the transfer of
customers from facilities servicing customers on a high cost, long-distance
basis to facilities within a closer geographic proximity;
(v) The capacity of the combined entity to increase sales by offering
additional product lines and services to customers now only partially
served by Rykoff-Sexton and/or US Foodservice, in particular, opportunities
for US Foodservice to (a) offer Rykoff-Sexton's line of equipment and
supplies, and contract and design services to additional customers through
US Foodservice's sales force, (b) sell Rykoff-Sexton's private label,
branded products which generally carry a higher gross margin, and (c) sell
Rykoff-Sexton's broad product line of imported specialty foods sourced
directly from Rykoff-Sexton's own re-distribution warehouses;
(vi) Cost savings from integrated, combined purchasing of equipment and
miscellaneous supplies, labels and packaging; and
(vii) Rationalization and consolidation of employee benefit plans,
including combined purchasing of insurance.
The cost savings estimates were developed solely for purposes of evaluating
the Merger, do not include non-recurring adjustments that will be recorded in
conjunction with the Merger, and should not be relied upon as an estimate of
actual cost savings that may be achieved. These estimates are based upon
assumptions that are inherently uncertain, though considered reasonable by
Rykoff-Sexton, and are subject to significant business, economic and
competitive uncertainties which are difficult to predict and often beyond the
control of management. Rykoff-Sexton and US Foodservice are currently
developing a strategy for implementing specific cost-saving measures and
operating synergies.
OPINION OF FINANCIAL ADVISOR TO RYKOFF-SEXTON
Rykoff-Sexton retained Goldman Sachs on December 6, 1995 as Rykoff-Sexton's
financial co-advisor (with BA Partners) in connection with the transaction
contemplated by the Merger Agreement.
At the request of Rykoff-Sexton, on February 2, 1996, Goldman Sachs
delivered an oral opinion to the Rykoff-Sexton Board of Directors, which was
subsequently confirmed in a written opinion dated February 2, 1996, to the
effect that as of such date, the aggregate number of Rykoff-Sexton Common
Shares to be paid by Rykoff-Sexton for the outstanding US Foodservice Common
Stock pursuant to the Merger Agreement is fair to Rykoff-Sexton. Goldman Sachs
has confirmed such opinion by delivery of a written opinion dated as of the
date of this Proxy Statement/Prospectus. The full text of the written opinion
of Goldman Sachs dated as of the date of this Proxy Statement/Prospectus is
set forth as Appendix B to this Proxy Statement/Prospectus and describes the
assumptions made, matters considered and limits on the review undertaken.
Rykoff-Sexton stockholders are urged to read the opinion in its entirety.
Goldman Sachs' opinion was directed to the Rykoff-Sexton Board of Directors in
connection with and for the purposes of their evaluation of the Merger
Agreement, and does not constitute a recommendation to any stockholder of
Rykoff-Sexton as to how such stockholder should vote with respect to the
approval of the issuance of Rykoff-Sexton Common Shares in connection with the
Merger Agreement.
In connection with its opinion, Goldman Sachs reviewed, among other things:
the Merger Agreement; the Registration Statement on Form S-4, including this
Proxy Statement/Prospectus; Annual Reports to Stockholders and Annual Reports
on Form 10-K of Rykoff-Sexton for the five fiscal years ended April 29, 1995;
certain interim reports to stockholders of Rykoff-Sexton and Quarterly Reports
on Form 10-Q of Rykoff-Sexton; certain other communications from Rykoff-Sexton
to its stockholders; audited financial statements of US Foodservice for the
three fiscal years ended December 30, 1995 and the twenty-seven weeks ended
January 2, 1993; certain
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internal financial analyses and forecasts for Rykoff-Sexton and US Foodservice
prepared by their respective managements; and certain internal forecasts for
Rykoff-Sexton and US Foodservice on a combined basis, after giving effect to
the Merger, prepared by the respective managements of Rykoff-Sexton and US
Foodservice. Goldman Sachs also held discussions with members of the senior
managements of Rykoff-Sexton and US Foodservice regarding the past and current
business operations, financial condition, future prospects of their respective
companies and the potential future prospects of their respective companies on
a combined basis, after giving effect to the Merger. In addition, Goldman
Sachs reviewed the reported price and trading activity for the Rykoff-Sexton
Common Shares, compared certain financial and stock market information for
Rykoff-Sexton with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the foodservice distribution industry
specifically and in other industries generally and performed such other
studies and analyses as it considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion, and any inaccuracy in or lack of completeness of such
information might or might not affect Goldman Sachs' evaluation of the
fairness of the Rykoff-Sexton Common Shares to be issued to US Foodservice
stockholders in the Merger. Goldman Sachs relied on the managements of Rykoff-
Sexton and US Foodservice as to the reasonableness and achievability of the
financial and operating forecasts (and the assumptions and bases therefor)
provided to it, and with the consent of the Rykoff-Sexton Board of Directors,
Goldman Sachs assumed that such forecasts, including without limitation
projected cost savings and operating synergies resulting from the Merger,
reflect the best then available estimates and judgements of such respective
managements and that such projections and forecasts will be realized in the
amounts and time periods then estimated by the managements of Rykoff-Sexton
and US Foodservice. Further, in its evaluation of the fairness of the Rykoff-
Sexton Common Shares to be issued to US Foodservice stockholders in the
Merger, Goldman Sachs assumed, with the permission of the Rykoff-Sexton Board
of Directors, that the consummation of the Merger would not result in a change
of control of Rykoff-Sexton. In addition, Goldman Sachs has not made an
independent evaluation or appraisal of the assets and liabilities of Rykoff-
Sexton or US Foodservice or any of their subsidiaries, and Goldman Sachs has
not been furnished with any such evaluation or appraisal.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its opinion to the Board of
Directors of Rykoff-Sexton on February 2, 1996. Certain financial data
contained in the summary has been restated to account for a savings of
approximately $15 million resulting from the redemption in March 1996 of the
10% Preferred Stock of US Foodservice pursuant to the terms of the Sara Lee
Redemption Agreement and the redemption of the Exchangeable Preferred Stock of
US Foodservice pursuant to the terms of the ML Redemption Agreement. See "--
Redemption or Purchase of Preferred Stock." This summary does not purport to
be a complete description of Goldman Sachs' written analyses or its
presentations to the Rykoff-Sexton Board of Directors.
Selected Companies Analysis--Public Market Observations, Comparison of
Selected Food Distribution Companies. Goldman Sachs reviewed and compared
certain financial information relating to Rykoff-Sexton to corresponding
financial information for three foodservice distributors: JP Foodservice Inc.,
Performance Food Group, and Sysco Corp. (the "Distributors"); and five food
wholesalers: Fleming Company Inc., Nash Finch Co., Richfood Holdings, Inc.,
Super Food Services and Supervalu Inc. (the "Wholesalers" and, together with
the Distributors, the "Selected Companies"). In its analysis, Goldman Sachs
calculated and compared various financial multiples and ratios with respect to
Rykoff-Sexton and the Selected Companies based on stock prices as of January
26, 1996 (except in the case of JP Foodservice Inc., as to which such
multiples and ratios were based on the stock price as of November 30, 1995).
Goldman Sachs considered enterprise value (equity market capitalization plus
debt, minority interests and preferred stock less cash) as a multiple of
latest twelve months ("LTM") sales, EBITDA and EBIT. Goldman Sachs' analysis
indicated enterprise value as a multiple of (i) LTM sales ranging from 0.30x
to 0.50x for the Distributors and from 0.10x to 0.49x for the Wholesalers, as
compared to a multiple of 0.25x for Rykoff-Sexton; (ii) LTM EBITDA ranging
from 8.4x to 10.4x for the Distributors and from 4.2x to 13.0x for the
Wholesalers, as compared to a multiple of 11.1x for Rykoff-Sexton;
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and (iii) LTM EBIT ranging from 11.2x to 13.9x for the Distributors and from
7.4x to 17.1x for the Wholesalers, as compared to a multiple of 20.7x for
Rykoff-Sexton.
Goldman Sachs also compared the price/earnings ratios for the Selected
Companies and Rykoff-Sexton based on LTM earnings ("LTM Earnings") and
estimated calendar year earnings for 1995 ("1995E Earnings") and 1996 ("1996E
Earnings"). This analysis indicated price/earnings ratios (i) based on LTM
Earnings, ranging from 16.1x to 22.2x for the Distributors and from 10.9x to
53.0x for the Wholesalers, as compared to 47.3x for Rykoff-Sexton; (ii) based
on 1995E Earnings, ranging from 18.8x to 21.3x for the Distributors and 12.7x
to 21.3x for the Wholesalers, as compared to 21.1x for Rykoff-Sexton; and
(iii) based on 1996E Earnings, ranging from 15.3x to 18.6x for the
Distributors and from 11.9x to 18.6x for the Wholesalers, as compared to 13.7x
for Rykoff-Sexton. The 1995E Earnings and 1996E Earnings reflect medians
derived from an aggregation of estimates, as reported by the Institutional
Broker Estimate Service ("IBES") as of January 24, 1996, of financial analysts
covering Rykoff-Sexton and the Selected Companies, based on each analyst's
financial model for the respective companies. Goldman Sachs also reviewed the
estimated IBES Long Term EPS Growth Rates for Rykoff-Sexton and the Selected
Companies, which indicated estimated five-year growth rates ranging from 11.5%
to 20% for the Distributors and from 6.0% to 14.0% for the Wholesalers, as
compared to an estimated rate of 13.0% for Rykoff-Sexton.
Selected Transactions. Goldman Sachs reviewed and compared to the Merger the
consideration paid in certain other selected merger and acquisition
transactions in the foodservice industry (the "Selected Transactions"). The
transactions reviewed (and the respective closing dates thereof) were: Rykoff-
Sexton/H&O Foods (11/95); ProSource Distribution Service (Onex Corp.)/Martin-
Brower Co. (3/95); Clayton Dubilier & Rice/Kraft Foodservice (2/95); Rykoff-
Sexton/Continental Foods (2/95); Unifax/White Swan (9/93); SUPERVALU/Wetterau
(10/92); Wal-Mart/McLane (12/90); Kraft/3 Branches of PYA (7/89); Chase
Manhattan Bank/PYA North and Midwest (J.P. Foodservice) (7/89);
Management/White Swan (division of Fleming Companies) (10/88); Sysco Corp./CFS
Continental (10/88); Management/IU Foodservice (Biggers) (8/88); Marriott
Corp./Saga Corp. (8/86); ARA Holding Company/ARA Services Inc. (12/84); and
Staley Manufacturing/CFS Continental Inc. (11/84). Goldman Sachs calculated
the aggregate consideration paid in the Selected Transactions as multiples of
LTM sales, EBITDA and EBIT of the acquired entities. This analysis resulted in
multiples ranging as follows: (i) from 0.19x to.44x for LTM sales; (ii) from
4.5x to 10.1x for LTM EBITDA; and (iii) from 7.9x to 18.2x for LTM EBIT.
Goldman Sachs also calculated the equity consideration paid in the Selected
Transactions as a multiple of net income. This calculation indicated a range
of 12.8x to 26.8x.
Implied Multiples Analysis. Goldman Sachs reviewed certain implied multiples
for the Merger based on US Foodservice's LTM results and also computed
multiples for the Merger based on US Foodservice's results for the calendar
year 1994 ("CY 1994") and its estimated results for the calendar years 1995
("CY 1995E") and 1996 ("CY 1996E"). This analysis indicated aggregate
consideration to be paid in the Merger as a multiple of LTM sales of 0.39x,
EBITDA of 9.9x and EBIT of 13.3x; CY 1994 sales of 0.43x, EBITDA of 10.6x and
EBIT of 14.0x; CY 1995E sales of 0.37x, EBITDA of 9.1x and EBIT of 12.7x; and
CY 1996E sales of 0.36x, EBITDA of 8.0x and EBIT of 10.7x. Goldman Sachs also
calculated the foregoing multiples for the Merger assuming annual pre-tax
synergies ("APS") resulting from the transaction (based on Rykoff-Sexton and
US Foodservice management estimates of potential synergies) ranging from $10
million to $30 million. These calculations resulted in total consideration to
be paid in the Merger as a multiple of EBITDA ranging from 5.8x (based on CY
1996E and an assumption of $30 million in APS) to 9.1x (based on CY 1994 and
an assumption of $10 million in APS) and EBIT ranging from 7.1x (based on CY
1996E and an assumption of $30 million in APS) to 11.5x (based on CY 1994 and
an assumption of $10 million in APS). Goldman Sachs also calculated the equity
consideration to be paid in the Merger as a multiple of net income available
to common stock. This analysis resulted in multiples for the Merger ranging
from 79.4x (based on LTM net income and no assumed APS) to 10.0x (based on CY
1996E net income and an assumption of $30 million in APS).
Historical Stock Trading Analysis. Goldman Sachs reviewed historical trading
prices and volumes for the Rykoff-Sexton Common Shares. Such review included,
among other things, an analysis of the weighted average
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market price of the Rykoff-Sexton Common Shares and the total volume of
Rykoff-Sexton Common Shares traded as a percentage of Rykoff-Sexton Common
Shares outstanding during the period of January 25, 1991 to January 25, 1996.
Such analysis indicated a weighted average market price of $16.27 per share
with 190.7% of the total outstanding Rykoff-Sexton Common Shares traded in
such period. Such review also included an analysis of the weighted average
market price of the Rykoff-Sexton Common Shares outstanding during the LTM
period preceding January 25, 1996. Such analysis indicated an LTM weighted
average market price of $20.08 per share (based on daily closing prices for
the Rykoff-Sexton Common Shares during such period) with 55.0% of the total
outstanding shares of Rykoff-Sexton traded in such period.
Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash
flow analysis based on US Foodservice management's projected free cash flow of
US Foodservice for the fiscal years 1997 through 2004 using discount rates
ranging from 9% to 13%. Goldman Sachs calculated the terminal value of US
Foodservice at 2004 based on assumed perpetual growth rates in free cash flow
ranging from 3% to 7% and discounted such terminal values to present value
using discount rates ranging from 9% to 13%. The above values and rates
produced implied per share values ranging from $7 to $157.
Pro Forma Contribution Analysis. Goldman Sachs reviewed certain historical
and estimated financial information (including sales, EBITDA, EBIT and net
income) for Rykoff-Sexton, US Foodservice and the pro forma combined entity
resulting from the Merger and analyzed the relative contributions of Rykoff-
Sexton and US Foodservice to the combined entity based on this review. Based
on the foregoing information, Goldman Sachs calculated a contribution by US
Foodservice to: (i) combined entity sales of 49.7% (based on LTM sales), 47.3%
(based on estimated fiscal year 1997 sales ("FY 1997E")) and 46.7% (based on
estimated fiscal year 1998 sales ("FY 1998E")); (ii) combined entity EBITDA of
59.4% (based on LTM EBITDA), 51.9% (based on FY 1997E EBITDA) and 50.5% (based
on FY 1998E EBITDA); (iii) combined entity EBIT of 64.5% (based on LTM EBIT),
54.4% (based on FY 1997E EBIT) and 52.7% (based on FY 1998E EBIT); and (iv)
net income of the combined entity of 55.6% (based on LTM net income), 46.9%
(based on FY 1997E net income) and 45.6% (based on FY 1998E net income).
Pro Forma Merger Analysis. Goldman Sachs prepared pro forma analyses of the
financial impact of the Merger using estimates of earnings per share ("EPS")
for Rykoff-Sexton and US Foodservice prepared by their respective managements
for the LTM, the fiscal year ended April 30, 1996, and the 1997, 1998 and 1999
fiscal years. Goldman Sachs performed these analyses assuming an Exchange
Ratio of 1.457 and a 40-year amortization period for goodwill. Goldman Sachs
compared the stand-alone estimated EPS of Rykoff-Sexton for the LTM and the
fiscal year ended April 30, 1996 to the pro forma estimated EPS of the
combined companies (with no assumed APS). This analysis indicated that, with
no APS, the estimated EPS of the combined companies would be 86.9% and 62.4%
lower than estimated EPS for Rykoff-Sexton on a stand-alone basis for the same
periods. Goldman Sachs also compared the estimated stand-alone EPS data for
the 1997, 1998 and 1999 fiscal years to the corresponding pro forma estimated
EPS of the combined companies assuming no APS and assuming APS of (i) $10
million, $20 million and $30 million ("Case I Synergies") and (ii) $15
million, $28.8 million and $42.7 million ("Case II Synergies"), in each case
for the 1997, 1998 and 1999 fiscal years, respectively. Goldman Sachs'
calculation indicated that, assuming Case I Synergies, estimated EPS of the
combined companies would be 7.7% lower than estimated stand-alone EPS data for
1997, and 4.8% and 29.9% accretive for 1998 and 1999 respectively. Goldman
Sachs' calculation also indicated that estimated EPS of the combined companies
would range from being 27.9% lower than estimated stand-alone EPS data for
1997 (assuming no APS) to being 48.1% accretive for 1999 (assuming Case II
Synergies).
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without
considering the analysis as a whole, could create an incomplete view of the
processes underlying Goldman Sachs' opinion. In arriving at its fairness
determination, Goldman Sachs considered the results of all such analyses and
did not rely exclusively on any single analyses, and did not exclude any of
the analyses summarized above in reaching its opinion that the Rykoff-Sexton
Common Shares to be issued to US Foodservice
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stockholders for the outstanding US Foodservice Common Stock pursuant to the
Merger Agreement is fair to Rykoff-Sexton. No factor was assigned a greater
weight by Goldman Sachs in reaching its opinion; rather Goldman Sachs
considered all of the analyses together in coming to the determination of
fairness. No company or transaction used in the above analysis as a comparison
is identical to Rykoff-Sexton or US Foodservice or the contemplated
transaction. The analyses were prepared solely for purposes of Goldman Sachs'
providing its opinion as to the fairness to Rykoff-Sexton of the Rykoff-Sexton
Common Shares consideration to be paid pursuant to the Merger Agreement and do
not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts
of future results are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested by such
analyses. As described above, Goldman Sachs' opinion and presentation to the
Rykoff-Sexton Board of Directors were one of many factors taken into
consideration by the Rykoff-Sexton Board in making its determination to
approve the Merger. The foregoing summary does not purport to be a complete
description of the analysis performed by Goldman Sachs and is qualified by
reference to the written opinion of Goldman Sachs attached as Appendix B to
this Proxy Statement/Prospectus.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Rykoff-Sexton
selected Goldman Sachs as its financial advisor because it is a nationally
recognized investment banking firm that has substantial experience in
transactions similar to the Merger. Goldman Sachs is familiar with Rykoff-
Sexton, having acted as its financial advisor in connection with the Merger
Agreement. Goldman Sachs provides a full range of financial, advisory and
brokerage services and in the course of its normal trading activities may from
time to time effect transactions and hold positions in the securities or
options on securities of Rykoff-Sexton for its own account and for the account
of customers.
Pursuant to a letter agreement dated December 14, 1995 (the "Engagement
Letter"), Rykoff-Sexton has agreed to pay to Goldman Sachs a non-refundable
fee of $100,000 ("Minimum Fee") which will be credited against any other fees
payable pursuant to the Engagement Letter. In addition, if at least 50% of the
outstanding common stock of US Foodservice, or at least 50% of the assets
(based on the book value thereof) of US Foodservice is acquired in one or more
transactions, Rykoff-Sexton has agreed to pay Goldman Sachs a transaction fee
equal to $1,500,000, less the Minimum Fee already paid. If less than 50% of
the outstanding common stock or assets (based on the book value thereof) of US
Foodservice is acquired, Rykoff-Sexton has agreed to pay Goldman Sachs a
transaction fee to be mutually agreed upon by Rykoff-Sexton and Goldman Sachs.
In addition, if the Merger is not consummated and Rykoff-Sexton receives a
break-up fee, topping fee or other similar payment from US Foodservice or its
stockholders (such fee or payment, less any out-of-pocket expenses incurred by
Rykoff-Sexton in connection therewith and not reimbursed, "Break-up Fee"),
Rykoff-Sexton has agreed to pay Goldman Sachs 5% of such Break-up Fee (less
any fees already paid pursuant to the Engagement Letter), in cash upon receipt
thereof by Rykoff-Sexton. The Merger Agreement does not provide for the
payment of any such Break-up Fee by US Foodservice or its stockholders.
Pursuant to the Engagement Letter, Rykoff-Sexton has also offered Goldman
Sachs the right to act as lead manager or agent (with BA Securities as co-
manager or co-agent) in any offering or placement of debt securities relating
to any refinancing of any indebtedness incurred or refinanced in connection
with the transactions contemplated by the Merger Agreement.
In addition, pursuant to the Engagement Letter, whether or not a transaction
is consummated, Rykoff-Sexton will pay Goldman Sachs reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of its attorneys,
plus any Illinois sales, use or similar taxes (including additions to such
taxes, if any) in connection with any matter referred to in the Engagement
Letter. Rykoff-Sexton has also agreed to indemnify Goldman Sachs against
certain liabilities, including certain liabilities arising under the Federal
securities laws.
Pursuant to a letter agreement dated November 20, 1995 (the "BA Engagement
Letter"), Rykoff-Sexton engaged BA Partners, a division of BA Securities, to
act as its financial advisor. Pursuant to the terms of the BA Engagement
Letter, Rykoff-Sexton agreed to pay to BA Partners a non-refundable fee of
$100,000 (the "BA
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Minimum Fee"), which will be credited against any other fees payable pursuant
to the BA Engagement Letter. In addition, if Rykoff-Sexton acquires at least
50% of the capital stock of US Foodservice or at least 50% of the business and
properties (based on the book value thereof) of US Foodservice, then Rykoff-
Sexton has agreed to pay BA Partners a success fee equal to $1,500,000, less
the BA Minimum Fee already paid. If less than 50% of capital stock or the
business and properties (based on the book value thereof) of US Foodservice is
acquired, Rykoff-Sexton has agreed to pay BA Partners a transaction fee to be
mutually agreed upon by Rykoff-Sexton and BA Partners. In addition, if the
Merger is not consummated and Rykoff-Sexton receives a break-up fee, topping
fee or other similar payment from US Foodservice or its stockholders, Rykoff-
Sexton agrees to pay BA Partners 5% of such break-up fee (less any fees
already paid pursuant to the BA Engagement Letter), in cash upon receipt by
Rykoff-Sexton. The Merger Agreement does not provide for the payment of any
such break-up fee by US Foodservice or its stockholders. The BA Engagement
Letter also provides that it is Rykoff-Sexton's intention to engage BA
Securities as an underwriter of any underwritten public debt offering or Rule
144A debt offering the proceeds of which are used to finance, or refinance
other debt incurred to finance, the transactions contemplated by the Merger.
In addition, pursuant to the BA Engagement Letter, whether or not a
transaction is consummated, Rykoff-Sexton will pay BA Partners reasonable out-
of-pocket expenses, including reasonable fees and expenses of its attorneys.
Rykoff-Sexton has also agreed to indemnify BA Partners against certain
liabilities, including certain liabilities arising under the Federal
securities laws.
BA Partners was not requested to, and did not provide, a fairness opinion to
the Rykoff-Sexton Board of Directors.
REDEMPTION OR PURCHASE OF PREFERRED STOCK
It is a condition precedent to the Merger that (i) all shares of US
Foodservice's Exchangeable Preferred Stock shall have been purchased by
Rykoff-Sexton or Merger Sub pursuant to the terms of the ML Redemption
Agreement or otherwise in accordance with the terms of the Merger Agreement,
and (ii) all shares of US Foodservice's 10% Preferred Stock shall have been
redeemed pursuant to the terms of the Sara Lee Redemption Agreement or
otherwise in accordance with the terms of the Merger Agreement. The Stock
Redemption Agreements provide for redemption prices at a discount from the
redemption prices payable pursuant to the US Foodservice Restated Certificate
of Incorporation, as amended (the "US Foodservice Charter"). The Sara Lee
Redemption Agreement contained a termination date of March 15, 1996. The
Merger Agreement required US Foodservice to use its best efforts to negotiate
and arrange committed bank loan financing to enable US Foodservice to fund,
prior to March 15, 1996, the full purchase price for the purchase of the 10%
Preferred Stock as set forth in the Sara Lee Redemption Agreement ("Sara Lee
Bridge Financing").
On February 15, 1996, US Foodservice entered into amendments to its existing
bank credit agreement dated as of September 23, 1993, among US Foodservice,
certain of US Foodservice's subsidiaries, as guarantors, and the lenders
parties thereto (the "Existing Credit Facility"), to increase by $20 million
the principal amount available under the revolving credit portion of the
Existing Credit Facility and modified certain financial covenants to reflect
additional borrowings necessary to effect the Sara Lee Bridge Financing. On
March 1, 1996, US Foodservice completed the Sara Lee Bridge Financing and
effected the purchase of the 10% Preferred Stock for a total price of
$21,261,916.
ML IBK and MBIV, each of which is an affiliate of ML & Co., currently hold
all of the issued and outstanding shares of Exchangeable Preferred Stock. Upon
redemption of the Exchangeable Preferred Stock pursuant to the ML Redemption
Agreement, ML IBK and MBIV will receive a total of approximately $24.4 million
(representing approximately $16.8 million in redemption price plus
approximately $7.6 million in accrued but unpaid dividends) plus accrued
interest at the rate of 15% per annum from October 15, 1995 to the date of
redemption. Such interest would total approximately $2.3 million as of May 31,
1996, resulting in a total redemption price on such date of approximately
$26.7 million pursuant to the ML Redemption Agreement.
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The ML Redemption Agreement provides that it may be terminated by either
party (i) on the earlier to occur of (a) the closing of the Merger and (b)
July 31, 1996 or (ii) if the Merger Agreement is earlier terminated, at any
time after the later of (a) May 31, 1996 and (b) the date of such termination.
Any redemption of the Exchangeable Preferred Stock pursuant to the Merger
Agreement will be deemed to occur immediately prior to the Effective Time. If
the Exchangeable Preferred Stock is redeemed on the closing of the Merger and
in connection with the consummation of the transactions contemplated by the
Merger Agreement, Rykoff-Sexton will make, on behalf of US Foodservice, all
the required payments under the ML Redemption Agreement directly to the
respective holders of the Exchangeable Preferred Stock.
Pursuant to the Merger Agreement, except as otherwise expressly provided for
therein, US Foodservice has agreed not to amend the ML Redemption Agreement or
redeem the Exchangeable Preferred Stock prior to the earlier of the closing of
the Merger and July 31, 1996 without the prior written consent of Rykoff-
Sexton.
RYKOFF-SEXTON FINANCING AND RECEIVABLES SECURITIZATION
Pursuant to the Commitment Letter, BofA and Chase each have committed
severally to provide funding of (i) up to $242.5 million toward the New Credit
Facility and (ii) up to $55 million toward the Receivables Securitization,
subject to the terms and conditions set forth in the Commitment Letter. BofA
will serve as the administrative agent, BA Securities will serve as
syndication agent and Chase will serve as an agent under the New Credit
Facility. In addition, BA Securities and Chase Securities will act as co-
arrangers in the syndication of the New Credit Facility to other financial
institutions acceptable to BofA, Chase and Rykoff-Sexton. The obligations of
Rykoff-Sexton, Merger Sub and US Foodservice to effect the Merger are subject
to the condition that all conditions precedent to the closing of the financing
described in the Commitment Letter shall have been satisfied and that the
transactions contemplated by the Commitment Letter shall have been
consummated. There are no specific plans for alternative sources of financing
the transaction if the conditions precedent described in the Commitment Letter
are unable to be satisfied. There can be no assurance as to whether, or the
definitive terms on which, the New Credit Facility and the Receivables
Securitization actually will be available to Rykoff-Sexton.
New Credit Facility. The Commitment Letter contemplates a New Credit
Facility providing for a $485 million financing comprised of three term loan
facilities, Tranche A, Tranche B and Tranche C, in an aggregate principal
amount of $335 million and the Revolver, a $150 million revolving credit
facility. The term loans will be in the following principal amounts: $150
million for the Tranche A Term Loan, $125 million for the Tranche B Term Loan,
and $60 million for the Tranche C Term Loan, with BA Securities and Chase
Securities reserving the right to shift up to $25 million of the Term Loan
Facilities among Tranches A, B and C and to adjust the amortization schedule
accordingly. The amount available under the Revolver will include a letter of
credit sublimit of $45 million and a swingline facility of up to $15 million.
The Tranche A Term Loan, the Tranche B Term Loan, the Tranche C Term Loan and
the Revolver will mature on October 31, 2001, October 31, 2002, April 30,
2003, and October 31, 2001, respectively.
Under the New Credit Facility, Rykoff-Sexton may elect to have the principal
amount of outstanding loans bear interest at rates per annum based on either
the "Base Rate" or "LIBOR," plus the "Applicable Margin." The Base Rate is
defined as the higher of (i) the Federal Funds Rate, plus 1/2 of 1% or (ii)
the average of the rates publicly announced from time to time by BofA and
Chase as their "reference rate." LIBOR is defined as the London Interbank
Offered Rate for the corresponding deposits of U.S. Dollars.
The Applicable Margins for the Revolver and the Tranche A Term Loan on the
Closing Date and for six months following the Closing Date will be 1 1/4% in
the case of Base Rate loans and 2 1/2% in the case of LIBOR loans. Thereafter,
the Applicable Margins for the Revolver and the Tranche A Term will be subject
to adjustment. The Applicable Margins for the Tranche B Term Loan will be 1
3/4% in the case of Base Rate loans and 3% in the case of LIBOR loans. The
Applicable Margins for the Tranche C Term Loan will be 2% in the case of Base
Rate loans and 3 1/4% in the case of LIBOR loans.
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Under the structure of the New Credit Facility contemplated by the
Commitment Letter, each of Rykoff-Sexton's subsidiaries (other than the SPC,
as hereinafter defined) will guaranty Rykoff-Sexton's obligations under the
New Credit Facility. Each such subsidiary will also guaranty Rykoff-Sexton's
obligations with respect to the $130 million 8 7/8% Senior Subordinated Notes
due 2003 (the "8 7/8% Notes") issued under an Indenture dated as of November
1, 1993, between Rykoff-Sexton and Norwest Bank Minnesota, N.A. as Trustee,
which will remain outstanding after the closing of the Merger. The
subsidiaries' obligations under their guaranties of Rykoff-Sexton's
obligations with respect to the 8 7/8% Notes will be subordinated to the
subsidiaries' obligations under their guaranties of Rykoff-Sexton's
obligations under the New Credit Agreement to the same extent as Rykoff-
Sexton's obligations with respect to the 8 7/8% Notes are subordinated to
Rykoff-Sexton's obligations under the New Credit Agreement. The New Credit
Facility will be secured by liens on substantially all of the assets of
Rykoff-Sexton and its subsidiaries, other than accounts receivable that will
be sold pursuant to the Receivables Securitization and any US Foodservice
receivables financing facility.
Consummation of the transactions contemplated by the Commitment Letter is
subject to the satisfaction or waiver of a number of conditions precedent,
including: (i) finalizing the structure, terms and documentation for the New
Credit Facility; (ii) satisfaction of all conditions precedent to the Merger;
(iii) the 8 7/8% Notes and US Foodservice's $90 million receivables
securitization program remaining outstanding; (iv) receipt of at least $110
million in initial cash proceeds from the SPC in connection with the
Receivables Securitization; (v) no litigation (a) with respect to the Merger
or the New Credit Facility, or (b) which could be reasonably expected to have
a material adverse effect on Rykoff-Sexton after giving effect to the Merger;
(vi) satisfactory outcome of pending arbitration claims (see "DESCRIPTION OF
RYKOFF-SEXTON--Litigation"); (vii) satisfactory legal due diligence; and
(viii) no material adverse change in the market for senior debt financing or
the financial markets generally. Accordingly, there can be no assurance as to
whether, or the definitive terms on which, the New Credit Facility actually
will be available to Rykoff-Sexton.
Receivables Securitization. The Receivables Securitization will consist of a
$110 million program for Rykoff-Sexton. The Receivables Securitization will be
structured as sales of certain accounts receivable of Rykoff-Sexton and its
subsidiaries to a bankruptcy-remote, special-purpose, wholly owned subsidiary
of Rykoff-Sexton (the "SPC"). The SPC, in turn, will sell the receivables it
purchases, or undivided interests therein, to an unaffiliated financing
vehicle for cash or cash equivalents. US Foodservice intends to restructure or
refinance the present US Foodservice receivables facility. In connection with
such restructuring or refinancing, BofA may acquire part of the existing
facility, or BofA and Chase will consider increasing the size of the
Receivables Securitization to $200 million, but Chase and BofA have made no
commitment to do so in the Commitment Letter.
Use of Proceeds. Rykoff-Sexton will use the proceeds of the New Credit
Facility to: (i) refinance indebtedness incurred by US Foodservice in
connection with the redemption or repurchase of the 10% Preferred Stock and
the Exchangeable Preferred Stock under the Stock Redemption Agreements; (ii)
refinance US Foodservice's currently outstanding debt, including the 14.25%
Senior Subordinated Debentures due 2000 (the "14.25% Debentures") and the
Existing Credit Facility; (iii) refinance Rykoff-Sexton's outstanding debt
under the Credit Agreement dated as of October 25, 1993, among Rykoff-Sexton
and BofA, as amended; (iv) provide financing for on-going working capital
needs; and (v) pay related fees and expenses, including certain prepayment
premiums payable in connection with the restructuring of US Foodservice's $90
million receivables securitization program. The proceeds from the Receivables
Securitization will be used for the same purposes as the New Credit Facility.
See "CAPITALIZATION" and "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION."
RESALE OF RYKOFF-SEXTON COMMON SHARES
All Rykoff-Sexton Common Shares received by US Foodservice stockholders in
the Merger will be freely transferable except that (i) Rykoff-Sexton Common
Shares received by persons who are deemed to be "affiliates" (as such term is
used in Rules 144 and 145 under the Securities Act) of US Foodservice prior to
the Merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145 promulgated under the Securities Act (or Rule 144 in
case of such persons who become affiliates of Rykoff-Sexton) or as
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otherwise permitted under the Securities Act, (ii) Rykoff-Sexton Common Shares
issued in exchange for US Foodservice Common Stock acquired by certain US
Foodservice management employees in connection with the forgiveness of certain
management loans may not be resold prior to one year from the Effective Time
or such earlier date on which such individual ceases to be an employee due to
resignation, retirement or termination, and (iii) to provide assurances in
connection with the qualification of the Merger as a tax-free reorganization
for federal income tax purposes, certain stockholders of US Foodservice,
including all of the ML Investors, will enter into the Tax Agreement with
Rykoff-Sexton at the Effective Time, pursuant to which each such stockholder
will be prohibited from selling, exchanging, distributing or otherwise
disposing of in any manner, during the two-year period following the Effective
Time, more than a certain percentage of the Rykoff-Sexton Common Shares
received in the Merger by such stockholder, with such percentage to be
determined by a formula at the Effective Time. For purposes, however, of
applying the transfer restrictions in the Tax Agreement to the ML Investors,
all of the Rykoff-Sexton Common Shares received in the Merger by the ML
Investors will be aggregated, and the ML Investors will be treated as a single
stockholder. See "--Interests of Certain Persons in the Merger--US Foodservice
Management Loans" and "OTHER AGREEMENTS--The Tax Agreement." Persons who may
be deemed to be affiliates of Rykoff-Sexton or US Foodservice generally
include individuals or entities that control, are controlled by, or are under
common control with, such party and may include certain officers and directors
of such party as well as principal stockholders of such party. The Merger
Agreement requires US Foodservice to use its reasonable efforts to cause each
person (other than Rykoff-Sexton and the ML Entities) who may be deemed to be
an affiliate of US Foodservice to deliver to Rykoff-Sexton on or prior to the
Effective Time a written agreement to the effect that such person will not
offer or sell or otherwise dispose of any of the Rykoff-Sexton Common Shares
issued to such person pursuant to the Merger except pursuant to an effective
registration statement or in compliance with Rule 145 or an exemption from
registration under the Securities Act. The ML Entities have also agreed to
execute such written agreement pursuant to the ML Agreement.
RISK FACTORS
Leverage and Debt Service
Following the consummation of the Merger, Rykoff-Sexton will have
substantial indebtedness. Giving effect to the Merger, the other acquisitions
described in "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION," the New
Credit Facility, the Receivables Securitization and the use of proceeds in
connection therewith, and assuming such transactions had occurred on January
27, 1996, Rykoff-Sexton's total indebtedness (excluding current maturities)
would have been approximately $487.7 million. Rykoff-Sexton may incur
additional indebtedness in the future, subject to certain limitations
contained in the instruments governing its indebtedness. Although the New
Credit Facility will result in indebtedness with lower average interest rates
than the indebtedness that is being repaid, Rykoff-Sexton will have
substantial debt service obligations following the Merger. Rykoff-Sexton's
scheduled principal payments on its outstanding indebtedness under the term
loan facilities of the New Credit Facility will be approximately $3.25 million
in 1996, $11.5 million in 1997, $21.5 million in 1998, $31.5 million in 1999,
$41.5 million in 2000, $49.0 million in 2001, $124.8 million in 2002 and $51.9
million in 2003. See "CAPITALIZATION" and "UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION."
Based upon the current level of operations and anticipated cost savings,
Rykoff-Sexton believes that after the Merger its cash flow from operations,
together with borrowings under the New Credit Facility and its other sources
of liquidity, will be adequate to meet its anticipated requirements for
working capital, capital expenditures, interest payments, dividends and
scheduled principal payments over the next several years. There can be no
assurance, however, that Rykoff-Sexton's business will continue to generate
cash flow at or above current levels or that anticipated cost savings can be
fully achieved. If Rykoff-Sexton is unable to generate sufficient cash flow
from operations in the future to service its debt and make necessary capital
expenditures, or if its future earnings growth is insufficient to amortize
required principal payments out of internally generated funds, Rykoff-Sexton
may be required to restrict or terminate the payment of dividends to
stockholders, refinance all or a portion of its existing debt, sell assets or
obtain additional financing. There can be no assurance that any such
refinancing or asset sales would be possible or that any additional financing
could be obtained, particularly
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in view of Rykoff-Sexton's high level of debt following the Merger and that
substantially all of its assets will be pledged to secure its obligations
under the New Credit Facility.
Rykoff-Sexton's level of debt will have several important effects on its
future operations, including the following: (i) Rykoff-Sexton will have
significant cash requirements to service debt, reducing funds available for
operations and future business opportunities and increasing Rykoff-Sexton's
vulnerability to adverse general economic and industry conditions; (ii) the
financial covenants and other restrictions contained in the New Credit
Facility and other agreements relating to the indebtedness of Rykoff-Sexton
will require it to meet certain financial tests and will restrict its ability
to borrow additional funds, to dispose of assets and to pay cash dividends;
(iii) the failure to comply with such financial covenants and other
restrictions may result in an event of default under the New Credit Facility
which, if not cured or waived, could have a material adverse effect on Rykoff-
Sexton; (iv) funds available for working capital, capital expenditures,
acquisitions and general corporate purposes may be limited; and (v) certain of
Rykoff-Sexton's borrowings will be at variable rates of interest, which could
result in higher interest expense if interest rates increase generally.
Rykoff-Sexton's leveraged position may also increase its vulnerability to
competitive pressures. Rykoff-Sexton's continued growth depends, in part, on
its ability to continue its expansion and, therefore, its inability to finance
capital expenditures through borrowed funds could have a material adverse
effect on its ability to expand. Moreover, any default under the documents
governing the indebtedness of Rykoff-Sexton could have a significant adverse
effect on the market value of the Rykoff-Sexton Common Shares.
Uncertainties in Integrating Business Operations and Achieving Cost Savings
In determining that the Merger is in the best interests of its stockholders,
the Rykoff-Sexton Board of Directors considered the cost savings, operating
efficiencies and other synergies expected to result from the integration of
the Rykoff-Sexton and US Foodservice businesses. Management of Rykoff-Sexton
has estimated that an acquisition by Rykoff-Sexton of US Foodservice could
create opportunities for cost savings of approximately $10 million during the
first twelve-month period following the Effective Time, $20 million during the
second twelve-month period following the Effective Time, and $30 million
annually thereafter. The cost savings estimates were developed solely for
purposes of evaluating the Merger, do not include non-recurring adjustments
that will be recorded in conjunction with the Merger, and should not be relied
upon as an estimate of actual cost savings that may be achieved. These
estimates are based upon assumptions and operating synergies that are
inherently uncertain, though considered reasonable by Rykoff-Sexton, and are
subject to significant business, economic and competitive uncertainties which
are difficult to predict and often beyond the control of management. See "--
Potential Cost Savings and Operating Synergies." Several of the cost savings
estimates are premised on the assumption that certain levels of efficiency
presently maintained by either Rykoff-Sexton or US Foodservice can be achieved
by Rykoff-Sexton following the Merger. Other estimates are based on
management's opinion as to what levels of enhanced purchasing leverage and
operating efficiencies should be achievable by an entity the size of Rykoff-
Sexton giving effect to the Merger.
The consolidation of functions, the integration of operations, systems,
marketing methods and procedures and the relocation of staff present
significant management challenges. There can be no assurance that such actions
will be accomplished successfully or as rapidly as currently expected.
Moreover, although the primary purpose of such actions will be to realize
direct cost savings and other operating efficiencies, there can be no
assurance of the extent to which such cost savings and efficiencies will be
achieved or that unforeseen costs and expenses or other factors will not
offset the projected cost savings in whole or in part. To the extent such cost
savings and efficiencies are not accomplished successfully or on a timely
basis, Rykoff-Sexton's earnings will be negatively affected and the Merger
could continue to be dilutive to current holders of Rykoff-Sexton Common
Shares.
Sale of Shares by ML Investors
Following the Merger, assuming the maximum number of Rykoff-Sexton Common
Shares are issued in the Merger, the ML Investors will beneficially own
approximately 36.4% of the outstanding Rykoff-Sexton Common
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Shares. The ML Investors may not sell their Rykoff-Sexton Common Shares
acquired in connection with the Merger except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 promulgated under the Securities Act or another
applicable exemption from the registration requirements of the Securities Act.
The ML Investors have the right, following the Merger, pursuant to the
Registration Rights Agreement, to require Rykoff-Sexton, subject to certain
qualifications, to effect the registration under the Securities Act of their
Rykoff-Sexton Common Shares. See "OTHER AGREEMENTS--The Registration Rights
Agreement." No predictions can be made as to the effect, if any, that market
sales of such shares, or the availability of such shares for future sales,
will have on the market price of Rykoff-Sexton Common Shares prevailing from
time to time. Sales of substantial amounts of Rykoff-Sexton Common Shares, or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Rykoff-Sexton Common Shares and could impair Rykoff-
Sexton's future ability to raise capital through an offering of its equity
securities. During the two-year period following the Effective Time, however,
the ML Investors will be prohibited under the Tax Agreement, which the ML
Investors and certain other stockholders of US Foodservice will enter into
with Rykoff-Sexton at the Effective Time, from selling, exchanging,
distributing or otherwise disposing of in any manner a number of Rykoff-Sexton
Common Shares that exceeds in the aggregate a certain percentage of the
Rykoff-Sexton Common Shares received by the ML Investors collectively in the
Merger, with such percentage to be determined by a formula at the Effective
Time. See "OTHER AGREEMENTS--The Tax Agreement."
Concentration of Ownership
Upon completion of the Merger, assuming the maximum number of Rykoff-Sexton
Common Shares are issued in the Merger, the ML Investors will beneficially own
approximately 36.4% of the outstanding Rykoff-Sexton Common Shares (34.6% if
all Assumed Options and Assumed Warrants are exercised). At the Effective
Time, the ML Entities will enter into the Standstill Agreement with Rykoff-
Sexton pursuant to which they will be entitled to designate four nominees to
the Rykoff-Sexton Board of Directors, with such number of nominees and Board
members decreasing if the percentage of outstanding Rykoff-Sexton Common
Shares beneficially owned by the ML Entities falls below certain levels. In
addition, pursuant to the Standstill Agreement, the ML Entities will vote the
Rykoff-Sexton Common Shares and other voting securities owned by them and
their affiliates for Rykoff-Sexton's nominees to the Rykoff-Sexton Board of
Directors, in accordance with the recommendation of the Nominating Committee
of the Rykoff-Sexton Board of Directors, subject to certain exceptions. The ML
Entities will also agree that neither they nor any of their affiliates will
(subject to certain exceptions) participate in proxy solicitations, acquire
additional Rykoff-Sexton Common Shares or otherwise engage in transactions, or
take actions involving a change of control of Rykoff-Sexton. The Rykoff-Sexton
Common Shares and other voting securities owned by the ML Investors will be
subject to certain restrictions on sale or transfer. The ML Entities will not
be prohibited from soliciting, offering, seeking to effect and negotiating
with any person with respect to sales or transfers of Rykoff-Sexton Common
Shares and other voting securities held by the ML Entities if otherwise
permitted by the Standstill Agreement. See "OTHER AGREEMENTS--The Standstill
Agreement" and "--The Tax Agreement."
The Rykoff-Sexton Common Shares to be received by the ML Investors in the
Merger will constitute a significant block of the voting power of the Rykoff-
Sexton Common Shares. The favorable vote of such shares, as required by the
Standstill Agreement, will make it easier to obtain the approval of Rykoff-
Sexton stockholders for the election of Rykoff-Sexton's nominees for the
Rykoff-Sexton Board of Directors. Such a voting block could also facilitate or
impede the approval of any other matter requiring approval of Rykoff-Sexton
stockholders, including a merger, consolidation or other business combination
involving Rykoff-Sexton, or discourage a potential acquiror from making a
tender offer or otherwise attempting to obtain control of Rykoff-Sexton.
Factors Relating to Future Acquisitions
A significant portion of the historical growth of Rykoff-Sexton's and US
Foodservice's revenues has resulted from acquisitions. An important part of
Rykoff-Sexton's growth strategy is the acquisition of other
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foodservice companies. See "--Background of the Merger--Foodservice Industry
Trends." The success of this strategy will depend upon Rykoff-Sexton's ability
to integrate and manage acquired businesses, and to realize economies of scale
and control costs.
Acquisitions involve risks, including difficulties in integrating acquired
operations, diversion of management resources and unanticipated problems and
liabilities. Future acquisitions by Rykoff-Sexton may result in potentially
dilutive issuances of equity securities, increased interest and amortization
expense, increased depreciation expense and decreased operating income, any of
which could have a material adverse effect on its operating results. There can
be no assurance that Rykoff-Sexton will be able to acquire companies on terms
favorable to it or that Rykoff-Sexton's existing financial resources,
including cash flow from operations and amounts available under the New Credit
Facility, will be sufficient to fund such acquisitions. If Rykoff-Sexton does
not have sufficient cash resources, its growth could be limited unless it is
able to obtain additional capital through subsequent debt or equity
financings. There can be no assurance that Rykoff-Sexton will be able to
obtain such financings or that, if available, such financings will be on terms
acceptable to Rykoff-Sexton. As a result, there can be no assurance that
Rykoff-Sexton will be able to implement its acquisition strategy successfully.
Exchange Ratio
The Exchange Ratio is derived by dividing $25 by the Closing Date Market
Price of one Rykoff-Sexton Common Share, subject to the limitation that (i) if
the foregoing would result in an Exchange Ratio greater than 1.457 (which
would occur if such price is less than $17.16 per share), the Exchange Ratio
shall be 1.457 or (ii) if the foregoing would result in an Exchange Ratio of
less than 1.244 (which would occur if such price is greater than $20.10 per
share), the Exchange Ratio shall be 1.244. Thus, subject to the $17.16 per
share limit, the lower the Closing Date Market Price of Rykoff-Sexton Common
Shares, the greater the number of Rykoff-Sexton Common Shares that will be
issued in the Merger. In addition, the price of Rykoff-Sexton Common Shares at
the Effective Time can be expected to vary from the Closing Date Market Price
and the prices as of the date of this Proxy Statement/Prospectus and the date
on which the Special Meeting is held due to changes in the business,
operations or prospects of Rykoff-Sexton, market assessments of the likelihood
that the Merger will be consummated and the timing thereof, general market and
economic conditions, and other factors. See "DIVIDENDS AND MARKET PRICES OF
RYKOFF-SEXTON COMMON SHARES."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Employment, Change in Control and Severance Agreements. In connection with
the execution of the Merger Agreement, Rykoff-Sexton entered into an amended
and restated employment agreement and a second amended and restated change in
control agreement with Mark Van Stekelenburg, the Chairman, President and
Chief Executive Officer of Rykoff-Sexton, effective as of the date of the
Merger Agreement. In connection with the execution of the Merger Agreement and
the execution of certain amended and restated change in control agreements,
Rykoff-Sexton also entered into individual severance agreements as of the date
of the Merger Agreement with certain members of its senior management (other
than Mr. Van Stekelenburg). The amended and restated change in control
agreements, as well as certain other Rykoff-Sexton compensation arrangements,
provide that, under the specified circumstances, the completion of the Merger
and certain other transactions in the future will not constitute a "change in
control" of Rykoff-Sexton. In addition, the Merger Agreement provides that as
a condition to the closing of the Merger, Rykoff-Sexton will enter into
employment agreements as of the Effective Time with certain of the senior
management executives of US Foodservice, including Frank H. Bevevino, who is
expected to become President of Rykoff-Sexton and Chief Executive Officer of
US Foodservice and Thomas G. McMullen, who is expected to become President of
US Foodservice. See "MANAGEMENT OF RYKOFF-SEXTON AFTER THE MERGER--Executive
Compensation."
US Foodservice Management Loans. Pursuant to the Merger Agreement, an
aggregate of $4.9 million currently outstanding in respect of loans made by US
Foodservice in 1992 to certain key employees to enable
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them to purchase shares of US Foodservice Common Stock will be forgiven,
subject to each such employee's agreement that the shares of US Foodservice
Common Stock purchased with the proceeds of such loans and the Rykoff-Sexton
Common Shares issuable in respect thereof in connection with the Merger will
not be sold for a period of one year from the Effective Time or such earlier
date on which such individual ceases to be an employee of Rykoff-Sexton and
its subsidiaries due to resignation, retirement or termination. In addition,
after the Effective Time, Rykoff-Sexton will extend loans to such employees in
amounts sufficient to cover the federal and state income tax due from such
employees as a result of such forgiveness that by their terms must be repaid
within fifteen months of the Effective Time or within three months of
resignation, retirement or termination.
Preferred Stock and Subordinated Debt Holders. Certain affiliates of US
Foodservice hold the 14.25% Debentures and the Exchangeable Preferred Stock,
all of which will be redeemed or purchased in connection with the Merger. All
$70.9 million principal amount of the 14.25% Debentures is held by Equitable
Deal Flow Fund, L.P. (the "Equitable Fund"), the Equitable Life Assurance
Society of the United States ("Equitable Life") and the Chase Manhattan Bank,
N.A., as trustee for E.Q. Asset Trust 1993 (the "Equitable Trust"). Each of
the Equitable Fund, Equitable Life and the Equitable Trust are affiliates of
each other, and of Equitable Variable Life Insurance Company ("Equitable
Variable Life"), which together with the Equitable Fund and Equitable Life
(the "Equitable Entities"), holds approximately 9.3% of US Foodservice Common
Stock (4.3% of the Rykoff-Sexton Common Shares upon completion of the Merger
assuming the maximum number of Rykoff-Sexton Common Shares are issued in the
Merger). The Equitable Fund, Equitable Life and the Equitable Trust will
receive an aggregate of $76.0 million pursuant to the redemption of the 14.25%
Debentures in the refinancing, which represents a redemption price of 107.13%
of the principal amount thereof. ML IBK and MBIV, each of which is controlled
by ML & Co., currently hold all of the Exchangeable Preferred Stock, the
redemption or purchase of which is a condition to the Merger. See "--
Redemption or Purchase of Preferred Stock."
MLPF&S Engagement Letter. US Foodservice retained MLPF&S to act as US
Foodservice's exclusive financial advisor in connection with a proposed
business combination involving Rykoff-Sexton pursuant to a letter agreement
dated December 5, 1995 between MLPF&S and US Foodservice (the "ML Engagement
Letter"). Pursuant to the ML Engagement Letter, MLPF&S agreed to assist US
Foodservice in analyzing, structuring, negotiating and effecting the proposed
business combination with Rykoff-Sexton, and to issue a fairness opinion, as
necessary or required. Pursuant to the terms of the ML Engagement Letter, US
Foodservice agreed to pay to MLPF&S a fee of $500,000, contingent upon and
payable in cash upon the execution of a letter of intent to effect a business
combination with Rykoff-Sexton to be credited against any other fees payable
pursuant to the ML Engagement Letter. In addition, if during the period MLPF&S
is retained by US Foodservice or within one year thereafter, a business
combination with Rykoff-Sexton is consummated, US Foodservice has agreed to
pay MLPF&S a fee of $3,000,000 in cash upon the closing of such business
combination. In addition, pursuant to the ML Engagement Letter, whether or not
a transaction is consummated, US Foodservice will reimburse MLPF&S, upon
request made from time to time, for its reasonable out of pocket expenses
incurred in connection with MLPF&S's activities under this letter agreement,
including reasonable fees and disbursements of its legal counsel. US
Foodservice has also agreed to indemnify MLPF&S against certain liabilities,
including certain liabilities arising under the Federal securities laws.
ML Entities Board Designations. Rykoff-Sexton has agreed in the Standstill
Agreement that at the Effective Time Rykoff-Sexton will take such action as
may be necessary to increase the size of its Board of Directors to 12 persons
and will use its best efforts to fill four of the vacancies existing in the
three classes of directors of Rykoff-Sexton with directors designated by the
ML Entities. Of the four initial designees of the ML Entities, one shall be
appointed to Class A with a current term expiring in 1996, one shall be
appointed to Class B with a current term expiring in 1998, and two shall be
appointed to Class C with current terms expiring in 1997. See "OTHER
AGREEMENTS--The Standstill Agreement."
Registration Rights Agreement. As a condition to US Foodservice's obligation
to effect the Merger, Rykoff-Sexton is required to execute the Registration
Rights Agreement, which provides that the ML Investors will have certain
"demand" and "piggyback" rights, and that the Equitable Entities and Frank H.
Bevevino will have
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certain "piggyback" rights, to require Rykoff-Sexton to register all or a
portion of the Rykoff-Sexton Common Shares owned by them. See "OTHER
AGREEMENTS--The Registration Rights Agreement."
Stock Options. In connection with the Merger, an aggregate of 442,856 of the
Assumed Options will, pursuant to the terms and conditions applicable thereto,
become exercisable at the Effective Time. In addition, with respect to those
Assumed Options the exercisability of which depends in part on the attainment
by US Foodservice of certain financial performance targets, and that are not
otherwise vested in accordance with their terms, the performance criteria
shall be deemed satisfied on the first anniversary of the Effective Time.
Approximately 139,349 of the Assumed Options are held by senior management
employees of US Foodservice.
Indemnification; Insurance. If waivers and releases are delivered by the ML
Entities and by any officer or director of US Foodservice who is also a
stockholder of US Foodservice of any and all claims, rights, causes of actions
and suits, whether known or unknown, against present or former directors and
officers of US Foodservice arising from or relating to acts or omissions of
such present or former directors and officers occurring prior to the Effective
Time, to the extent that such former directors and officers would be entitled
to indemnification from and against liability arising from such acts or
omissions under the US Foodservice By-laws, then Rykoff-Sexton will, and will
cause US Foodservice to, indemnify and hold harmless, from and after the
Effective Time, each current and former officer or director of US Foodservice
with respect to acts or omissions occurring prior to the Effective Time to the
same extent as would have been required by US Foodservice's By-laws. After the
Effective Time, Rykoff-Sexton will cause the directors and officers of US
Foodservice and its subsidiaries to be covered by directors' and officers'
liability insurance maintained by Rykoff-Sexton on terms and conditions no
less favorable to such directors and officers as are applicable to similarly
situated directors and officers of other subsidiaries of Rykoff-Sexton. Such
insurance will not include coverage for any acts or omissions of such officers
and directors occurring prior to the Effective Time.
Sara Lee Commitment Agreements. Two subsidiaries of US Foodservice entered
into Commitment Agreements, dated as of August 10, 1992, as amended as of
September 27, 1995, with Sara Lee, the former holder of all of the 10%
Preferred Stock, whereby such subsidiaries agreed to cause their respective
subsidiaries, comprising all of the US Foodservice operating companies, to
purchase food and other products from Sara Lee totaling $16.1 million each
during the 12-month period ending September 11, 1993 and to increase the
amount of such purchases by 10% per year each year for six years and by 4% per
year for the next three years. If the target purchases are not met after an
initial three-year period and two subsequent three-year periods, such
subsidiaries are required to make liquidated payments to Sara Lee, not to
exceed an aggregate of $0.5 million each at the end of three years, $1.0
million each at the end of six years (less the amount of any such payment made
after three years) and approximately $1.9 million each at the end of nine
years (less the amount of any such payment made after three and six years). To
the extent a subsidiary's purchases exceed the three-, six- and nine-year
targets in its respective agreement, such excess amounts can be applied to its
respective yearly purchase commitments to reach its three-, six- and nine-year
targets and to the other subsidiary's purchase commitments to reach its three-
, six- and nine-year targets, thereby potentially reducing each subsidiary's
respective obligation to make the liquidated payments referred to above. The
September 1995 amendments provide a guarantee by US Foodservice on behalf of
its subsidiaries under each of the respective Commitment Agreements. The
amount of purchases under the terms of the agreement for 1995, 1994 and 1993
were approximately $40.7 million, $33.2 million and $30.4 million,
respectively, for such subsidiaries combined. All products were purchased on
terms and conditions competitive with those obtained through other suppliers
of US Foodservice.
Real Estate Matters. On February 28, 1996, US Foodservice entered into a
twelve-year lease (commencing on the date the premises are delivered with
certain improvements substantially completed) for approximately 25,000 square
feet of office space located in Plains Township, Pennsylvania. The lease
provides for a base rental rate of $12.50 per square foot, subject to certain
increases, plus payment of the tenant's pro rata share of building expenses,
including utilities, real estate taxes and insurance. The owner and lessor of
the office building is Paul-Francis Realty, L.P. ("PFR"), a Pennsylvania
limited partnership whose principals include entities controlled by Paul S.
Siegel and Frank H. Bevevino, the current Chairman of the Board and Chief
Executive Officer of US Foodservice, who will become President and a director
of Rykoff-Sexton following the Merger. PFR has engaged
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Mericle Development Corporation ("Mericle") to manage and lease the facility.
The lease will become a commitment of Merger Sub following the Merger.
LISTING OF THE RYKOFF-SEXTON COMMON SHARES ON THE NYSE
It is a condition to each party's obligation to consummate the Merger that
the Rykoff-Sexton Common Shares to be issued in connection with the Merger
(including shares issuable upon exercise of Assumed Options and Assumed
Warrants) be approved for listing on the NYSE, subject only to official notice
of issuance. Rykoff-Sexton has agreed to use all reasonable efforts to cause
such shares to be so approved for listing, subject only to official notice of
issuance, prior to the Effective Time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary description of the material federal
income tax consequences of the Merger. The discussion is based upon the
provisions of the Code, applicable Treasury Regulations promulgated thereunder,
judicial decisions and administrative rulings and practices, all as in effect
on the date of this Proxy Statement/Prospectus, and does not address any state,
local or foreign income or other tax consequences of the Merger.
The consummation of the Merger is conditioned, among other things, upon the
receipt by Rykoff-Sexton of an opinion of Jones, Day, Reavis & Pogue, special
counsel for Rykoff-Sexton, to the effect that the Merger should be treated for
federal income tax purposes as a tax-free reorganization under Section 368(a)
of the Code. Such opinion, which will be dated the date of the closing of the
Merger, will be based upon certain customary representations that are expected
to be made at the Effective Time by executives of Rykoff-Sexton and US
Foodservice and by certain holders of US Foodservice Common Stock, and will be
subject to certain assumptions and limitations set forth therein. It should be
noted that a ruling will not be sought from the IRS regarding the Merger. The
opinion of counsel referred to above will not be binding on the IRS, and the
IRS may disagree with the conclusions expressed in such opinion.
Treatment of Rykoff-Sexton and Its Stockholders. Jones, Day, Reavis & Pogue,
special counsel for Rykoff-Sexton, has advised Rykoff-Sexton that, in
accordance with its opinion referred to above, neither Rykoff-Sexton nor the
existing stockholders of Rykoff-Sexton will recognize any gain or loss as a
result of the Merger. In addition, neither Merger Sub nor US Foodservice should
recognize any gain or loss as a result of the Merger.
Treatment of Holders of US Foodservice Common Stock. The following discussion
is not a complete description of all of the federal income tax consequences of
the Merger to holders of US Foodservice Common Stock, and, in particular, does
not address all aspects of federal income taxation that may be relevant to a
particular holder of US Foodservice Common Stock in light of such holder's
personal investment or tax circumstances, or to a holder of US Foodservice
Common Stock that is subject to special treatment under the federal income tax
laws (including life insurance companies, foreign persons, tax-exempt entities,
financial institutions, broker-dealers, or holders who acquired US Foodservice
Common Stock pursuant to the exercise of employee stock options or otherwise as
compensation). In addition, no information is provided herein as to the tax
consequences of the Merger to any holder of US Foodservice Common Stock who
exercises appraisal rights under Section 262 or to any holder of US Foodservice
Common Stock who also owns Preferred Stock and who receives cash as a result of
the redemption or purchase of such Preferred Stock. See "--Redemption or
Purchase of Preferred Stock." The discussion also assumes that the US
Foodservice Common Stock will be held as capital assets by the holders thereof
at the Effective Time of the Merger. EACH HOLDER OF US FOODSERVICE COMMON STOCK
IS ADVISED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES TO SUCH HOLDER OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT
OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
Jones, Day, Reavis & Pogue, special counsel for Rykoff-Sexton, has advised
Rykoff-Sexton that, in accordance with its opinion referred to above, the
material federal income tax consequences of the Merger to holders of US
Foodservice Common Stock who do not own Preferred Stock will be as follows:
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(i) No gain or loss should be recognized by a holder of US Foodservice
Common Stock upon the conversion of such holder's shares of US Foodservice
Common Stock into Rykoff-Sexton Common Shares pursuant to the Merger. A
holder of US Foodservice Common Stock that receives cash in lieu of a
fractional interest in a Rykoff-Sexton Common Share will recognize gain or
loss, which will be capital gain or loss, equal to the difference between
the amount of cash received and the ratable portion of the holder's tax
basis in the shares of US Foodservice Common Stock being converted pursuant
to the Merger that is allocated to such fractional interest;
(ii) The tax basis of the Rykoff-Sexton Common Shares received by a
former holder of US Foodservice Common Stock pursuant to the Merger in the
aggregate should be the same as the holder's tax basis in the shares of US
Foodservice Common Stock being converted pursuant to the Merger, reduced by
the ratable portion of such tax basis that is allocable to any fractional
interest in a Rykoff-Sexton Common Share with respect to which cash is
being received; and
(iii) The holding period of the Rykoff-Sexton Common Shares received by a
former holder of US Foodservice Common Stock pursuant to the Merger should
include the holder's holding period with respect to the shares of US
Foodservice Common Stock being converted pursuant to the Merger.
AMENDMENTS TO RIGHTS AGREEMENT
Rykoff-Sexton and Chemical Bank, as successor Rights Agent (the "Rights
Agent"), are party to a Rights Agreement dated as of December 8, 1986 (as
amended, the "Rights Agreement"). In connection with the execution of the
Letter of Intent and the Merger Agreement, the Rykoff-Sexton Board of
Directors approved amendments to the Rights Agreement to provide that the
Merger and the transactions entered into in connection therewith would not
trigger the dilution provisions of the Rights Agreement. See "DESCRIPTION OF
RYKOFF-SEXTON CAPITAL STOCK--Common Shares, Rights and Series A Preferred
Stock."
REGULATORY MATTERS
The Merger is subject to the requirements of the HSR Act, which provides
that certain acquisition transactions (including the Merger) may not be
consummated until certain information has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. Rykoff-Sexton and US Foodservice filed the required information and
material with respect to the Merger with the Antitrust Division and the FTC on
or about December 22, 1995. The required waiting period under the HSR Act
expired on January 21, 1996. ML & Co., Merrill Lynch Capital Appreciation
Partnership No. B-XVIII, L.P. and Merrill Lynch Capital Appreciation
Partnership No. XIII L.P. filed the required information with the Antitrust
Division and the FTC on January 17, 1996 and Merrill Lynch Capital
Appreciation Company Limited II filed such information on January 25, 1996.
Early termination of the waiting period for ML & Co., Merrill Lynch Capital
Appreciation Partnership No. B-XVIII, L.P. and Merrill Lynch Capital
Appreciation Partnership No. XIII, L.P. was granted on January 29, 1996, and
such early termination was granted for Merrill Lynch Capital Appreciation
Company Limited II on February 7, 1996. Satisfaction or termination of the
waiting period requirement does not preclude the Antitrust Division, the FTC
or any other party either before or after the Effective Time from challenging
or seeking to delay or enjoin the Merger on antitrust or other grounds. There
can be no assurance that such a challenge, if made, would not be successful.
ACCOUNTING TREATMENT
The Merger will be accounted for by Rykoff-Sexton under the purchase method
of accounting in accordance with generally accepted accounting principles.
APPRAISAL RIGHTS
Stockholders of Rykoff-Sexton have no dissenters' or appraisal rights with
respect to the Merger or the issuance of Rykoff-Sexton Common Shares pursuant
to the Merger Agreement.
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If the Merger is consummated, a holder of record of US Foodservice Common
Stock on the date of making a demand for appraisal, as described below, who
continues to hold such shares through the Effective Time, who has not voted
such shares in favor of the Merger and who strictly complies with the
procedures set forth under Section 262 of the DGCL ("Section 262") will be
entitled to have such shares appraised by the Delaware Court of Chancery under
Section 262 and to receive payment of the "fair value" of such shares in lieu
of the consideration provided for in the Merger Agreement. THE STATUTORY RIGHT
OF APPRAISAL GRANTED BY SECTION 262 REQUIRES STRICT COMPLIANCE WITH THE
PROCEDURES SET FORTH IN SECTION 262. FAILURE TO FOLLOW ANY OF SUCH PROCEDURES
MAY RESULT IN A TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER SECTION 262.
The following is a summary of certain of the provisions of Section 262 and
is qualified in its entirety by reference to the full text of Section 262, a
copy of which is attached to this Proxy Statement/Prospectus as Appendix C.
Under Section 262, if the Merger is approved by the requisite votes, US
Foodservice has advised Rykoff-Sexton that it will, either before the
Effective Time or within 10 days thereafter, notify each of the stockholders
entitled to appraisal rights of the Effective Time and that appraisal rights
are available for any or all of such stockholder's shares of US Foodservice
Common Stock (the "Notice"). The Notice will include a copy of Section 262. A
holder of US Foodservice Common Stock electing to exercise appraisal rights
under Section 262 must deliver a written demand for appraisal of such
stockholder's shares to US Foodservice within 20 days after the date of
mailing of the Notice. Such written demand must reasonably inform US
Foodservice of the identity of the stockholder of record and of such
stockholder's intention to demand appraisal of such stockholder's shares. All
such demands should be delivered to US Foodservice Inc., 1065 Highway 315,
Cross Creek Pointe, Wilkes-Barre, Pennsylvania 18702, Attention: General
Counsel.
Holders of shares of US Foodservice Common Stock on the date of making such
written demand for appraisal who continuously hold such shares through the
Effective Time are entitled to seek appraisal. Demand for appraisal must be
executed by or for the holder of record, fully and correctly, as such holder's
name appears on the holder's stock certificates representing shares of US
Foodservice Common Stock. If US Foodservice Common Stock is owned of record in
a fiduciary capacity, such as by a trustee, guardian or custodian, the demand
should be made in that capacity, and if US Foodservice Common Stock is owned
of record by more than one person, as in a joint tenancy or tenancy in common,
the demand should be made by or for all owners of record. An authorized agent,
including one or more joint owners, may execute the demand for appraisal for a
holder of record; however, such agent must identify the record owner or owners
and expressly disclose in such demand that the agent is acting as agent for
the record owner or owners of such shares. Similarly, a person having a
beneficial interest in shares of US Foodservice Common Stock held of record in
the name of another person, such as a broker or nominee, must act promptly to
cause the record holder to follow the steps summarized herein properly and in
a timely manner to perfect such rights.
Within 120 days after the Effective Time, US Foodservice or any stockholder
who has complied with the requirements of Section 262 may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
the shares of US Foodservice Common Stock held by all stockholders seeking
appraisal. A petitioning stockholder must serve a copy of such petition on US
Foodservice. If no petition is filed by either US Foodservice or a dissenting
stockholder within such 120-day period, the rights of all dissenting
stockholders to appraisal shall cease. US Foodservice stockholders seeking to
exercise appraisal rights should not assume that US Foodservice will file a
petition with respect to the appraisal of the fair value of their shares or
that US Foodservice will initiate any negotiations with respect to the fair
value of such shares. US Foodservice is under no obligation to and has no
present intention to take any action in this regard. Accordingly, US
Foodservice stockholders who wish to seek appraisal of their shares should
initiate all necessary action with respect to the perfection of their
appraisal rights within the time periods and in the manner prescribed in
Section 262. FAILURE TO FILE THE PETITION ON A TIMELY BASIS WILL CAUSE THE
STOCKHOLDER'S RIGHT TO AN APPRAISAL TO CEASE.
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Within 120 days after the Effective Time, any holder of shares of US
Foodservice Common Stock who has complied with Section 262 is entitled, upon
written request, to receive from US Foodservice a statement setting forth the
aggregate number of shares of US Foodservice Common Stock not voted in favor
of the Merger and with respect to which demands for appraisal have been
received by US Foodservice and the number of holders of such shares. Such
statement must be mailed within 10 days after the written request therefor has
been received by US Foodservice or within 10 days after expiration of the time
for delivery of demands for appraisal under Section 262, whichever is later.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court of Chancery will determine which stockholders are
entitled to appraisal rights and will appraise the shares of US Foodservice
Common Stock owned by such stockholders, determining the fair value of such
shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest to be paid,
if any, upon the amount determined to be the fair value. In determining fair
value, the court is to take into account all relevant factors. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings. The Delaware Supreme Court has also held that "elements of future
value, including the nature of the enterprise, which are known or susceptible
of proof as of the date of the merger and not the product of speculation, may
be considered."
Stockholders considering seeking appraisal should consider that the fair
value of their shares determined under Section 262 could be more, the same, or
less than the value of the consideration to be received pursuant to the Merger
Agreement without the exercise of appraisal rights, and an investment banking
opinion as to fairness from a financial point of view are not necessarily
opinions as to fair value as determined under Section 262. The cost of the
appraisal proceeding may be determined by the Court of Chancery and assessed
against the parties as such court deems equitable in the circumstances. Upon
application of a stockholder, such court may order that all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding (including without limitation reasonable attorney's fees and the
fees and expenses of experts) be charged pro rata against the value of all
shares of the US Foodservice Common Stock entitled to appraisal. In the
absence of such a determination or assessment, each party bears its own
expenses.
Any stockholder who has fully demanded appraisal in compliance with Section
262 will not, after the Effective Time, be entitled to vote such US
Foodservice Common Stock for any purpose or receive payment of dividends or
other distributions on such stock, except for dividends or distributions, if
any, payable to US Foodservice stockholders of record on a date prior to the
Effective Time.
A US Foodservice stockholder may withdraw a demand for appraisal and accept
the terms of the Merger at any time within 60 days after the Effective Time,
or thereafter may withdraw such demand with the written approval of US
Foodservice. In the event an appraisal proceeding is properly instituted in
the Delaware Court of Chancery, such proceeding may not be dismissed as to any
stockholder without the approval of the Court of Chancery, and any such
approval may be conditioned on the terms the Court of Chancery deems just.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE LAW, ANY
STOCKHOLDER OF US FOODSERVICE WHO IS CONSIDERING EXERCISING APPRAISAL RIGHTS
SHOULD CONSULT HIS, HER OR ITS LEGAL ADVISOR.
THE MERGER AGREEMENT
This section of the Proxy Statement/Prospectus describes all material terms
of the Merger Agreement. The following description, however, does not purport
to be complete and is qualified in its entirety by reference to the Merger
Agreement, which is attached hereto as Appendix A and is incorporated herein
by reference. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed thereto in the Merger Agreement.
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GENERAL
Subject to the terms and conditions of the Merger Agreement, US Foodservice
will merge with and into Merger Sub at the Effective Time. The separate
corporate existence of US Foodservice will then cease, and Merger Sub will be
the surviving corporation (the "Surviving Corporation") and will continue to
be governed by the laws of the State of Delaware.
Certificate of Incorporation and By-Laws. The Merger Agreement provides that
the certificate of incorporation of Merger Sub as in effect immediately prior
to the Effective Time will become the certificate of incorporation of the
Surviving Corporation, except that Article FIRST of such certificate of
incorporation will be amended to change the name of Merger Sub to US
Foodservice Inc. The by-laws of Merger Sub in effect at the Effective Time
will become the by-laws of the Surviving Corporation.
Directors and Officers. The directors of Merger Sub at the Effective Time
will become the directors of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal. The officers of US Foodservice at the Effective
Time will become the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal. See "MANAGEMENT OF RYKOFF-SEXTON AFTER
THE MERGER--Directors and Executive Officers after the Merger."
Conversion of US Foodservice Common Stock in the Merger. At the Effective
Time, each issued and outstanding share of US Foodservice Common Stock (other
than shares, if any, owned by Rykoff-Sexton, Merger Sub or any other
subsidiary of Rykoff-Sexton, shares held in treasury by US Foodservice, and
shares held by holders who have properly perfected their appraisal rights
under Delaware law) will be converted into that number of Rykoff-Sexton Common
Shares equal to the Exchange Ratio (the "Share Consideration"), with a maximum
Exchange Ratio of 1.457 (which corresponds to a Closing Date Market Price of
less than $17.16) and a minimum Exchange Ratio of 1.244 (which corresponds to
a Closing Date Market Price of more than $20.10). If, prior to the Effective
Time, Rykoff-Sexton should split, reclassify or combine the Rykoff-Sexton
Common Shares, or pay a stock dividend or other stock distribution in Rykoff-
Sexton Common Shares, or otherwise change the Rykoff-Sexton Common Shares into
any other securities, or make any other dividend or distribution on the
Rykoff-Sexton Common Shares (other than normal cash dividends), or if a record
date with respect to any of the foregoing shall have been set, then the
Exchange Ratio will be appropriately adjusted to reflect such split,
reclassification, combination, dividend or other distribution or change.
In addition, (i) each outstanding option to purchase shares of US
Foodservice Common Stock listed in the US Foodservice Disclosure Statement
(each, an "Option") issued pursuant to US Foodservice's stock option plans
(collectively, the "Option Plans"), whether or not vested or exercisable, will
be assumed by Rykoff-Sexton and will constitute an Assumed Option to acquire,
on the same terms and conditions as were applicable under such Option, a
number of Rykoff-Sexton Common Shares equal to the product of the Exchange
Ratio and the number of shares of US Foodservice's Common Stock subject to
such Option immediately prior to the Effective Time, at a price per share
equal to the aggregate exercise price for the shares of US Foodservice's
Common Stock subject to such Option divided by the number of full Rykoff-
Sexton Common Shares deemed to be purchasable pursuant to such Option;
provided, that the performance criteria for those Options which are
performance options, not vested in accordance with their terms, will, however,
be deemed satisfied on the first anniversary of the Effective Time; and the
conversion of any Option into an Assumed Option with an exercise price less
than $.10 per Rykoff-Sexton Common Share will be subject to the optionee's
agreement that upon exercise, (a) to the extent Rykoff-Sexton is holding
Rykoff-Sexton Common Shares as treasury shares that are not reserved for any
other purpose, Rykoff-Sexton will issue the appropriate number of such
treasury shares to the optionee and (b) to the extent that no such treasury
shares are available, such optionee will pay an exercise price of $.10 per
Rykoff-Sexton Common Share; and (ii) each Warrant will be assumed by Rykoff-
Sexton and will constitute an Assumed Warrant to acquire, on the same terms
and conditions as were applicable under such Warrant, a number of Rykoff-
Sexton Common Shares equal to the product of the Exchange Ratio and the number
of shares of US Foodservice Common Stock subject to such Warrant at a price
per share equal to the aggregate
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exercise price for such shares subject to such Warrant divided by the number
of full Rykoff-Sexton Common Shares deemed to be purchasable pursuant to such
Warrant. At the Effective Time, Rykoff-Sexton will deliver to holders of
Assumed Options and Assumed Warrants appropriate option and warrant agreements
representing the right to acquire Rykoff-Sexton Common Shares on the same
terms and conditions as contained in the Assumed Options and Assumed Warrants
(subject to any adjustments required by the preceding sentence), upon
surrender of the outstanding Options and Warrants. Rykoff-Sexton will comply
with the terms of the Option Plans as they apply to the Assumed Options and
will take all corporate action necessary to reserve for issuance a sufficient
number of Rykoff-Sexton Common Shares for delivery upon exercise of the
Assumed Options and Assumed Warrants.
Rykoff-Sexton will file a registration statement on Form S-8 (or any
successor form) or another appropriate form, effective as of the Effective
Time, with respect to Rykoff-Sexton Common Shares subject to Assumed Options
and will use commercially reasonable efforts to maintain the effectiveness of
such registration statement or registration statements (and the prospectus or
prospectuses contained therein) for so long as the Assumed Options remain
outstanding.
Based upon the number of shares of US Foodservice Common Stock outstanding
on March 31, 1996, assuming the exercise of all outstanding Assumed Options
and Assumed Warrants (whether or not currently exercisable), and based upon
the maximum Exchange Ratio permitted by the Merger Agreement, a maximum of
14,296,723 Rykoff-Sexton Common Shares may be issued in connection with the
Merger.
Fractional Shares. No fractional Rykoff-Sexton Common Shares will be issued
in the Merger. In lieu of any such fractional shares, each holder of US
Foodservice Common Stock pursuant to the Merger will be paid an amount in cash
(without interest) determined by multiplying (i) the Closing Date Market Price
by (ii) the fractional interest to which such holder otherwise would be
entitled. As soon as practicable after the determination of the amount of cash
to be paid to former stockholders of US Foodservice in lieu of any fractional
interests, Rykoff-Sexton will deposit with the Exchange Agent the cash
necessary for such purpose.
EFFECTIVE TIME OF THE MERGER
The Merger will be consummated and become effective on the date and at the
time at which the certificate of merger to be filed pursuant to the DGCL is
accepted for filing by the Secretary of State of the State of Delaware (or
such later date and time as may be specified in such certificate of merger as
may be permitted by such Secretary of State), which will be the Closing Date
or as soon as practicable thereafter. See "--Conditions; Waivers."
Promptly after the Effective Time, the Exchange Agent will mail a
transmittal form and instructions to each holder of record (other than Rykoff-
Sexton, Merger Sub or any other subsidiary of Rykoff-Sexton) of a Certificate
or Certificates which form and instructions are to be used in forwarding the
Certificates for surrender and exchange for payment therefor. US FOODSERVICE
STOCKHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR EXCHANGE
UNTIL SUCH TRANSMITTAL FORM AND INSTRUCTIONS ARE RECEIVED. At and after the
Effective Time and until surrendered as provided above, Certificates will
represent solely the right to receive the Share Consideration and a cash
payment in lieu of any fractional shares with respect to each share of US
Foodservice Common Stock represented thereby. The holders of Certificates will
not be entitled to receive dividends or any other distributions from Rykoff-
Sexton after the Effective Time in respect of Rykoff-Sexton Common Shares
until such Certificates are so surrendered. Upon surrender of a Certificate,
there will be paid to the person in whose name such Rykoff-Sexton Common
Shares are issued any dividends or other distributions which have a record
date after the Effective Time and which became payable prior to surrender with
respect to such Rykoff-Sexton Common Shares. After such surrender, there will
be paid to the person in whose name the Rykoff-Sexton Common Shares are issued
any dividends or other distributions on such shares which have a record date
after the Effective Time and prior to such surrender and a payment date after
such surrender, and such payment will be made on the payment date. In no event
will the persons entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto. The Merger Agreement includes representations and warranties
by US Foodservice as to, among other things, (A) the corporate organization,
standing and power of US Foodservice and its subsidiaries, (B) the
authorization of the Merger Agreement, (C) US Foodservice's capitalization,
(D) certain business interests and investments, (E) pending or threatened
litigation, (F) the Merger Agreement's noncontravention of any agreement, law,
order or charter or by-law provision and the absence of the need (except as
specified) for governmental or third-party consents to the Merger, (G) the
terms, existence, operations, liabilities and compliance with applicable laws
of employee plans of US Foodservice and its subsidiaries, and certain other
matters relating to the Employee Retirement Income Security Act of 1974, as
amended, (H) certain labor matters, (I) payment of taxes, (J) ownership of and
rights to use certain intellectual property, (K) ownership of and encumbrances
affecting certain properties and assets, (L) certain environmental matters,
(M) the accuracy of US Foodservice's S-1 Registration Statement and financial
statements, (N) the conduct of US Foodservice's business in the ordinary
course and the absence of any material adverse change in the business,
financial condition, results of operations, properties, assets or liabilities
of US Foodservice and its subsidiaries, (O) certain contracts and leases of US
Foodservice, (P) certain transactions with affiliates, (Q) brokers and finders
employed by US Foodservice, (R) the accuracy of information to be supplied by
US Foodservice for inclusion in this Proxy Statement/Prospectus and in the
Registration Statement, (S) certain tax matters, (T) termination of the US
Foodservice stockholders agreement (the "Stockholders Agreement"), and (U) the
fairness opinion received by US Foodservice.
The Merger Agreement also includes representations and warranties by Rykoff-
Sexton and Merger Sub as to, among other things, (A) the corporate
organization, standing and power of Rykoff-Sexton and its subsidiaries, (B)
the authorization of the Merger Agreement, (C) Rykoff-Sexton's capitalization,
(D) the Rykoff-Sexton Common Shares to be issued pursuant to the Merger
Agreement, (E) certain business interests and investments, (F) pending or
threatened litigation, (G) the Merger Agreement's noncontravention of any
agreement, law, order or charter or by-law provision and the absence of the
need (except as specified) for governmental or third-party consents to the
Merger, (H) the terms, existence, operations, liabilities and compliance with
applicable laws of employee plans of Rykoff-Sexton and its subsidiaries, and
certain other matters relating to the Employee Retirement Income Security Act
of 1974, as amended, (I) certain labor matters, (J) payment of taxes, (K)
ownership of and rights to use certain intellectual property, (L) ownership of
and encumbrances affecting certain properties and assets, (M) certain
environmental matters, (N) the accuracy of Rykoff-Sexton's financial
statements and periodic reports filed with the SEC, (O) the absence of any
change in the business, financial condition, results of operations,
properties, assets or liabilities of Rykoff-Sexton and its subsidiaries, (P)
certain contracts and leases of Rykoff-Sexton and its subsidiaries, (Q)
certain transactions with affiliates, (R) the ownership, activities and assets
of Merger Sub, (S) brokers and finders employed by Rykoff-Sexton, (T) the
accuracy of information to be supplied by Rykoff-Sexton for inclusion in this
Proxy Statement/Prospectus and in the Registration Statement, (U) certain tax
matters, (V) forgiveness of certain loans to key management employees of US
Foodservice, and (W) the fairness opinion received by Rykoff-Sexton.
The representations and warranties of each of the parties contain various
customary exceptions for materiality, knowledge and previously disclosed
information. The representations and warranties of each of the parties are
deemed to be conditions to the Merger to the extent provided for in the Merger
Agreement, but will not survive the Merger.
The Merger Agreement provides that each party thereto agrees that neither it
nor any affiliate or stockholder thereof, nor any of their respective
partners, officers, directors, employees or representatives makes, has made or
will be deemed to have made, any representation or warranty, express or
implied, to any other party or to any affiliate or stockholder thereof or any
of their respective partners, officers, directors, employees or
representatives with respect to (a) the execution and delivery of the Merger
Agreement or the transactions contemplated thereby; (b) any financial
projections delivered to or made available to any such persons or their
counsel, accountants, advisors, representatives or affiliates, whether before
or after the execution of the Merger Agreement, and agrees that it has not and
will not rely on such financial projections in connection with its evaluation
of any other party
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or the Merger; or (c) any information, statement or document delivered to or
made available to any such persons or their counsel, accountants, advisors,
representatives or affiliates, whether before or after the execution of the
Merger Agreement, with respect to any other party or the business, operations
or affairs of any other party, except (with respect to clauses (a) and (c)
only), to the extent and as expressly covered by a representation and warranty
contained in the Merger Agreement or in the ML Agreement or the other
agreements expressly referred to in the Merger Agreement or the ML Agreement.
BUSINESS OF US FOODSERVICE PENDING THE MERGER
US Foodservice has agreed that, among other things, prior to the Effective
Time, except as contemplated by the Merger Agreement or the Commitment Letter,
as set forth in US Foodservice's Disclosure Statement or as otherwise
permitted by the prior written consent of Rykoff-Sexton, (i) US Foodservice
and its subsidiaries will each conduct its operations according to its
ordinary course of business consistent with past practice, and (ii) it and its
subsidiaries will not enter into any material transaction other than in the
ordinary course of business consistent with past practice. US Foodservice has
agreed that, unless Rykoff-Sexton agrees in writing or except as previously
disclosed to Rykoff-Sexton or otherwise permitted pursuant to the Merger
Agreement or as contemplated by the Commitment Letter, prior to the Effective
Time neither US Foodservice nor any of its subsidiaries will:
(A) except for (1) shares issued upon exercise of Options outstanding as
of February 2, 1996 and (2) the issuance of Class A Common Stock or Class B
Common Stock, as the case may be, upon conversion of Class A Common Stock
or Class B Common Stock as required by the US Foodservice Charter, issue,
deliver, sell, dispose of, pledge or otherwise encumber, or authorize or
propose the issuance, sale, disposition or pledge or other encumbrance of
(a) any additional shares of its capital stock of any class (including
shares of US Foodservice Common Stock), or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for any shares of its capital stock, or any rights, warrants, options,
calls, commitments or any other agreements of any character to purchase or
acquire any shares of its capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of its capital stock, or (b) any other securities in
respect of, in lieu of, or in substitution for, shares of US Foodservice
Common Stock outstanding on February 2, 1996;
(B) redeem, purchase or otherwise acquire, or propose to redeem, purchase
or otherwise acquire, any of its outstanding securities (including shares
of US Foodservice Common Stock), except for redemption of the Preferred
Stock in accordance with the ML Redemption Agreement or Sara Lee Redemption
Agreement or as otherwise contemplated by the Merger Agreement;
(C) split, combine, subdivide or reclassify any shares of its capital
stock or declare, set aside for payment or pay any dividend, or make any
other actual, constructive or deemed distribution in respect of any shares
of its capital stock or otherwise make any payments to stockholders in
their capacity as such;
(D) (1) other than in the ordinary course of business consistent with
past practices, and as approved by the US Foodservice Board of Directors,
(a) grant any increases in the base compensation of any of its directors,
officers or key employees, or (b) pay or agree to pay any material pension,
retirement allowance or other employee benefit not required by any of the
US Foodservice employee plans or benefit arrangements as in effect on
February 2, 1996 to any such director, officer or key employee, whether
past or present, (2) (a) enter into any new or amend any existing
employment or severance agreement with any such director, officer or key
employee of US Foodservice or any of its subsidiaries, except as permitted
in US Foodservice's Disclosure Statement or (b) except as may be required
to comply with applicable law, become obligated under any US Foodservice
employee plan or benefit arrangement which was not in existence on February
2, 1996, or amend any such plan or arrangement in existence on February 2,
1996 if such amendment would have the effect of enhancing or accelerating
any benefits thereunder;
(E) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
US Foodservice or any of its subsidiaries (other than the Merger);
(F) other than as disclosed in US Foodservice's current capital budget,
make any acquisition or disposition, by means of merger, consolidation or
otherwise, of any material assets (other than sales of
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inventory in the ordinary course of business and the disposition of
obsolete assets or assets no longer used in the business) or other business
enterprise or operation;
(G) adopt any amendments to the US Foodservice Charter or its By-laws or
alter through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any of its
subsidiaries;
(H) other than (1) borrowings under existing credit facilities, (2) other
borrowings in the ordinary course at any time outstanding up to $10 million
after February 2, 1996, (3) borrowings in connection with the redemption of
Preferred Stock to the extent permitted by the Merger Agreement, and (4)
borrowings of up to $35 million to be used for construction of a new
operating facility for Biggers Brothers, Inc. ("Biggers Brothers"), incur
any indebtedness for borrowed money or guarantee any such indebtedness or,
except in the ordinary course consistent with past practice, make any
loans, advances or capital contributions to, or investments in, any other
person (other than to US Foodservice or any wholly-owned subsidiary of US
Foodservice);
(I) enter into any agreement providing for acceleration of payment of any
material obligation or performance of any material benefit or payment or
other consequence as a result of a change of control of US Foodservice or
its subsidiaries;
(J) except as disclosed in US Foodservice's current capital budget, enter
into any contract, arrangement or understanding requiring the lease or
purchase of equipment, materials, supplies or services over a period
greater the 12 months which is not cancelable without penalty on 30 days'
or less notice;
(K) take any actions, which would, or would be reasonably likely to
adversely affect the qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, and US Foodservice will use all
reasonable efforts to achieve such result; or
(L) enter into any contract, agreement, commitment or arrangement to do
any of the foregoing.
BUSINESS OF RYKOFF-SEXTON PENDING THE MERGER
Rykoff-Sexton has agreed that, among other things, prior to the Effective
Time, except as contemplated by the Merger Agreement or the Commitment Letter,
as set forth in the Rykoff-Sexton Disclosure Statement or as otherwise
permitted by the prior written consent of US Foodservice, (i) Rykoff-Sexton
and its subsidiaries will each conduct its operations according to its
ordinary course of business consistent with past practice, and (ii) it and its
subsidiaries will not enter into any material transaction other than in the
ordinary course of business consistent with past practice. Rykoff-Sexton has
agreed that, unless US Foodservice agrees in writing or except as previously
disclosed to US Foodservice or otherwise permitted by the Merger Agreement or
as contemplated by the Commitment Letter, prior to the Effective Time neither
Rykoff-Sexton nor any of its subsidiaries will:
(A) issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (1) any shares of its capital stock of any class, or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for any shares of its capital stock, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of its capital stock, or (2) any other
securities in respect of, in lieu of, or in substitution for, shares of
capital stock outstanding on the date hereof;
(B) redeem, purchase or otherwise acquire, or propose to redeem, purchase
or otherwise acquire, any of its outstanding securities;
(C) split, combine, subdivide or reclassify any shares of its capital
stock or declare, set aside for payment or pay any dividend (other than
normal cash dividends in the ordinary course, but not in an amount to
exceed $.03 per share semi-annually, and other than dividends of
subsidiaries of Rykoff-Sexton to Rykoff-Sexton), or make any other actual,
constructive or deemed distribution in respect of any shares of its capital
stock or otherwise make any payments to stockholders in their capacity as
such;
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(D) (1) other than in the ordinary course of business consistent with
past practices, and as approved by the Rykoff-Sexton Board of Directors,
(a) grant any increases in the base compensation of any of its directors,
officers or key employees, or (b) pay or agree to pay any material pension,
retirement allowance or other employee benefit not required by any of the
Rykoff-Sexton employee plans or benefit arrangements as in effect on
February 2, 1996 to any such director, officer or key employees, whether
past or present, or (2)(a) enter into any new or amend any existing
employment or severance agreement with any such director, officer or key
employee, except as contemplated in the Merger Agreement or as permitted in
the Rykoff-Sexton Disclosure Statement, or (b) except as may be required to
comply with applicable law, become obligated under any new Rykoff-Sexton
employee plan or benefit arrangement which was not in existence on February
2, 1996, or amend any such Rykoff-Sexton employee plan or benefit
arrangement in existence on February 2, 1996 if such amendment would have
the effect of accelerating or materially enhancing any benefits thereunder;
(E) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
Rykoff-Sexton or any of its subsidiaries (other than the Merger);
(F) other than as disclosed in Rykoff-Sexton's current capital budget,
make, engage in negotiations with any third party respecting, or directly
or indirectly solicit or initiate any inquiry, proposal or offer
respecting, the acquisition or disposition, by means of merger,
consolidation, business combination or otherwise, all or a material amount
of assets of, or any securities of, Rykoff-Sexton or any subsidiary of
Rykoff-Sexton (other than sales of inventory in the ordinary course of
business or the disposition of obsolete assets or assets no longer used in
the business or the sale of U.S. Lace Paperworks); provided, however, that
nothing contained in such provision will require the Board of Directors of
Rykoff-Sexton to act or refrain from acting in connection with taking and
disclosing to Rykoff-Sexton's stockholders a position contemplated by Rules
14d-9 and 14e-2 under the Exchange Act;
(G) adopt any amendments to the Rykoff-Sexton Charter or By-laws (except
for By-law amendments which are required in connection with the performance
by Rykoff-Sexton of its obligations under the Merger Agreement or under any
other agreement contemplated under the Merger Agreement) or alter through
merger, liquidation, reorganization, restructuring or in any other fashion
the corporate structure or ownership of any of its subsidiaries;
(H) other than (1) borrowings under existing credit facilities and (2)
other borrowings in the ordinary course in the aggregate at any time
outstanding up to $10 million after February 2, 1996, incur any
indebtedness for borrowed money or guarantee any such indebtedness or,
except in the ordinary course consistent with past practice, make any
loans, advances or capital contributions to, or investments in, any other
person (other than to Rykoff-Sexton or any wholly owned subsidiary of
Rykoff-Sexton);
(I) except in connection with modifications to Rykoff-Sexton's Change in
Control Agreements as contemplated in the Merger Agreement, enter into any
agreement providing for acceleration of payment of any material obligation
or performance of any material benefit or obligation or other consequence
as a result of a change of control of Rykoff-Sexton or its subsidiaries;
(J) except as disclosed in Rykoff-Sexton's current capital budget, enter
into any contract, arrangement or understanding requiring the lease or
purchase of equipment, materials, supplies or services over a period
greater than 12 months, which is not cancelable without penalty on 30 days'
or less notice;
(K) take any actions, which would, or would be reasonably likely to,
adversely affect the qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, and Rykoff-Sexton will use all
reasonable efforts to achieve such result; or
(L) enter into any contract, agreement, commitment or arrangement to do
any of the foregoing.
NO SOLICITATION
Under the Merger Agreement, US Foodservice has agreed that, prior to the
Effective Time, neither it nor any of its subsidiaries, employees, officers,
agents or representatives will, directly or indirectly, (i) solicit or
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initiate any inquiry, proposal or offer from any person relating to any
acquisition or purchase of all or a material amount of the assets of, or any
securities of, or any merger, consolidation or business combination with, US
Foodservice or any of its subsidiaries (any such inquiry, proposal or offer
hereinafter a "US Foodservice Alternative Proposal"), or (ii)(1) participate
in any negotiations with respect to a US Foodservice Alternative Proposal, (2)
furnish to any other person any confidential information with respect to US
Foodservice or its business, or (3) otherwise cooperate in any way with, or
assist or participate in, or facilitate any US Foodservice Alternative
Proposal. US Foodservice must promptly notify Rykoff-Sexton if any US
Foodservice Alternative Proposal is made.
CERTAIN OTHER COVENANTS
Under the Merger Agreement, both Rykoff-Sexton and US Foodservice have
agreed: (A) to promptly make all filings and seek to obtain all authorizations
required under all applicable laws with respect to the Merger and the other
transactions contemplated by the Merger Agreement; (B) to promptly take, or
cause to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or appropriate to satisfy the conditions to the
Merger and to consummate and make effective the transactions contemplated by
the Merger Agreement on the terms and conditions set forth in the Merger
Agreement as soon as practicable, subject to certain qualifications; (C) to
afford access to officers, employees, counsel, accountants and other
authorized representatives of the other party, during the period prior to the
Effective Time, to their respective properties, books and records (including,
without limitation, the work papers of independent accountants) and, during
such period, to furnish promptly to such representatives all information
concerning their respective businesses, properties and personnel as may
reasonably be requested; (D) that US Foodservice will use reasonable efforts
to cause each party (other than Rykoff-Sexton and the ML Entities) to the
Registration Rights Agreement or who may otherwise be deemed to be an
affiliate of US Foodservice to deliver to Rykoff-Sexton on or prior to the
Effective Time, an affiliate letter with respect to Rule 145 under the
Securities Act, in the form attached to the Merger Agreement; (E) to cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding certain transfer, recording,
registration and similar taxes and fees payable in connection with the
transactions contemplated by the Merger Agreement; and (F) that Rykoff-Sexton
will assume liability for and hold stockholders of US Foodservice harmless
against liability for real property transfer or gain tax imposed on such
stockholders by the State of New York as a result of the Merger.
Under the Merger Agreement, US Foodservice has agreed to take or cause to be
taken all stockholder action necessary in accordance with applicable law, US
Foodservice's Charter and Bylaws and the Stockholders Agreement to approve the
Merger Agreement and the Merger. Rykoff-Sexton has agreed to take all action
necessary in accordance with applicable law, Rykoff-Sexton's Restated
Certificate of Incorporation and Bylaws to convene the Special Meeting. In
addition, the Merger Agreement provides that the Boards of Directors of both
US Foodservice and Rykoff-Sexton will recommend and declare advisable such
approval. See "THE SPECIAL MEETING--Vote Required." Under the Merger
Agreement, Rykoff-Sexton and US Foodservice have also agreed to cooperate and
promptly prepare the Registration Statement which Rykoff-Sexton has agreed to
promptly file with the SEC.
Under the Merger Agreement, Rykoff-Sexton and US Foodservice have agreed to
take certain actions with respect to the redemption or purchase of the
Preferred Stock. See "THE MERGER--Redemption or Purchase of Preferred Stock."
In addition, Rykoff-Sexton and US Foodservice have agreed to use their
reasonable best efforts to consummate the transactions set forth in the
Commitment Letter. See "THE MERGER--Rykoff-Sexton Financing and Receivables
Securitization."
Under the Merger Agreement, Rykoff-Sexton has agreed that, subject to the
delivery of certain waivers and releases by the ML Entities and certain other
stockholders of US Foodservice, from and after the Effective Time, to (and to
cause US Foodservice to) indemnify and hold harmless each person who is now,
or has been at any time prior to the date of the Merger Agreement, an officer
or director of US Foodservice with respect to acts or omissions occurring
prior to the Effective Time to the extent required by the Bylaws of US
Foodservice. In addition, Rykoff-Sexton has agreed to cause the directors and
officers of US Foodservice and its subsidiaries to
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be covered by directors' and officers' liability insurance maintained by
Rykoff-Sexton from and after the Effective Time, provided, that such insurance
will not include coverage for any acts or omissions occurring prior to the
Effective Time. See "THE MERGER--Interests of Certain Persons in the Merger."
The Merger Agreement also provides that with respect to certain payments
required to be made by US Foodservice which may constitute a "parachute
payment" under the Code, US Foodservice agrees to (A) in consultation with
Rykoff-Sexton, obtain stockholder approval of such payments in accordance with
the Code and regulations thereunder and (B) at least 15 days prior to the
closing of the Merger, provide evidence satisfactory to Rykoff-Sexton that
such approval has been obtained.
Under the Merger Agreement, Rykoff-Sexton has agreed to extend loans to
those management employees of US Foodservice for whom US Foodservice
management loans were forgiven at the Effective Time and whose Rykoff-Sexton
Common Shares are subject to restrictions on transfer specified in the Merger
Agreement, in an amount sufficient to cover the federal and state income tax
due from such management employees as a result of such forgiveness. See "THE
MERGER--Interests of Certain Persons in the Merger."
CONDITIONS; WAIVERS
Conditions to Each Party's Obligations to Effect the Merger. The respective
obligations of US Foodservice, Rykoff-Sexton and Merger Sub to effect the
Merger are subject to the fulfillment at or prior to the Effective Time of
each of the following conditions (any of which may be waived in whole or in
part under the Merger Agreement by the party benefitting thereby, to the
extent permitted by applicable law): (A) the Merger Agreement and the
transactions contemplated thereby shall have been duly approved by the
requisite holders of shares of US Foodservice Common Stock in accordance with
applicable law, the US Foodservice Charter and By-laws and the Stockholders
Agreement, and the issuance of Rykoff-Sexton Common Shares in connection with
the Merger shall have been duly approved by requisite holders of Rykoff-Sexton
Common Shares in accordance with the rules of the NYSE; (B) except for the
filing of a certificate of merger in accordance with the DGCL, all
authorizations required in connection with the execution and delivery of the
Merger Agreement and the performance of the obligations under the Merger
Agreement shall have been made or obtained, except where the failure to have
made or obtained any such authorizations would not have a material adverse
effect on the business, properties, operations or financial condition of
Rykoff-Sexton and its subsidiaries (including the Surviving Corporation)
following the Effective Time; (C) there shall not be in effect any judgment,
writ, order, injunction or decree of any court or governmental body of
competent jurisdiction, restraining, enjoining or otherwise preventing
consummation of the transactions contemplated by the Merger Agreement; (D) the
Registration Statement shall have been declared effective by the SEC under the
Securities Act and shall be effective at the Effective Time, and no stop order
suspending effectiveness shall have been issued, no action, suit, proceeding
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under state
securities laws or the Securities Act or Exchange Act relating to the issuance
or trading of the Rykoff-Sexton Common Shares to be issued in the Merger shall
have been received; (E) the Rykoff-Sexton Common Shares required to be issued
under the Merger Agreement (including upon exercise of Assumed Options and
Assumed Warrants) shall have been approved for listing on the NYSE, subject
only to official notice of issuance; (F) all conditions precedent to the
closing of the financing described in the Commitment Letter shall have been
satisfied, and the transactions contemplated by the Commitment Letter shall
have been consummated; (G) all shares of Exchangeable Preferred Stock shall
have been purchased by Rykoff-Sexton or Merger Sub pursuant to the ML
Redemption Agreement or as otherwise contemplated by the Merger Agreement, and
all shares of 10% Preferred Stock shall have been redeemed in accordance with
the terms and conditions set forth in the Sara Lee Redemption Agreement or as
otherwise contemplated by the Merger Agreement; (H) US Foodservice shall have
received an opinion of Morgan, Lewis & Bockius LLP, dated the Closing Date, to
the effect that the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code; and (I)
Rykoff-Sexton shall have received an opinion of (1) Jones, Day, Reavis & Pogue
(addressed to Rykoff-Sexton), dated the Closing Date, to the effect that the
Merger should be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and (2) Shearman & Sterling
(addressed to the ML Entities), dated the Closing Date, to the effect that
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the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code.
Conditions to the Obligations of Rykoff-Sexton and Merger Sub. The
respective obligations of Rykoff-Sexton and Merger Sub to effect the Merger
are subject to the fulfillment at or prior to the Effective Time of each of
the following conditions (any and all of which may be waived in whole or in
part under the Merger Agreement by Rykoff-Sexton or Merger Sub, as the case
may be, to the extent permitted by applicable law): (A)(1) each of the
representations and warranties of US Foodservice contained in the Merger
Agreement or otherwise required by the Merger Agreement to be made after the
date thereof in a writing expressly referred to in the Merger Agreement by or
on behalf of US Foodservice shall have been true in all material respects when
made and, except for certain specified exceptions, at the time of the closing
of the Merger with the same effect as though such representations and
warranties had been made at such time, and (2) each of the representations and
warranties of each of the ML Entities contained in the ML Agreement or
otherwise required under the Merger Agreement or the ML Agreement to be made
by any ML Entity after the date of the Merger Agreement in a writing expressly
referred to in the Merger Agreement or in the ML Agreement by or on behalf of
any ML Entity pursuant to the Merger Agreement or the ML Agreement shall have
been true in all material respects when made and, except for certain specified
exceptions, at the time of the closing of the Merger with the same effect as
though such representations and warranties had been made at such time; (B)(1)
at or prior to the closing of the Merger, US Foodservice shall have performed
or complied in all material respects with all agreements and conditions
contained in the Merger Agreement required to be performed or complied with by
it prior to or at the time of the closing of the Merger, and (2) at or prior
to the closing of the Merger, each ML Entity shall have performed or complied
in all material respects with all agreements and conditions contained in the
ML Agreement required to be performed or complied with by it prior to or at
the time of the closing of the Merger; (C) Rykoff-Sexton shall have received
from Morgan, Lewis & Bockius LLP or other counsel for US Foodservice
satisfactory to Rykoff-Sexton an opinion covering the items specified in an
exhibit to the Merger Agreement; (D) Rykoff-Sexton shall have received the
Standstill Agreement executed by each ML Entity, together with the opinion of
Shearman & Sterling or other counsel for the ML Entities satisfactory to
Rykoff-Sexton, dated the Closing Date, covering the items specified in an
exhibit to the Merger Agreement; (E) the opinion of Goldman Sachs dated the
date of the Merger Agreement shall not have been withdrawn, or materially
modified or amended, on or prior to the date of the Proxy
Statement/Prospectus; (F) the Stockholders Agreement shall have been
terminated and be of no further force and effect; (G) Rykoff-Sexton shall have
received a Tax Agreement executed by each ML Entity and the other parties
thereto; and (H) with respect to any action, suit, arbitration or other
proceeding pending against US Foodservice or any subsidiary thereof as of the
date of the Merger Agreement where the amount in controversy exceeds $10
million ("Covered US Foodservice Proceeding"), (1) a final non-appealable
judgment or award shall have been entered in such Covered US Foodservice
Proceeding, or a binding settlement agreement of such Covered US Foodservice
Proceeding shall have been executed and delivered, providing in each such case
for (a) a judgment or award in favor of US Foodservice or such subsidiary, or
(b) payment by US Foodservice or such subsidiary of, or the imposition of
fines or other remedies against US Foodservice or such subsidiary involving,
an amount (i) not in excess of the range specified in any letter or opinion of
US Foodservice's counsel in such Covered US Foodservice Proceeding to the US
Foodservice's auditors during the 12 months preceding the date of the Merger
Agreement ("Previous US Foodservice Auditor's Letter") or (ii) if such amount
is in excess of such range, the payment of such amount does not have, or would
not reasonably be expected to have (so far as can be foreseen at the time), a
material adverse effect on the business, properties, operation or financial
condition of US Foodservice and its subsidiaries, taken as a whole (a "US
Foodservice Material Adverse Effect"), or (2) if such Covered US Foodservice
Proceeding has not been finally resolved, (a) the US Foodservice shall have
received an update ("US Foodservice Update Letter") to the Previous US
Foodservice Auditor's Letter which specifies a range above which an award or
judgment is not favored by the balance of probabilities, and (b) (i) such
range shall not exceed that specified in the Previous US Foodservice Auditor's
Letter, or (ii) if such range as set forth in the US Foodservice Update Letter
exceeds the range set forth in the Previous US Foodservice Auditor's Letter,
an award or judgment in such range would not have, or would not reasonably be
expected to have so far as can be foreseen at the time, a US Foodservice
Material Adverse Effect.
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Conditions to the Obligations of US Foodservice. The obligations of US
Foodservice to effect the Merger are subject to the fulfillment at or prior to
the Effective Time of each of the following conditions (any and all of which
may be waived in whole or in part under the Merger Agreement by US Foodservice
to the extent permitted by applicable law): (A) each of the representations
and warranties of Rykoff-Sexton and Merger Sub contained in the Merger
Agreement or otherwise required by the Merger Agreement to be made after the
date thereof in a writing expressly referred to in the Merger Agreement by or
on behalf of Rykoff-Sexton and Merger Sub pursuant to the Merger Agreement
shall have been true in all material respects when made and, except for
certain specified exceptions, at the time of the closing of the Merger with
the same effect as though such representations and warranties had been made at
such time; (B) at or prior to the closing of the Merger, Rykoff-Sexton and
Merger Sub shall have each performed or complied in all material respects with
all agreements and conditions contained in the Merger Agreement required to be
performed or complied with by it prior to or at the time of the closing of the
Merger; (C) US Foodservice shall have received from Jones, Day, Reavis & Pogue
and Maslon Edelman Borman & Brand LLP, or other counsel for Rykoff-Sexton
satisfactory to US Foodservice, opinions, dated the Closing Date, covering the
items specified in an exhibit to the Merger Agreement; (D) the Registration
Rights Agreement, duly executed by Rykoff-Sexton, shall have been received by
the other parties thereto; (E) the individuals listed on the employment
agreements included as an exhibit to the Merger Agreement shall have received
executed employment agreements from Rykoff-Sexton in the respective forms of
such exhibit; (F) with respect to any action, suit, arbitration or other
proceeding pending against Rykoff-Sexton or any of its subsidiaries as of the
date of the Merger Agreement where the amount in controversy exceeds $10
million ("Covered Rykoff-Sexton Proceeding"), (1) a final non-appealable
judgment or award shall have been entered in such Covered Rykoff-Sexton
Proceeding, or a binding settlement agreement of such Covered Rykoff-Sexton
Proceeding shall have been executed and delivered, providing in each such case
for (a) a judgment or award in favor of Rykoff-Sexton or such subsidiary, or
(b) payment by Rykoff-Sexton or such subsidiary of, or the imposition of fines
or other remedies against Rykoff-Sexton or such subsidiary involving, an
amount (i) not in excess of the range specified in any letter or opinion of
Rykoff-Sexton's counsel in such Covered Rykoff-Sexton Proceeding to Rykoff-
Sexton's auditors during the 12 months preceding the date of the Merger
Agreement ("Previous Rykoff-Sexton Auditor's Letter") or (ii) if such amount
is in excess of such range, the payment of such amount does not have, or would
not reasonably be expected to have (so far as can be foreseen at the time), a
material adverse effect on the business, properties, operation or financial
condition of Rykoff-Sexton and its subsidiaries, taken as a whole (a "Rykoff-
Sexton Material Adverse Effect"), or (2) if such Covered Rykoff-Sexton
Proceeding has not been finally resolved, (a) Rykoff-Sexton shall have
received an update ("Rykoff-Sexton Update Letter") to the Previous Rykoff-
Sexton Auditor's Letter which specifies a range above which an award or
judgment is not favored by the balance of probabilities, and (b) (i) such
range shall not exceed that specified in the Previous Rykoff-Sexton Auditor's
Letter, or (ii) if such range as set forth in the Rykoff-Sexton Update Letter
exceeds the range set forth in the Previous Rykoff-Sexton Auditor's Letter, an
award or judgment in such range would not have, or would not reasonably be
expected to have so far as can be foreseen at the time, a Rykoff-Sexton
Material Adverse Effect.
AMENDMENT; TERMINATION
Amendment. The parties to the Merger Agreement may not amend, change,
supplement, waive or otherwise modify the Merger Agreement except by an
instrument in writing signed by all the parties to the Merger Agreement. The
Merger Agreement may be amended by the parties thereto, by action taken by
their respective Board of Directors, at any time before or after approval of
matters presented in connection with the Merger by the stockholders of US
Foodservice, Rykoff-Sexton and Merger Sub, but after any such stockholder
approval, no amendment may be made which by law requires the further approval
of stockholders without obtaining such approval.
Termination by Mutual Consent. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of matters presented in connection with the Merger by
holders of Rykoff-Sexton Common Shares or holders of shares of US Foodservice
Common Stock, by the mutual written consent of the Boards of Directors of each
of Rykoff-Sexton and US Foodservice.
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Termination by Either Rykoff-Sexton or US Foodservice. The Merger Agreement
may also be terminated (upon notice from the terminating party to the other
parties) and the Merger may be abandoned by action of the Board of Directors
of either Rykoff-Sexton or US Foodservice at any time prior to the Effective
Time, before or after approval of the issuance of Rykoff-Sexton Common Shares
in connection with the Merger by holders of the shares of US Foodservice or
holders of the Rykoff-Sexton Common Shares, if (A) the Merger is not
consummated by July 31, 1996 (provided that the right to terminate the Merger
Agreement under such provision shall not be available to any party whose
failure to perform its covenants set forth in the Merger Agreement has been
the cause of or resulted in the failure of the Merger to occur on or before
such date), (B) any court of competent jurisdiction in the United States or
governmental body in the United States issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable (provided that the party seeking to
terminate the Merger Agreement pursuant to such provision shall have used all
reasonable efforts to remove such order, decree, ruling or other action), or
(C) the approval of Rykoff-Sexton's stockholders required under the Merger
Agreement shall not have been obtained at the Special Meeting.
Termination by Rykoff-Sexton. The Merger Agreement may be terminated (upon
notice from Rykoff-Sexton to US Foodservice) and the Merger may be abandoned
at any time prior to the Effective Time, before or after the approval of the
issuance of Rykoff-Sexton Common Shares in connection with the Merger by
holders of Rykoff-Sexton Common Shares, by action of the Rykoff-Sexton Board
of Directors, if (A) US Foodservice shall have failed to comply in any
material respect with any of the covenants, conditions or agreements contained
in the Merger Agreement to be complied with or performed by US Foodservice at
or prior to such date of termination, which failure to comply has not been
cured within 30 Business Days following receipt by US Foodservice of notice of
such failure to comply, (B) any of the ML Entities shall have failed to comply
in any material respect with any of the covenants, conditions or agreements
contained in the ML Agreement to be complied with or performed by any of the
ML Entities at or prior to the such date of termination, which failure to
comply has not been cured by such ML Entity within 30 Business Days following
receipt by such ML Entity of notice of such failure to comply, (C) any
representation or warranty of US Foodservice contained in the Merger Agreement
shall not be true in all material respects when made (provided such breach has
not been cured within 30 Business Days following receipt by US Foodservice of
notice of the breach) or on and as of the Effective Time as if made on and as
of the Effective Time, except that those representations and warranties which
address matters only as of a particular date shall remain true in all material
respects as of such date, or (D) any representation or warranty of any ML
Entity contained in the ML Agreement shall not be true in all material
respects when made (provided such breach has not been cured within 30 Business
Days following receipt by such ML Entity of notice of the breach) or on and as
of the Effective Time as if made on and as of the Effective Time, except that
those representations and warranties which address matters only as of a
particular date shall remain true in all material respects as of such date.
Termination by US Foodservice. The Merger Agreement may be terminated (upon
notice from US Foodservice to Rykoff-Sexton) and the Merger may be abandoned
at any time prior to the Effective Time, before or after the approval of the
Merger Agreement by holders of the shares of US Foodservice Common Stock, by
action of the US Foodservice Board of Directors, if (A) Rykoff-Sexton or
Merger Sub shall have failed to comply in any material respect with any of the
covenants, conditions or agreements contained in the Merger Agreement to be
complied with or performed by Rykoff-Sexton or Merger Sub at or prior to such
date of termination, which failure to comply has not been cured within 30
Business Days following receipt by the breaching party of notice of such
failure to comply, or (B) any representation or warranty of Rykoff-Sexton or
Merger Sub contained in the Merger Agreement shall not be true in all material
respects when made (provided such breach has not been cured within 30 Business
Days following receipt by the breaching party of notice of the breach) or on
and as of the Effective Time as if made on and as of the Effective Time,
except that those representations and warranties which address matters only as
of a particular date shall remain true in all material respects as of such
date. Notwithstanding anything to the contrary contained in this paragraph, US
Foodservice may terminate the Merger Agreement if (A) as permitted pursuant to
the proviso to Section 7.5 of the Merger Agreement, Rykoff-Sexton has refused
to consent to any divestiture, hold separate or similar transaction on the
part of US Foodservice, or
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Rykoff-Sexton refuses to take or commit to take any action referred to in such
proviso, in each case that is required, in the reasonable opinion of US
Foodservice, for the consummation of the transactions contemplated by the
Merger Agreement, and (B) Rykoff-Sexton has failed to make such consent or
take or commit to be taken such action, within 10 Business Days following
receipt by Rykoff-Sexton of notice of US Foodservice's intention to terminate
the Merger Agreement on that basis.
Certain Consequences of Termination. In the event of termination of the
Merger Agreement and abandonment of the Merger as provided above, no party to
the Merger Agreement (or any of its respective directors or officers) shall
have any liability or further obligation under the Merger Agreement, except
the obligations of the parties pursuant to the provisions of the Merger
Agreement dealing with access to information, confidentiality, publicity,
expenses and certain miscellaneous matters, except that nothing in the Merger
Agreement will relieve any party from liability for any wilful breach of any
of its representations and warranties, covenants or other agreements set forth
in the Merger Agreement. The failure of Rykoff-Sexton or US Foodservice to
close the transactions contemplated by the Commitment Letter will not be
deemed to be a wilful breach of any of its representations and warranties,
covenants or other agreements set forth in the Merger Agreement.
EXPENSES; TERMINATION FEE
Except as provided below, each party to the Merger Agreement will bear its
own expenses, except that in the event of a dispute concerning the terms or
enforcement of the Merger Agreement, the prevailing party will be entitled to
reimbursement of reasonable legal fees and disbursements from the other party
or parties to such dispute.
Rykoff-Sexton agrees that if (A) an RSI Alternative Proposal (as defined in
the Merger Agreement) shall have been publicly announced or sent to holders of
Rykoff-Sexton Common Shares after the date of the Merger Agreement and prior
to the Special Meeting, and (B) the issuance of Rykoff-Sexton Common Shares in
connection with the Merger shall not have been approved by the requisite
holders of Rykoff-Sexton Common Shares in accordance with the rules of the
NYSE at the Special Meeting, and (C) within 12 months of the date on which
such meeting is held a definitive agreement with respect to such RSI
Alternative Proposal is executed by Rykoff-Sexton, then simultaneous with the
execution of such definitive agreement, unless Rykoff-Sexton shall have
properly terminated the Merger Agreement as described above in clauses (A) and
(B) of the section entitled "--Termination by Either Rykoff-Sexton or US
Foodservice," or otherwise as described above under the section entitled "--
Termination by Rykoff-Sexton," Rykoff-Sexton shall pay to US Foodservice an
amount equal to $4,500,000 plus all Expenses (not to exceed $1,000,000)
incurred by US Foodservice. The payment by Rykoff-Sexton of such amounts will
be liquidated damages and following the payment of such amounts, Rykoff-Sexton
will have no liability or further obligation under the Merger Agreement except
pursuant to provisions of the Merger Agreement that expressly survive
termination of the Merger Agreement.
OTHER AGREEMENTS
THE ML AGREEMENT
Pursuant to the ML Agreement among Rykoff-Sexton and the ML Entities entered
into simultaneously with the Merger Agreement, each of the ML Entities has
agreed that, during the term of the ML Agreement, it will not (i) sell,
transfer, pledge, assign or otherwise dispose of, or enter into any contract,
option or other agreement with respect to the transfer, pledge, assignment or
other disposition of, any US Foodservice Class A Common Stock owned by any of
the ML Entities ("ML Entities Shares"); (ii) acquire any additional shares of
US Foodservice Class A Common Stock without the prior written consent of
Rykoff-Sexton; (iii) enter into a voting agreement (other than the Standstill
Agreement, which is described below) with respect to any ML Entities Shares;
or (iv) solicit or initiate any US Foodservice Alternative Proposal,
participate in any negotiations with respect to any US Foodservice Alternative
Proposal, furnish to any other person any confidential information with
respect to US Foodservice or its business, or otherwise cooperate in any way
with or assist or participate in,
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or facilitate any US Foodservice Alternative Proposal. MLCP has also agreed
promptly to notify Rykoff-Sexton if any US Foodservice Alternative Proposal is
made to any ML Entity.
Each of the ML Entities has also agreed that, at all times prior to the
Effective Time, the ML Entities will collectively continue to own and exercise
voting rights with respect to the ML Entities Shares. In addition, each ML
Entity has agreed that at any meeting of the stockholders of US Foodservice,
and in any action by written consent of the stockholders of US Foodservice, it
will (i) vote the ML Entities Shares in favor of the Merger and the Merger
Agreement, and (ii) vote the ML Entities Shares against any action or
agreement which would result in a breach of any covenant, representation or
warranty of US Foodservice under the Merger Agreement. Each of the ML Entities
has also agreed to revoke any previous proxies or consents with respect to the
ML Entities Shares or any other voting securities of US Foodservice.
In accordance with the ML Agreement, at the Effective Time, (i) Rykoff-
Sexton and the ML Entities will enter into the Standstill Agreement, the
Registration Rights Agreement and the Tax Agreement (all of which are
described below), and (ii) the ML Entities will execute a waiver and release
relating to any claims the ML Entities may have against any directors or
officers of US Foodservice to the extent such directors and officers would be
entitled to indemnification by US Foodservice under its by-laws.
The ML Agreement will terminate at the earlier of the Effective Time or the
termination of the Merger Agreement.
THE STANDSTILL AGREEMENT
Pursuant to the ML Agreement, at the Effective Time, Rykoff-Sexton and the
ML Entities will enter into the Standstill Agreement, which provides for
certain standstill, voting and transfer restrictions on the ML Entities, and
provides for representation on the Rykoff-Sexton Board of Directors and
certain committees thereof by individuals selected by the ML Entities.
Standstill Provisions. During the term of the Standstill Agreement, except
as otherwise expressly provided therein or as approved by the prior
affirmative vote of a majority of the directors of Rykoff-Sexton who are not
affiliated with the ML Entities, the ML Entities will not, and will not permit
any of their respective affiliates to, directly or indirectly, (i) acquire,
propose to acquire (or publicly announce or otherwise disclose an intention to
propose to acquire) or offer to acquire, by purchase or otherwise, any
securities entitled to vote generally for the election of directors ("Rykoff-
Sexton Voting Securities") of Rykoff-Sexton if the effect of such acquisition
would be to increase the number of shares of Rykoff-Sexton Voting Securities
beneficially owned by the ML Entities and their affiliates to an amount
representing more than 36.4% of the aggregate number of votes which may be
cast by holders of outstanding shares of Rykoff-Sexton Voting Securities
("Total Voting Power") (such percentage to be automatically reduced to reflect
the actual percentage of Rykoff-Sexton Voting Securities owned by the ML
Entities and their affiliates from time to time); (ii) propose (or publicly
announce or otherwise disclose an intention to propose), solicit, offer, seek
to direct, negotiate with or provide any confidential information relating to
Rykoff-Sexton or its business to any other person with respect to, any tender
or exchange offer, merger, consolidation, share exchange, business
combination, restructuring, recapitalization or similar transaction involving
Rykoff-Sexton; provided that the ML Entities will not be prohibited from
soliciting, offering, seeking to effect and negotiating with any person with
respect to sales or transfers of Rykoff-Sexton Voting Securities held by the
ML Entities if otherwise permitted by the Standstill Agreement; (iii) make, or
in any way participate in, any solicitation of proxies to vote, solicit any
consent with respect to the voting of any Rykoff-Sexton Voting Securities or
become a participant in any election contest with respect to Rykoff-Sexton;
(iv) form, participate in or join any person or group with respect to any
Rykoff-Sexton Voting Securities, or otherwise act in concert with any third
person (other than an ML Entity) for the purpose of acquiring any Rykoff-
Sexton Voting Securities or holding or disposing of Rykoff-Sexton Voting
Securities for any purpose otherwise prohibited by the Standstill Agreement;
(v) deposit any Rykoff-Sexton Voting Securities into a voting trust or similar
arrangement; (vi) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals with respect to Rykoff-Sexton,
or induce or attempt to induce any other person to initiate any
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stockholder proposal; (vii) except as specifically provided for in the
Standstill Agreement, seek election to or seek to place a representative on
the Board of Directors of Rykoff-Sexton, or seek the removal of any member of
the Board of Directors of Rykoff-Sexton; (viii) call or seek to have called
any meeting of the stockholders of Rykoff-Sexton for any purpose otherwise
prohibited by the Standstill Agreement; (ix) take any other action to seek to
control Rykoff-Sexton; (x) demand, request or propose to amend, waive or
terminate the foregoing provisions; or (xi) agree to do any of the foregoing,
or advise, assist, encourage or persuade any third party to take any action
with respect to any of the foregoing.
In addition, each of the ML Entities will notify Rykoff-Sexton promptly if
any inquiries or proposals are received by, or any negotiations or discussions
are initiated or continued regarding any of the foregoing matters with, any ML
Entity or, to its knowledge (subject to applicable confidentiality policies),
any of their respective affiliates.
Notwithstanding the above restrictions, the Standstill Agreement provides
that MLPF&S and its affiliates (other than the ML Entities) may effect or
recommend transactions in the ordinary course of its or their business, in,
relating to or involving Rykoff-Sexton Voting Securities provided that MLPF&S
and its affiliates (other than the ML Entities) do not acquire beneficial
ownership of Rykoff-Sexton Voting Securities representing more than 2% of the
Total Voting Power, subject to increase to (i) 3% in the event that the ML
Entities beneficially own Rykoff-Sexton Voting Securities representing less
than 30%, but at least 22%, of the Total Voting Power; (ii) 4% in the event
that the ML Entities beneficially own Rykoff-Sexton Voting Securities
representing less than 22%, but at least 16%, of the Total Voting Power; and
(iii) 5% in the event that the ML Entities beneficially own Rykoff-Sexton
Voting Securities representing less than 16%, but at least 10%, of the Total
Voting Power. Such permitted activities may include transactions in which
MLPF&S or its affiliates are acting as an investment banking organization
providing advisory services, an investment advisor, an investment company, a
broker or dealer in securities, as an underwriter or placement agent of
securities, a market maker, a specialist, an arbitrageur or a block
positioner. Such permitted activities may not, however, include any activities
or transactions which have the purpose or effect of seeking to control or
influence the management, policies or affairs of Rykoff-Sexton, including,
without limitation, through advising any person with respect to any
unsolicited bid for control of, or any other offer for securities of or any
business combination involving, Rykoff-Sexton.
Board Representation. The Standstill Agreement provides that, at the
Effective Time of the Merger, Rykoff-Sexton will increase the size of its
Board of Directors to 12 and will use its best efforts to fill four of the
vacancies thereby created with directors designated by a representative of the
ML Entities ("ML Directors"). Of the four initial ML Directors, one will be
appointed to Class A (current term expiring in 1996), one will be appointed to
Class B (current term expiring in 1998) and two will be appointed to Class C
(current terms expiring in 1997). Any designees of ML Directors who are not
employees of either an ML Entity which is controlled by ML & Co. or an
affiliate of an ML Entity which is controlled by ML & Co. must be reasonably
acceptable to the Rykoff-Sexton directors other than the ML Directors.
Until such time as the ML Entities no longer beneficially own Rykoff-Sexton
Voting Securities representing at least 10% of the Total Voting Power, except
as contemplated by the Standstill Agreement or otherwise agreed to by a
majority of ML Directors, Rykoff-Sexton will not take or recommend to its
stockholders any action which would (i) cause the Rykoff-Sexton Board of
Directors to consist of any number of directors other than 12 directors
divided into three classes of four directors each, or (ii) result in any
amendment to the by-laws of Rykoff-Sexton or the by-laws or regulations of any
subsidiary of Rykoff-Sexton in effect at the Effective Time of the Merger that
would impose any qualifications to the eligibility of directors of Rykoff-
Sexton or any subsidiary of Rykoff-Sexton to serve on any committee of the
Board of Directors of Rykoff-Sexton or on the Board of Directors (or any
committee thereof) of any subsidiary of Rykoff-Sexton, except as may be
required by applicable law.
In addition, Rykoff-Sexton will use its best efforts to cause the Nominating
Committee of its Board of Directors (or if the Nominating Committee makes no
such recommendation, the Rykoff-Sexton Board of
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Directors) to recommend for election in the applicable year in which the
respective class term expires, in each case as designated by the ML Entities,
(i) four ML Directors, consisting of one ML Director in each of Class A and
Class B and two ML Directors in Class C, so long as the ML Entities
beneficially own Rykoff-Sexton Voting Securities representing at least 34% of
the Total Voting Power; (ii) three ML Directors, consisting of one ML Director
in each of Class A, Class B and Class C, so long as the ML Entities
beneficially own Rykoff-Sexton Voting Securities representing less than 34%,
but at least 27%, of the Total Voting Power; (iii) two ML Directors,
consisting of one ML Director in Class A and one ML Director in Class B or
Class C, so long as the ML Entities beneficially own Rykoff-Sexton Voting
Securities representing less than 27%, but at least 16%, of the Total Voting
Power; and (iv) one ML Director in Class A, so long as the ML Entities
beneficially own Rykoff-Sexton Voting Securities representing less than 16%,
but at least 10%, of the Total Voting Power.
Until such time as the ML Entities no longer beneficially own Rykoff-Sexton
Voting Securities representing at least 16% of the Total Voting Power, to the
extent that, and for so long as, any of the ML Directors is qualified under
the then-current rules of the NYSE, the rules and regulations under the Code,
the rules and regulations under Section 16(b) of the Exchange Act and Rykoff-
Sexton's by-laws, Rykoff-Sexton will use its best efforts to cause the Rykoff-
Sexton Board of Directors to designate one of the ML Directors to serve on
each of the committees of the Rykoff-Sexton Board of Directors to the same
extent, and on the same basis, as the other members of the Rykoff-Sexton Board
of Directors. In addition, subject to the same director qualification
requirements, in the event that, and for so long as, the ML Entities own
Rykoff-Sexton Voting Securities representing less than 16% but at least 10% of
the Total Voting Power, Rykoff-Sexton will use its best efforts to cause the
Rykoff-Sexton Board of Directors to designate one of the ML Directors to serve
on the Nominating Committee and the Management Development--Compensation and
Stock Option Committee of the Rykoff-Sexton Board of Directors to the same
extent, and on the same basis, as the other members of the Board of Directors.
The Standstill Agreement also provides that, so long as the ML Entities
beneficially own Rykoff-Sexton Voting Securities representing at least 10% of
the Total Voting Power, the ML Directors will have representation on the board
of directors (and any committees thereof) of any subsidiaries of Rykoff-Sexton
in a manner similar to their rights to representation on the Rykoff-Sexton
Board of Directors, but only to the extent that any directors of Rykoff-Sexton
who are not officers or employees of Rykoff-Sexton are members of the board of
directors of any such subsidiary of Rykoff-Sexton.
The ML Entities will have the right, with cause, to request the removal of
any ML Director from the Rykoff-Sexton Board of Directors, subject to the
applicable provisions of the Rykoff-Sexton Charter and By-Laws as well as
applicable statutory provisions, and Rykoff-Sexton will use its best efforts
to have such removal approved by the Rykoff-Sexton Board of Directors. The ML
Entities will also have the right to designate nominees for vacancies caused
by a ML Director ceasing to serve as a member of the Board of Directors,
subject to certain restrictions, provided that the filling of the vacancy is
to be made by action of the Rykoff-Sexton Board of Directors in accordance
with the terms of the Rykoff-Sexton Charter. In addition, in the event that
the percentage of Total Voting Power represented by the Rykoff-Sexton Voting
Securities beneficially owned in the aggregate by the ML Entities at any time
decreases below any of the minimum percentages specified above entitling the
ML Entities to board and committee representation, the ML Entities will cause
such number of ML Directors to resign as is necessary to adjust the number of
remaining ML Directors to the number (if any) to which the ML Entities would
have otherwise been entitled under the Standstill Agreement if the nominations
to the Board or Directors (or any committee thereof) of Rykoff-Sexton or any
subsidiary of Rykoff-Sexton were made at such time. Any subsequent increase in
the percentage of the Total Voting Power represented in the aggregate by the
Rykoff-Sexton Voting Securities beneficially owned by the ML Entities above
any such minimum percentage will not entitle the ML Entities to have any
additional ML Directors named or elected.
Nothing in the Standstill Agreement requires the ML Entities to designate
any ML Directors or requires an ML Director to serve in office. Until such
time as the ML Entities no longer beneficially own Rykoff-Sexton Voting
Securities representing in the aggregate at least 10% of the Total Voting
Power, in the event there is a vacancy created on the Rykoff-Sexton Board of
Directors by the resignation or removal of an ML Director or
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the failure of the ML Entities to designate an ML Director (other than a
resignation as a result of a decrease in the percentage of the aggregate
number of votes of all outstanding Rykoff-Sexton Voting Securities represented
by Rykoff-Sexton Voting Securities owned by the ML Entities below the minimum
percentages specified above for representation on the Rykoff-Sexton Board of
Directors) upon the written request of the ML Entities, Rykoff-Sexton will
reduce the size of the Rykoff-Sexton Board of Directors by the number of such
vacancies and thereafter, the ML Entities will have no right to designate any
ML Directors to the extent of such reduction.
The Standstill Agreement provides that the rights to board and committee
representation described above will extend only to those ML Entities which are
controlled by ML & Co., and in the event of any transaction resulting in ML &
Co. no longer controlling such ML Entity, such ML Entity will no longer have
any rights to such board and committee representation, but will be bound by
the other terms of the Standstill Agreement.
Rykoff-Sexton's obligations described above regarding board and committee
representation are subject to compliance with the provisions of the Rykoff-
Sexton Charter and Bylaws and the fiduciary duties of Rykoff-Sexton's Board of
Directors and Nominating Committee to the stockholders of Rykoff-Sexton.
Nothing set forth in such provisions will require Rykoff-Sexton to violate any
such provisions or require any director of Rykoff-Sexton to breach any such
fiduciary duty.
Voting Provisions. During the term of the Standstill Agreement, until such
time as the ML Entities no longer beneficially own Rykoff-Sexton Voting
Securities representing at least 10% of the Total Voting Power, the ML
Entities will take all such action as may be required so that all Rykoff-
Sexton Voting Securities owned by the ML Entities and their affiliates, as a
group, are (i) voted for Rykoff-Sexton's nominees to the Rykoff-Sexton Board
of Directors, in accordance with the recommendation of the Nominating
Committee of the Rykoff-Sexton Board of Directors, and (ii) voted on all
matters to be voted on by holders of Rykoff-Sexton Voting Securities. The
foregoing obligation referred to in clause (i) is subject to (i) Rykoff-Sexton
having performed its obligations under the Standstill Agreement to use its
best efforts to cause the Rykoff-Sexton Board of Directors to designate one of
the ML Directors to serve on such Nominating Committee as long as the ML
Entities own Rykoff-Sexton Voting Securities representing at least 10% of the
Total Voting Power, if the ML Entities have requested such representation on
the Nominating Committee; and (ii) the right of the ML Entities to abstain
from, or to vote against, any one (and only one) nominee for election to the
Rykoff-Sexton Board of Directors at an annual meeting of stockholders (other
than any nominee who was a member of the Rykoff-Sexton Board of Directors as
of the date of the Merger Agreement) if the ML Entities have a reasonable,
good faith objection to any such nominee based on such nominee's personal
qualifications to serve as a member of the Rykoff-Sexton Board of Directors.
In addition, the ML Entities agree to be present, in person or by proxy, at
all duly held meetings of stockholders of Rykoff-Sexton so that all Rykoff-
Sexton Voting Securities held by the ML Entities may be counted for
determining the presence of a quorum at such meetings.
Transfer Restrictions and Right of First Refusal. During the term of the
Standstill Agreement, except as described below, the ML Entities will agree
not to, directly or indirectly, sell, transfer or assign any Rykoff-Sexton
Voting Securities, except (i) to Rykoff-Sexton, (ii) pursuant to a merger or
consolidation of Rykoff-Sexton which has been approved by the affirmative vote
of a majority of the members of the Rykoff-Sexton Board of Directors then in
office, (iii) pursuant to a bona fide public offering registered under the
Securities Act, in which the ML Entities will use commercially reasonable
efforts to effect as wide a distribution of such Rykoff-Sexton Voting
Securities as is reasonably practicable and to prevent any person or group
from acquiring pursuant to such offering beneficial ownership of Rykoff-Sexton
Voting Securities representing more than 5% of the Total Voting Power, (iv)
pursuant to Rule 144 under the Securities Act, (v) pursuant to a pro rata
distribution (including any such distribution pursuant to any liquidation or
dissolution of any ML Entity) by any ML Entity to its partners or
stockholders, if no ultimate successor or distributee, as the case may be, and
no person who controls such ultimate successor or distributee, acquires from
any ML Entity in such distribution beneficial ownership of Rykoff-Sexton
Voting Securities representing more than 3% of the Total Voting Power, (vi)
transfers of Rykoff-Sexton Voting Securities to any person or group which,
after giving effect to such transfer, would beneficially own Rykoff-Sexton
Voting Securities representing less than 5% of the Total Voting Power, (vii)
transfers of Rykoff-Sexton Voting Securities representing less than 10% of the
Total Voting Power to any
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person or group eligible to file a short-form statement on Schedule 13G under
Rule 13d-1 under the Exchange Act based on its ownership of Rykoff-Sexton
Voting Securities, (viii) transfers of Rykoff-Sexton Voting Securities made on
or after January 1, 2000, in connection with the required dissolution of any
ML Entity, to any person or group (A) which, after giving effect to such
transfer, would beneficially own Rykoff-Sexton Voting Securities representing
in the aggregate less than the greater of (x) 15% of the Total Voting Power or
(y) such other percentage of the Total Voting Power as would make such person
or group an "Acquiring Person" under Rykoff-Sexton's shareholders' rights plan
or (B) approved by the prior affirmative vote of a majority of the members of
the Rykoff-Sexton Board of Directors other than the ML Directors, (ix)
pursuant to a tender offer or exchange offer that the Rykoff-Sexton Board of
Directors, by action taken by the affirmative vote of a majority of the
members of the Board of Directors then in office, has determined not to
oppose, or (x) following compliance with procedures with respect to the right
of first refusal described below.
Pursuant to the right of first refusal, except as otherwise permitted under
the Standstill Agreement, if any ML Entity (the "Selling ML Entity") receives
an offer from, or enters into any agreement or understanding with, a third
party to purchase or otherwise acquire Rykoff-Sexton Voting Securities from
the Selling ML Entity, the Selling ML Entity will have the right, provided
that the rights of the Selling ML Entity under the Standstill Agreement will
not transfer to such third party, to sell or otherwise transfer the amount of
Rykoff-Sexton Voting Securities which are the subject of such offer by, or
agreement or understanding with, such third party if, prior to such transfer,
Rykoff-Sexton has been given the opportunity to purchase such Rykoff-Sexton
Voting Securities pursuant to the following procedures. The Selling ML Entity
must give written notice of such proposed transfer to Rykoff-Sexton specifying
the amount of Rykoff-Sexton Voting Securities proposed to be transferred, the
proposed price therefor (the "Transfer Consideration"), the identity of the
offeror and other material terms of the proposed transfer. Rykoff-Sexton will
thereafter have a period of 15 business days to provide the Selling ML Entity
with written notice of the exercise of its right to purchase all such Rykoff-
Sexton Voting Securities for cash in an amount equivalent to the Transfer
Consideration. Rykoff-Sexton may also specify a designee as purchaser under
the right of first refusal. The closing of the purchase pursuant to the
exercise of the right of first refusal must take place within 60 days after
Rykoff-Sexton gives notice of such exercise (such period to be extended for up
to an additional 60 days, if necessary, to comply with applicable laws and
regulations). If Rykoff-Sexton elects not to exercise its right of first
refusal, the Selling ML Entity will be free, during the following 60-day
period (such period to be extended for up to an additional 60 days, if
necessary, to comply with applicable laws and regulations), to transfer the
Rykoff-Sexton Voting Securities in accordance with the terms of the original
offer.
Term. The Standstill Agreement will continue in effect until the earlier of
(i) the tenth anniversary of the Effective Date and (ii) the date on which the
ML Entities and their affiliates beneficially own Rykoff-Sexton Voting
Securities representing less than 10% of the Total Voting Power. The
Standstill Agreement will be reinstated, however, if, after termination of the
Standstill Agreement due to a reduction in beneficial ownership below such 10%
threshold and prior to the tenth anniversary of the Effective Date, (i) the ML
Entities subsequently become the beneficial owners of Rykoff-Sexton Voting
Securities representing 10% or more of the Total Voting Power or (ii) the ML
Entities and their affiliates subsequently become the beneficial owner of 5%
or more of all outstanding Rykoff-Sexton Voting Securities in a manner which
requires the filing of a Schedule 13D under the Exchange Act.
THE REGISTRATION RIGHTS AGREEMENT
It is a condition to US Foodservice's obligation to effect the Merger that
Rykoff-Sexton execute and deliver the Registration Rights Agreement, which
provides for certain rights to the ML Investors, the Equitable Entities and
Frank H. Bevevino (collectively, the "Holders") with respect to the Rykoff-
Sexton Common Shares owned by them (the "Registrable Securities").
The ML Investors may make a written demand of Rykoff-Sexton to effect the
registration of all or part of the ML Investors' Registrable Securities.
Rykoff-Sexton will not be required to take any action if, among other things,
(i) four demand registrations have been previously effected, or (ii) the
Registrable Securities requested to
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be registered have a then current market value of less than $50 million,
unless such demand is for registration of all remaining Registrable Securities
held by the ML Investors. Rykoff-Sexton will be required to file the
registration statement within 30 business days of exercise of any demand
right. Rykoff-Sexton will not be required to effect a registration during
certain "blackout periods" during which Rykoff-Sexton has determined in good
faith that such registration (i) could materially impair or delay a pending
transaction (up to 180 days) or (ii) would require disclosure of confidential
information (up to 90 days).
If Rykoff-Sexton seeks to register, in a proposed public offering for its
own account or for the account of any holder of Rykoff-Sexton Common Shares
(other than pursuant to a registration statement on Form S-4 or Form S-8 or
any successor form under the Securities Act, or filed in connection with an
exchange offer or an offering of securities solely to existing stockholders or
employees of Rykoff-Sexton), any Rykoff-Sexton Common Shares while the
Registration Rights Agreement is in effect, the Holders will have the right to
request that Rykoff-Sexton include any or all of their Registrable Securities
in the proposed offering. Rykoff-Sexton must provide each Holder with at least
20 business days' notice prior to the filing of the registration statement.
Such notice must specify the approximate date on which Rykoff-Sexton proposes
to file such registration statement and advise the Holder of his or its right
to have any or all of his or its Registrable Securities included in the
registration. A Holder, in a written request given to Rykoff-Sexton within 15
days after such Holder's receipt of written notice from Rykoff-Sexton, may
include his or its Registrable Securities in such registration statement,
subject to constraints of marketability of the proposed offering, as
determined in good faith by the lead managing underwriter. In the event that
marketing constraints prevent the registration of all Registrable Securities
requested to be registered, such Registrable Securities shall be registered,
to the extent marketable, on a pro rata basis.
In registering Registrable Securities, Rykoff-Sexton will use its reasonable
best efforts to, among other things, make relevant filings with the SEC,
provide appropriate notices and necessary disclosures to requesting parties,
and customarily required warranties and representations to underwriters.
Each Holder will pay all underwriting discounts, commissions, transfer taxes
and documentary stamp taxes related to the Registrable Securities offered for
sale by such Holder as well as the fees and disbursements of its counsel
(other than counsel representing the Holders as a group). All other fees and
expenses in connection with the registration of Registrable Securities,
including those of counsel representing the Holders as a group, will be borne
by Rykoff-Sexton.
Rykoff-Sexton will agree to indemnify the Holders and the prospective
underwriters of registrations of Registrable Securities for liabilities for
material misstatements and omissions, other than any material misstatements or
omissions based on information provided by the Holders, included in the
registration statement. Likewise, each Holder will agree to indemnify Rykoff-
Sexton, all other Holders or any underwriter for liabilities for material
misstatements and omissions made in the registration statement in reliance on
information provided to Rykoff-Sexton by such Holders, subject to certain
limitations. To the extent that indemnification from an indemnifying party is
unavailable, contribution will also be available, with certain limitations, to
any of the above parties in relation to relative fault.
THE TAX AGREEMENT
To provide assurances in connection with the qualification of the Merger as
a tax-free reorganization for federal income tax purposes, Rykoff-Sexton and
certain of the stockholders of US Foodservice, including all of the ML
Investors, will enter into the Tax Agreement at the Effective Time. It is a
condition to the respective obligations of Rykoff-Sexton and Merger Sub to
effect the Merger that each of the ML Investors execute and deliver to Rykoff-
Sexton the Tax Agreement.
Transfer Restrictions. Each stockholder of US Foodservice that is a party to
the Tax Agreement will agree, for the two-year period following the Effective
Time, not to (i) sell, exchange, distribute or otherwise dispose of in any
manner, or enter into one or more transactions whereby such stockholder gives
up substantially all of the
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benefits and burdens of ownership in, or (ii) enter into one or more contracts
or other agreements to so transfer, or that would by its or their terms
require a transfer of, more than a certain percentage (referred to as the
"Permitted Sales Factor") of the Rykoff-Sexton Common Shares received by such
stockholder in the Merger. The Permitted Sales Factor will be determined at
the Effective Time by a formula set forth in the Tax Agreement, and will
depend on, among other things, the total number of shares of US Foodservice
Common Stock converted into Rykoff-Sexton Common Shares in the Merger, the
total number of shares of US Foodservice Common Stock held by stockholders
that exercise appraisal rights under Section 262, the fair market value of one
Rykoff-Sexton Common Share at the Effective Time, the total amount paid as
consideration by Rykoff-Sexton and/or US Foodservice to purchase or redeem the
Preferred Stock (including any amount paid as consideration to purchase or
redeem the Preferred Stock even if such purchase or redemption occurs prior to
the Effective Time), the total amount of cash paid to holders of shares of US
Foodservice Common Stock in lieu of the receipt of fractional Rykoff-Sexton
Common Shares, and the number of Rykoff-Sexton Common Shares that will be
owned at the Effective Time by former stockholders of US Foodservice that are
parties to the Tax Agreement.
The Permitted Sales Factor is intended to provide that, at all times during
the two-year period following the Merger, the stockholders of US Foodservice
that are parties to the Tax Agreement will in the aggregate continue to own a
number of Rykoff-Sexton Common Shares having a value, determined as of the
Effective Time, equal to at least 40% of the value of the formerly outstanding
US Foodservice Common Stock and Preferred Stock, determined as of the same
time. For purposes of measuring the value of the formerly outstanding US
Foodservice Common Stock and Preferred Stock, however, any US Foodservice
Common Stock that is exchanged for cash as a result of the exercise of
appraisal rights under Section 262 or in lieu of the receipt of fractional
Rykoff-Sexton Common Shares (and certain shares of US Foodservice Common Stock
that would be issued upon exercise of certain options) will be treated as
being outstanding US Foodservice Common Stock at the Effective Time.
Furthermore, US Foodservice's Preferred Stock will also be treated for such
purposes as being outstanding at the Effective Time even if the Preferred
Stock is in fact purchased or redeemed prior to the Effective Time, and the
value of such Preferred Stock will be deemed to be equal to the total amount
paid by Rykoff-Sexton and/or US Foodservice, as the case may be, to purchase
or redeem such Preferred Stock, either pursuant to the terms of the ML
Redemption Agreement and the Sara Lee Redemption Agreement or otherwise in
accordance with the terms of the Merger Agreement. See "THE MERGER--Redemption
or Purchase of Preferred Stock." As a consequence, the Permitted Sales Factor
could be significantly lower than 60%, which would be the resulting percentage
if all of the US Foodservice Common Stock and Preferred Stock were to be
exchanged solely for Rykoff-Sexton Common Shares pursuant to the Merger and
all of the Rykoff-Sexton Common Shares issued in the Merger were owned at the
Effective Time by former stockholders of US Foodservice that were parties to
the Tax Agreement.
The transfer restrictions in the Tax Agreement will not apply to any
transfers of Rykoff-Sexton Common Shares during the two-year restricted period
that are incident to an extraordinary business transaction involving Rykoff-
Sexton (such as a merger, consolidation, tender or exchange offer,
restructuring, recapitalization or other similar transaction) so long as any
such transaction is not arranged as part of an overall plan to which the
transferring stockholder is a party and pursuant to which the Merger is also
being consummated.
In addition, notwithstanding the transfer restrictions in the Tax Agreement,
Equitable Deal Flow Fund, L.P., a stockholder of US Foodservice, may be
permitted to distribute to its partners Rykoff-Sexton Common Shares it
receives in the Merger if it becomes required to do so by the terms of its
partnership agreement, provided that each of such partners shall have first
agreed in writing to be bound by and to comply with the transfer restrictions
in the Tax Agreement and certain other conditions are satisfied.
All of the Rykoff-Sexton Common Shares received by the ML Investors pursuant
to the Merger will be aggregated for purposes of applying the transfer
restrictions in the Tax Agreement to the ML Investors. As a result, during the
two-year restricted period, any particular ML Investor will be able to sell a
number of Rykoff-Sexton Common Shares that exceeds the total number of Rykoff-
Sexton Common Shares received by such ML Investor in the Merger multiplied by
the Permitted Sales Factor so long as the ML Investors do not sell in the
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aggregate a number of Rykoff-Sexton Common Shares that exceeds the total
number of Rykoff-Sexton Common Shares received by the ML Investors
collectively in the Merger multiplied by the Permitted Sales Factor.
Tax Representation. Each stockholder of US Foodservice that is a party to
the Tax Agreement will represent and warrant to Rykoff-Sexton that, as of the
Effective Time, such stockholder has no plan or intention to sell, exchange,
distribute or otherwise dispose of in any manner, or enter into one or more
transactions whereby such stockholder gives up substantially all of the
benefits and burdens of ownership in, a number of Rykoff-Sexton Common Shares
received by such stockholder in the Merger that would exceed the total number
of Rykoff-Sexton Common Shares so received multiplied by the Permitted Sales
Factor.
Reliance. Jones, Day, Reavis & Pogue, special counsel for Rykoff-Sexton,
Morgan, Lewis & Bockius LLP, special counsel for US Foodservice, and Shearman
& Sterling, counsel for the ML Investors, will each rely on the transfer
restrictions relating to Rykoff-Sexton Common Shares issued pursuant to the
Merger and the tax representations contained in the Tax Agreement in rendering
their tax opinions at the closing of the Merger to Rykoff-Sexton, US
Foodservice and the ML Investors, respectively, with regard to the treatment
of the Merger as a tax-free reorganization for federal income tax purposes.
See "THE MERGER AGREEMENT--Conditions; Waivers."
Waiver of Claims. In the case solely of a stockholder of US Foodservice that
is a party to the Tax Agreement and that (i) has complied with the transfer
restrictions in the Tax Agreement relating to Rykoff-Sexton Common Shares
issued pursuant to the Merger, and (ii) has not breached any of its general
representations and warranties contained in the Tax Agreement (for example,
with respect to due authorization, execution and delivery, enforceability, the
absence of any conflicts with laws or other agreements, and beneficial
ownership for federal income tax purposes of such stockholder's shares of US
Foodservice Common Stock immediately prior to the Effective Time), Rykoff-
Sexton and each other stockholder of US Foodservice that is a party to the Tax
Agreement will waive and release any and all claims, rights, causes of action,
and suits, whether known or unknown, that any of them could have asserted as
of the Effective Time or might assert in the future against such stockholder
under the Tax Agreement or otherwise resulting from or relating to the failure
of the Merger to qualify as a tax-free reorganization for federal income tax
purposes.
Parties. At the discretion of MLCP, stockholders of US Foodservice owning
fewer than 25,000 shares of Class A Common Stock of US Foodservice immediately
prior to the Effective Time will not be required to become parties to the Tax
Agreement, provided that each such stockholder makes the tax representation
described above in a written certificate that is delivered to Rykoff-Sexton
prior to the Effective Time.
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OWNERSHIP OF RYKOFF-SEXTON COMMON SHARES
The following table sets forth certain information regarding the beneficial
ownership of Rykoff-Sexton Common Shares as of March 31, 1996, and as adjusted
to reflect the issuance by Rykoff-Sexton of up to 12,880,552 Rykoff-Sexton
Common Shares in connection with the Merger (assuming the maximum Exchange
Ratio), by (i) each person or entity known by Rykoff-Sexton to be the
beneficial owner of more than 5% of Rykoff-Sexton Common Shares, (ii) each
director of Rykoff-Sexton, (iii) certain executive officers of Rykoff-Sexton,
(iv) certain proposed executive officers who are expected to serve as
executive officers of Rykoff-Sexton following consummation of the Merger and
(v) all executive officers and directors of Rykoff-Sexton and such proposed
executive officers as a group:
<TABLE>
<CAPTION>
SHARES PERCENTAGE PERCENTAGE
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) THE MERGER THE MERGER
- ------------------------------------ ------------ ---------- ----------
<S> <C> <C> <C>
State Farm Mutual Automobile 1,429,985(3) 9.66% 5.17%
Insurance Company and related
entities (2)........................
One State Farm Plaza
Bloomington, Illinois 61701
FMR Corp. and related entities (2).. 1,334,875(4) 9.02% 4.82%
82 Devonshire Street
Boston, Massachusetts 02109-3605
Putnam Investments, Inc. and related 957,900(5) 6.47% 3.46%
entities (2)........................
One Post Office Square
Boston, Massachusetts 02109
The Prudential Insurance Company of 823,700(6) 5.57% 2.98%
America (2).........................
Prudential Plaza
Newark, New Jersey 07102-3777
David L. Babson & Co., Inc. (2)..... 1,011,250(7) 6.83% 3.65%
One Memorial Drive
Cambridge, Massachusetts 02142
ML Investors (8).................... 0 0 36.40%
c/o Merrill Lynch Capital Partners,
Inc.
225 Liberty Street
New York, New York 10080
Mark Van Stekelenburg............... 260,828(9) 1.74% *
Harold E. Feather................... 100,828(10) * *
R. Burt Gookin...................... 8,697(11) * *
Alan V. Giuliani.................... 50,896(12) * *
Robert J. Harter, Jr................ 62,848(13) * *
Richard J. Martin................... 32,509(14) * *
James I. Maslon..................... 371,728(15) 2.51% 1.34%
James P. Miscoll.................... 9,167(16) * *
Neil I. Sell........................ 9,580(17) * *
Bernard Sweet....................... 12,837(18) * *
Jan W. Jeurgens..................... 0 0 0
Frank H. Bevevino................... 0 0 2.18%(19)
Thomas G. McMullen.................. 0 0 *(20)
All directors and executive officers
as a group (14 persons before the
Merger; 16 persons after the
Merger)(21)........................ 937,896(22) 6.14% 6.16%(22)(23)
</TABLE>
- --------
*Less than 1%.
(1) Except as otherwise noted, all persons have sole voting and investment
power with respect to their shares.
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(2) Based on the most recent Schedule 13D or 13G on file with the SEC.
(3) State Farm Mutual Automobile Insurance Company and related entities have
sole voting power as to 1,429,985 shares (9.66% before the Merger, 5.17%
after the Merger) and sole dispositive power as to 1,429,985 shares
(9.66% before the Merger, 5.17% after the Merger).
(4) As reported in a Schedule 13G filed by FMR Corp. on February 15, 1996
(the "Schedule 13G"), Fidelity Management & Research Company ("Fidelity
Research"), a wholly-owned subsidiary of FMR Corp. and an investment
adviser registered under the Investment Advisers Act of 1940,
beneficially owns 1,334,875 shares (9.02% before the Merger, 4.82% after
the Merger). Fidelity Contrafund, an investment company registered under
the Investment Company Act of 1940, beneficially owns 1,105,375 shares
(7.47% before the Merger, 3.99% after the Merger). In addition, the
Schedule 13G reports that each of Edward C. Johnson 3d, the Chairman of
FMR Corp., FMR Corp., through its control of Fidelity Research, and
certain related funds claim to have sole dispositive power as to
1,334,875 shares (9.02% before the Merger, 4.82% after the Merger) owned
by such funds. The sole voting power of such shares resides in the
respective Board of Trustees for each of the various funds.
(5) Putnam Investments, Inc. and related entities have shared voting power
over 372,300 shares (2.52% before the Merger, 1.35% after the Merger) and
shared dispositive power over 957,900 (6.47% before the Merger, 3.46%
after the Merger).
(6) The Prudential Insurance Company of America has sole voting power as to
335,300 shares (2.27% before the Merger, 1.21% after the Merger), shared
voting power as to 485,700 shares (3.28% before the Merger, 1.75% after
the Merger), sole dispositive power as to 335,300 shares (2.27% before
the Merger, 1.21% after the Merger) and shared dispositive power as to
488,400 shares (3.30% before the Merger, 1.76% after the Merger).
(7) David L. Babson & Co., Inc. has sole voting power as to 583,200 shares
(3.94% before the Merger, 2.11% after the Merger), shared voting power as
to 428,050 shares (2.89% before the Merger, 1.55% after the Merger) and
sole dispositive power as to 1,011,250 shares (6.83% before the Merger,
3.65% after the Merger).
(8) The ML Investors consist of the following entities, each of which after
the consummation of the Merger, will beneficially own the percentage of
outstanding Rykoff-Sexton Common Shares indicated after its name: Merrill
Lynch Capital Appreciation Partnership No. B-XVIII, L.P. (15.74%), ML
Offshore LBO Partnership No. B-XVIII (7.92%), ML IBK Positions, Inc.
(5.20%), MLCP Associates L.P. No. II (*), MLCP Associates L.P. No. IV
(*), Merrill Lynch KECALP L.P. 1994 (*), Merrill Lynch KECALP L.P. 1991
(*), Merrill Lynch Capital Appreciation Partnership No. XIII, L.P.
(5.85%), ML Offshore LBO Partnership No. XIII, L.P. (*), ML Employees LBO
Partnership No. I, L.P. (*), Merrill Lynch KECALP L.P. 1987 (*) and
Merchant Banking L.P. No. II (*). The ML Investors are affiliates of ML &
Co., and ML & Co. disclaims beneficial ownership of all such shares for
all purposes.
(9) Includes options exercisable within 60 days to purchase 233,437 shares
pursuant to the Rykoff-Sexton, Inc. 1988 Stock Option and Compensation
Plan (the "1988 Plan"). Also includes 62 shares owned by one of his
children.
(10) Includes options exercisable within 60 days to purchase 84,375 shares
pursuant to the Rykoff-Sexton, Inc. 1980 Stock Option Plan and the 1988
Plan.
(11) Includes options exercisable within 60 days to purchase 6,667 shares
pursuant to the Rykoff-Sexton, Inc. 1993 Director Stock Option Plan (the
"1993 Plan"). Also includes 1,718 shares owned by his spouse.
(12) Includes options exercisable within 60 days to purchase 42,969 shares
pursuant to the 1988 Plan.
(13) Includes options exercisable within 60 days to purchase 31,250 shares
pursuant to the 1988 Plan. Also includes 2,576 shares owned by his
spouse.
(14) Includes options exercisable within 60 days to purchase 31,719 shares
pursuant to the 1988 Plan.
(15) Includes 23,515 shares held of record by Mr. Maslon as trustee for his
children, 203,460 shares held of record by Mr. Maslon as co-trustee for
his mother and 125 shares owned by his spouse. Includes options
exercisable within 60 days to purchase 6,667 shares pursuant to the 1993
Plan.
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(16) Includes options exercisable within 60 days to purchase 6,667 shares
pursuant to the 1993 Plan.
(17) Includes options exercisable within 60 days to purchase 6,667 shares
pursuant to the 1993 Plan.
(18) Includes options exercisable within 60 days to purchase 6,667 shares
pursuant to the Rykoff-Sexton, Inc. 1989 Director Stock Option Plan and
the 1993 Plan. Also includes 1,406 shares owned by his spouse.
(19) Includes Assumed Options to purchase 64,490 shares (assuming the maximum
Exchange Ratio) that are not otherwise exercisable but will become
immediately exercisable as of the Effective Time. Also includes 135,757
shares (assuming the maximum Exchange Ratio) to be issued in the Merger
to a charitable trust of which Mr. Bevevino is the trustee with the right
to vote.
(20) Includes Assumed Options to purchase 15,291 shares (assuming the maximum
Exchange Ratio) that are not otherwise exercisable but will become
immediately exercisable as of the Effective Time.
(21) Pursuant to the Standstill Agreement, the ML Entities will be entitled to
designate up to four nominees to the Rykoff-Sexton Board of Directors.
Because such nominees have not yet been identified, the beneficial
ownership of Rykoff-Sexton Common Shares of all directors and executive
officers as a group after the Merger does not give effect to the share
holdings of such nominees.
(22) Includes options exercisable within 60 days to purchase an aggregate of
467,631 shares pursuant to various stock-based option plans of Rykoff-
Sexton.
(23) Includes Assumed Options to purchase 79,781 shares (assuming the maximum
Exchange Ratio) that are not otherwise exercisable but will become
immediately exercisable as of the Effective Time.
The information contained in the foregoing footnotes is for explanatory
purposes only and each of the persons named therein disclaims beneficial
ownership of shares designated as beneficially owned by or held in trust for
any other person, including family members.
MANAGEMENT OF RYKOFF-SEXTON AFTER THE MERGER
After the Merger, US Foodservice will be a wholly-owned subsidiary of
Rykoff-Sexton and will operate under the direction and guidance of Rykoff-
Sexton's senior management and Board of Directors. US Foodservice will operate
as the distribution division of Rykoff-Sexton and will include the current
Rykoff-Sexton distribution operations.
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE MERGER
Mark Van Stekelenburg, presently Chairman, President and Chief Executive
Officer of Rykoff-Sexton, will be Chairman and Chief Executive Officer of
Rykoff-Sexton following the Effective Time. Frank H. Bevevino, the current
Chairman of the Board of Directors and Chief Executive Officer of US
Foodservice, will become President of Rykoff-Sexton and a member of Rykoff-
Sexton's Board of Directors as of the Effective Time. Mr. Bevevino will also
be Chief Executive Officer of US Foodservice and in that capacity will be
responsible for all foodservice distribution operations of Rykoff-Sexton.
Pursuant to the Standstill Agreement, Rykoff-Sexton will use its best efforts
to cause to be appointed four additional directors to be designated by the ML
Entities effective as of the Effective Time, but the ML Entities have not yet
determined who such designees shall be. Upon the appointment of such persons,
the Rykoff-Sexton Board of Directors will consist of 12 directors, seven of
whom were directors of Rykoff-Sexton as of the date of the Merger Agreement.
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Set forth below is certain information about each person who is expected to
be a member of the Board of Directors or an executive officer of Rykoff-Sexton
as of the Effective Time.
<TABLE>
<CAPTION>
YEAR
TERM AS BECAME
YEAR BECAME DIRECTOR EXECUTIVE
NAME A DIRECTOR EXPIRES OFFICER AGE
- ---- ----------- -------- --------- ---
<S> <C> <C> <C> <C>
Mark Van Stekelenburg...................... 1992 1998 1991 45
(Chairman of the Board of Directors since
December 1995, Chief Executive Officer
since December 1992 and President of
Rykoff-Sexton from December 1992 to the
Effective Time. Mr. Van Stekelenburg joined
Rykoff-Sexton in 1991 and was Executive
Vice President until December 1992. He was
previously President and Chief Executive
Officer of Grootverbruik Ahold, the
foodservice division of Royal Ahold, N.V.,
The Netherlands.)
Frank H. Bevevino.......................... 1996 1996 1996 55
(President of Rykoff-Sexton as of the
Effective Time. Chairman of the Board,
President and Chief Executive Officer of US
Foodservice and its predecessor from August
1988 to the Effective Time. From April 1977
to August 1988, Mr. Bevevino was the
President of F.H. Bevevino & Co., Inc., now
a subsidiary of US Foodservice, which he
founded in 1977. From January 1971 to March
1977, Mr. Bevevino was a principal and
Executive Vice President of Custom
Management Corporation, a contract
foodservice management company.)
R. Burt Gookin............................. 1985 1997 -- 81
(Retired since 1979. Mr. Gookin was
previously Vice Chairman of the Board and
chief Executive Officer of H. J. Heinz
Company.)
Jan W. Jeurgens............................ 1995 1997 -- 74
(Retired since 1983. From 1968-1983, Mr.
Jeurgens served as Chief Executive Officer
of Netherlands-based Makro International, a
world-wide wholesaler of food and non-food
products. Mr. Jeurgens continues an active
involvement in the international
distribution industry.)
James I. Maslon............................ 1962 1996 -- 69
(Retired since 1992. Mr. Maslon was
previously Vice President--Manufacturing of
Rykoff-Sexton's S.E. Rykoff & Co.
division.)
James P. Miscoll........................... 1992 1998 -- 61
(Retired since 1992. Mr. Miscoll was
previously Vice Chairman of BankAmerica
Corporation. He is a director of Coast
Federal Financial, Inc., Montgomery-Watson,
Inc., Winkler McManus and CHELA (California
Higher Education Loan Authority).)
Neil I. Sell............................... 1982 1996 -- 54
(Partner since 1972 in the law firm of
Maslon Edelman Borman & Brand, a
Professional Limited Liability Partnership.
Mr. Sell is a director of Grand Casinos,
Inc. and Stratosphere Corporation.)
Bernard Sweet.............................. 1978 1998 -- 72
(Retired since 1985. Mr. Sweet was
previously President and Chief Executive
Officer of Republic Airlines, Inc. He is a
director of G&K Services, Inc.)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
YEAR
TERM AS BECAME
YEAR BECAME DIRECTOR EXECUTIVE
NAME A DIRECTOR EXPIRES OFFICER AGE
- ---- ----------- -------- --------- ---
<S> <C> <C> <C> <C>
Harold E. Feather.......................... -- -- 1992 57
(Executive Vice President, Corporate
Planning since 1994. Mr. Feather joined
Rykoff-Sexton in 1983 and served as
President, Rykoff-Sexton Distribution
Division, from 1992 until 1994. Before
then, he worked for John Sexton & Co. for
over 28 years.)
Alan V. Giuliani........................... -- -- 1990 50
(President, Rykoff-Sexton Manufacturing
Division since 1992. Mr. Giuliani joined
Rykoff-Sexton in August 1990 and served as
Vice President from 1990 until 1992. He was
previously Vice President-Research and
Development/Engineering for the Dove
International Division, and Vice President-
New Business Development and Vice
President-Plant Manager for the M&M/Mars
Division.)
Robert J. Harter, Jr....................... -- -- 1989 50
(Senior Vice President, Human Resources and
General Counsel since 1993 and Secretary
since 1995. Mr. Harter joined Rykoff-Sexton
in October 1989 and served as Vice
President and General Counsel from 1989
until 1993. He was previously Senior Vice
President and General Counsel for Tiger
International, Inc.)
Richard J. Martin.......................... -- -- 1988 50
(Senior Vice President and Chief Financial
Officer since 1993. Mr. Martin joined
Rykoff-Sexton in August 1988 and served as
Vice President from 1988 until 1993. He was
previously a partner with the accounting
firm of Arthur Andersen LLP and was
associated with that firm for twenty-one
years.)
Thomas G. McMullen......................... -- -- 1996 55
(President of Rykoff-Sexton's foodservice
distribution division as of the Effective
Time. Mr. McMullen served as President,
Chief Operating Officer and Director of US
Foodservice since January 1992. Mr.
McMullen joined US Foodservice in January
1992. He previously served as President and
a director of Bevaco from August 1988.)
</TABLE>
Additional information about Messrs. Van Stekelenburg, Miscoll, Sweet,
Jeurgens, Maslon, Gookin and Sell is contained in Rykoff-Sexton's Proxy
Statement for its 1995 Annual Meeting of Stockholders, relevant portions of
which are incorporated by reference in this Proxy Statement/Prospectus from
the Annual Report on Form 10-K. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "AVAILABLE INFORMATION."
EXECUTIVE COMPENSATION
Employment Agreements
In connection with the signing of the Merger Agreement, Rykoff-Sexton
entered into an amended and restated employment agreement with Mark Van
Stekelenburg that became effective on the date of signing of the Merger
Agreement. If the Merger is not completed by July 31, 1996, however, Mr. Van
Stekelenburg's prior employment agreement with Rykoff-Sexton will be
reinstated in place of his amended and restated agreement. The amended and
restated employment agreement generally parallels Mr. Van Stekelenburg's prior
employment agreement. It provides a minimum annual base salary of $450,000 for
a five-year term beginning on the date of signing (with automatic one-year
renewals commencing at the end of the fifth year unless either party gives
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<PAGE>
advance notice to the contrary), with a guaranteed minimum bonus of 50% of
annual base salary for Rykoff-Sexton's 1997 fiscal year and 25% of annual base
salary for Rykoff-Sexton's 1998 fiscal year. The agreement provides term life
insurance of not less than $1,000,000 and a corresponding tax reimbursement.
If Mr. Van Stekelenburg's employment is involuntarily terminated without cause
during the term of the amended and restated agreement, he will receive
termination payments for the greater of two years or the remaining term of the
agreement. Termination benefits include salary and welfare benefit
continuation, bonus (equal to the average amount of his incentive bonus during
the three years preceding termination), immediate exercisability of any
outstanding stock options, the lapse of any restrictions on other equity
awards, and if termination occurs before July 20, 1999, two additional years
of service credit added to Mr. Van Stekelenburg's Supplemental Executive
Retirement Plan. See "--Executive Compensation--Supplemental Executive
Retirement Plans (SERPs)." Termination payments will be offset by any payments
(other than tax reimbursements) made under his change in control agreement.
See "--Executive Compensation--Change in Control Agreements and Golden
Parachute Tax Exemption." In general, "cause" is defined as a willful and
continued failure to perform assigned duties after notice of such failure,
willful misconduct that is materially injurious to Rykoff-Sexton or a material
breach of the agreement's confidentiality/nondisclosure provisions. Mr. Van
Stekelenburg will be deemed to have been involuntarily terminated if he
terminates employment after any of the following events: Rykoff-Sexton's
breach of any material provision of the employment agreement (unless cured
within a specified time); notice to Mr. Van Stekelenburg of Rykoff-Sexton's
intent to terminate the agreement and his employment; Mr. Van Stekelenburg's
disability, failure to be reappointed Chief Executive Officer and Chairman of
the Board, or failure to be reelected to the Board of Directors; failure by a
successor or assign of Rykoff-Sexton to assume liability under the employment
agreement or Mr. Van Stekelenburg's Supplemental Executive Retirement Plan; or
the Board of Directors' failure to approve Mr. Van Stekelenburg's strategic
plans for Rykoff-Sexton as a result of irreconcilable differences with respect
to the future direction of Rykoff-Sexton.
The Merger Agreement provides that, as a condition to the closing of the
Merger, Rykoff-Sexton will enter into employment agreements as of the
Effective Time with certain of the senior executives of US Foodservice,
including Frank H. Bevevino, expected to become President of Rykoff-Sexton and
Chief Executive Officer of US Foodservice, and Thomas G. McMullen, expected to
become President of US Foodservice. The proposed employment agreements with
Messrs. Bevevino and McMullen generally parallel Mr. Van Stekelenburg's
amended and restated employment agreement. Each agreement provides an annual
base salary ($400,000 for Mr. Bevevino and $230,000 for Mr. McMullen) for a
specified term (five years for Mr. Bevevino and three years for Mr. McMullen,
with automatic one-year renewals commencing at the end of the initial term
unless either party gives advance notice to the contrary), with a guaranteed
minimum bonus of 50% of annual base salary for Rykoff-Sexton's 1997 fiscal
year and 25% of annual base salary for Rykoff-Sexton's 1998 fiscal year. The
agreements also guarantee for each of Messrs. Bevevino and McMullen no later
than three months from the Effective Time a grant of an option to purchase a
specified minimum number of Rykoff-Sexton's Common Shares (25,000 shares for
Mr. Bevevino and 10,000 shares for Mr. McMullen). Rykoff-Sexton agrees to
provide term life insurance in the amount of $1,000,000 and a corresponding
tax reimbursement for Mr. Bevevino. In the event that Mr. Bevevino or Mr.
McMullen is involuntarily terminated by Rykoff-Sexton without "cause" during
the term of the agreement, he will receive termination payments for the
greater of two years or the period remaining in the term. "Cause" is defined
in each agreement in the same manner as it is defined in Mr. Van
Stekelenburg's amended and restated employment agreement. Events constituting
involuntary termination for Mr. Bevevino are generally comparable to those for
Mr. Van Stekelenburg, but include a material reduction in Mr. Bevevino's
authority and responsibilities or relocation without Mr. Bevevino's consent
from Wilkes-Barre, Pennsylvania. For Mr. McMullen, involuntary termination
includes disability, notice from Rykoff-Sexton that it intends to terminate
the agreement and his employment, reduction in base salary (unless the
reduction is part of a general reduction applicable to senior executives of
Rykoff-Sexton), or relocation without consent from Wilkes-Barre, Pennsylvania.
Termination benefits for Messrs. Bevevino and McMullen include salary and
welfare benefit continuation, bonus (equal to the average amount of the
executive's incentive bonus during the three years preceding termination),
immediate exercisability of any outstanding stock options and the lapse of any
restrictions on other equity awards. Salary and bonus termination payments for
Mr. Bevevino are guaranteed to total at least $1,000,000.
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Change in Control Agreements and Golden Parachute Tax Exemption
As of the date of signing of the Merger Agreement, Rykoff-Sexton entered
into a second amended and restated change in control agreement with Mr. Van
Stekelenburg and amended and restated change in control agreements with
certain other of Rykoff-Sexton's senior executives (Harold E. Feather, Alan V.
Giuliani, Robert J. Harter, Jr. and Richard J. Martin). Each such agreement
generally parallels the executive's prior change in control agreement, and
provides for the payment of specified benefits under the circumstances
described below after a "change in control". In general, a "change in control"
is deemed to occur under the amended and restated change in control agreements
if any person becomes the beneficial owner of 25% or more of the combined
voting power of Rykoff-Sexton's outstanding securities, or upon a change in
the membership of Rykoff-Sexton's Board of Directors within any 12-month
period, with the result that the incumbent members do not constitute a
majority of the Board of Directors.
Under the amended and restated change in control agreements, (1) the Merger
will not constitute a change in control if the ML Entities have executed a
written agreement (such as the Standstill Agreement) approved by Rykoff-
Sexton's Board of Directors that imposes one or more limitations on the amount
of the ML Entities' beneficial ownership of Rykoff-Sexton Common Shares, and
such agreement (and any amendment thereto approved by at least a majority of
the members of the Rykoff-Sexton Board of Directors who are not ML Directors
(the "Present Directors")) continues to be in effect and binding on the ML
Entities and the ML Entities remain in compliance with such agreement, as
determined by at least a majority of the Present Directors, and (2) certain
acquisitions of Rykoff-Sexton Common Shares from an ML Entity will not
constitute a change in control if so determined by the Present Directors;
provided, however, that the foregoing transactions will not be excluded from a
change in control if either (A) Mr. Van Stekelenburg ceases to be the Chief
Executive Officer of Rykoff-Sexton immediately following the consummation of
the Merger and throughout the 12-month period thereafter, unless due to his
death, to "disability" or termination for "cause" (as "disability" and "cause"
are defined in Mr. Van Stekelenburg's amended and restated employment
agreement), or to a voluntary termination of Mr. Van Stekelenburg's employment
that is not treated as an involuntary termination of employment under Mr. Van
Stekelenburg's amended and restated employment agreement, or (B) the Rykoff-
Sexton Directors as of December 5, 1995, together with their successors who
are Present Directors, cease to constitute at least a majority of the Rykoff-
Sexton Board of Directors immediately following the consummation of the Merger
and throughout the 12-month period thereafter. See "--Executive Compensation--
Employment Agreements." The amended and restated change in control agreements
also exclude certain other future transactions that might be initiated by
Rykoff-Sexton and in which the Chief Executive Officer and the majority of the
Board of Directors remain the same.
If a change in control occurs, the agreements (other than Mr. Van
Stekelenburg's) will provide an executive with an amount equal to 2.99 times
the sum of his base salary plus the amount that would otherwise be earned
under any executive compensation plan if within two years subsequent to the
change in control, the executive's employment is involuntarily terminated by
Rykoff-Sexton other than for death, disability or "cause" (defined generally
as the executive's willful and continued failure to substantially perform his
duties, after specific demand for substantial performance has been made by
Rykoff-Sexton, or the executive's willful engaging in misconduct that is
materially injurious to Rykoff-Sexton) or if the executive terminates his
employment for "good reason" (defined as (1) certain changes to the
executive's duties, titles, offices or positions, (2) a salary reduction or a
failure to increase salary by certain amounts, (3) failure to maintain, or
certain adverse effects on the executive's participation in, certain benefit,
incentive or stock option plans, (4) certain relocations of the offices of
Rykoff-Sexton or the executive, (5) a reduction in the executive's vacation
days, (6) a material breach of, or failure by a successor or assign of Rykoff-
Sexton to assume, the executive's change in control agreement, or (7) a
purported termination of the executive's employment that is not implemented
pursuant to the terms of the executive's change in control agreement). Mr. Van
Stekelenburg will receive an amount equal to 2.99 times the sum of his base
salary plus the amount that would otherwise be earned under any executive
compensation plan if, within two years subsequent to a change in control, his
employment is terminated by Rykoff-Sexton for any or no reason (other than
death) or if Mr. Van Stekelenburg elects to terminate his employment for any
or no reason. Termination benefits for each of the executives also include
outplacement expense reimbursement and
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<PAGE>
welfare benefit continuation for two years after the executive's termination
of employment. The agreements with Messrs. Van Stekelenburg and Feather also
provide for payment of an amount necessary to restore any benefit diminution
if the 20% excise tax imposed under Section 4999 of the Code is applicable to
their agreements. Prior to a change in control, each of the amended and
restated change in control agreements provides for a base term of three years,
with automatic one-year renewals unless Rykoff-Sexton gives advance notice to
the contrary. Rykoff-Sexton has previously entered into change in control
agreements with Donald E. Willis, Jr. and four other Rykoff-Sexton executives,
the terms of which are generally the same as the amended and restated
agreements with Messrs. Giuliani, Harter and Martin, except for the term and
the definition of "change in control"; under these agreements, the Merger will
constitute a change in control and entitle the executive to compensation if
his employment is terminated as described above.
In connection with the Merger, US Foodservice has agreed that it will
undertake such actions as may be necessary to ensure that payments made under,
or the cancellation of, any employment, severance, supplemental retirement,
stock option or loan agreement between US Foodservice and certain of its
employees are excluded from the excise tax and deduction disallowance
provisions of Sections 280G and 4999 of the Code.
Severance Agreements
In connection with the negotiation and execution of the amended and restated
change in control agreements, Rykoff-Sexton entered into individual severance
agreements as of the date of signing of the Merger Agreement with Messrs.
Feather, Giuliani, Harter and Martin. The individual severance agreements
provide for termination benefits if an executive is involuntarily terminated
by Rykoff-Sexton other than for death, disability or "cause" (or terminates
voluntarily after a reduction in pay, other than a general reduction, or
notice of non-renewal of the agreement) during a three-year term (with
automatic one-year renewals unless either party gives advance notice to the
contrary). "Cause" for the severance agreements is defined as a failure by the
executive consistently to meet applicable performance appraisal standards; an
intentional act of fraud, embezzlement or theft; intentional wrongful damage
to Rykoff-Sexton's property; intentional misconduct that is materially
injurious to Rykoff-Sexton; or a breach of the confidentiality/nonsolicitation
provisions of the severance agreement. Termination benefits include salary and
welfare benefit continuation for two years, bonus (based on actual performance
results during the applicable performance period and calculated as though the
executive had remained employed throughout the period, but prorated to reflect
the period of actual service), full vesting in any stock options and in each
individual's Supplemental Executive Retirement Plan and crediting of benefits
under Rykoff-Sexton's Deferred Compensation Plan at a "preferred" rate.
Termination payments will be offset by any payments made under an individual's
employment agreement or change in control agreement.
Supplemental Executive Retirement Plans (SERPs)
As of the date of the Merger Agreement, Rykoff-Sexton amended and restated
SERPs previously established for Messrs. Feather, Giuliani, Harter, Martin and
Willis. Except for the definition of "change in control," discussed below, the
amended SERPs are identical to the prior SERPs. The amended SERPs generally
provide an executive who retires at or after age 62 and who has at least 15
years of service with an annual lifetime benefit after retirement of 50% of
his final average pay, reduced by any benefits the executive is entitled to
receive under Rykoff-Sexton's qualified pension plan or certain retirement-
type nonqualified deferred compensation plans sponsored by Rykoff-Sexton,
retirement benefits under a prior employer's qualified or nonqualified plans,
and any Social Security retirement benefits received by the executive. If an
executive terminates employment with less than 15 years of service, the
executive's annual benefit is calculated by multiplying his final average pay
by a percentage that equals 2 1/2% times years of service up to 20, subject to
the same reductions as discussed above. Benefits under the SERP are also
reduced to take into account early retirement (early retirement is defined as
retirement after attainment of age 55 with 10 years of service). Final average
pay under the SERP means an executive's highest average annual base salary
plus bonus paid during any consecutive three-year period within the five-year
period ending on the date the executive terminates employment. The SERP also
provides disability benefits, calculated for an executive with at least one
year but less than 10 years of service as 25% of final
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<PAGE>
average pay, with the same reductions as noted above except that no reduction
is made for early commencement of benefits. For an executive with at least 10
years of service, the disability annual benefit is calculated by multiplying
his final average pay by a percentage that equals 2 1/2% times years of
service up to 20, again with the same reductions as noted above except that no
reduction is made for early commencement of benefits. After an executive's
death, the SERP also provides a lifetime benefit for his surviving spouse in
an amount equal
to 50% of the executive's benefit, reduced by any survivor benefits paid under
the Rykoff-Sexton qualified pension plan. The amendments to the SERPs have
revised the definition of "change in control" under such SERPs to be identical
to such definition contained in the amended and restated change in control
agreements. See "--Executive Compensation--Change in Control Agreements and
Golden Parachute Tax Exemption." If a change in control occurs, an executive
becomes 100% vested in his benefits under the SERP and is entitled to receive
benefits equal to the retirement benefit payable at age 62, with reduction for
any early commencement of benefits. If a change in control does not occur, an
executive becomes 100% vested only after attaining age 55 with at least five
years of participation in the SERP (or after becoming disabled or dying with a
surviving spouse prior to termination of employment).
Rykoff-Sexton previously entered into a SERP with Mr. Van Stekelenburg. His
accrued SERP benefits are fully vested after five years of Rykoff-Sexton
service or upon disability. If Mr. Van Stekelenburg retires on or after age 60
with at least five years of service, his SERP and the Rykoff-Sexton qualified
pension plan together provide an annual lifetime benefit equal to 60% of his
final average pay, reduced by 3% for each year of Rykoff-Sexton service less
than 20 years. If he retires before age 60 but after 55 with at least five
years of service, his annual benefit is reduced by 0.5% for each month before
age 60. If he terminates employment before age 55 with at least five years of
service, he will receive an annual benefit beginning after age 55 that is
actuarially reduced from the benefit payable at age 60. The SERP also provides
disability benefits, calculated as 30% of final average pay if Mr. Van
Stekelenburg becomes disabled with at least one year but less than 10 years of
service and calculated as his normal retirement benefit at age 60 if he
becomes disabled with at least 10 years of service. Annual SERP benefits are
reduced by any Social Security retirement benefits received by Mr. Van
Stekelenburg. Final average pay under the SERP means the average of Mr. Van
Stekelenburg's cash compensation (plus certain deferred amounts) during the
last three years of his Rykoff-Sexton employment. After Mr. Van Stekelenburg's
death, the SERP provides a lifetime benefit for his surviving spouse in an
amount generally equal to 60% of Mr. Van Stekelenburg's retirement benefits
under the SERP, reduced by any survivor benefits paid under Rykoff-Sexton's
qualified pension plan.
Deferred Compensation Plan and Master Trust Agreement
The Rykoff-Sexton Deferred Compensation Plan permits specified Rykoff-Sexton
executives and members of Rykoff-Sexton's Board of Directors to elect to defer
portions of annual base salary, annual bonus and/or directors' fees. The
minimum deferral for any year is $2,000 of base salary, bonus or fees, and the
maximum annual deferral is 50% of annual base salary and 100% of each of
annual bonus and director's fees. Interest is credited to an individual's
account on the amount deferred at specified rates. A higher interest rate is
generally applied for payments due to death, disability or retirement after
age 62 (or for employees only, after age 55 with five years of service), or
for payments made to a participant with at least five years of participation
in the Plan. The higher interest rate is also applied after a change in
control occurs. The Master Trust Agreement for Executive Deferral Plans
provides a means of securing payment for various of Rykoff-Sexton's deferred
compensation plans for executives, including the Deferred Compensation Plan
and the SERPs. Certain provisions of the Master Trust Agreement take effect
only after a change in control occurs.
Between the date of signing of the Merger Agreement and the Effective Time,
Rykoff-Sexton has agreed to amend the Deferred Compensation Plan and the
Master Trust Agreement to conform the definition of change in control under
both documents to the definition set forth in the amended and restated change
in control agreements. See "--Executive Compensation--Change in Control
Agreements and Golden Parachute Tax Exemption." The amendment to the Master
Trust Agreement also requires the consent of the trustee.
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<PAGE>
US Foodservice Management Loans
In connection with the Merger, an aggregate of approximately $4.9 million in
loans made by US Foodservice in 1992 to certain key management employees to
enable them to purchase shares of US Foodservice Common Stock will be
forgiven. In addition, after the Effective Time, Rykoff-Sexton will extend
loans to such employees in amounts sufficient to cover the federal and state
income tax due from such employees as a result of such forgiveness that by
their terms must be repaid within 15 months, or, if sooner, within three
months of resignation, retirement or termination. See "THE MERGER--Interests
of Certain Persons in the Merger--US Foodservice Management Loans."
Stock Options and Other Stock-Based Compensation Plans
At the Effective Time, each Assumed Option, whether or not vested or
exercisable, shall be assumed by Rykoff-Sexton and shall constitute an option
to acquire, on the same terms and conditions as were applicable under such
Assumed Option, a number of Rykoff-Sexton Common Shares equal to the product
of the Exchange Ratio and the number of shares of US Foodservice Common Stock
subject to such Assumed Option immediately prior to the Effective Time, at a
price per share equal to the aggregate exercise price for the shares of US
Foodservice Common Stock subject to such Assumed Option divided by the number
of Rykoff-Sexton Common Shares deemed to be purchasable pursuant to such
Assumed Option; provided, however, that any Assumed Option with an exercise
price of less than $.10 per Rykoff-Sexton Common Share shall be subject to the
optionee's agreement that upon exercise, (i) to the extent Rykoff-Sexton has
treasury Rykoff-Sexton Common Shares available, Rykoff-Sexton shall issue the
appropriate number of such treasury shares to the optionee and (ii) to the
extent that no such treasury shares are available, such optionee shall pay an
exercise price of $.10 per Rykoff-Sexton Common Share.
Outstanding US Foodservice options consist of both "performance options,"
the exercisability of which depends in part on the attainment by US
Foodservice of certain financial performance targets, and "normal options,"
the exercisability of which does not depend on the attainment by US
Foodservice of certain financial targets. With respect to the 463,714 normal
options outstanding as of March 31, 1996, a total of 340,527 will, pursuant to
the terms and conditions applicable thereto, become exercisable upon
consummation of the Merger. With respect to the 280,561 performance options
outstanding as of March 31, 1996, a total of 102,330 will, pursuant to the
terms and conditions applicable thereto, become exercisable upon consummation
of the Merger. In addition, with respect to those performance options not
vested in accordance with their terms, the performance criteria shall be
deemed satisfied on the first anniversary of the Effective Time.
Certain Rykoff-Sexton stock based compensation plans provide for the
acceleration of benefits thereunder upon a change in control of Rykoff-Sexton
(as defined in such plans). The Rykoff-Sexton Board of Directors, immediately
prior to the execution of the Merger Agreement, took action under each such
plan to provide that the Merger would not be deemed a change in control for
purposes of such plan.
Additional information regarding the compensation of directors and executive
officers of Rykoff-Sexton is contained in Rykoff-Sexton's Proxy Statement for
its 1995 Annual Meeting of Stockholders, relevant portions of which are
incorporated by reference in this Proxy Statement/Prospectus from the Annual
Report on Form 10-K. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"AVAILABLE INFORMATION."
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DESCRIPTION OF RYKOFF-SEXTON
GENERAL
Established in 1911, Rykoff-Sexton is a leading manufacturer and distributor
of high-quality foods and related non-food products and services for the
foodservice industry throughout the United States. Rykoff-Sexton's products
and services are sold wherever food is prepared and consumed away from home.
Rykoff-Sexton distributes its product line of approximately 41,000 items to
restaurants, industrial cafeterias, health care facilities, schools and
colleges, hotels, airlines, supermarket service delicatessen departments and
other segments of the travel and leisure markets. It also offers design and
engineering services for all types of foodservice operations through its
contract/design group. Rykoff-Sexton's products consist of a broad line of
private label and national branded food and foodservice equipment and
supplies. Rykoff-Sexton's proprietary private label products accounted for
approximately 56% of its net sales in fiscal 1995. Rykoff-Sexton develops and
manufactures many of its private label products, and also manufactures other
products for certain customers under the customers' own brand labels.
Rykoff-Sexton's principal operations are conducted through the Rykoff-Sexton
Distribution Division (the "Distribution Division"), the Rykoff-Sexton
Manufacturing Division (the "Manufacturing Division") and San Francisco
International Cheese Imports. The Distribution Division is comprised of 26
distribution branches and eight additional sales offices that are largely
located in major metropolitan areas throughout the United States. The
Distribution Division also offers design and engineering services for all
types of foodservice operations through its 10 contract/design offices. In
fiscal 1995, sales of the Distribution Division (including products sold
through this division by the Manufacturing Division and San Francisco
International Cheese Imports) generated approximately 99% of Rykoff-Sexton's
net sales.
The Manufacturing Division manufactures products primarily under Rykoff-
Sexton's proprietary private labels and also manufactures products for other
manufacturers, distributors, restaurant chains and other large users under
their own brand labels at its four manufacturing plants. Approximately 90% of
the Manufacturing Division's products are sold through the Distribution
Division and the remainder are sold directly to customers.
Rykoff-Sexton's smaller division, San Francisco International Cheese
Imports, distributes domestic and imported cheeses and specialty and gourmet
products both through the Distribution Division and directly to customers.
On November 1, 1995, Rykoff-Sexton acquired substantially all of the assets
of H&O Foods, a privately owned Nevada corporation. H&O Foods is a regional,
full-line institutional foodservice distributor serving Nevada, California and
Arizona. Rykoff-Sexton intends to continue the business of H&O Foods within
such states. Rykoff-Sexton paid approximately $30,700,000 for the assets
acquired, subject to certain post-closing purchase price adjustments. The
aggregate consideration consisted of approximately $5,500,000 in cash, Rykoff-
Sexton's issuance of unsecured promissory notes in the amounts of $5,305,000
and $21,350,000, and its assumption of certain H&O Foods liabilities.
Rykoff-Sexton, which was organized under the laws of the state of Delaware
in 1961, is the successor to a business founded in 1911. Rykoff-Sexton's
principal executive offices are located at 1050 Warrenville Road, Lisle,
Illinois 60532-5201, and its telephone number is (708) 964-1414.
Additional information concerning Rykoff-Sexton is included in certain
documents incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
LITIGATION
In October 1994, Rykoff-Sexton sold all of the stock of its then wholly-
owned subsidiary, Tone Brothers, to Burns Philp Food Inc. ("Burns Philp"). The
sale agreement provides for arbitration in the case of a dispute and Burns
Philp has filed a notice of arbitration in which it claims contract and fraud
damages in excess of $57 million in connection with its purchase of Tone
Brothers. In management's opinion, based on consultation with
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legal counsel, the sale agreement should limit any claims for breach of
representations under the sale agreement to a maximum of $25 million.
Rykoff-Sexton believes it has substantial legal and factual defenses to the
Burns Philp claims and is defending itself vigorously in the matter. The
evidentiary hearing was concluded on February 13, 1996, and Rykoff-Sexton and
Burns Philp are briefing the issues addressed during the evidentiary hearing.
Final arguments have been set for April 5, 1996 by the arbitration panel. The
outcome of this matter is currently uncertain; however, in management's
opinion, based on consultation with legal counsel, the resolution of this
matter will not have a material adverse effect on Rykoff-Sexton's consolidated
financial position or its results of operations.
Rykoff-Sexton and its subsidiary, John Sexton & Co., are defendants in a
number of cases currently in litigation or potential claims encountered in the
normal course of business which are being vigorously defended. In the opinion
of management, the resolution of these matters will not have a material
adverse effect on Rykoff-Sexton's consolidated financial position or results
of operations.
DESCRIPTION OF US FOODSERVICE
GENERAL
US Foodservice, which was formed by MLCP in 1992, is the result of the
combination of two regional broadline foodservice distributors, Unifax, Inc.
("Unifax") and WS Holdings, the parent company of White Swan.
Unifax was formed in 1988 when an investment group led by Frank H. Bevevino,
US Foodservice's current Chairman and Chief Executive Officer, acquired
Roanoke Restaurant Service, Inc., Biggers Brothers and F.H. Bevevino &
Company, Inc. ("Bevaco") from I.U. International Corporation ("IU"). Bevaco
had been acquired from Frank H. Bevevino and Bevaco's other shareholders by IU
in 1987. In 1992, US Foodservice, which was then named Unifax Holdings,
acquired all of the outstanding capital stock of Unifax. As part of the
acquisition, certain members of management of Unifax received Common Stock of
US Foodservice in exchange for common stock of Unifax. The ML Entities owned
the remaining 81% of the Common Stock of US Foodservice.
White Swan is a regional broadline foodservice company that was acquired by
WS Holdings in 1988. In September 1993, US Foodservice and WS Holdings, each
of which was at the time controlled by ML & Co., completed the 1993
Foodservice Merger whereby WS Holdings became a wholly-owned subsidiary of US
Foodservice. At the time of the 1993 Foodservice Merger, the ML Investors
owned 93% of the Class A common stock of WS Holdings. US Foodservice is
currently wholly-owned by the ML Investors, the Equitable Entities, management
and employees of US Foodservice and other stockholders. The ML Investors
currently own 78.2% of the Common Stock of US Foodservice.
In 1994, US Foodservice acquired the assets of four distribution centers,
one in Georgia and three in Florida (the "1994 Foodservice Acquisitions"), for
a total of $36.2 million. The 1994 Foodservice Acquisitions were funded, in
part, with an equity contribution of $25.0 million from the ML Investors. In
1995, US Foodservice completed two more acquisitions by acquiring the assets
of Fort Myers Meat & Seafood Company, Inc. in Fort Myers, Florida and the
assets of City Provisioners, Inc. in Ormond Beach, Florida (the "1995
Foodservice Acquisitions" and, collectively with the 1994 Foodservice
Acquisitions, the "Foodservice Acquisitions"). The purchase price for the
assets of the 1995 Foodservice Acquisitions was a total of $38.7 million,
which US Foodservice financed with borrowings.
On January 15, 1996, Biggers Brothers purchased substantially all of the
operating assets of Brigman Food Distributors, Inc., a small, local
distributor located in Charleston, South Carolina. The business has been
integrated into the ongoing operations of Biggers Brothers.
US Foodservice's principal executive office is located at 1065 Highway 315,
Cross Creek Pointe, Wilkes-Barre, Pennsylvania 18702, and its telephone number
is (717) 831-7500.
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BUSINESS
GENERAL
US Foodservice is a leading provider of high-quality food and related non-
food products throughout its marketing regions, and is the fifth largest
broadline foodservice distributor in the United States. US Foodservice serves
more than 40,000 customers in over 30 states, primarily in the Southeastern,
Southwestern and the Mid-Atlantic regions of the United States. Through 17
decentralized distribution centers, US Foodservice supplies over 20,000
foodservice products to customers of various sizes operating in a wide variety
of formats, including independent and chain restaurants, healthcare
institutions, schools and universities, hotels and motels, and business
foodservice facilities. US Foodservice markets an extensive array of national
brands, as well as private label and exclusive brands designed to complement
the national brands in meeting the demands of a diverse customer base. US
Foodservice's product line includes canned and dry groceries, meat, seafood,
poultry, fresh produce, frozen foods, dairy products and non-food items such
as paper products, janitorial supplies and light and heavy restaurant
equipment and supplies.
COMPETITIVE STRENGTHS
US Foodservice's 1995 net sales were approximately $1.7 billion. US
Foodservice believes its position as a leader in the foodservice distribution
industry is attributable to a number of competitive strengths, including the
following:
Diverse Customer Base. US Foodservice distributes food and related non-food
products to over 40,000 customers in more than 30 states. Restaurants and
healthcare institutions represent 56% and 17%, respectively, of US
Foodservice's current sales mix. US Foodservice's accounts include "street"
accounts, which are typically independently owned units that represent stable,
long-term customer relationships, and "chain" accounts, which include
franchised or corporate-owned units of a national or regional restaurant
chain, hotel and healthcare management group. Street accounts contribute 52%
of US Foodservice's current sales, while chain accounts contribute 41%. The
size and diverse nature of US Foodservice's customer base reduces its
dependence on any individual customer or chain account. For the fifty-two
weeks ended December 30, 1995, US Foodservice's largest customer accounted for
approximately 5% of net sales.
Decentralized Management Structure. US Foodservice employs a decentralized
operating strategy whereby each of the distribution centers formulates and
executes its own business plan to better serve the needs of its customers,
subject to overall corporate management controls and guidelines. US
Foodservice believes this encourages entrepreneurial management at the local
level, which enhances customer relationships through more personalized
service, enables quick reaction to local competition and provides US
Foodservice with stronger controls over working capital. With distribution
center management in control of the day-to-day business activities, corporate
management can focus on longer-term business strategies. Further, certain
functions are centralized at US Foodservice's corporate headquarters to
provide for better financial controls and improve overall profitability,
including large-scale marketing programs, personnel benefits coordination,
risk management, tax and treasury functions, and high level vendor
negotiations. US Foodservice also employs a sophisticated process for
benchmarking operational activities between the distribution centers in order
to establish best practices for all distribution centers.
Strong Customer Relationships. US Foodservice has established strong
customer relationships as a result of its local market presence, superior
customer service and diverse, high-quality product line. US Foodservice
benefits from long-standing local market presence in each of its operating
regions, primarily as a result of the acquisition of established, independent,
family-owned foodservice distributors. US Foodservice, recognizing the
benefits of strong local management, has allowed the distribution centers to
retain responsibility in such areas as customer support, marketing and sales
activities, and warehousing and distribution functions. The distribution
centers market products based on regional tastes and preferences and deliver
efficient service as a result of their local presence. The distribution
centers enlist larger street customers as "program" accounts, which are
accorded additional services in return for purchasing a majority of their
products from the distribution center. The services
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include market information on commodity items, vendor and manufacturer visits
to introduce new products, analysis of menu profitability and preferential
treatment at marketing functions such as food shows. Establishing a program
with a street customer allows the customer to obtain many of the benefits
available to, and thereby compete more effectively with, the chain accounts.
US Foodservice typically receives consistent order size and delivery day
commitments from program customers, which reduces operating costs. Finally, US
Foodservice's broad, high-quality product line allows US Foodservice to become
its customers' primary supplier by meeting all of their foodservice needs.
Value-Added Services. US Foodservice provides a wide range of value-added
services to its customers, including advice and assistance on product
selection, computerized menu planning and recipes, nutritional information,
inventory control, marketing strategies and training of customer personnel. US
Foodservice's approximately 700 highly skilled salespersons, in addition to
soliciting purchase orders, advise customers on menu options, food preparation
and serving methods, as well as merchandising techniques and unit cost
controls. Consistent with US Foodservice's decentralized management strategy,
each distribution center develops vendor supported, value-added services for
its specific customer base. Successful marketing services and programs are
disseminated to other distribution centers, which implement them as
appropriate, helping to reduce duplicative efforts and costs.
Strong Vendor Relationships. US Foodservice enjoys strong vendor
relationships as a result of concentrating its purchasing power among a select
group of vendors, as well as its emphasis on marketing national brand
products. As a result, US Foodservice believes it receives more attractive
pricing terms, incentive programs and additional marketing support such as
sales training, food show participation and advertising support in US
Foodservice publications. While US Foodservice's corporate product directors
negotiate with vendors in order to take advantage of the aggregate purchasing
power of all distribution centers, each distribution center employs purchasing
agents to meet regional customer demands for product, as well as to achieve
efficient, localized management of inventory.
Diverse Product Line and Support of National Brand Products. By distributing
more than 20,000 national brand, private label and exclusive brand products,
US Foodservice seeks to ensure that each of its over 40,000 customers has the
ability to choose the product which meets the customer's selection criteria of
quality, price or consistency. US Foodservice focuses on the marketing of
national brands, and currently approximately 85% of sales are of national
brand products. The marketing of national brands ensures consistency of
product for the customer and an improved level of partnership with the vendor.
US Foodservice's private label items are typically products such as canned and
frozen fruits and vegetables purchased from a number of suppliers. The private
label indicates to the customer that the product meets specific quality
standards dictated by US Foodservice. US Foodservice also has several
exclusive brands, many of which are trademarked, that are used to market the
highest quality products available. By managing the mix of national brands,
private labels and exclusive brands, US Foodservice believes it can optimize
the margins on product sales.
Geographic Diversification. US Foodservice distributes products in more than
30 states. Several of US Foodservice's operating regions are characterized by
strong local economies and favorable demographics. These favorable
demographics include growing populations in certain states, such as Florida,
the Carolinas and Texas, as well as increasing numbers of dual income
households and high net worth retirees. In addition, the marketing regions of
the distribution centers are substantially contiguous, with little overlap.
This allows US Foodservice to solicit business from organizations that have
operations in multiple regions, which would not otherwise be available to the
distribution centers on an individual basis. US Foodservice's size, as well as
its geographic diversity, mitigate the adverse effects that a downturn in the
business of any one distribution center would have on US Foodservice as a
whole.
Management Team. US Foodservice is led by an experienced management team at
both the corporate and distribution center levels. Many of US Foodservice's
corporate staff are former division executives with extensive operating
experience. In addition, US Foodservice's decentralized management structure
promotes the recruitment, development and retention of qualified managers, who
are given the opportunity to move throughout
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the organization to satisfy both the manager's career ambitions and US
Foodservice's staffing requirements. The current management team has overseen
the formation of US Foodservice by the combination of Unifax and White Swan in
1993, at the time the seventh and eighth largest foodservice distribution
companies, respectively, in the United States. Additionally, current
management has integrated seven acquisitions of foodservice distribution
centers in 1994, 1995 and 1996.
PRODUCTS
US Foodservice offers a broad and diverse line of products consisting of
more than 20,000 items. These products include a wide array of canned and dry
groceries (approximately 28% of net sales), fresh and frozen meats (21%),
frozen foods (16%), refrigerated and dairy products (7%), poultry (7%), fresh
and frozen seafood (5%) and fresh produce (5%). US Foodservice also offers a
variety of non-food items, including paper products, such as disposable
napkins, plates and cups, as well as a full line of janitorial and cleaning
supplies (8%). In addition, US Foodservice offers tableware, such as
glassware, china and silverware, along with a comprehensive line of light and
heavy restaurant and kitchen equipment (3%).
National brands currently represent approximately 85% of US Foodservice's
sales. US Foodservice believes its commitment to national brands provides it
with a competitive advantage over distributors who stress the marketing of
products under private labels. The marketing of a national brand ensures
consistency of product for the customer and an improved level of partnership
with vendors, which results in competitive pricing and significant sales and
marketing support.
In addition to national brands, US Foodservice selectively markets commodity
products, such as frozen and canned fruits and vegetables, and chicken and
pork products, under its US Foodservice label and additional products under US
Foodservice brand names, many of which are trademarked. US Foodservice's
policy is to pack only the finest quality product available under its labels
and exclusive brands. This strategy is designed to effectively compete with
competitors' private labels on price-sensitive items, and the exclusive brands
build customer confidence and loyalty for these products and to US
Foodservice. Examples of US Foodservice brands include "Cross Valley Farms(R)"
for deli and dairy products, "Pine Ridge Farms" for turkey products, "Arctic
Harvest(R)" and "Asian Harvest(R)" for seafood products, "La Comida(R)" for
Mexican and snack food products, "La Bella Villa(R)" for Italian and tomato
products, and "Gold N Clear" for shortenings and oils.
Several of the distribution centers also provide extended product lines
based on processing conducted in their facilities. Distribution centers in
Ormond Beach, Florida and Pittston, Pennsylvania are United States Department
of Agriculture ("USDA") approved processors of meat. These facilities are
therefore allowed to cut and pack meat into customer-requested portion sizes.
CUSTOMERS
US Foodservice classifies its foodservice customers as "street," "program"
(a category within street), "chain" and "other."
Street accounts, which contributed approximately 52% of net sales for the
fifty-two weeks ended December 30, 1995, are typically single-unit facilities,
locally owned and operated, that purchase products on a weekly basis from
several broadline and specialty distributors. Street accounts may include
restaurants, diners, taverns, schools and hotels. US Foodservice assigns a
geographical territory to a salesperson who contacts the street accounts
weekly to take orders, collect receivables and provide professional services,
such as menu planning, wait-staff training and coordinating meetings with
product specialists and manufacturers' sales representatives.
Recognizing that operational costs are best controlled when they are
consistent and when the sale involves a minimal amount of product handling,
salespersons establish "program" accounts by means of distribution agreements
that provide for structured distribution delivery days, delivery times and
product volume. Program accounts purchase a majority of their product
requirements from US Foodservice and are rewarded with
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preferential treatment at marketing events, such as food shows, information
regarding market trends and expanded vendor support. Approximately 42% of
street account volume is derived from program accounts.
Chain accounts, which contributed approximately 41% of net sales for the
fifty-two weeks ended December 30, 1995, include franchised or corporate owned
units of a national or regional restaurant chain, hotel or healthcare
management group. They are serviced by US Foodservice with fewer salespersons
than a street or program account, and although gross margins are generally
lower for chain accounts than for street or program accounts, the order sizes
are typically larger, reducing warehousing and delivery costs per order, and
resulting in operating margins similar to street and program sales.
Other sales include those to schools and other institutions on a bid basis,
as well as retail sales and sales to other distributors. Accounts classified
as "other" accounted for approximately 7% of net sales for the fifty-two weeks
ended December 30, 1995.
US Foodservice distributes food and related products to five primary types
of institutions: restaurants (56% of net sales for the fifty-two weeks ended
December 30, 1995), healthcare institutions (17%), schools and universities
(11%), business and industrial facilities (8%), and hotels and motels (3%),
with other customers comprising the remaining sales.
SALES AND MARKETING
US Foodservice relies on its highly skilled and motivated sales force to
increase account penetration and establish new customer relationships. US
Foodservice currently employs over 600 salespersons for street accounts in
either commissioned sales, supervisory or customer representative roles, and
over 100 salespersons to service its chain accounts. Salespersons assist
customers in reviewing new product offerings, evaluating current product lines
and market trends, and ensuring that all facets of the distribution centers'
operations are providing the level of service demanded by customers. US
Foodservice equips its sales force with sales and promotional materials,
including videos, to assist customers in marketing their products and training
their staff. Salespersons also participate in ServSafe(R) training, the
National Restaurant Association's certification program on food safety and
sanitation. Salespersons have an average tenure of 6.5 years with US
Foodservice and receive extensive training from the distribution centers and
vendors. A salesperson's compensation is based on a commission structure
designed by each distribution center according to sales volume, account
profitability, new account origination and collection of accounts receivable.
More than 85% of the sales force use laptop computers that provide access to
sales history data for each customer, as well as extensive information
concerning inventory and product availability. Timely access to such data
reduces the clerical effort involved in a sales call, and allows the
salesperson to act in an advisory capacity to the customer. As a result, US
Foodservice's current service level, defined as the percentage of items
shipped to items ordered, is approximately 99%.
Another value-added marketing tool is the Cygnet menu management program,
which assists in the management of foodservice departments in long term
healthcare facilities and hospitals. Every six months, each Cygnet customer is
provided with four-week cycle menus, designed by registered dieticians. The
customer is then able to control portion sizes, inventory and product
purchases.
VENDORS
US Foodservice employs product directors and local purchasing agents with
specific product expertise who purchase goods from over 3,500 independent
vendors. These suppliers include both large national multi-line and smaller
local specialty processors and packagers. As one of the largest customers of
most of its suppliers, US Foodservice is able to secure competitive prices and
marketing support. US Foodservice purchases products from a diverse group of
suppliers and believes it has adequate alternative sources of supply for
substantially all of its products. Orders to the vendors for products are
initiated at each distribution center based upon customer purchase history,
vendor performance, warehouse restrictions and working capital goals.
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The quality of the products sold to customers is one of the most important
aspects of US Foodservice's business. Quality control is a constant focus
within US Foodservice for all employees. Members of the corporate and
distribution center purchasing staffs visit canners and growers regularly to
assure that they meet US Foodservice's high standards. US Foodservice also
monitors quality by product sampling. US Foodservice has developed a
comprehensive product specification manual for all private label products
which is given to vendors.
To mitigate US Foodservice's risk from adulterated products, US Foodservice
requires its vendors of both nationally branded and private label products to
provide indemnification agreements and maintain specified levels of insurance.
DISTRIBUTION
US Foodservice distributes its products from its 17 distribution centers
located in Florida, Georgia, North Carolina, Ohio, Oklahoma, Pennsylvania,
Tennessee, Texas, Virginia and West Virginia. Twelve of these distribution
centers are broadline, four are system and one is a specialty center. These
distribution centers contain dry, refrigerated and frozen storage areas as
well as office space for the sales, purchasing, marketing and financial
personnel. Products may be delivered directly by the vendor, via common
carrier or backhauled on one of US Foodservice's delivery vehicles.
Customers place orders with distribution centers either through salespersons
or directly via telephone, facsimile machine, or direct computer access
between the customer's and the distribution centers' computers. Once an order
is received, it is usually processed and shipped to ensure delivery to the
customer within 24 hours. US Foodservice's fleet of trucks consists of more
than 900 vehicles. The majority of the delivery routes are mapped by a
computer system measuring variables such as desired customer delivery time,
number of cases, mileage, route alternatives, backhaul opportunities and
governmental regulations regarding allowable driving hours. This system allows
US Foodservice to monitor the efficiency of its deliveries to customers.
PROPERTIES
As of December 30, 1995, US Foodservice leased its corporate headquarters
and operated 17 distribution centers, consisting of office and warehouse space
with a total floor area of approximately 2.6 million square feet. The
following table describes the principal properties of US Foodservice as of
December 30, 1995:
<TABLE>
<CAPTION>
FACILITY LOCATION SQUARE FEET OWNED OR LEASED
-------- -------- ----------- ---------------
<C> <S> <C> <C>
Corporate Headquarters Wilkes-Barre, PA........... 12,000 Leased
Distribution Centers:
Biggers Charlotte, NC.............. 397,000 Owned
Dallas Mesquite, TX............... 247,000 Owned
Austin Austin, TX................. 244,000 Leased
Davis Oklahoma City, OK.......... 218,000 Owned
Kings Knoxville, TN.............. 180,000 Owned
Roanoke Salem, VA.................. 175,000 Owned
Lubbock Lubbock, TX................ 153,000 Owned
CP Ormond Beach, FL........... 142,000 Owned
Watson Dallas, TX................. 130,000 Leased
Ohio Columbus, OH............... 126,000 Leased
Bevaco Pittston, PA............... 119,000 Owned
Standard Hurricane, WV.............. 115,000 Owned
Riviera Beach Riviera Beach, FL.......... 95,000 Owned
Mom's Dallas, TX................. 74,000 Leased
Atlanta Atlanta, GA................ 69,000 Owned
Orlando Orlando, FL................ 59,000 Owned
Fort Myers Fort Myers, FL............. 47,000 Owned
</TABLE>
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The corporate headquarters and Watson leases expire in 1996; the Ohio lease
expires in 1997; the Mom's lease expires in 2000; and the Austin lease expires
in 2007. US Foodservice is currently planning to enter into a long-term lease
for new corporate headquarters in Luzerne County, Pennsylvania with a term
beginning in August 1996. Expansions have been recently completed at Davis,
Bevaco, Austin and Lubbock. US Foodservice is currently planning to construct
a new, technologically advanced distribution center for Biggers Brothers
beginning in 1996. This project is expected to be completed in 14 months at an
estimated cost of $35.0 million. US Foodservice believes that its existing
warehouse facilities and the planned Biggers Brothers distribution center will
be sufficient to satisfy its warehouse requirements for the foreseeable
future.
COMPETITION
US Foodservice operates throughout the Southeastern, Southwestern and Mid-
Atlantic regions of the United States and encounters significant competition
in each of its marketing areas. US Foodservice competes with the several
national distributors, including Rykoff-Sexton, as well as numerous regional
and local distributors.
US Foodservice believes that although price is a consideration, competition
in the foodservice distribution industry is generally based on product
quality, customer relations and service. As one of the leading broadline
distributors in its marketing regions, US Foodservice believes that it carries
a wider selection of food products of superior quality and value than most of
its competitors. US Foodservice believes that its extensive product line,
maintenance of consistent product quality, commitment to vendor partnerships,
highly motivated sales force and decentralized management philosophy
contribute to its ability to compete effectively in its regional markets.
EMPLOYEES
US Foodservice has approximately 3,700 full-time employees, of which
approximately 100 are covered by a collective bargaining agreement.
Approximately 65% of the employees of US Foodservice receive a portion of
their compensation based on performance criteria. US Foodservice believes that
its relationship with its employees is satisfactory.
LEGAL PROCEEDINGS
On April 28, 1993, the United States of America filed a one-count Department
of Justice ("DOJ") information against White Swan (which became a subsidiary
of US Foodservice on September 22, 1993) in the U.S. District Court for the
Southern District of Texas. The DOJ proceeding concerned activities of the
White Swan-Houston Division (now consolidated with Austin) involving the
submission of bids for the supply of wholesale grocery products to public
schools and other public entities in southeastern Texas from 1985 through
early 1990. On June 10, 1993, White Swan entered a plea of guilty and paid a
fine of $650,000.
White Swan also paid $60,000 to the State of Texas in September 1993 in
settlement of claims brought by the State of Texas for alleged violations of
the Texas Free Enterprise and Antitrust Act of 1983 relating to the same
activities investigated by the DOJ.
On June 1, 1994, in connection with the same matter, White Swan received a
written Notice of a Proposed Debarment by the USDA, Food and Nutrition Service
("FNS"). Appropriate documentation was sent to the FNS and a meeting was held
in August 1994. On January 20, 1995, White Swan received a proposed Compliance
Agreement in Lieu of Debarment ("Compliance Agreement") from the USDA. Various
drafts of the Compliance Agreement have been exchanged and negotiations are
ongoing.
US Foodservice is involved in various litigation matters incidental to the
conduct of its business. Management does not believe that the outcome of any
of these legal proceedings will have a material adverse effect on the
financial condition or results of operations of US Foodservice.
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DESCRIPTION OF MERGER SUB
Merger Sub, a Delaware corporation and a wholly-owned subsidiary of Rykoff-
Sexton, was incorporated on December 20, 1995 solely for the purpose of
effecting the Merger. Merger Sub engages in no other business. The mailing
address of Merger Sub's principal executive offices is c/o Rykoff-Sexton,
Inc., 1050 Warrenville Road, Lisle, Illinois 60532-5201, and its telephone
number is (708) 964-1414.
US FOODSERVICE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data as of December
31, 1994 and December 30, 1995 and for the fiscal years ended January 1, 1994,
December 31, 1994 and December 30, 1995, respectively, have been derived from
the consolidated financial statements of US Foodservice audited by Arthur
Andersen LLP, independent public accountants, included elsewhere herein.
The financial data for periods prior to January 3, 1993 are presented as set
forth due to the circumstances of the 1993 Foodservice Merger. See
"DESCRIPTION OF US FOODSERVICE--General." The 1993 Foodservice Merger has been
accounted for as a combination of companies under common control. As such, the
assets and liabilities of the merged entities have been reflected at their
historical carrying values in the consolidated financial statements of US
Foodservice. The results of operations have been presented as if the 1993
Foodservice Merger had occurred as of September 4, 1992, the date both Unifax
Holdings and WS Holdings came under the common control of ML & Co. Prior to
September 4, 1992, the results of operations represent those of WS Holdings
only. In addition, effective January 2, 1993, WS Holdings changed its fiscal
year end from the last Saturday in June to the Saturday following the Friday
nearest to December 31 to conform to US Foodservice's fiscal year end. As a
result, the financial data as set forth below include (i) data as of and for
the fifty-two week periods ended June 29, 1991 and June 27, 1992,
respectively, which have been derived from the audited consolidated financial
statements of WS Holdings, not included herein, (ii) data as of and for the
twenty-seven week period ended January 2, 1993 (which includes the results of
WS Holdings for the entire twenty-seven week period and the results of Unifax
Holdings from September 4, 1992 through January 2, 1993), which have been
derived from the audited consolidated financial statements of US Foodservice,
not included herein and (iii) data as of January 1, 1994, which have been
derived from the audited consolidated financial statements of US Foodservice,
not included herein.
The selected historical consolidated financial data should be read in
conjunction with the US Foodservice consolidated financial statements and
notes thereto and "--US Foodservice Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere herein.
89
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
JANUARY 1, 1994(1) DECEMBER 31, 1994(1)(2) DECEMBER 30, 1995(3)
(52 WEEKS) (52 WEEKS) (52 WEEKS)
------------------ ----------------------- --------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $1,439,409 $1,470,061 $1,676,007
Cost of goods sold.... 1,195,556 1,209,941 1,382,213
---------- ---------- ----------
Gross profit.......... 243,853 260,120 293,794
Operating expenses.... 188,501 200,387 225,189
Depreciation and
amortization......... 21,322 14,523 16,379
Forgiveness of notes
receivable from stock
sale................. 1,005 1,012 980
Write-off of goodwill
and related
intangible assets.... 14,274 -- --
Restructuring and
other charges
(credits)............ 36,669 (3,425) --
---------- ---------- ----------
Income (loss) from
operations........... (17,918) 47,623 51,246
Interest expense, net. 30,694 31,690 35,727
Other expense
(income), net........ 252 110 1,031
---------- ---------- ----------
Income (loss) before
income taxes and
extraordinary item... (48,864) 15,823 14,488
Income tax provision
(benefit)............ (2,882) 2,912 6,691
---------- ---------- ----------
Income (loss) before
extraordinary item... (45,982) 12,911 7,797
Extraordinary loss(4). 8,686 -- --
---------- ---------- ----------
Net income (loss)..... $ (54,668) $ 12,911 $ 7,797
========== ========== ==========
Net income (loss) per
share attributable to
common stockholders.. $ (7.93) $ 0.68 $ 0.02
Income (loss) per
share before
extraordinary item
attributable to
common stockholders.. $ (6.81) $ 0.68 $ 0.02
========== ========== ==========
Cash dividend per
share................ -- -- --
========== ========== ==========
Weighted average
shares outstanding... 7,729,227 8,241,211 9,147,639
BALANCE SHEET DATA (AT
PERIOD END):
Total assets.......... $ 516,835 $ 554,509 $ 610,535
Long-term debt........ 294,102 294,388 343,334
Mandatory redeemable
preferred stock...... 54,772 57,137 53,196
Stockholders' equity
(deficit)............ (2,564) 28,678 30,791
</TABLE>
90
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
JUNE 29, 1991 JUNE 27, 1992 27 WEEKS ENDED
(52 WEEKS) (52 WEEKS) JANUARY 2, 1993
------------- ------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 650,984 $ 697,983 $ 627,955
Cost of goods sold............... 529,629 571,509 520,136
--------- --------- ---------
Gross profit..................... 121,355 126,474 107,819
Operating expenses............... 83,378 90,200 82,820
Depreciation and amortization.... 14,115 14,668 10,426
Forgiveness of notes receivable
from stock sale................. -- -- 994
Write-off of goodwill and related
intangible assets............... -- -- --
Restructuring and other charges
(credits)....................... -- -- --
--------- --------- ---------
Income from operations........... 23,862 21,606 13,579
Interest expense (net)........... 23,576 20,991 14,421
Other expense (income), net...... 806 275 (39)
--------- --------- ---------
Income (loss) before income taxes
and extraordinary item.......... (520) 340 (803)
Income tax provision (benefit)... 1,282 1,916 1,221
--------- --------- ---------
Income (loss) before
extraordinary item.............. (1,802) (1,576) (2,024)
Extraordinary loss(4)............ -- -- 5,081
--------- --------- ---------
Net income (loss)................ $ (1,802) $ (1,576) $ (7,105)
--------- --------- ---------
Net income (loss) per share
attributable to common
stockholders.................... $ (2.68) $ (2.33) $ (1.67)
Income (loss) per share before
extraordinary item attributable
to common stockholders.......... $ (2.68) $ (2.33) $ (0.81)
========= ========= =========
Cash dividend per share.......... $ -- $ -- $ --
========= ========= =========
Weighted average shares
outstanding..................... 1,814,496 2,198,717 5,899,177
BALANCE SHEET DATA (AT PERIOD END):
Total assets..................... $ 243,530 $ 247,664 $ 553,425
Long-term debt................... 159,816 158,006 290,100
Mandatory redeemable preferred
stock........................... 22,338 25,882 49,388
Stockholders' equity (deficit)... (10,344) (15,511) 58,018
</TABLE>
- --------
(1) Income (loss) before extraordinary item includes nonrecurring charges of
approximately $50.9 million in the fiscal year ended January 1, 1994 and
nonrecurring credits of $3.4 million in the fiscal year ended December 31,
1994. The charges and credits relate to nonrecurring transactions
including the write-off of unamortized goodwill and related intangible
assets attributable to three of White Swan's distribution centers, and
restructuring and other charges. See "--US Foodservice Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 14 to the consolidated financial statements of US Foodservice
included elsewhere herein for a further explanation of such charges and
credits.
(2) Statement of operations data for the fiscal year ended December 31, 1994
include the results of the Atlanta Distribution Center from September 9,
1994, the date of its acquisition, and of the Fort Myers, Orlando and
Riviera Beach distribution centers from September 16, 1994, the date of
their acquisition.
(3) Statement of operations data for the fiscal year ended December 30, 1995
include the results of the Fort Myers Meat & Seafood distribution center
from January 20, 1995, the date of its acquisition, and of the CP
Distribution Center from April 1, 1995, the date of its acquisition.
(4) For the fiscal year ended January 1, 1994, US Foodservice recorded an
extraordinary item of approximately $8.7 million net of related tax
benefit of approximately $3.2 million, related to the early extinguishment
of indebtedness, and recorded a similar charge of approximately $5.1
million net of related tax benefit of $3.1 million for the twenty-seven
week period ended January 2, 1993.
91
<PAGE>
US FOODSERVICE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The foodservice industry is characterized primarily by small and medium-size
(less than $100.0 million in net sales) independent distributors serving local
and regional markets. In recent years the industry has experienced significant
consolidation as the services required by customers (such as product
diversity, geographic coverage, competitive pricing, accurate on-time
delivery, and auxiliary services such as menu planning) have increased,
requiring substantial capital and operational resources. This has created a
significant competitive advantage for the relatively small number of large
distributors that have the resources to satisfy these customer requirements.
Such distributors are better able to deploy working capital to carry broader
product lines, develop stronger vendor relationships and make greater
investments in technology.
In September 1993, US Foodservice completed the 1993 Foodservice Merger,
thereby creating the fourth largest broadline foodservice distributor in the
United States. As a result of the 1993 Foodservice Merger, US Foodservice:
(i) doubled its net sales, thereby further enhancing its relationships and
leverage with its vendors and obtaining more competitive pricing and
enhanced marketing and merchandising support;
(ii) expanded its geographic diversity, thereby achieving the capability to
service a larger chain account base while reducing its exposure to
regional economic downturns;
(iii) realized synergies through consolidation and rationalization of
certain distribution centers and corporate functions;
(iv) expanded the diversity of its customer base, product line and
services; and
(v) enhanced its pool of management resources.
US Foodservice's historical growth has depended, in part, on its ability to
acquire, integrate and operate new businesses within existing and contiguous
geographical markets. Since the 1993 Foodservice Merger, US Foodservice has
completed the Foodservice Acquisitions. US Foodservice believes that its
success in integrating these acquired businesses is primarily the result of
its entrepreneurial, decentralized management structure and the application of
its management information systems. Most acquired businesses generate margins
lower than those of existing distribution centers until fully integrated into
the purchasing, merchandising and operational systems of US Foodservice. The
time necessary to integrate acquired businesses depends upon the size and
operating sophistication of such businesses, but the benefits of integration
do not typically begin to be fully realized until after one year. As an
example of integration benefits, the gross margins of the 1994 Foodservice
Acquisitions have increased from 14.1% for the 13 weeks ended December 31,
1994 to 15.6% for the 13 weeks ended December 30, 1995.
US Foodservice continually evaluates the level of profitability of
individual customer accounts. This has allowed US Foodservice to successfully
focus its resources towards its more profitable accounts and to modify less
profitable relationships. As a result of this review process, US Foodservice
selectively discontinues relationships with less profitable accounts, which
results in lower net sales but allows for improved operating margins and more
efficient use of US Foodservice's distribution infrastructure.
The following table sets forth US Foodservice's income (loss) from
operations for the periods indicated:
<TABLE>
<CAPTION>
52 WEEKS ENDED
------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
Net sales.................................. 100.00% 100.00% 100.00%
Gross profit............................... 16.94 17.69 17.53
Operating expenses......................... 13.10 13.63 13.44
Depreciation and amortization.............. 1.48 0.99 0.98
Nonrecurring charges (credits)............. 3.54 (0.23) --
Income (loss) from operations.............. (1.24) 3.24 3.06
</TABLE>
92
<PAGE>
RESULTS OF OPERATIONS
Fiscal 1995 Compared to Fiscal 1994
Net Sales. Net sales increased 14.0% to $1,676.0 million in fiscal 1995 from
$1,470.1 million in fiscal 1994. The Foodservice Acquisitions contributed
$169.9 million to this increase in net sales, which offset sales decreases
resulting from US Foodservice's decision to terminate its relationship with a
large, low-margin, multi-unit customer as part of its efforts to continually
review customer profitability and optimize resource allocation. Excluding the
effect of this decision, existing distribution centers experienced $60.0
million in net sales increases primarily due to the addition of new customers
and increased sales to existing customers. Price inflation did not have a
measurable effect on net sales.
Gross Profit. Gross profit increased 13.0% to $293.8 million in fiscal 1995
from $260.1 million in fiscal 1994. Despite an increase in gross profit, gross
margin for fiscal 1995 declined to 17.5% from 17.7% for fiscal 1994. The
Foodservice Acquisitions attained gross margins of 15.7%, while the existing
distribution centers had gross margins of 17.8%. The Foodservice Acquisitions'
lower gross margins were primarily attributable to the nature of their
customer mix, as well as to the Foodservice Acquisitions' not having completed
the implementation of US Foodservice's merchandising, marketing and
operational programs.
Operating Expenses. Operating expenses increased 12.4% to $225.2 million in
fiscal 1995 from $200.4 million in fiscal 1994. The Foodservice Acquisitions
accounted for $21.9 million of this increase. Operating expenses as a
percentage of net sales decreased to 13.4% in fiscal 1995 from 13.6% in fiscal
1994.
Depreciation and Amortization. Depreciation and amortization expense
increased 12.8% to $16.4 million in fiscal 1995 from $14.5 million in fiscal
1994. The Foodservice Acquisitions accounted for substantially all of the
increase.
Income from Operations. Income from operations decreased 7.6% to $51.2
million in fiscal 1995 from $47.6 million in fiscal 1994. Excluding the
nonrecurring credit in fiscal 1994, US Foodservice's income from operations
increased 15.9%, or $7.0 million, in fiscal 1995 compared to fiscal 1994. The
increase in net sales accounted for most of the improvement.
Interest Expense. Interest expense increased 12.7% to $35.7 million in
fiscal 1995 from $31.7 million in fiscal 1994. The increase in interest
expense resulted from higher debt levels incurred to finance the 1995
Foodservice Acquisitions, as well as the impact of higher interest rates.
Provision for Income Taxes. Provision for income taxes of $6.7 million in
fiscal 1995 reflected an effective tax rate of approximately 46.2%. The
effective rate in fiscal 1995 is greater than the Federal statutory rate of
34% primarily due to the non-deductibility of goodwill amortization and the
effect of state taxes. Provision for income taxes of $2.9 million in fiscal
1994 reflected an effective rate of 18.4%, which is lower than the Federal
statutory rate of 34% primarily due to the reduction in valuation allowances
against deferred tax assets of approximately $10.3 million.
Fiscal 1994 Compared to Fiscal 1993
Net Sales. Net sales increased 2.1% to $1,470.0 million in fiscal 1994 from
$1,439.4 million in fiscal 1993. The 1994 Foodservice Acquisitions contributed
$41.0 million to net sales in fiscal 1994 which offset sales decreases
resulting from US Foodservice's decision to discontinue its relationships with
several low-margin customers, including one significant account in mid-fiscal
1994 which resulted in a $24.0 million reduction in sales. The decision to
discontinue the business with these customers was the result of an overall
review of all significant customer relationships in connection with the 1993
Foodservice Merger. In addition, in 1993 US Foodservice consolidated its
Houston and Corpus Christi, Texas operations into its Austin, Texas facility.
This consolidation resulted in the elimination of $42.0 million of business in
the Houston and Corpus Christi markets. Excluding the effects of these
actions, existing distribution centers experienced $56.7 million in net sales
93
<PAGE>
increases primarily due to the addition of new customers and increased sales
to existing customers. Sales growth was adversely affected during fiscal 1994
by the inclement weather which impacted certain of the distribution centers.
Price inflation did not have a measurable effect on net sales.
Gross Profit. Gross profit increased 6.7% to $260.1 million in fiscal 1994
from $243.9 million in fiscal 1993. The gross margin increased to 17.7% in
fiscal 1994 from 16.9% in fiscal 1993. The 1994 Foodservice Acquisitions
provided $5.9 million of the increase in gross profit. The increase in gross
margin is a direct result of the benefits derived from US Foodservice's
purchasing leverage and strong vendor relationships that resulted from the
additional sales volume generated by the 1993 Foodservice Merger. Gross
margins also benefited in fiscal 1994 as a result of US Foodservice's decision
to terminate relationships with several low margin customers.
Operating Expenses. Operating expenses increased 6.3% to $200.4 million in
fiscal 1994 from $188.5 million in fiscal 1993. The 1994 Foodservice
Acquisitions accounted for $4.9 million of the increase in operating expenses.
Operating expenses, as a percentage of sales, increased to 13.6% in fiscal
1994 as compared to 13.1% in fiscal 1993. The increase is due, in part, to
expenses associated with expansion into new sales regions and, to a lesser
extent, the inclement weather experienced in fiscal 1994.
Depreciation and Amortization. Depreciation and amortization expense
decreased 31.9% to $14.5 million in fiscal 1994 from $21.3 million in fiscal
1993. The decrease is primarily attributable to the full amortization of
amounts paid under a non-compete agreement between White Swan and its former
owner in fiscal 1993.
Nonrecurring Charges (Credits). In connection with the 1993 Foodservice
Merger, and as a result of the decision to consolidate three distribution
centers, certain nonrecurring expenses were incurred in fiscal 1993 which were
classified as restructuring and other charges in the amount of $36.7 million.
These costs include lease termination, severance and other costs associated
with the consolidation of distribution centers and the costs relating to
financial integration and elimination of duplicative tasks. In addition,
during fiscal 1994, a credit of $3.4 million resulted from US Foodservice's
termination of a lease relating to the consolidation of a Distribution Center
on terms more favorable than originally estimated. During fiscal 1993, WS
Holdings wrote off $14.3 million of unamortized goodwill and related
intangible assets attributable to three distribution centers. The three
distribution centers operated at a loss before interest and amortization
during 1993 and projections of future results indicated that such losses would
continue. See Note 14 to the consolidated financial statements of US
Foodservice included elsewhere herein.
Income From Operations. Income from operations was $47.6 million in fiscal
1994 compared to a loss from operations of $17.9 million in fiscal 1993. This
was partially attributable to nonrecurring charges of $50.9 million in fiscal
1993. Excluding the nonrecurring charges, income from operations increased
33.8% to $44.2 million in fiscal 1994 from $33.0 million in fiscal 1993. This
increase was a result of an increase in net sales, improved gross margins, and
the decrease in amortization associated with the White Swan non-compete
agreement.
Interest Expense. Interest expense increased from $30.7 million in fiscal
1993 to $31.7 million in fiscal 1994. The increase reflects higher interest
rates.
Extraordinary Item. An extraordinary loss was recorded in fiscal 1993
totaling $8.7 million due to the write-off of debt issuance costs associated
with the refinancing of the debt of US Foodservice and WS Holdings in the 1993
Foodservice Merger.
Provision for Income Taxes. Provision for income taxes amounted to $2.9
million in fiscal 1994 versus a benefit of $2.9 million in fiscal 1993. The
effective rate of 18.4% in fiscal 1994 is lower than the Federal statutory
rate of 34% due to the reduction in valuation allowances against deferred tax
assets of approximately $10.3 million. This reduction is the result of US
Foodservice's evaluation that the tax assets reserved for in fiscal 1993 will
be realized.This reduction was partially offset by an Internal Revenue Service
audit assessment and other reserves of $4.4 million, nondeductible goodwill
amortization of $1.7 million and state and other taxes of $1.2 million.
94
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
US Foodservice's liquidity requirements arise primarily from the funding of
its working capital needs, obligations on indebtedness and capital
expenditures. Historically, these requirements have been met with operating
cash flows and borrowings under the Existing Credit Facility. Working capital
needs are driven primarily by the needs of the individual distribution centers
and correlate closely with sales levels. Capital expenditures are also based
on the requirements of the individual distribution centers.
During fiscal 1995, US Foodservice generated cash flows from operations of
$26.0 million. The primary sources of cash included a decrease in inventories
of $2.9 million and increases in accrued expenses of $0.2 million and bank
overdrafts (outstanding disbursements) of $8.5 million which, together with
net income, depreciation and amortization, deferred income taxes and other
items, produced total sources of $46.4 million. These sources were partially
offset by increases in accounts receivable of $8.7 million and prepaid
expenses and other assets of $1.3 million and decreases in accounts payable of
$5.7 million, income taxes payable of $2.0 million and noncurrent liabilities
of $2.7 million. This cash, together with borrowings of $50.0 million under
the Existing Credit Facility and proceeds of $15.0 million from the sale of
receivables, was used to fund payments of $38.7 million for the 1995
Foodservice Acquisitions, repay $16.6 million of long-term debt, fund capital
expenditures of $16.3 million and purchase certain outstanding US Foodservice
preferred stock for $6.7 million. Other net uses of cash amounted to $1.2
million. Overall, US Foodservice had a net increase in cash of $11.5 million
in fiscal 1995.
During fiscal 1994, US Foodservice generated cash flows from operations of
$27.3 million. This operating cash was provided primarily from net income of
$12.9 million, depreciation and amortization of $17.0 million and an increase
in bank overdrafts (outstanding disbursements) of $17.3 million, offset by
decreases in accounts payable of $13.6 million and other noncurrent
liabilities of $10.6 million. The decrease in other noncurrent liabilities is
primarily the result of the payment of the various costs previously accrued in
the 1993 restructuring charge. US Foodservice used $36.2 million of cash for
the 1994 Foodservice Acquisitions and $11.8 million of cash for capital
expenditures, which included over $2.0 million in facilities expansions and
improvements and $1.0 million for development of US Foodservice's proprietary
software package. US Foodservice issued additional equity for net proceeds of
$24.9 million, which, along with cash from operations, was used to fund the
1994 Foodservice Acquisitions. US Foodservice also sold $15.0 million of
receivables and repaid $14.5 million of long-term debt. These factors
contributed to a net increase in cash of $2.8 million for fiscal 1994.
During fiscal 1993, US Foodservice and WS Holdings completed the 1993
Foodservice Merger, whereby WS Holdings became a wholly owned subsidiary of US
Foodservice. The 1993 Foodservice Merger required the complete refinancing of
both WS Holdings' and US Foodservice's pre-1993 Foodservice Merger debt. This
was effectively completed by the issuance of new long-term debt under US
Foodservice's Existing Credit Facility, as well as the exchange of the 14.25%
Debentures and the Exchangeable Preferred Stock to replace the then existing
WS Holdings senior subordinated debt and preferred stock. US Foodservice also
recorded $60.0 million of proceeds from the sale of receivables. On a combined
basis, US Foodservice generated $33.4 million in cash flows from operations in
fiscal 1993, a large portion of which was provided as the result of a
concentrated effort on managing working capital after the 1993 Foodservice
Merger, increasing accounts payable by $23.1 million and accrued expenses by
$7.7 million. Capital expenditures for fiscal 1993 were $8.1 million.
Combining these various items, cash increased $2.0 million in fiscal 1993.
In connection with the 1993 Foodservice Merger, US Foodservice entered into
a Receivable Purchase Agreement and a Pooling and Servicing Agreement (the
"Agreements"). The Agreements allow US Foodservice to borrow at substantially
lower rates than might otherwise be available. In October 1994, US Foodservice
completed the Series 1994-1 Accounts Receivable Securitization, which produced
proceeds of $75.0 million, of which $60.0 million was used to replace the 1993
securitization. This securitization has since been modified and increased by
an additional $15.0 million to $90.0 million, with the addition of certain
other distribution centers' accounts receivable. See Note 4 to the
consolidated financial statements of US Foodservice included elsewhere herein.
US Foodservice intends to restructure its present receivables financing
facility as an off-balance sheet
95
<PAGE>
sale of assets. If, however, the present US Foodservice receivables facility
cannot be restructured in a manner satisfactory to Rykoff-Sexton and US
Foodservice, US Foodservice intends to refinance the present US Foodservice
receivables facility. In such event, BofA and Chase will consider increasing
the size of the Receivables Securitization to $200 million, but Chase and BofA
have made no commitment to do so in the Commitment Letter. See "THE MERGER--
Rykoff-Sexton Financing and Receivables Securitization."
US Foodservice anticipates $14.1 million of capital expenditures in 1996,
excluding the Biggers Brothers facility described below. Annual maintenance
capital expenditures range from $8.0 million to $10.0 million each year. As
discussed above, US Foodservice funds capital expenditures through operating
cash flows and bank borrowings.
US Foodservice began construction, in 1996, of a new, technologically
advanced distribution center for Biggers Brothers. This project is expected to
take 14 months to complete at an estimated total cost of $35.0 million, and to
be financed by industrial bonds or other long-term mortgage-based financing.
Interim financing, if necessary, will be drawn from the available credit
facilities.
96
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined statements of operations and unaudited pro
forma combined balance sheet give effect to (i) the acquisitions of
Continental and H&O Foods, (ii) the Merger and (iii) the New Credit Facility,
the Receivables Securitization and the application of the net proceeds
therefrom. The unaudited pro forma combined statement of operations for the
fifty-two weeks ended April 29, 1995 is comprised of the results of Rykoff-
Sexton for the fifty-two weeks ended April 29, 1995, the results of
Continental (acquired on February 21, 1995) for the period May 1, 1994 to
February 20, 1995, the results of H&O Foods for the year ended April 30, 1995,
and the results of US Foodservice for the fifty-two weeks ended April 1, 1995.
The unaudited pro forma combined statement of operations for the thirty-nine
weeks ended January 27, 1996 is comprised of the results of Rykoff-Sexton for
the thirty-nine weeks ended January 27, 1996, the results of H&O Foods
(acquired on November 1, 1995) for the six-months ended October 31, 1995, and
the results of US Foodservice for the thirty-nine weeks ended December 30,
1995. The unaudited pro forma combined balance sheet as of January 27, 1996
has been prepared by combining the consolidated balance sheet of Rykoff-Sexton
as of January 27, 1996 and the balance sheet of US Foodservice as of December
30, 1995.
The unaudited pro forma combined statements of operations for the fifty-two
weeks ended April 29, 1995 and the thirty-nine weeks ended January 27, 1996
assume that the Merger, the acquisitions of Continental and H&O Foods, the New
Credit Facility and the Receivables Securitization occurred on May 1, 1994.
The unaudited pro forma combined balance sheet as of January 27, 1996 assumes
that the Merger, the New Credit Facility and the Receivables Securitization
occurred on January 27, 1996. The pro forma combined statements of operations
and balance sheet do not purport to represent the results of operations or
financial position of Rykoff-Sexton had the transactions and events assumed
therein occurred on the dates specified, nor are they necessarily indicative
of the results of operations that may be achieved in the future. The pro forma
adjustments are based on management's preliminary assumptions regarding
purchase accounting adjustments. The actual allocation of the purchase price
will be adjusted to the extent that actual amounts differ from management's
estimates.
The pro forma financial information is based upon certain assumptions and
adjustments described in the notes to the pro forma financial statements. The
pro forma combined financial information should be read in conjunction with
the historical financial statements, and related notes thereto, of Rykoff-
Sexton and US Foodservice incorporated by reference or contained elsewhere
herein.
97
<PAGE>
RYKOFF-SEXTON
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE FIFTY-TWO WEEKS ENDED APRIL 29, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO-FORMA
FOR
PRO-FORMA CONTINENTAL
RYKOFF- CONTINENTAL FOR H&O FOODS AND H&O
SEXTON (UNAUDITED) PRO-FORMA CONTINENTAL (UNAUDITED) PRO-FORMA FOODS
(AUDITED) (5/1/94-2/20/95) ADJUSTMENTS ACQUISITION (5/1/94-4/30/95) ADJUSTMENTS ACQUISITIONS
---------- ---------------- ----------- ----------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales........... $1,569,019 $83,841 $ -- $1,652,860 $119,565 $ -- $1,772,425
Cost Of Sales... 1,241,291 69,808 1,311,099 104,480 1,415,579
---------- ------- ------- ---------- -------- ------- ----------
Gross Profit.... 327,728 14,033 341,761 15,085 356,846
Warehouse,
Selling, General
and
Administrative.. 301,235 11,492 617 (2) 312,353 11,927 433 (2) 324,713
(991)(3)
---------- ------- ------- ---------- -------- ------- ----------
Net Operating
Expenses........ 301,235 11,492 (374) 312,353 11,927 433 324,713
---------- ------- ------- ---------- -------- ------- ----------
Operating
Profit.......... 26,493 2,541 374 29,408 3,158 (433) 32,133
Interest
Expense, net.... 10,867 (78) 1,757 (4) 12,624 421 2,524 (4) 15,055
78 (3) (514)(4)
Other Expense...
---------- ------- ------- ---------- -------- ------- ----------
Income From
Continuing
Operations
Before Income
Taxes........... 15,626 2,619 (1,461) 16,784 2,737 (2,443) 17,078
Provision For
Income Taxes.... 6,250 464 (7) 6,714 117 (7) 6,831
---------- ------- ------- ---------- -------- ------- ----------
Income From
Continuing
Operations...... $ 9,376 $ 2,619 $(1,925) $ 10,070 $ 2,737 $(2,560) $ 10,247
========== ======= ======= ========== ======== ======= ==========
Weighted Average
Shares
Outstanding--
Historical...... 14,730 14,730 14,730
========== ========== ==========
Weighted Average
Shares
Outstanding--
Minimum Shares..
Weighted Average
Shares
Outstanding--
Maximum Shares..
Earnings per
Share Data:
Income from
continuing
operations per
share--
Historical...... $ 0.64 $ 0.68 $ 0.69
========== ========== ==========
Income from
continuing
operations per
share--Minimum
Shares..........
Income from
continuing
operations per
share--Maximum
Shares..........
<CAPTION>
PRO FORMA FOR
CONTINENTAL,
H&O FOODS,
MERGER, NEW
CREDIT
FACILITY AND
US FOODSERVICE RECEIVABLES
(UNAUDITED) PRO-FORMA SECURITIZATION
(4/3/94-4/1/95) ADJUSTMENTS (1)(9)
--------------- -------------- ---------------
<S> <C> <C> <C>
Sales........... $1,508,988 $ -- $3,281,413
Cost Of Sales... 1,241,472 2,657,051
--------------- -------------- ---------------
Gross Profit.... 267,516 624,362
Warehouse,
Selling, General
and
Administrative.. 219,217 5,159 (2) 549,089
--------------- -------------- ---------------
Net Operating
Expenses........ 219,217 5,159 549,089
--------------- -------------- ---------------
Operating
Profit.......... 48,299 (5,159) 75,273
Interest
Expense, net.... 32,346 27,667 (4) 42,570
(31,563)(4)
1,833 (5)
(2,768)(5)
Other Expense... 14,075 (6) 14,075
--------------- -------------- ---------------
Income From
Continuing
Operations
Before Income
Taxes........... 15,953 (14,403) 18,628
Provision For
Income Taxes.... 2,769 (3,698)(7) 5,902
--------------- -------------- ---------------
Income From
Continuing
Operations...... $ 13,184 $(10,705) $ 12,726
=============== ============== ===============
Weighted Average
Shares
Outstanding--
Historical......
Weighted Average
Shares
Outstanding--
Minimum Shares.. 26,168(8)
===============
Weighted Average
Shares
Outstanding--
Maximum Shares.. 28,127(8)
===============
Earnings per
Share Data:
Income from
continuing
operations per
share--
Historical......
Income from
continuing
operations per
share--Minimum
Shares.......... $ 0.49(8)
===============
Income from
continuing
operations per
share--Maximum
Shares.......... $ 0.45(8)
===============
</TABLE>
98
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE
FIFTY-TWO WEEKS ENDED APRIL 29, 1995:
(1) Rykoff-Sexton has begun to identify cost savings resulting from a business
integration plan, which is expected to be implemented following the
Merger. The business integration plan contemplates, among other things,
(i) elimination of duplicative executive and distribution functions and
(ii) closing and consolidating of certain facilities. Rykoff-Sexton's
business integration plan provides for the events generating the cost
savings to occur in phases. Management has not completed its assessment
and thus has not included the impact of any special charges or cost
savings in the pro forma combined statement of operations for the fifty-
two weeks ended April 29, 1995. See "THE MERGER--Potential Cost Savings
and Operating Synergies."
(2) Reflects adjustments to depreciation and amortization based on the
preliminary purchase accounting allocations related to property, plant and
equipment and intangible assets acquired in connection with the
acquisitions of Continental and H&O Foods and the Merger as more fully
described in Note (2) to the unaudited pro forma combined balance sheet.
Buildings are being depreciated over 30 years and goodwill is being
amortized over 40 years.
(3) Represents the elimination of rental income, lease expense, interest
income and owners salaries that ceased as a result of the acquisition of
Continental.
(4) Represents the elimination of historical interest expense on debt which
was refinanced or not assumed, offset by the additional interest expense
that would have been incurred had the acquisitions of H&O Foods and
Continental, the Merger and the New Credit Facility occurred on May 1,
1994. For purposes of the unaudited pro forma combined statement of
income, the interest rate was assumed to be LIBOR plus the Applicable
Margin as further described in "THE MERGER--Rykoff-Sexton Financing and
Receivables Securitization." The weighted average rate assumed was 8.26%.
The proceeds from the New Credit Facility will be used to refinance
substantially all of the outstanding debt of US Foodservice and to
refinance Rykoff-Sexton's Credit Agreement dated as of October 25, 1993,
among Rykoff-Sexton and BofA, as amended. The weighted average interest
rate on the debt expected to be retired ranged from 7.58% to 8.13% for US
Foodservice's revolver and term loans and 14.25% on the 14.25% Debentures
and 5.54% for Rykoff-Sexton. See Note 6 to the consolidated financial
statements of US Foodservice included elsewhere herein for further
information regarding the historical indebtedness of US Foodservice. See
Note 5 to the consolidated financial statements of Rykoff-Sexton
incorporated by reference herein for further information with respect to
the historical indebtedness of Rykoff-Sexton.
(5) Represents the elimination of historical amortization of deferred
financing costs on debt which was refinanced, offset by the amortization
of deferred financing costs on debt that would have been incurred had the
New Credit Facility been in place on May 1, 1994. The deferred financing
costs associated with the New Credit Facility are amortized over the terms
of the related debt, approximately six years.
(6) Represents the loss on the sale of accounts receivable under the asset
securitization program that would have been incurred had the Receivables
Securitization program been in place on May 1, 1994. The loss related to
the sale of receivables represents the yield on the aggregate receivables
sold. The yield under the Receivables Securitization is based on either a
certain base rate plus an applicable margin or LIBOR plus an applicable
margin as determined by the SPC. The computed yield rate for purposes of
the unaudited pro forma combined statement of income was 7.0%, assuming a
constant level of receivables secured of $200 million. To the extent that
the amount of receivables secured or the interest rate changes, the amount
of the loss could change.
(7) Adjustments to reflect income tax effects assuming a combined state and
federal statutory income tax rate of 40%, excluding nondeductible goodwill
amortization. The difference between the Rykoff-Sexton historical
effective tax rate of 40.0% and the effective tax rate of the unaudited
pro forma combined statement of income of 31.7% is due to (i) the
nondeductible goodwill amortization resulting from the Merger which
increased the combined effective rate by 11.1% offset by (ii) the
historical effective tax rate of US Foodservice of 17.4% which decreased
the combined effective rate by 19.4%. See Note 11 to the
99
<PAGE>
consolidated financial statements of US Foodservice included elsewhere
herein for further information regarding the effective tax rate of US
Foodservice.
(8) As part of the Merger, Rykoff-Sexton will issue Rykoff-Sexton Common Shares
to US Foodservice stockholders based on the Exchange Ratio as described in
"THE MERGER--Conversion of Shares; Exchange of Certificates" and will
assume the Assumed Options and the Assumed Warrants as described in "THE
MERGER AGREEMENT--General--Conversion of US Foodservice Common Stock in the
Merger." The weighted average shares outstanding has been computed using
both the minimum possible number of shares issuable in the Merger and the
maximum possible number of shares issuable in the Merger. The minimum
number of shares represents Rykoff-Sexton's historical weighted average
shares plus 10,997,534 shares issued as part of the Merger plus the
dilutive effect of shares issuable pursuant to the Assumed Options and
Assumed Warrants, assuming the Minimum Exchange Ratio. The maximum number
of shares represents Rykoff-Sexton's historical weighted average shares
plus 12,880,552 shares issued as part of the Merger plus the dilutive
effect of shares issuable pursuant to the Assumed Options and Assumed
Warrants, assuming the Maximum Exchange Ratio.
(9) Material nonrecurring charges which result directly from the transaction
which are not considered in the pro forma combined statement of operations
for the fifty-two weeks ended April 29, 1995 include the forgiveness of
notes receivable from the sale of stock to management of $1.0 million, fees
relating to the Receivables Securitization of $2.0 million, and related tax
effects of $2.8 million.
100
<PAGE>
RYKOFF-SEXTON
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THIRTY-NINE WEEKS ENDED JANUARY 27, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA FOR
H&O FOODS,
MERGER, NEW
CREDIT
RYKOFF- PRO FORMA US FACILITY AND
SEXTON H&O FOODS FOR H&O FOODSERVICE RECEIVABLES
(UNAUDITED) (UNAUDITED) PRO FORMA FOODS (UNAUDITED) PRO FORMA SECURITIZATION
(1/27/96) (4/1/95-10/31/95) ADJUSTMENTS ACQUISITION (12/30/95) ADJUSTMENTS (1)(8)
----------- ----------------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales................... $1,314,695 $66,875 $ -- $1,381,570 $1,284,858 $ -- $2,666,428
Cost Of Sales........... 1,053,727 58,411 1,112,138 1,058,967 2,171,105
---------- ------- ------- ---------- ---------- -------- ----------
Gross Profit............ 260,968 8,464 269,432 225,891 495,323
Warehouse, Selling,
General and
Administrative......... 244,863 6,682 217(2) 251,762 184,973 3,869 (2) 440,604
Reversal Of
Restructuring Reserves. (6,441) (6,441) (6,441)
---------- ------- ------- ---------- ---------- -------- ----------
Net Operating Expenses.. 238,422 6,682 217 245,321 184,973 3,869 434,163
---------- ------- ------- ---------- ---------- -------- ----------
Operating Profit........ 22,546 1,782 (217) 24,111 40,918 (3,869) 61,160
Interest Expense, net... 12,452 259 1,262 (3) 13,712 27,647 20,357 (3) 31,514
(261)(3) (29,390)(3)
(2,187)(4)
1,375 (4)
Other Expense........... 10,506 (5) 10,506
---------- ------- ------- ---------- ---------- -------- ----------
Income Before Income
Taxes.................. 10,094 1,523 (1,218) 10,399 13,271 (4,530) 19,140
Provision For Income
Taxes.................. 4,028 122 (6) 4,150 5,794 (264)(6) 9,680
---------- ------- ------- ---------- ---------- -------- ----------
Net Income.............. $ 6,066 $ 1,523 $(1,340) $ 6,249 $ 7,477 $ (4,266) $ 9,460
========== ======= ======= ========== ========== ======== ==========
Weighted Average Shares
Outstanding--
Historical............. 14,965 14,965
========== ==========
Weighted Average Shares
Outstanding--Minimum
Shares................. 26,403 (7)
==========
Weighted Average Shares
Outstanding--Maximum
Shares................. 28,362 (7)
==========
Earnings per Share Data:
Net Income per share--
Historical............ $ 0.41 $ 0.42
========== ==========
Net Income per share--
Minimum Shares........ $ 0.36 (7)
==========
Net Income per share--
Maximum Shares........ $ 0.33 (7)
==========
</TABLE>
101
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE
THIRTY-NINE WEEKS ENDED JANUARY 27, 1996:
(1) Rykoff-Sexton has begun to identify cost savings resulting from a business
integration plan which is expected to be implemented following the Merger.
The business integration plan contemplates, among other things, (i)
elimination of duplicative executive and distribution functions and (ii)
closing and consolidation of certain facilities. Rykoff-Sexton's business
integration plan provides for the events generating the cost savings to
occur in phases. Management has not completed its assessment and thus has
not included the impact of any special charges or cost savings in the pro
forma combined statement of operations for the thirty-nine weeks ended
January 27, 1996. See "THE MERGER--Potential Cost Savings and Operating
Synergies."
(2) Reflects adjustments to depreciation and amortization based on the
preliminary purchase accounting allocations related to property, plant and
equipment and intangible assets acquired in connection with the
acquisition of H&O Foods and the Merger as more fully described in Note
(2) to the unaudited pro forma combined balance sheet. Buildings are being
depreciated over 30 years and goodwill is being amortized over 40 years.
(3) Represents the elimination of historical interest expense on debt which
was refinanced or not assumed, offset by the additional interest expense
that would have been incurred had the acquisition of H&O Foods, the Merger
and the New Credit Facility occurred on May 1, 1994. For purposes of the
unaudited pro forma combined statement of income, the interest rate was
assumed to be LIBOR plus the Applicable Margin as further described in
"THE MERGER--Rykoff-Sexton Financing and Receivables Securitization." The
weighted average rate assumed was 8.26%. The proceeds from the New Credit
Facility will be used to refinance substantially all of the outstanding
debt of US Foodservice and to refinance Rykoff-Sexton's Credit Agreement
dated as of October 25, 1993, among Rykoff-Sexton and BofA, as amended.
The weighted average interest rate on the debt expected to be retired
ranged from 8.61% to 9.11% for US Foodservice's revolver and term loans
and 14.25% on the 14.25% Debentures and 6.98% for Rykoff-Sexton. See Note
6 to the consolidated financial statements of US Foodservice included
elsewhere herein for further information regarding the historical
indebtedness of US Foodservice. See Note 5 to the consolidated financial
statements of Rykoff-Sexton incorporated by reference herein for further
information with respect to the historical indebtedness of Rykoff-Sexton.
(4) Represents the elimination of historical amortization of deferred
financing costs on debt which was refinanced, offset by the amortization
of deferred financing costs on debt that would have been incurred had the
New Credit Facility been in place on May 1, 1994. The deferred financing
costs associated with the New Credit Facility are amortized over the terms
of the related debt, approximately six years.
(5) Represents the loss on the sale of accounts receivable under the asset
securitization program that would have been incurred had the Receivables
Securitization program been in place on May 1, 1994. The loss related to
the sale of receivables represents the yield on the aggregate receivables
sold. The yield under the Receivables Securitization is based on either a
certain base rate plus an applicable margin or LIBOR plus an applicable
margin as determined by the SPC. The computed yield rate for both
securitization programs for purposes of the unaudited pro forma combined
statement of income was 7.0%, assuming a constant level of receivables
secured of $200 million. To the extent that the amount of receivables
secured or the interest rate changes, the amount of the loss could change.
(6) Adjustments to reflect income tax effects assuming a combined state and
federal statutory income tax rate of 40%, excluding nondeductible goodwill
amortization. The difference between the Rykoff-Sexton historical
effective tax rate of 40.0% and the effective tax rate of the unaudited
pro forma combined statement of income of 50.6% is due to (i) the
nondeductible goodwill amortization resulting from the Merger which
increased the combined effective rate by 8.1% and (ii) the historical
effective tax rate of US Foodservice of 43.7% which increased the combined
effective rate by 2.5%. See Note 11 to the consolidated financial
statements of US Foodservice included elsewhere herein for further
information regarding the effective tax rate of US Foodservice.
(7) See Note (8) to Unaudited Pro Forma Combined Statement of Operations for
Fifty-Two Weeks Ended April 29, 1995.
(8) Material nonrecurring charges which result directly from the transaction
which are not considered in the pro forma combined statement of operations
for the thirty-nine weeks ended January 27, 1996 include the forgiveness
of notes receivable from the sale of stock to management of $1.0 million,
fees relating to the Receivables Securitization of $2.0 million, and
related tax effects of $2.8 million.
102
<PAGE>
RYKOFF-SEXTON
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JANUARY 27, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RYKOFF-
SEXTON US
(UNAUDITED) FOODSERVICE PRO-FORMA
ASSETS 1/27/96 12/30/95 ADJUSTMENTS PRO FORMA
------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cash And Cash Equivalents... $ 6,628 $ 22,182 $ 13,730 (1) $ 42,540
Accounts Receivable, Net.... 176,785 151,147 (266,667)(3) 61,265
Inventories................. 161,642 88,449 250,091
Prepaid Expenses............ 27,692 10,655 38,347
-------- -------- --------- ----------
Total Current Assets..... 372,747 272,433 (252,937) 392,243
-------- -------- --------- ----------
Property, Plant And
Equipment, Net............. 208,939 109,665 318,604
Goodwill.................... 42,185 213,907 206,340 (2h) 462,432
Other Assets, Net........... 7,860 14,530 66,667 (3) 91,822
11,000 (5)
(8,235)(2d)
-------- -------- --------- ----------
Total Assets............. $631,731 $610,535 $ 22,835 $1,265,101
======== ======== ========= ==========
<CAPTION>
LIABILITIES AND
SHAREHOLDERS' EQUITY
--------------------
<S> <C> <C> <C> <C>
Short-Term Debt............. 115,888 15,466 (112,094)(1) 19,260
Accounts Payable............ 104,517 114,623 219,140
Accrued Liabilities......... 45,674 29,824 (7,374)(2f) 65,324
(800)(4)
(2,000)(7)
-------- -------- --------- ----------
Total Current
Liabilities............. 266,079 159,913 (122,268) 303,724
Long-Term Debt, Less Current
Portion.................... 137,891 343,334 335,000 (1) 487,729
(338,696)(1)
10,200 (2e)
Deferred Income Taxes....... 11,073 9,251 20,324
Other Long-Term Liabilities. 1,676 14,050 (9,087)(2g) 7,639
1,000 (6)
-------- -------- --------- ----------
Total Liabilities........ 416,719 526,548 (123,851) 819,416
Mandatory Redeemable
Preferred Stock............ 53,196 (5,216)(2g)
(47,980)(2g)
Shareholders' Equity
Common Stock, At Stated
Value...................... 1,513 89 (89)(2c) 2,801
1,288 (2a)
Additional Paid-In Capital.. 95,136 124,020 (124,020)(2c) 323,721
219,712 (2a)
8,873 (2b)
Retained Earnings........... 122,343 (91,797) 91,797 (2c) 123,143
(1,200)(4)
2,000 (7)
Notes Receivable from Sale
of Stock................... (980) 980 (7)
-------- -------- --------- ----------
218,992 31,332 199,341 449,665
Less: Treasury Stock, At
Cost....................... 3,980 541 (541)(2c) 3,980
-------- -------- --------- ----------
Total Shareholders'
Equity.................. 215,012 30,791 199,882 445,685
-------- -------- --------- ----------
Total Liabilities and
Shareholders' Equity.... $631,731 $610,535 $ 22,835 $1,265,101
======== ======== ========= ==========
</TABLE>
103
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF JANUARY 27,
1996:
(1) Gives effect to the New Credit Facility with the incurrence of debt
pursuant thereto as contemplated by the Merger, the Receivables
Securitization, and the application of the net proceeds therefrom (after
payment of the debt, Merger related fees, and mandatory redeemable
preferred stock) as follows (in thousands):
<TABLE>
<S> <C>
Proceeds from New Credit Facility............................. $ 335,000
Proceeds from the Receivables Securitization (see Note (3)
below)....................................................... 200,000
Repayment of bank borrowings.................................. (450,790)
Merger related fees (see Notes (4)(5)(6) below)............... (22,500)
Payment of Preferred Stock (see Note (2) below)............... (47,980)
---------
Net Cash.................................................. $ 13,730
=========
</TABLE>
(2) Rykoff-Sexton acquired substantially all of the assets of Continental in
February 1995. The aggregate purchase price was $27.0 million, which was
financed through available cash resources and issuance of a promissory
note. See Note 2 of Rykoff-Sexton's Annual Report on Form 10-K
incorporated by reference herein for further description. Continental is
included in the historical Rykoff-Sexton balance sheet as of January 27,
1996.
Rykoff-Sexton acquired substantially all of the assets of H&O Foods in
November 1995. Rykoff-Sexton paid approximately $30.7 million, which
consisted of cash and the issuance of unsecured promissory notes.
Additionally, Rykoff-Sexton agreed to assume certain H&O Foods liabilities.
The final purchase price is subject to certain post-closing purchase price
adjustments. See Rykoff-Sexton's Current Report on Form 8-K dated November
1, 1995, as amended, incorporated by reference herein for further
description. H&O Foods is included in the historical Rykoff-Sexton balance
sheet as of January 27, 1996.
Consideration for the Merger will consist of issuance of Rykoff-Sexton
Common Shares based on the Exchange Ratio as described in "THE MERGER--
Conversion of Shares; Exchange of Certificates." Rykoff-Sexton will assume
the Assumed Options and the Assumed Warrants, which will be exercisable for
a number of Rykoff-Sexton Common Shares based on the Exchange Ratio as
described in "THE MERGER AGREEMENT--General--Conversion of US Foodservice
Common Stock in the Merger."
The acquisitions of Continental and H&O Foods and the Merger will each be
accounted for as a purchase pursuant to APB Opinion No. 16, "Business
Combinations." Accordingly, the purchase cost will be allocated to the
assets and the liabilities based on their relative fair values. Such
allocations are subject to final determination based on valuations, reviews
of conformity of accounting policies and other studies to be performed. The
final values may differ from those set forth below for US Foodservice.
<TABLE>
<CAPTION>
US FOODSERVICE
--------------
(IN THOUSANDS)
<S> <C>
Purchase cost:
Equity issued:
Common Stock........................................... $ 1,288
Additional paid-in capital............................. 219,712
Stock options and warrants assumed....................... 8,873
Acquisition costs (see Note (6) below)................... 10,500
Less estimated book value of net assets acquired......... (30,791)
--------
Excess of purchase cost over book value................ $209,582
========
Allocation of excess of purchase cost over book value to
assets of Rykoff-Sexton:
Long-term deferred assets.............................. $ (8,235)
Long-term debt......................................... (10,200)
Income taxes payable................................... 7,374
Estimated discount on redemption of Preferred Stock.... 14,303
Goodwill............................................... 206,340
--------
$209,582
========
</TABLE>
104
<PAGE>
The following are the pro forma adjustments on the unaudited pro forma
combined balance sheet as they relate to the excess of purchase price over
book value:
(2a) Common stock and additional paid-in capital have been computed using the
number of shares to be issued assuming an Exchange Ratio of 1.457 (the
maximum Exchange Ratio, which results in the maximum number of Rykoff-
Sexton Common Shares that may be issued in connection with the Merger)
and a Closing Date Market Price of $17.16. If a Closing Date Market Price
of $15.75 (the closing price of one Rykoff-Sexton Common Share as
reported by the NYSE Composite Tape on February 2, 1996) is assumed,
equity issued would decrease by approximately $18 million. Under the
terms of the Merger Agreement, Rykoff-Sexton will value the transaction
based on the Closing Date Market Price at the time the transaction is
consummated.
(2b) Represents the value of the stock options and warrants assumed as part of
the Merger as described in "The MERGER AGREEMENT--General--Conversion of
US Foodservice Common Stock in the Merger." The value of these assumed
stock options and warrants was computed using a Closing Date Market Price
of $17.16. Rykoff-Sexton is undertaking a study to value these assumed
stock options and warrants. Final value may be different than that
computed above.
(2c) Represents the elimination of the historical equity components of US
Foodservice (including the minimum pension liability classified within
retained earnings).
(2d) Certain long-term deferred assets were determined to have zero value.
(2e) Long-term debt of US Foodservice has been written up to the value to be
paid with the proceeds from the New Credit Facility.
(2f) Adjustments 2d and 2e decrease income taxes payable.
(2g) The Exchangeable Preferred Stock and the 10% Preferred Stock of US
Foodservice will be redeemed at a discount. On October 15, 1995, the
total redemption price under the redemption agreements was $44.0 million.
The book value of the Preferred Stock and accrued dividends on said date
was $60.8 million, resulting in a discount of $16.8 million. The discount
has been reduced by estimated dividends payable of $2.5 million (as
provided in the redemption agreements) from October 15, 1995 to the
anticipated redemption dates. The 10% Preferred Stock was redeemed on
March 1, 1996 for approximately $21.3 million and it is anticipated that
the Exchangeable Preferred Stock will be redeemed for approximately $26.7
million, assuming a redemption date of May 31, 1996, for a total
redemption of $48.0 million.
(2h) The difference in the excess of purchase cost over book value and the
amounts allocated to assets was assigned to goodwill.
Management has not completed its assessment of its business integration plan,
as discussed in Note (1) of the unaudited pro forma combined statement of
operations, and thus has not included the costs associated with the business
integration plan in the balance sheet as of January 27, 1996.
(3) Represents the effects of the Receivables Securitization, as follows (in
thousands):
<TABLE>
<S> <C>
Gross receivables sold.......................................... $266,667
Less: Overcollateralization..................................... (66,667)
--------
$200,000
========
</TABLE>
As part of the Receivables Securitization, Rykoff-Sexton will sell
undivided interests in a pool of receivables. The overcollateralization
represents Rykoff-Sexton's residual interest in the pool of receivables
based on historical loss factors and effective yield rates. See "THE
MERGER--Rykoff-Sexton Financing and Receivables Securitization" for a
further description of the New Credit Facility and the Receivables
Securitization.
105
<PAGE>
(4) Fees relating to the Receivables Securitization of $2.0 million, net of
applicable tax effects of $0.8 million, have been expensed.
(5) Fees relating to the New Credit Facility of $11.0 million have been
capitalized as a long-term asset.
(6) Acquisition costs of $10.5 million relating to the Merger have been
allocated to the purchase price. Of the $10.5 million acquisition costs,
$9.5 million are paid concurrent with the Merger and $1.0 million would be
paid upon future registration of the Rykoff-Sexton Common Shares under the
Registration Rights Agreement.
(7) Represents the forgiveness of notes receivable from the sale of stock to
management of $1.0 million and applicable income taxes of $2.0 million.
106
<PAGE>
DESCRIPTION OF RYKOFF-SEXTON CAPITAL STOCK
GENERAL
Rykoff-Sexton's authorized capital stock consists of 40,000,000 Common
Shares, of which 14,798,820 shares were outstanding as of March 31, 1996, and
10,000,000 shares of preferred stock ("Rykoff-Sexton Preferred Stock"), no
shares of which are outstanding. No series of Rykoff-Sexton Preferred Stock
has been designated other than 50,000 shares of Series A Junior Participating
Preferred Stock, par value $.10 per share (the "Series A Preferred Stock").
The maximum number of Rykoff-Sexton Common Shares to be issued in connection
with the Merger (including Rykoff-Sexton Common Shares reserved for issuance
upon exercise of the Assumed Warrants and Assumed Options) is 14,296,723. The
following description is a summary of the material provisions of Rykoff-
Sexton's capital stock and is qualified in its entirety by reference to the
provisions of the Rykoff-Sexton Charter, its By-laws (the "Rykoff-Sexton By-
laws") and the Rights Agreement, copies of which have been filed as exhibits
to the Registration Statement of which the Proxy Statement/Prospectus forms a
part.
COMMON SHARES, RIGHTS AND SERIES A PREFERRED STOCK
The following description of Rykoff-Sexton Common Shares and certain
associated rights should be read carefully by the holders of US Foodservice
Common Stock, because, at the Effective Time, each issued and outstanding
share of US Foodservice Common Stock will be converted into Rykoff-Sexton
Common Shares based on the Exchange Ratio as set forth in the Merger Agreement
and described herein.
Rykoff-Sexton Common Shares
Subject to any prior rights of any Rykoff-Sexton Preferred Stock then
outstanding, holders of Rykoff-Sexton Common Shares are entitled to such
dividends as may be declared from time to time by the Rykoff-Sexton Board of
Directors out of funds legally available therefor. Each holder of Rykoff-
Sexton Common Shares is entitled to one vote for each share owned by such
holder on all matters submitted to a vote of the stockholders of Rykoff-
Sexton. Such shares are not entitled to any cumulative voting rights. In the
event of any liquidation, dissolution or winding up of Rykoff-Sexton, holders
of Rykoff-Sexton Common Shares are entitled to share equally and ratably in
any assets remaining after the payment of all debt and liabilities, subject to
the prior rights, if any, of holders of Rykoff-Sexton Preferred Stock. Holders
of Rykoff-Sexton Common Shares have no preemptive or other subscription or
conversion rights. Rykoff-Sexton Common Shares are not subject to redemption
and the outstanding Rykoff-Sexton Common Shares are, and the Rykoff-Sexton
Common Shares to be issued in connection with the Merger will be, fully paid
and nonassessable.
Rights
Under the Rights Agreement, each outstanding Rykoff-Sexton Common Share is
accompanied by 0.64 preferred share purchase rights (each, a "Right"), and
0.64 Rights will be attached to each Rykoff-Sexton Common Share to be issued
in connection with the Merger or pursuant to Assumed Options or Assumed
Warrants. Except as described below, each Right entitles the registered holder
to purchase from Rykoff-Sexton a unit (a "Unit") consisting of one two-
hundredth of a share of Series A Preferred Stock at a purchase price of $100
per Unit (the "Purchase Price"), subject to adjustment. The description and
terms of the Rights are set forth in the Rights Agreement.
From the date of the Rights Agreement, the Rights attach implicitly to all
Rykoff-Sexton Common Share certificates outstanding. No separate Right
certificates have been distributed. A "Distribution Date" for the Rights will
occur upon the earlier of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person")
has acquired beneficial ownership of 15% or more of the then outstanding
Rykoff-Sexton Common Shares, excluding Rykoff-Sexton, any subsidiary of
Rykoff-Sexton, any employee benefit plan of Rykoff-Sexton or of any subsidiary
of Rykoff-Sexton, any entity organized,
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appointed or established by Rykoff-Sexton for or pursuant to the terms of any
such plan, or the ML Entities if the ML Entities shall have executed a written
agreement with Rykoff-Sexton (and approved by the Rykoff-Sexton Board of
Directors) on or prior to the date on which the ML Entities (together with its
affiliates) became the beneficial owner of 15% or more of the Rykoff-Sexton
Common Shares then outstanding, which agreement imposes one or more
limitations on the ML Entities' beneficial ownership of Rykoff-Sexton Common
Shares and if, and so long as, such written agreement (a "Written Agreement")
(or any amendment thereto approved by at least a majority of the members of
the Rykoff-Sexton Board of Directors who are not affiliates or associates of
an ML Entity or representatives or nominees of an ML Entity or any such
affiliate or associate (the "ML Entity Directors")) continues to be in effect
and bind the ML Entities and the ML Entities are in compliance (as determined
by the Rykoff-Sexton Board of Directors in its discretion by at least a
majority of the members who are not ML Entity Directors) with the terms of
such Written Agreement (including any such amendment), provided that no
amendment of any such Written Agreement shall cure any prior breach of such
Written Agreement or any amendment thereto or (ii) 10 days following the
commencement of (or first public announcement of the intent to commence) a
tender offer or exchange offer if, upon consummation thereof, the person or
group proposing such offer would be the beneficial owner of 30% or more of the
outstanding Rykoff-Sexton Common Shares. The Standstill Agreement would
qualify as a Written Agreement that would exclude the ML Entities from being
an Acquiring Person, so long as the conditions described above are satisfied.
Until the Distribution Date, the Rights will be transferred with and only
with Rykoff-Sexton Common Share certificates. Until the Distribution Date (or
earlier redemption or expiration of the Rights), certificates for Rykoff-
Sexton Common Shares issued since December 18, 1986 (the record date for the
initial distribution of Rights) upon transfer or new issuance of Rykoff-Sexton
Common Shares contain or will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date, the surrender for
transfer of any certificates for Rykoff-Sexton Common Shares will also
constitute the transfer of the Rights associated with the Rykoff-Sexton Common
Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on December 18, 1996, unless earlier redeemed by Rykoff-Sexton. As
described below, Rykoff-Sexton contemplates amending the Rights Agreement
prior to the Effective Time to, among other things, extend the expiration date
of the Rights.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of Rykoff-Sexton Common Shares as of the close of business
on the Distribution Date. From and after a Distribution Date, such separate
Right Certificates alone will evidence the Rights.
In the event that, at any time following the Distribution Date, (i) Rykoff-
Sexton is the surviving corporation in a merger with an Acquiring Person and
Rykoff-Sexton Common Shares are not changed or exchanged, (ii) any person
becomes the beneficial owner of 15% or more of the then outstanding Rykoff-
Sexton Common Shares, unless the event causing the 15% threshold to be crossed
is (a) an acquisition of Rykoff-Sexton Common Shares by the ML Entities, if
the ML Entities shall have executed a Written Agreement and if, and so long
as, such Written Agreement (or any amendment thereto approved by at least a
majority of the members of the Rykoff-Sexton Board of Directors who are not ML
Entity Directors) continues to be in effect and bind the ML Entities and the
ML Entities are in compliance (as determined by the Rykoff-Sexton Board of
Directors in its discretion by at least a majority of the members who are not
ML Entity Directors) with the terms of such Written Agreement (including any
such amendment), provided that no amendment of any such Written Agreement
shall cure any prior breach of such Written Agreement or any amendment
thereto, (b) a transaction in which the holders of Rights have the right to
receive common stock of the acquiring entity, as described below, or (c) an
acquisition of Rykoff-Sexton Common Shares pursuant to a tender offer or
exchange offer of all outstanding Rykoff-Sexton Common Shares at a price and
on terms determined by a majority of "disinterested" members of the Rykoff-
Sexton Board of Directors to be fair and otherwise in the best interests of
Rykoff-Sexton and its stockholders, or (iii) an Acquiring Person engages in
one or more "self-dealing" transactions as set forth in the Rights Agreement
(each a "Flip-In Event"), then each holder of a Right will thereafter have the
right to receive,
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upon exercise thereof at the then current Purchase Price of the Right, Rykoff-
Sexton Common Shares (or, in certain circumstances, a combination of cash,
other property, Rykoff-Sexton Common Shares or other securities) that have a
value of two times the Purchase Price of the Right. The Standstill Agreement
would qualify as a Written Agreement that would exclude the acquisition of
Rykoff-Sexton Common Shares by the ML Entities from being a triggering event
under the foregoing provisions, so long as the conditions described above are
satisfied. In the event that, at any time following the Distribution Date,
Rykoff-Sexton is acquired in a merger or other business combination transaction
or 50% or more of its assets or earning power are sold, provision shall be made
so that each holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the then current Purchase Price of the Right, common
stock of the acquiring entity which has a value of two times the Purchase Price
of the Right. Notwithstanding any of the foregoing, following the occurrence of
any of the events described above in this paragraph, any Rights that are or
were beneficially owned by an Acquiring Person or affiliates or associates of
an Acquiring Person will be null and void.
The Purchase Price payable and the number of Units of Series A Preferred
Stock or other securities or property issuable upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
Series A Preferred Stock, (ii) upon the grant to holders of the Series A
Preferred Stock of certain rights or warrants to subscribe for Series A
Preferred Stock or convertible securities at less than the current market price
of the Series A Preferred Stock or (iii) upon the distribution to holders of
the Series A Preferred Stock of evidences of indebtedness or assets (excluding
regular quarterly cash dividends) or of subscription rights or warrants (other
than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in the
Purchase Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Series A
Preferred Stock on the last trading date prior to the date of exercise.
At any time until 30 days following the public announcement that a person or
group of affiliated or associated persons has acquired beneficial ownership of
15% or more of the outstanding Rykoff-Sexton Common Shares, Rykoff-Sexton may
redeem the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). The Rykoff-Sexton Board of Directors may from time to
time, in its discretion, extend the period for redemption. Immediately upon
action of the Rykoff-Sexton Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof will have no rights as a
stockholder of Rykoff-Sexton (other than those as an existing stockholder),
including, without limitation, the right to vote or to receive dividends.
The Series A Preferred Stock purchasable upon exercise of the Rights will be
nonredeemable and will be subordinate to any other series of Rykoff-Sexton
Preferred Stock that may be issued in the future unless such series is
specifically stated to be junior. Each whole share of Series A Preferred Stock
will have a minimum preferential quarterly dividend of either $20 per share or
200 times the dividend per share declared on Rykoff-Sexton Common Shares,
whichever is greater. In the event of liquidation, the holders of Series A
Preferred Stock will receive a preferred liquidation payment of either $200 per
share or 200 times the payment made per share of Rykoff-Sexton Common Shares,
whichever is greater. Each whole share of Preferred Stock will have 200 votes,
voting together with the Rykoff-Sexton Common Shares. In the event of any
merger, consolidation or other transaction in which Rykoff-Sexton Common Shares
are exchanged, each share of Series A Preferred Stock will be entitled to
receive 200 times the amount received per Rykoff-Sexton Common Share. The
rights of the Series A Preferred Stock are protected by customary antidilution
provisions. Because of the nature of the Series A Preferred Stock's dividend,
liquidation and voting rights, Rykoff-Sexton expects that the value of the one
two-hundredth of a share of Series A Preferred Stock purchasable (as described
above) upon the exercise of each Right would approximate the value of one
Rykoff-Sexton Common Share.
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The Rights Agreement and the Rights have certain anti-takeover effects. The
Rights will cause substantial dilution to a person or group that attempts to
acquire Rykoff-Sexton on terms not approved by the Rykoff-Sexton Board of
Directors. The Rights should not interfere with any merger or other business
combination approved by the Rykoff-Sexton Board of Directors, including the
Merger, because of the ability of the Rykoff-Sexton Board of Directors and the
Rights Agent to amend the Rights Agreement and because the Rights may be
redeemed by the Rykoff-Sexton Board of Directors at the Redemption Price until
30 days following the public announcement that a person or group of affiliated
and associated persons has acquired beneficial ownership of 15% or more of the
outstanding Rykoff-Sexton Common Shares.
The terms of the Rights Agreement may be amended by Rykoff-Sexton and the
Rights Agent, but following a Distribution Date no amendment may adversely
affect the interests of holders of the Rights.
Amendments to Rights Agreement
In connection with the Merger negotiations, the Rights Agreement was amended
twice. Rykoff-Sexton and the then Rights Agent entered into a Second Amendment
to Rights Agreement as of December 4, 1995 (the "Second Amendment"). The Second
Amendment provided that the negotiation and execution of the Letter of Intent,
and the preliminary negotiations with respect to the Merger would not cause any
person to be deemed an Acquiring Person or to beneficially own any Rykoff-
Sexton Common Shares.
Rykoff-Sexton and the Rights Agent entered into the Third Amendment to the
Rights Agreement dated as of January 31, 1996 to provide that the ML Entities
would not be considered an Acquiring Person or cause a Flip-In Event to occur,
notwithstanding beneficial ownership by the ML Entities of 15% or more of the
outstanding Rykoff-Sexton Common Shares, if the ML Entities shall have executed
a Written Agreement and if, and so long as, such Written Agreement (or any
amendment thereto approved by at least a majority of the members of the Rykoff-
Sexton Board of Directors who are not ML Entity Directors) continues to be in
effect and bind the ML Entities and the ML Entities are in compliance (as
determined by the Rykoff-Sexton Board of Directors in its discretion by at
least a majority of the members who are not ML Entity Directors) with the terms
of such Written Agreement (including any such amendment), provided that no
amendment of any such Written Agreement shall cure any prior breach of such
Written Agreement or any amendment thereto. As noted above, the Standstill
Agreement would qualify as a Written Agreement that would exclude the ML
Entities from being considered an Acquiring Person and exclude the acquisition
by the ML Entities of Rykoff-Sexton Common Shares from constituting a Flip-In
Event, so long as the conditions described above are satisfied.
The Third Amendment also reduced from 25% to 15% the percentage of beneficial
ownership of Rykoff-Sexton Common Shares by a person (other than certain
affiliates of Rykoff-Sexton) that will result in a person or group of
affiliated or associated persons constituting an Acquiring Person or a Flip-In
Event occurring.
Rykoff-Sexton anticipates amending and restating the Rights Agreement prior
to the Effective Time to extend the termination date of the Rights for an
additional 10-year period and to effect certain technical changes.
PREFERRED STOCK
Under the Rykoff-Sexton Charter, the Rykoff-Sexton Board of Directors has the
authority, without further action by the stockholders, to issue up to 10
million shares of Rykoff-Sexton Preferred Stock in one or more series and to
fix the voting powers, designations, preferences and the relative participating
optional or other special rights and qualifications, limitations and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series. To date, the Rykoff-Sexton Board of Directors has so
fixed only the Series A Preferred Stock. Because Rykoff-Sexton's Board of
Directors has the power to establish the preferences and rights of the shares
of any additional series of Rykoff-Sexton Preferred Stock, it may afford
holders of any such Rykoff-Sexton Preferred Stock preferences, powers and
rights (including voting rights), senior to the rights of holders of Rykoff-
Sexton Common Shares, which could adversely affect the holders of Rykoff-Sexton
Common Shares.
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THE WARRANTS
Pursuant to the Merger Agreement, Rykoff-Sexton will assume the obligations
of US Foodservice under the Common Stock Purchase Warrants of US Foodservice
(the "US Foodservice Warrants"). The US Foodservice Warrants evidence the
right to acquire a total of 227,700 shares of US Foodservice Common Stock at a
purchase price of $15.35 per share.
Under the terms of the US Foodservice Warrants, US Foodservice may not
effect the Merger unless, prior to the consummation of the Merger, Rykoff-
Sexton has assumed the obligations of US Foodservice under the US Foodservice
Warrants by a written instrument delivered to, and reasonably satisfactory to,
the holders of at least a majority of the shares of US Foodservice Common
Stock issuable upon exercise of the outstanding US Foodservice Warrants, and
has provided such holders with an opinion of counsel reasonably satisfactory
to such holders to the effect that the US Foodservice Warrants will continue
in full force and effect after the Merger. To satisfy this condition, it is
anticipated that Rykoff-Sexton will issue Common Stock Purchase Warrants of
Rykoff-Sexton (the "New Warrants") to the holders of the US Foodservice
Warrants at the Effective Time in replacement of the Assumed Warrants. The
terms of the New Warrants will be identical to the terms of the US Foodservice
Warrants required to be assumed by Rykoff-Sexton under the terms of the Merger
Agreement, except for adjustments to the purchase price and the number of
shares issuable to reflect the Exchange Ratio and certain changes to reflect
the status of Rykoff-Sexton as a public company and the termination of the
Stockholders Agreement.
Giving effect to the Merger, and assuming the maximum Exchange Ratio, the
New Warrants will evidence the right to acquire approximately 331,761 Rykoff-
Sexton Common Shares (representing approximately 2.3% of the Rykoff-Sexton
Common Shares on a fully diluted basis) at a purchase price of $10.54 per
share. The purchase price of the New Warrants, and the number of Rykoff-Sexton
Common Shares for which the New Warrants will be exercisable, are subject to
adjustment in the event of certain issuances of Rykoff-Sexton Common Shares
without consideration or for consideration below market prices, stock
dividends, stock splits, share combinations, recapitalizations and similarly
dilutive events.
Each New Warrant will be exercisable until September 30, 2005. The holders
of New Warrants will not have any voting rights until, and to the extent that,
the New Warrants are exercised for Rykoff-Sexton Common Shares. The holders of
the New Warrants will be entitled to certain "demand" and "piggyback"
registration rights with respect to the Rykoff-Sexton Common Shares issued or
issuable upon exercise of the New Warrants.
DESCRIPTION OF US FOODSERVICE CAPITAL STOCK
The authorized capital stock of US Foodservice consists of 50,000,000 shares
of Class A Common Stock, 50,000,000 shares of Class B Common Stock and two
million shares of preferred stock, $.01 par value ("US Foodservice Preferred
Stock"). As of January 31, 1996, all outstanding US Foodservice Common Stock
was subject to a .396-for-1 reverse stock split. As of March 31, 1996,
8,019,254.8759 shares of US Foodservice Class A Common Stock were issued and
outstanding and 37,152.5119 shares were held as treasury stock, and
821,206.2466 shares of US Foodservice Class B Common Stock were issued and
outstanding. As of March 31, 1996, 33,564.35 shares of US Foodservice
Preferred Stock were designated as 10% Preferred Stock, of which no shares
were issued and outstanding. As of March 31, 1996, 314,000 shares of US
Foodservice Preferred Stock were designated as Exchangeable Preferred Stock,
of which 246,179 shares were issued and outstanding. The following description
is a summary of the material provisions of US Foodservice's capital stock.
COMMON STOCK
Subject to the voting rights of holders of any then outstanding US
Foodservice Preferred Stock, holders of US Foodservice Class A Common Stock
are entitled to one vote for each share held of record and holders of US
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Foodservice Class B Common Stock are entitled to one-sixth ( 1/6) of a vote
per share held of record voting as a single class with the Class A Common
Stock on all matters submitted to a vote of the stockholders, except that
holders of Class B Common Stock are entitled to one vote per share held of
record and vote as a single class with the Class A Common Stock on any
consolidation or merger of US Foodservice with or into any other corporation
or corporations, any sale, lease or exchange of all or substantially all of US
Foodservice's property and assets, and any liquidation, dissolution or winding
up of US Foodservice voted on by US Foodservice stockholders. Shares of US
Foodservice Common Stock do not have cumulative voting rights. Holders of a
majority of the shares of the US Foodservice Common Stock represented at a
meeting can elect all of the directors. Subject to preferences that may be
applicable to any then outstanding US Foodservice Preferred Stock, holders of
US Foodservice Common Stock are entitled to receive ratably such dividends as
may be declared by the US Foodservice Board of Directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up
of US Foodservice, holders of the US Foodservice Common Stock are entitled to
share ratably in all assets remaining after payment of liabilities and the
liquidation preference of any then outstanding US Foodservice Preferred Stock.
Except as provided in the Stockholders Agreement, which will terminate as of
the Effective Time, holders of US Foodservice Common Stock have no preemptive
rights and have no right to convert their US Foodservice Common Stock into any
other securities. There are no redemption or sinking fund provisions
applicable to the US Foodservice Common Stock. All outstanding shares of US
Foodservice Common Stock are, and the US Foodservice Common Stock to be
outstanding immediately prior to the Effective Time will be, fully paid and
nonassessable.
PREFERRED STOCK
The US Foodservice Board of Directors has the authority, without further
action by the stockholders, to issue up to two million shares of US
Foodservice Preferred Stock in one or more series and to fix the voting
powers, designations, preferences, and relative, participating, optional, or
other special rights, and qualifications, limitations, and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, and the number of shares constituting any
series. Because the US Foodservice Board of Directors has the power to
establish the preferences and rights of the shares of any such series of US
Foodservice Preferred Stock, it may afford holders of any US Foodservice
Preferred Stock preferences, powers, and rights (including voting rights,
senior to the rights of holders of US Foodservice Common Stock, which could
adversely affect the rights of holders of US Foodservice Common Stock).
The US Foodservice Board of Directors has created two classes of Preferred
Stock. The 10% Preferred Stock consists of 33,564.35 authorized shares, having
the stated value of $10.00 per share of which no shares are issued and
outstanding.
The Exchangeable Preferred Stock is limited to 314,000 shares and ranks on
parity with the 10% Preferred Stock. The holders of Exchangeable Preferred
Stock are entitled to receive cumulative dividends at the initial annual rate
of $15 per share. Restrictions under the Existing Credit Agreement have
limited US Foodservice's ability to pay cash dividends and such dividends have
been accruing since January 15, 1994. In the event of any dissolution,
liquidation or winding up of US Foodservice, the holders of Exchangeable
Preferred Stock then outstanding are entitled to be paid out of the assets of
US Foodservice, an amount in cash equal to $100 for each share outstanding,
together with an amount in cash equal to all accrued and unpaid dividends.
Mandatory redemption begins on October 15, 2001, and continues on October 15,
2002 and October 15, 2003. US Foodservice may, at its sole option, exchange,
on any dividend payment date, shares of Exchangeable Preferred Stock then
outstanding, in whole for US Foodservice's 15% Junior Subordinated Exchange
Debentures due 2003. This option has not been exercised by US Foodservice. US
Foodservice may redeem the Exchangeable Preferred Stock at a discount pursuant
to the ML Redemption Agreement. See "THE MERGER--Redemption or Purchase of
Preferred Stock."
DIRECTORS' LIABILITY
The US Foodservice Charter includes provisions to eliminate the personal
liability of its directors for monetary damages resulting from breaches of
their fiduciary duty. This provision does not eliminate liability for
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breaches of the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, violations under
Section 174 of the DGCL concerning the unlawful payment of dividends or stock
redemption or repurchases, or any transaction from which the director derives
an improper personal benefit. In addition, these provisions will not limit the
liability of US Foodservice directors under Federal securities laws. US
Foodservice believes that these provisions are necessary to attract and retain
qualified persons as directors.
COMPARATIVE RIGHTS OF RYKOFF-SEXTON STOCKHOLDERS AND
US FOODSERVICE STOCKHOLDERS
US Foodservice is a closely held Delaware corporation, with a small number
of institutional stockholders that exercise control of the corporation. Such
persons' rights as stockholders have been governed by the Stockholders
Agreement as well as the US Foodservice Charter and US Foodservice's By-laws
(the "US Foodservice By-laws"). Following the Merger, the Stockholders
Agreement will have been terminated and the US Foodservice stockholders will
hold shares in Rykoff-Sexton, a Delaware corporation and a public company, and
their rights will be governed by Delaware law, the Rykoff-Sexton Charter, the
Rykoff-Sexton By-laws and the Rights Agreement. Accordingly, the material
difference between the present rights of US Foodservice stockholders and their
rights as holders of Rykoff-Sexton securities is that following the Merger
they will be stockholders in a public company governed by the Rykoff-Sexton
Charter and By-laws as well as the Rights Agreement rather than the US
Foodservice Charter and By-laws and the Stockholders Agreement.
Other significant differences between the rights of US Foodservice
stockholders and Rykoff-Sexton stockholders are set forth below. This summary
is not intended to be relied upon as an exhaustive list or detailed
description of the provisions discussed and is qualified in its entirety by
the Rykoff-Sexton Charter and By-laws and the Rights Agreement and by the US
Foodservice Charter and By-laws and the Stockholders Agreement, to which US
Foodservice stockholders are referred. The Standstill Agreement also contains
provisions relating to, among other things, the right of the ML Entities to
designate representatives to serve on the Rykoff-Sexton Board of Directors,
removal of such representatives and the filling of vacancies. See "OTHER
AGREEMENTS--The Standstill Agreement."
AUTHORIZED SHARES OF CAPITAL STOCK; DIVIDEND RIGHTS
US Foodservice. The US Foodservice Charter authorizes the issuance of
50,000,000 shares of Class A Common Stock, 50,000,000 shares of Class B Common
Stock and 2,000,000 shares of US Foodservice Preferred Stock. The US
Foodservice Board of Directors may issue US Foodservice Preferred Stock from
time to time in one or more series, and may fix the voting powers,
designations, preferences, and relative, participating, optional, or other
special rights, and qualifications, limitations and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series.
The US Foodservice Charter provides the Class A Common Stock and Class B
Common Stock with exchange rights. Subject to certain restrictions set forth
in the US Foodservice Charter and the Stockholders Agreement, each record
holder of US Foodservice Common Stock is entitled at any time to exchange any
or all of the shares of Class A Common Stock or Class B Common Stock held by
such holder for the same number of shares of Class B Common Stock or Class A
Common Stock, as the case may be. The US Foodservice Charter also provides for
automatic conversion of Class B Common Stock, with the exception of such stock
owned by the Equitable Entities, into Class A Common Stock in the event that
US Foodservice attempts to list any shares of US Foodservice Common Stock on a
national securities exchange or on the over-the-counter market, and such
exchange informed US Foodservice of its unwillingness to authorize the shares
for listing because of the outstanding shares of Class B Common Stock. In the
event that any shares of Class B Common Stock are registered under the
Securities Act and US Foodservice has simultaneously registered an equal
number of shares of Class A Common Stock, then immediately upon the sale of
registered shares of Class B Common Stock, such stock shall automatically
convert into an equal number of shares of registered Class A Common Stock.
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Subject to preferences that may be applicable to any then outstanding US
Foodservice Preferred Stock, holders of US Foodservice Common Stock are
entitled to receive ratably such dividends as may be declared by the US
Foodservice Board of Directors.
Rykoff-Sexton. The Rykoff-Sexton Charter authorizes the issuance of
40,000,000 Common Shares and 10,000,000 shares of Rykoff-Sexton Preferred
Stock, 50,000 of which have been designated as Series A Preferred Stock. As of
March 31, 1996, 15,131,516 Rykoff-Sexton Common Shares were issued, of which
14,798,820 were outstanding, and no shares of Preferred Stock were issued and
outstanding. The shares of Rykoff-Sexton Preferred Stock may be issued from
time to time by the Rykoff-Sexton Board of Directors in one or more series,
and the variations, relative rights and preferences as between different
series of each class may be fixed and determined by resolution of the Rykoff-
Sexton Board of Directors with respect to voting rights, the rate of dividend,
redemption, liquidation payments, sinking fund provisions, conversion and the
number of shares constituting any series.
During the time that any series of Rykoff-Sexton Preferred Stock is
outstanding, no dividends may be declared or paid by the Rykoff-Sexton Board
of Directors on the Rykoff-Sexton Common Shares, unless dividends on all
outstanding shares of Rykoff-Sexton Preferred Stock for the current and all
past dividend periods have been declared and paid or provision made for the
payment thereof.
REDEMPTION AND REPURCHASE OF CAPITAL STOCK
Under the DGCL, subject to certain limitations, a corporation's stock may be
made subject to redemption by the corporation at its option, at the option of
the holders of such stock or upon the happening of a specified event. The DGCL
also provides that a corporation may repurchase its own shares with certain
exceptions.
US Foodservice. As previously described, the US Foodservice Board of
Directors may fix the terms of redemption of US Foodservice Preferred Stock.
The Stockholders Agreement requires, with certain exceptions, that a
redemption or offer to purchase made by US Foodservice for equity securities
of US Foodservice must be approved by the affirmative vote of the holders of
at least two-thirds of the US Foodservice Class A Common Stock. The
Stockholders Agreement also provides that any such redemption or offers to
purchase US Foodservice Common Stock must be made available to each party to
the Stockholders Agreement on a pro rata basis and at the same consideration
per share.
Rykoff-Sexton. As previously described, the Rykoff-Sexton Charter provides
the Rykoff-Sexton Board of Directors with the power to fix redemption and
repurchase rights, preferences and limitations of Rykoff-Sexton Preferred
Stock.
LIQUIDATION RIGHTS
The rights of holders of shares of US Foodservice Common Stock upon the
liquidation or dissolution of US Foodservice are substantially the same as
those of the holders of Rykoff-Sexton Common Shares.
VOTING RIGHTS
US Foodservice. Subject to the voting rights of holders of any then
outstanding US Foodservice Preferred Stock, holders of Class A Common Stock
are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders, and the holders of Class B Common
Stock are entitled to one-sixth of one vote per share and shall vote as a
single class with the Class A Common Stock on all matters submitted to a vote
of the stockholders. Holders of Class B Common Stock are entitled to one vote
for each share, however, and shall vote as a single class with the Class A
Common Stock, with respect to any consolidation or merger of US Foodservice,
any sale, lease or exchange of all or substantially all of the property and
assets of US Foodservice, and any liquidation, dissolution or winding up of US
Foodservice to be voted on by the stockholders. Neither the US Foodservice
Charter nor By-laws provide for cumulative voting for the election of
directors.
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Rykoff-Sexton. Subject to the voting rights of holders of any then
outstanding Rykoff-Sexton Preferred Stock, each Rykoff-Sexton Common Share is
entitled to one vote on each matter submitted to a vote of the stockholders of
Rykoff-Sexton. Rykoff-Sexton Common Shares are not entitled to any cumulative
voting rights.
SUPERMAJORITY VOTING REQUIREMENTS; BUSINESS COMBINATIONS
US Foodservice. The US Foodservice Charter and By-laws do not have
supermajority voting requirements for business combinations or other matters.
The Stockholders Agreement, however, requires the affirmative vote of the
holders of at least two-thirds of the US Foodservice Class A Common Stock to
approve the following transactions, among others: (i) any merger or
consolidation involving US Foodservice or any subsidiary of US Foodservice;
(ii) any sale, purchase, lease, exchange or other disposition of all or
substantially all of the assets of US Foodservice; (iii) any sale, purchase,
lease, exchange or other disposition of assets of US Foodservice or any
subsidiary having a fair market value or acquired for consideration which
exceeds 10% of the consolidated capitalization of US Foodservice and its
subsidiaries; and (iv) any increase or reduction of the authorized capital or
the creation of any additional class of capital stock of US Foodservice.
Rykoff-Sexton. The DGCL generally requires the affirmative vote of the
holders of a majority of the outstanding stock of a corporation entitled to
vote on the matter to approve a merger, consolidation or dissolution of the
corporation or a disposition of all or substantially all of the corporation's
assets. The Rykoff-Sexton Charter, however, contains provisions regarding the
vote required to approve certain business combinations or other significant
corporate transactions involving Rykoff-Sexton and an individual, corporation
or other entity with beneficial ownership of a number of Rykoff-Sexton Common
Shares which exceeds 5% of the outstanding Rykoff-Sexton Common Shares (a
"Related Person").
The Rykoff-Sexton Charter requires the affirmative vote or consent of the
holders of not less than 80% of the outstanding shares of stock of Rykoff-
Sexton entitled to vote on the matter: (i) to adopt any agreement for, or to
approve, the merger or consolidation of Rykoff-Sexton or any subsidiary
(within the meaning of the Rykoff-Sexton Charter), with or into any Related
Person; (ii) to authorize any sale, lease, transfer, exchange or other
disposition to any Related Person of all or substantially all of the assets of
Rykoff-Sexton or any such subsidiary; (iii) to authorize the issuance or
transfer by Rykoff-Sexton or any such subsidiary of any Rykoff-Sexton voting
securities or voting securities of any such subsidiary in exchange or payment
for securities or assets of any Related Person, if such authorization is
otherwise required by law or by any agreement between Rykoff-Sexton and any
national securities exchange or by any other agreement to which Rykoff-Sexton
or any such subsidiary is a party; (iv) to adopt any plan for the dissolution
of Rykoff-Sexton; or (v) to adopt any amendment, change or repeal of the
foregoing provisions. Such 80% affirmative vote will not be required, however,
if the Rykoff-Sexton Board of Directors by resolution approves a memorandum of
understanding with such Related Person setting forth the principal terms of
the transaction and if such transaction is substantially consistent therewith.
Such resolution must be adopted by 80% of the directors who were elected and
acting members of the Rykoff-Sexton Board of Directors prior to the time such
Related Person became the beneficial owner of 5% or more of the outstanding
Rykoff-Sexton Common Shares entitled to vote in elections of directors. The
DGCL applies to the approval of the transactions listed above notwithstanding
any such resolution.
A separate provision of the Rykoff-Sexton Charter requires the affirmative
vote of the holders of at least 80% of the outstanding Rykoff-Sexton Common
Shares not beneficially owned by any Related Person that is a party or
beneficiary of or has proposed the transaction or matter to be voted upon to
approve the following transactions (each a "Business Combination"): (i) any
merger or consolidation of Rykoff-Sexton with or into a Related Person or
affiliate or associate of a Related Person; (ii) any sale, lease, exchange,
transfer or other disposition of at least 10% of the assets of Rykoff-Sexton
or any such subsidiary; (iii) a merger into or consolidation with Rykoff-
Sexton or a subsidiary, of a Related Person or an affiliate or associate of a
Related Person; (iv) any sale, lease, exchange, transfer or other disposition
to Rykoff-Sexton or a subsidiary of all or any part of the assets of a Related
Person or affiliate or associate of a Related Person; (v) any reclassification
or recapitalization of Rykoff-Sexton Common Shares consummated within three
years after a Related Person becomes a Related Person that would have the
effect of increasing the voting power of such Related Person or
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an affiliate or associate of such Related Person; and (vi) any agreement,
contract or other arrangement providing for any of the transactions described
above. A Business Combination does not include, however, a parent-subsidiary
merger pursuant to Section 253 of the DGCL or any transaction involving a
Related Person who has been a Related Person for at least three years or
involving an affiliate or associate of such Related Person. Such 80%
affirmative vote will not be required to approve a Business Combination,
however, (i) if certain price criteria and procedural requirements are
satisfied or (ii) a majority of the "Continuing Directors" of the Rykoff-
Sexton Board of Directors adopt a resolution approving the Business
Combination. "Continuing Directors" mean all members of the Rykoff-Sexton
Board of Directors except any director who (i) while serving as a member of
the Rykoff-Sexton Board of Directors is a Related Person who is a party to or
beneficiary of or has proposed the transaction or matter to be voted upon, or
is an affiliate or associate of such Related Person, or any representative of
such persons, or (ii) became a member of the Rykoff-Sexton Board of Directors
following the date upon which such a Related Person became a Related Person,
unless such director is recommended or elected to succeed a Continuing
Director by a majority of the Continuing Directors.
PREEMPTIVE RIGHTS
US Foodservice. The US Foodservice Charter does not provide for preemptive
rights for stockholders. Under the Stockholders Agreement, however, in the
event that US Foodservice issues shares of US Foodservice Common Stock or
equivalents, each party to the Stockholders Agreement, except certain
Management Investors (as defined in the Stockholders Agreement) that the US
Foodservice Board of Directors has not designated as participating, has the
right to acquire its pro rata portion of such shares of US Foodservice Common
Stock or equivalents so that each party's percentage ownership interest in US
Foodservice's capital stock remains unchanged. Preemptive rights are not
provided for shares issued in connection with (i) an acquisition of a
business, (ii) any stock split, stock dividend or reclassification, (iii) the
exercise of the Warrants or (iv) the exercise of stock options or pursuant to
a stock purchase agreement or other incentive plans approved by the US
Foodservice Board of Directors.
Rykoff-Sexton. The Rykoff-Sexton Charter does not provide for preemptive
rights for stockholders.
APPRAISAL RIGHTS
US Foodservice. The DGCL provides for appraisal rights only in the case of
certain mergers or consolidations and not (unless the certificate of
incorporation of a corporation so provides) in the case of other mergers, a
sale or transfer of all or substantially all of its assets or an amendment to
its certificate of incorporation. In addition, the DGCL does not provide
appraisal rights in connection with a merger or consolidation (unless the
certificate of incorporation of a corporation so provides) to the holders of
shares of a constituent corporation listed on a national securities exchange
(or designated as a national market system security by the National
Association of Securities Dealers, Inc.) or held of record by more than 2,000
stockholders, unless the applicable agreement of merger or consolidation
requires the holders of such shares to receive, in exchange for such shares,
any property other than shares of stock of the resulting or surviving
corporation, shares of stock of any other corporation listed on a national
securities exchange (or designated as described above) or held of record by
more than 2,000 holders, cash in lieu of fractional shares or any combination
of the foregoing. The DGCL also denies appraisal rights to the stockholders of
the surviving corporation in a merger if such merger did not require for its
approval the vote of the stockholders of such surviving corporation.
The US Foodservice Charter does not provide for appraisal rights other than
those rights designated by the DGCL. Because US Foodservice stockholders must
approve the Merger and are not stockholders of the type denied appraisal
rights under the DGCL, US Foodservice stockholders will have appraisal rights
pursuant to the Merger.
Rykoff-Sexton. In addition to the appraisal rights provided for by the DGCL,
the Rykoff-Sexton Charter provides for appraisal rights in the event of a
merger under Section 253 of the DGCL of Rykoff-Sexton into
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another corporation that has been a Related Person or an affiliate or
associate of a Related Person for less than three years, provided that the
DGCL does not give voting rights to the Rykoff-Sexton stockholders with
respect to such merger.
SPECIAL MEETINGS OF STOCKHOLDERS
US Foodservice. The US Foodservice By-laws provide that special meetings may
be called (i) by the Chairman, the President, any Vice President, the
Secretary or any Assistant Secretary, (ii) at the request of a majority of the
US Foodservice Board of Directors or (iii) at the written request of the
holders of a majority of the outstanding shares of US Foodservice entitled to
vote at the meeting.
Rykoff-Sexton. The Rykoff-Sexton By-laws provide that special meetings of
stockholders may be called by the Chairman of the Board, or at the written
request of a majority of the directors then in office. The stockholders of
Rykoff-Sexton do not have the right to request or call a special meeting of
stockholders.
STOCKHOLDER ACTION WITHOUT A MEETING
US Foodservice. The US Foodservice By-laws provide that any action required
or permitted to be taken at any annual or special meeting of stockholders, may
be taken without a meeting, provided that a written consent is signed by the
holders of outstanding stock representing the minimum number of votes that
would be necessary to take such action at a meeting.
Rykoff-Sexton. The Rykoff-Sexton Charter specifically prohibits stockholder
action by written consent.
STOCKHOLDER PROPOSAL PROCEDURES
None of the DGCL, the US Foodservice Charter and By-laws and the Rykoff-
Sexton Charter and By-laws limit the ability of US Foodservice and Rykoff-
Sexton stockholders, respectively, to bring any business (other than
nominations for the election of directors) before a meeting of stockholders.
See "--Nominations of Directors."
STOCKHOLDER RIGHTS PLAN
US Foodservice. US Foodservice does not have a stockholder rights plan.
Rykoff-Sexton. Rykoff-Sexton is party to the Rights Agreement. See
"DESCRIPTION OF RYKOFF-SEXTON CAPITAL STOCK--Common Shares, Rights and Series
A Preferred Stock--Rights."
CLASSIFIED BOARD OF DIRECTORS
US Foodservice. The US Foodservice Charter and By-laws do not provide for a
classified board of directors.
Rykoff-Sexton. The Rykoff-Sexton Charter and By-laws provide for a
classified board of directors divided into three classes, with directors
serving staggered three-year terms.
NOMINATIONS OF DIRECTORS
US Foodservice. The US Foodservice By-laws do not limit the ability of
stockholders to nominate directors for election. The Stockholders Agreement
entitles (i) the Management Investors (as defined in the Stockholders
Agreement) to designate two nominees for director, (ii) the Equitable Fund to
designate one nominee for director and (iii) the ML Investors to designate up
to seven nominees or, if the Equitable Fund has designated a nominee, up to
eight nominees for director.
Rykoff-Sexton. The Rykoff-Sexton By-laws provide that nominations for the
election of directors can be made by the Rykoff-Sexton Board of Directors, a
proxy committee appointed by the Rykoff-Sexton Board of
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Directors or any stockholder entitled to vote in the election of directors.
The Rykoff-Sexton By-laws require that stockholders entitled to vote in the
election of directors generally may nominate one or more persons for election
as directors if written notice of intent to make a nomination at a meeting of
stockholders is delivered to Rykoff-Sexton's Secretary (i) with respect to an
election to be held at an annual meeting of stockholders, not less than 90
days prior to such annual meeting, and (ii) with respect to an election to be
held at a special meeting of stockholders, not later than the close of
business on the seventh day following the date on which notice of such special
meeting is first given to stockholders. Such stockholder's notice must set
forth: (i) the name and address of the stockholder; (ii) a representation that
the stockholder is a holder of record of stock of Rykoff-Sexton entitled to
vote at such meeting and intends to appear in person or by proxy at the
meeting; (iii) a description of all arrangements or understandings between the
stockholder and each nominee or other person or persons pursuant to which each
nomination is to be made by the stockholder; (iv) such other information
regarding each nominee that would have been required to be included in a proxy
statement filed pursuant to the proxy rules of the SEC; and (v) the consent of
each nominee to serve as a director if elected.
REMOVAL OF DIRECTORS
US Foodservice. Under the DGCL, US Foodservice directors may be removed with
or without cause by the holders of a majority of shares entitled to vote at an
election of directors. The Stockholders Agreement provides that, if a majority
of interest of any party who has nominated a director proposes that such
director be removed from the US Foodservice Board of Directors, with or
without cause, the other parties to the Stockholders Agreement will vote their
shares or consent in writing to effect the director's removal. Pursuant to the
Stockholders Agreement, directors of US Foodservice may not otherwise be
removed without cause. The Stockholders Agreement further provides that any
director may be removed with cause if the holders of a majority of the
outstanding shares of Class A Common Stock consent in writing to such removal.
Rykoff-Sexton. The Rykoff-Sexton Charter and By-laws provide that any
director may be removed at any time, for cause, by the vote of a majority of
the outstanding stock of Rykoff-Sexton entitled to vote at an election of
directors.
VACANCIES IN THE BOARD OF DIRECTORS
US Foodservice. The US Foodservice By-laws provide that when any vacancy
occurs in the US Foodservice Board of Directors, whether by reason of increase
in the number of members composing the US Foodservice Board of Directors, or
otherwise, a majority of the remaining members of the US Foodservice Board of
Directors may appoint a director or directors to fill such vacancy or
vacancies. The Stockholders Agreement provides that when any vacancy occurs in
the US Foodservice Board of Directors, each party to the Stockholders
Agreement will cause the directors designated by it to vote for the individual
designated to fill such vacancy by the party who designated the director who
caused the vacancy.
Rykoff-Sexton. The Rykoff-Sexton Charter and By-laws provide that any
vacancy in the Rykoff-Sexton Board of Directors, whether by reason of increase
in the number of members composing the Rykoff-Sexton Board of Directors, or
otherwise, shall be filled by the affirmative vote of a majority of the
Continuing Directors.
INDEMNIFICATION
US Foodservice. The US Foodservice By-laws provide for indemnification by US
Foodservice, to the fullest extent permitted by the DGCL, of officers,
directors, employees and agents for expenses, judgments, fines and amounts
paid in settlement by such persons (including attorneys' fees).
Rykoff-Sexton. The Rykoff-Sexton Charter also provides for indemnification
by Rykoff-Sexton of officers, directors, employees and agents, to the fullest
extent permitted by the DGCL.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
US Foodservice. The US Foodservice Charter eliminates the personal liability
of US Foodservice directors for monetary damages resulting from breaches of
their fiduciary duty. It does not, however, eliminate liability
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for breaches of a director's duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
violations under Section 174 of the DGCL concerning the unlawful payment of
dividends or stock redemption or repurchases, or any transaction from which
the director derives an improper benefit.
Rykoff-Sexton. The Rykoff-Sexton Charter eliminates the personal liability
of Rykoff-Sexton directors in the same way as the US Foodservice Charter does.
AMENDMENT OF CHARTER DOCUMENTS
US Foodservice. The US Foodservice Charter may be amended pursuant to the
DGCL by a majority vote of the total number of shares outstanding and entitled
to vote thereon. If any such amendment would adversely affect the rights of
any holders of shares of a class or series of stock, the vote of the holders
of a majority of all outstanding shares of the class or series, voting as a
class, is also necessary to authorize such amendment. In addition, the
Stockholders Agreement provides that the US Foodservice Charter may be amended
only upon the affirmative vote of the holders of at least two-thirds of the US
Foodservice Class A Common Stock.
Rykoff-Sexton. Under the Rykoff-Sexton Charter, the amendment, repeal or
adoption of provisions of such document relating to (i) the removal of
directors or the filling of director vacancies or the classification of the
Rykoff-Sexton Board of Directors, (ii) restrictions on stockholders taking
action by written consent and (iii) special meetings of stockholders requires
the affirmative vote of the holders of at least 80% of the outstanding Rykoff-
Sexton Common Shares. Such 80% affirmative vote is not required, however, if a
majority of the Continuing Directors adopt a resolution approving such
amendment or repeal proposal and such proposal receives the affirmative vote
of the holders of at least a majority of the Rykoff-Sexton Common Shares.
The amendment, repeal or adoption of provisions of the Rykoff-Sexton Charter
relating to Business Combinations requires the affirmative vote of the holders
of at least 80% of the outstanding Rykoff-Sexton Common Shares not
beneficially owned by any Related Person who is a beneficiary of or has
proposed the transaction. Such 80% affirmative vote, however, is not required
if a majority of the Continuing Directors adopt a resolution approving such
amendment or repeal proposal and the holders of at least a majority of the
outstanding Rykoff-Sexton Common Shares affirmatively approve such proposal.
Under the DGCL all other amendments to the Rykoff-Sexton Charter must be
approved by the affirmative vote of holders of a majority of shares of capital
stock of Rykoff-Sexton entitled to vote generally in the election of
directors, unless a class vote is required under the DGCL.
AMENDMENT OF BY-LAWS
US Foodservice. The US Foodservice Charter and By-laws provide that the
stockholders or the Board of Directors may adopt, alter, amend or repeal the
US Foodservice By-laws. The Stockholders Agreement provides, however, that the
US Foodservice By-laws may be amended only upon the affirmative vote of the
holders of at least two-thirds of the US Foodservice Class A Common Stock.
Rykoff-Sexton. The Rykoff-Sexton Charter provides that the Board of
Directors is authorized to make, alter or repeal the Rykoff-Sexton By-laws.
The Rykoff-Sexton By-laws further provide that they may be altered, amended or
repealed or new by-laws adopted by the stockholders or by the affirmative vote
of a majority of the directors then in office.
VALIDITY OF COMMON SHARES
A legal opinion to the effect that the Rykoff-Sexton Common Shares offered
hereby, when issued in accordance with the Merger Agreement, will be validly
issued and fully paid and nonassessable, has been rendered by Jones, Day,
Reavis & Pogue, special counsel to Rykoff-Sexton.
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EXPERTS
Rykoff-Sexton. The audited consolidated financial statements of Rykoff-
Sexton and subsidiaries as of April 29, 1995 and April 30, 1994 and for each
of the three years in the three-year period ended April 29, 1995, incorporated
by reference herein, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said reports.
Continental. The audited consolidated financial statements of Continental as
of April 30, 1994 and 1993, and the related statements of income and retained
earnings and cash flows for the years then ended, incorporated by reference
herein, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said report.
H&O Foods. The audited consolidated financial statements of H&O Foods as of
October 31, 1995 and December 31, 1994 and for the ten months ended October
31, 1995 and the year ended December 31, 1995 incorporated by reference
herein, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said report.
US Foodservice. The audited consolidated balance sheets as of December 31,
1994 and December 30, 1995 and the consolidated statements of operations,
mandatory redeemable preferred stock and stockholders' equity (deficit) and
cash flows for the fiscal years ended January 1, 1994, December 31, 1994 and
December 30, 1995 included in this Proxy Statement/Prospectus and the related
financial statement schedule included elsewhere in the Registration Statement
of which this Proxy Statement/Prospectus forms a part have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals by stockholders intended to be presented at the 1996 Annual
Meeting of Stockholders must have been received by the Secretary of Rykoff-
Sexton no later than March 29, 1996, to be included in Rykoff-Sexton's proxy,
notice of meeting and proxy statement relating to such meeting and should be
mailed to Rykoff-Sexton, Inc., 1050 Warrenville Road, Lisle, Illinois 60532-
5201, Attention: Secretary.
OTHER BUSINESS
The Board of Directors of Rykoff-Sexton is aware of no other matter that
will be presented for action at the Special Meeting. If any other matter
requiring a vote of the stockholders arising from the conduct of the meeting
properly comes before the Special Meeting, the persons authorized under
management proxies will vote and act according to their best judgments in
light of the conditions then prevailing.
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US FOODSERVICE INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
US FOODSERVICE INC.:
Report of Independent Public Accountants--
Arthur Andersen LLP................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and December 30,
1995................................................................... F-3
Consolidated Statements of Operations for the fiscal years ended January
1, 1994, December 31, 1994 and December 30, 1995....................... F-5
Consolidated Statements of Mandatory Redeemable Preferred Stock and
Stockholders' Equity (Deficit) for the fiscal years ended January 1,
1994, December 31, 1994 and December 30, 1995.......................... F-6
Consolidated Statements of Cash Flows for the fiscal years ended January
1, 1994, December 31, 1994 and December 30, 1995....................... F-7
Notes to Consolidated Financial Statements.............................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To US FOODSERVICE INC.:
We have audited the accompanying consolidated balance sheets of US
FOODSERVICE INC. (a Delaware Corporation) and subsidiaries as of December 31,
1994 and December 30, 1995, and the related consolidated statements of
operations, mandatory redeemable preferred stock and stockholders' equity
(deficit), and cash flows for each of the three fiscal years in the period
ended December 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of US
FOODSERVICE INC. and subsidiaries as of December 31, 1994 and December 30,
1995, and the results of their operations and their cash flows for each of the
three fiscal years in the period ended December 30, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA,
March 1, 1996
F-2
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
ASSETS 1994 1995
------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 10,730 $ 22,182
Receivables, net of allowance for doubtful accounts
of $3,805 and $3,804.............................. 135,927 151,147
Inventories........................................ 85,842 88,449
Prepaid expenses and other current assets.......... 5,047 6,445
Deferred income taxes.............................. 5,963 4,210
-------- --------
Total current assets............................. 243,509 272,433
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $32,205 and $37,707................. 97,440 109,665
GOODWILL, net of accumulated amortization of $11,790
and $17,652......................................... 200,572 213,907
DEFERRED COSTS, net of accumulated amortization of
$4,428 and $5,734................................... 9,305 8,235
NONCOMPETE AGREEMENTS, net of accumulated
amortization $2,068 and $666........................ 545 435
OTHER ASSETS......................................... 3,138 5,860
-------- --------
Total assets..................................... $554,509 $610,535
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1995
------------------------------------ ------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdraft..................................... $ 29,339 $ 37,820
Current maturities of long-term debt............... 15,240 15,094
Current maturities of capital lease obligations.... 375 372
Accounts payable................................... 82,520 76,803
Accrued expenses and other current liabilities..... 26,439 27,443
Income taxes payable............................... 4,433 2,381
-------- --------
Total current liabilities........................ 158,346 159,913
-------- --------
LONG-TERM DEBT:
Receivables securitization financing............... 75,000 90,000
Revolving credit loans............................. 10,000 60,000
Term loans......................................... 123,750 107,604
Senior subordinated guaranteed notes............... 70,892 70,892
Other.............................................. 1,257 1,705
-------- --------
Total long-term debt............................. 280,899 330,201
-------- --------
CAPITALIZED LEASE OBLIGATIONS........................ 13,489 13,133
DEFERRED INCOME TAXES................................ 4,262 9,251
OTHER NONCURRENT LIABILITIES......................... 11,698 14,050
-------- --------
Total liabilities................................ 468,694 526,548
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 13)
MANDATORY REDEEMABLE PREFERRED STOCK:
10% Cumulative redeemable preferred stock.......... 26,024 28,633
Series A cumulative redeemable exchangeable
preferred stock................................... 31,113 24,563
-------- --------
Total mandatory redeemable preferred stock....... 57,137 53,196
-------- --------
STOCKHOLDERS' EQUITY:
Class A common stock, $.01 par value, 50,000,000
shares authorized, 8,056,189, shares outstanding.. 81 81
Class B common stock, nonvoting, $.01 par value,
50,000,000 shares authorized, 821,206 shares
outstanding....................................... 8 8
Additional paid-in capital, net of deferred
compensation of $463 and $398..................... 121,952 124,020
Notes receivable from sale of stock................ (1,960) (980)
Accumulated deficit................................ (90,922) (90,697)
Treasury stock, at cost (32,836 and 37,152 shares
of Class A common stock).......................... (481) (541)
Minimum pension liability adjustment............... -- (1,100)
-------- --------
Total stockholders' equity....................... 28,678 30,791
-------- --------
Total liabilities and stockholders' equity....... $554,509 $610,535
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
NET SALES................................ $1,439,409 $1,470,061 $1,676,007
COST OF GOODS SOLD....................... 1,195,556 1,209,941 1,382,213
---------- ---------- ----------
Gross profit......................... 243,853 260,120 293,794
---------- ---------- ----------
OPERATING EXPENSES (excluding
depreciation and amortization).......... 188,501 200,387 225,189
---------- ---------- ----------
DEPRECIATION EXPENSE..................... 8,458 8,259 10,025
---------- ---------- ----------
AMORTIZATION EXPENSE..................... 12,864 6,264 6,354
---------- ---------- ----------
FORGIVENESS OF NOTES RECEIVABLE FROM
STOCK SALE.............................. 1,005 1,012 980
---------- ---------- ----------
NONRECURRING CHARGES (CREDITS):
Write-off of goodwill and related
intangible assets..................... 14,274 -- --
Restructuring and other charges
(credits)............................. 36,669 (3,425) --
---------- ---------- ----------
Total nonrecurring charges (credits). 50,943 (3,425) --
---------- ---------- ----------
Income (loss) from operations........ (17,918) 47,623 51,246
---------- ---------- ----------
INTEREST EXPENSE, net.................... 30,694 31,690 35,727
---------- ---------- ----------
OTHER EXPENSE, NET....................... 252 110 1,031
---------- ---------- ----------
Income (loss) before income taxes and
extraordinary item.................. (48,864) 15,823 14,488
INCOME TAX PROVISION (BENEFIT)........... (2,882) 2,912 6,691
---------- ---------- ----------
Income (loss) before extraordinary
item................................ (45,982) 12,911 7,797
EXTRAORDINARY ITEM--LOSS ON EARLY
EXTINGUISHMENT OF DEBT, net of related
tax benefit of $3,203................... 8,686 -- --
---------- ---------- ----------
NET INCOME (LOSS)........................ (54,668) 12,911 7,797
PREFERRED DIVIDENDS...................... 6,621 7,321 7,614
---------- ---------- ----------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS............................ $ (61,289) $ 5,590 $ 183
---------- ---------- ----------
EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary
item.................................. $ (6.81) $ 0.68 $ 0.02
Extraordinary item..................... (1.12) -- --
---------- ---------- ----------
Net income (loss) attributable to
common stockholders................. $ (7.93) $ 0.68 $ 0.02
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MANDATORY REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MANDATORY REDEEMABLE
PREFERRED STOCK STOCKHOLDERS' EQUITY (DEFICIT)
----------------------- ---------------------------------------------------------------------------------
SERIES A
10% CUMULATIVE
CUMULATIVE REDEEMABLE CLASS CLASS NOTES MINIMUM TOTAL
REDEEMABLE EXCHANGEABLE A B ADDITIONAL RECEIVABLE PENSION STOCKHOLDERS'
PREFERRED PREFERRED COMMON COMMON PAID-IN FROM SALE ACCUMULATED TREASURY LIABILITY EQUITY
STOCK STOCK STOCK STOCK CAPITAL OF STOCK DEFICIT STOCK ADJUSTMENT (DEFICIT)
---------- ------------ ------ ------ ---------- ---------- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY
2, 1993.......... $21,528 $27,860 $70 $ 8 $ 97,140 $(3,977) $(35,223) $ -- $ -- $ 58,018
Amortization of
deferred
compensation.... -- -- -- -- 71 -- -- -- -- 71
Forgiveness of
notes receivable
from sale of
stock........... -- -- -- -- -- 1,005 -- -- -- 1,005
Purchase and
retirement of
common stock.... -- -- (1) -- (216) -- -- -- -- (217)
Purchase of
treasury stock
at cost......... -- -- -- -- -- -- -- (152) -- (152)
Preferred stock
dividends....... 2,131 3,253 -- -- -- -- (6,621) -- -- (6,621)
Net loss........ -- -- -- -- -- -- (54,668) -- -- (54,668)
------- ------- --- --- -------- ------- -------- ----- ------- --------
BALANCE, JANUARY
1, 1994.......... 23,659 31,113 69 8 96,995 (2,972) (96,512) (152) -- (2,564)
Amortization of
deferred
compensation.... -- -- -- -- 72 -- -- -- -- 72
Forgiveness of
notes receivable
from sale of
stock........... -- -- -- -- -- 1,012 -- -- -- 1,012
Purchase of
treasury stock
at cost......... -- -- -- -- -- -- -- (329) -- (329)
Proceeds from
issuance of
common stock.... -- -- 12 -- 24,885 -- -- -- -- 24,897
Preferred stock
dividends....... 2,365 -- -- -- -- -- (7,321) -- -- (7,321)
Net income...... -- -- -- -- -- -- 12,911 -- -- 12,911
------- ------- --- --- -------- ------- -------- ----- ------- --------
BALANCE, DECEMBER
31, 1994......... 26,024 31,113 81 8 121,952 (1,960) (90,922) (481) -- 28,678
Amortization of
deferred
compensation.... -- -- -- -- 66 -- -- -- -- 66
Forgiveness of
notes receivable
from sale of
stock........... -- -- -- -- -- 980 -- -- -- 980
Purchase of
treasury stock
at cost......... -- -- -- -- -- -- -- (60) -- (60)
Purchase of
preferred stock
at discount..... -- (6,550) -- -- 2,002 -- -- -- -- 2,002
Preferred stock
dividends....... 2,609 -- -- -- -- -- (7,572) -- -- (7,572)
Minimum pension
liability
adjustment...... -- -- -- -- -- -- -- -- (1,100) (1,100)
Net income...... -- -- -- -- -- -- 7,797 -- -- 7,797
------- ------- --- --- -------- ------- -------- ----- ------- --------
BALANCE, DECEMBER
30, 1995......... $28,633 $24,563 $81 $ 8 $124,020 $ (980) $(90,697) $(541) $(1,100) $ 30,791
======= ======= === === ======== ======= ======== ===== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................... $ (54,668) $12,911 $ 7,797
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities--
Write-off of goodwill and related
intangible assets.................... 14,274 -- --
Extraordinary loss on early
extinguishment of debt, net of tax... 8,686 -- --
Depreciation and amortization......... 21,322 14,523 16,379
Amortization of deferred financing
costs................................ 2,373 2,511 2,382
Forgiveness of notes receivable from
sale of stock........................ 1,005 1,012 980
Deferred income taxes................. (7,203) (219) 6,742
Loss on disposal of property and
equipment............................ 9,016 640 518
Changes in assets and liabilities,
excluding effects of acquisitions--
(Increase) decrease in receivables,
net................................ (1,502) (1,207) (8,684)
(Increase) decrease in inventories.. 6,125 (1,719) 2,925
(Increase) decrease in prepaid
expenses and other current assets.. 1,111 230 (1,101)
(Increase) decrease in other assets. (3,037) 3,002 (165)
Increase (decrease) in bank
overdraft.......................... (2,801) 17,296 8,481
Increase (decrease) in accounts
payable............................ 23,109 (13,571) (5,717)
Increase (decrease) in accrued
expenses and other current
liabilities........................ 7,664 (671) 222
Increase (decrease) in income taxes
payable............................ 269 3,131 (2,052)
Increase (decrease) in other
noncurrent liabilities............. 7,620 (10,611) (2,679)
--------- ------- -------
Net cash provided by operating
activities....................... 33,363 27,258 26,028
--------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. (8,097) (11,780) (16,271)
Payment for the net assets of
businesses, net of cash acquired....... -- (36,212) (38,663)
Proceeds from sale of equipment......... 549 197 493
Increase in intangible assets........... (548) (824) (647)
--------- ------- -------
Net cash used in investing
activities....................... (8,096) (48,619) (55,088)
--------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt................................... 307,892 15,000 65,719
Payments on long-term debt.............. (319,768) (14,534) (16,563)
Payment of deferred financing costs..... (10,729) (616) (1,548)
Payments on capital lease obligations... (264) (297) (359)
Proceeds from issuance of common stock.. -- 24,897 --
Purchase of treasury stock.............. (152) (329) (60)
Purchase and retirement of common stock. (217) -- --
Purchase of preferred stock............. -- -- (6,677)
--------- ------- -------
Net cash provided by (used in)
financing activities............. (23,238) 24,121 40,512
--------- ------- -------
Increase in cash and cash
equivalents...................... 2,029 2,760 11,452
CASH, BEGINNING OF YEAR................... 5,941 7,970 10,730
--------- ------- -------
CASH, END OF YEAR......................... $ 7,970 $10,730 $22,182
========= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Formation
US FOODSERVICE INC. was formed by the combination of the operations of two
broadline foodservice companies, White Swan, Inc. and Unifax, Inc., pursuant
to the transactions described below.
In October 1988, WS Holdings Corporation ("WS Holdings") acquired all of the
outstanding common stock of White Swan, Inc. ("White Swan"). On September 4,
1992, Unifax Holdings, Inc. ("Unifax Holdings") acquired all of the
outstanding common and preferred stock of Unifax, Inc. and subsidiaries
("Unifax"). Both acquisitions were accounted for using the purchase method of
accounting. Unifax Holdings and WS Holdings were both controlled by
partnerships that are under the common control of Merrill Lynch Capital
Partners.
In 1993, Unifax Holdings changed its name to US FOODSERVICE INC. (the
"Company"). Effective September 22, 1993, the Company entered into an
Agreement and Plan of Merger dated September 10, 1993, whereby WS Investments,
a wholly owned subsidiary of the Company, merged with and into WS Holdings,
with WS Holdings surviving as a wholly owned subsidiary of the Company (the
"Merger"). Pursuant to this agreement, each share of Class A common stock and
Class B common stock of WS Holdings converted into the right to receive
1.84165 shares of the Company's Class A or Class B common stock. At the date
of the Merger, partnerships that are under the common control of Merrill Lynch
Capital Partners owned 81% of the Class A common stock of Unifax Holdings and
93% of the Class A common stock of WS Holdings.
The merger described above represents a combination of companies under
common control. As such, the assets and liabilities of the merged entities
have been reflected at their historical carrying values in the accompanying
consolidated financial statements and the consolidated statements of
operations, mandatory redeemable preferred stock and stockholders' equity
(deficit) and cash flows include the results of WS Holdings and US FOODSERVICE
INC. for all periods presented.
Nature of Operations
The Company is engaged principally in the distribution of a broad line of
food and related products to the foodservice industry. The Company's market
area includes the New England, Mid-Atlantic and especially the Southeastern
and Southwestern regions of the United States. Although the Company's
subsidiaries are not dependent on any single customer, many of their customers
are concentrated in the restaurant, healthcare and education industries. No
single customer accounts for more than 10% of the Company's trade receivables
or sales for any of the periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and all of its directly and indirectly wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Fiscal Year
The Company follows a fifty-two/fifty-three week fiscal calendar. Unless
otherwise noted, "1993," "1994" and "1995" refer to the fifty-two weeks ended
January 1, 1994, December 31, 1994 and December 30, 1995, respectively.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
F-8
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Inventories
Inventories consist principally of food products and related supplies held
for sale. All inventories are stated at the lower of cost or market with
approximately 39% and 33% at December 31, 1994 and December 30, 1995,
respectively, determined by the last-in, first-out ("LIFO") cost method and
the remainder by the first-in, first-out ("FIFO") cost method. Had the FIFO
method been used to value all inventories, the value of inventories at
December 31, 1994 and December 30, 1995 would have been higher by $1,283,000
and $1,821,000, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided using straight-line and accelerated methods over the
estimated useful lives of the related assets.
The estimated useful lives used in computing depreciation for financial
reporting purposes are as follows:
<TABLE>
<S> <C>
Land improvements....................................... 20 years
Buildings and improvements.............................. 7-35 years
Capital leases.......................................... Term of the lease
Vehicles and equipment.................................. 2-15 years
</TABLE>
For income tax purposes, the Company uses accelerated depreciation methods
for most depreciable assets and, for certain assets, shorter estimated useful
lives than for financial reporting.
Derivatives
As further discussed in Notes 4 and 15, the Company uses an interest rate
exchange agreement (the "Agreement") as a hedge to reduce interest expense on
$75 million of long-term debt under the receivables securitization financing.
The Agreement requires that the Company receive interest at 8.29% and pay
interest at the six month LIBOR rate plus .35% on $75 million, on a semi-
annual basis. The counterparty to the Agreement is a bank. The Agreement,
which went into effect in 1994, is in effect through December 1996. The
Company has additional interest rate protection instruments covering $150
million of borrowings which generally limit interest rates to between 4.5% and
7%. These instruments expire in 1996 and 1997.
Goodwill
The excess of cost over fair value of net assets acquired (goodwill) is
being amortized using the straight-line method primarily over 40 years.
Amortization expense of $6,465,000, $5,458,000 and $5,862,000 was charged to
operations for 1993, 1994 and 1995, respectively.
It is the Company's policy to review goodwill and other intangible assets
for possible impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. This
evaluation is based upon expectations of undiscounted future cash flows for
each operating division. If such review indicates that the carrying amount of
goodwill and other intangible assets is not recoverable, it is the Company's
policy to reduce the carrying amount of such assets to recoverable value.
Recoverable value is based on the present value of the expected future cash
flows using a discount rate commensurate with the risks involved. In 1993,
goodwill and related intangible assets of certain divisions of White Swan
totaling $14,274,000 were determined not to be recoverable and, accordingly,
were written off in the accompanying 1993 consolidated statement of operations
(see Note 14).
F-9
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Noncompete Agreements and Deferred Costs
The amounts assigned to the noncompete agreements are being amortized on a
straight-line basis over the term of the agreements, which range up to six
years. Amortization expense of $6,147,000, $582,000 and $256,000 was charged
to operations in 1993, 1994 and 1995, respectively. During 1995, certain fully
amortized noncompete agreements were removed from the records of the Company.
Deferred costs include deferred financing costs associated with the issuance
of term loans and the revolving credit facility under the Credit Agreement
dated September 23, 1993, as amended (see Note 6), and the accounts receivable
securitization program, as amended (see Note 4). In addition, deferred costs
include organization and related costs associated with the establishment of
the Company. The deferred financing costs are being amortized principally
using the effective interest method over the terms of the related debt.
Interest expense includes amortization of deferred financing costs of
approximately $2,373,000, $2,511,000 and $2,382,000 in 1993, 1994 and 1995,
respectively. Deferred organization and related costs are being amortized on a
straight-line basis principally over five years. Amortization expense of
$252,000, $224,000 and $236,000 was charged to operations in 1993, 1994 and
1995, respectively.
Income Taxes
The Company files a consolidated federal tax return. The Company accounts
for income taxes under the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109,
deferred income taxes are provided for differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements,
adjusted for any valuation allowances considered necessary.
Use of Estimates in the Preparation of Financial Statements
The preparation of 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.
Revenue Recognition
Sales are recorded upon the shipment of the goods to the customer.
Earnings (Loss) Per Common Share
Earnings or losses per common share are determined by dividing earnings
(losses) by the weighted average number of common shares, including common
stock equivalents outstanding during each year. When dilutive, stock options
and warrants are included as share equivalents using the treasury stock
method. Earnings or losses used in the calculation are reduced or increased,
respectively, by the dividends accrued on preferred stock.
Earnings or losses per common share and share data in the consolidated
financial statements have been calculated to reflect the effect of the .396-
for-1 reverse split of shares of the Company discussed in Note 17. The number
of shares used in computing earnings or losses per common share was 7,729,227,
8,241,211 and 9,147,639 in 1993, 1994 and 1995, respectively. The difference
between primary earnings per share and fully diluted earnings per share is not
material.
New Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be
F-10
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Disposed Of." This Statement, issued in March 1995, requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. This
Statement is effective for financial statements for fiscal years beginning
after December 15, 1995, with earlier adoption encouraged. The Company adopted
SFAS 121 in March 1995 and reviews on a regular basis the expected cash flows
to be generated by its long-lived assets. The initial adoption of SFAS 121 had
no impact on the Company's consolidated financial position or results of
operations.
Restatement Adjustments
The 1993 and 1994 consolidated financial statements have been restated to
reflect the current accounting treatment of the accounts receivable
securitization transaction (Note 4) and the 1993 write-off of certain goodwill
balances (Note 14). These changes resulted from discussion with the staff of
the Securities and Exchange Commission and evolving accounting practices in
these areas.
Prior to 1995, the accounts receivable transaction was recorded as a sale of
accounts receivable. In 1995, however, the Company determined that this
transaction would have more appropriately been reflected as a financing
transaction and, accordingly, receivables, receivables securitization
financing and interest expense have been restated to reflect this change in
all consolidated financial statements presented herein.
The 1993 consolidated financial statements previously reflected a goodwill
write-off of $74,642,000. Based on further consideration of the criteria for
evaluating the impairment of goodwill, the amount of the goodwill write-off
was revised to $14,274,000. Accordingly, goodwill, related accumulated
amortization and amortization expense have been restated to reflect this
change in all consolidated financial statements presented herein.
3. PROPERTY, PLANT AND EQUIPMENT:
The components of property, plant and equipment are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Land and improvements.......................... $ 5,532 $ 9,763
Buildings and improvements (including capital
leases)....................................... 76,812 85,676
Vehicles and equipment......................... 47,301 51,933
-------- --------
129,645 147,372
Less--Accumulated depreciation and
amortization.................................. (32,205) (37,707)
-------- --------
$ 97,440 $109,665
======== ========
</TABLE>
4. SALES OF ACCOUNTS RECEIVABLE:
In connection with the refinancing discussed in Note 6, the Company entered
into a Receivable Purchase Agreement and a Pooling and Servicing Agreement
(the "Agreements") whereby accounts receivable of certain operating
subsidiaries were sold, at a discount from face value, for cash and notes
realizing net proceeds of $60 million. As discussed below, additional proceeds
were realized in 1994 and 1995 as a result of the sale of accounts receivable
of certain additional operating subsidiaries. Under the Agreements, the
Company established a separate wholly owned, bankruptcy remote, subsidiary,
USFAR Inc. ("USFAR"), to purchase accounts receivable at a discount from face
value from the participating operating subsidiaries. USFAR purchases accounts
receivable from the participating operating subsidiaries on a continuous
basis, subject to certain limitations as described in the Agreements. USFAR
subsequently sells the accounts receivable at the same discount to the USFAR
Trust (the "Trust"), which is owned by third-party investors. The investors'
interest in the accounts receivable purchased is evidenced by trade
receivables-backed certificates (the "Certificates"). Through October 1994,
the Certificates bore interest at a rate selected by USFAR equal to (i) the
higher of (a) the prime rate plus .5% or (b) the federal funds rate plus 1.75%
or (ii) the weighted average eurodollar rate, as defined, plus 2.5%.
F-11
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In October 1994, USFAR completed the Series 1994-1 Accounts Receivable
Securitization (the "Securitization"). In connection with the Securitization,
$60 million of previous advances from the Trust were repaid and a new pool of
accounts receivable was sold to the Trust. The proceeds realized from the sale
were $75 million. The incremental increase in the proceeds realized from the
sale of additional accounts receivable of $15 million reduced the maximum
availability on the revolving credit loans from $65 million to $50 million
(see Note 6). Under the Securitization, the interest rate on the Certificates
was changed to an effective fixed rate of 8.29% paid monthly. In December
1994, USFAR entered into an interest rate exchange agreement whereby the
effective interest rate on $75 million of proceeds under the Securitization
was changed to the six-month LIBOR rate plus .35%, through December 1996. At
December 31, 1994, the effective interest rate on the Securitization, after
giving effect to the interest rate exchange agreement, was 7.225%.
On June 26, 1995, USFAR completed a modification of the Securitization (the
"Modification") whereby the accounts receivable of certain additional
operating subsidiaries were added to the Securitization. The proceeds realized
from the sale of accounts receivable of the additional operating subsidiaries
were $15 million, which increased the proceeds realized from the sale of
accounts receivable under the Securitization to $90 million. The incremental
increase in the proceeds realized from the sale of additional accounts
receivable of $15 million reduced the maximum availability on the revolving
credit loans from $50 million to $42.5 million (see Note 6). Under the
Modification, the interest rate on the additional $15 million of Certificates
is 6.5%. At December 30, 1995, the weighted average interest rate on the
Certificates was 7.87%. The effective interest rate on the Securitization,
after giving effect to the interest rate exchange agreement discussed above,
was 6.06%.
The Company accounts for the transaction described above as a financing
transaction in the accompanying consolidated financial statements.
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
The components of accrued expenses and other current liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Compensation and related taxes.................. $ 8,068 $ 8,521
Benefits........................................ 1,517 1,465
Interest........................................ 2,600 3,019
Operating expenses.............................. 7,539 7,592
Insurance....................................... 4,412 3,835
Other current liabilities....................... 2,303 3,011
------- -------
$26,439 $27,443
======= =======
</TABLE>
6. LONG-TERM DEBT:
In September 1993, in connection with the Merger, substantially all of the
outstanding debt of the Company and WS Holdings was refinanced. Prior to the
refinancing, debt of the Company included $50,169,000 of term loans,
$32,000,000 of senior notes, $20,500,000 of senior subordinated notes and
$33,000,000 under a $50 million revolving credit facility. The debt of WS
Holdings included $35,191,000 of term loans, $70,892,000 of 14.25% senior
subordinated guaranteed notes, $2,526,000 of 16.25% senior subordinated
guaranteed notes and $57,000,000 under a $60 million revolving credit
facility.
As a result of the refinancing discussed above, all unamortized deferred
financing costs and unamortized debt discount were charged to expense as of
the date of the refinancing. Such expense, totaling $11,889,000, less the
related tax effect of $3,203,000, has been presented as an extraordinary item
in the accompanying consolidated statement of operations for 1993.
F-12
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The 14.25% senior subordinated guaranteed notes of WS Holdings were
exchanged for senior subordinated guaranteed notes of the Company (the
"Notes") with similar terms. The Notes are subject to redemption, at the
election of the Company, at any time, or at the election of the Noteholders,
upon the occurrence of a change of control of the Company, at the redemption
price. The redemption price, as defined by the agreement, decreases from
114.25% beginning October 18, 1994, to 100% on October 18, 1997 and
thereafter, of the outstanding principal amount, depending on the date of such
redemption, plus accrued interest. The Notes are subordinated to the term
loans and the revolving credit loans (the "Revolver" and the "Acquisition
Revolver").
In connection with the September 23, 1993 refinancing discussed above, the
Company entered into a $215 million credit agreement (the "Credit Agreement")
with certain banks. The Credit Agreement provided for $150 million in term
loans (including two tranches of $75 million) and a $65 million Revolver. In
connection with the Securitization discussed in Note 4, the limit on the
Revolver was reduced to $50 million in October 1994 and further reduced to
$42.5 million in June 1995. In December 1995, the Revolver was increased by $7
million to $49.5 million, in connection with the repurchase of part of the
Series A cumulative redeemable exchangeable preferred stock (see Note 8). The
Credit Agreement is collateralized by certain assets of the Company and the
guarantees of the subsidiaries of the Company, except for USFAR.
One of the $75 million term loan tranches bears interest at (i) the higher
of (a) the prime rate plus 1.25% or (b) the federal funds rate plus .5% or
(ii) LIBOR plus 2.5%. The rates on prime rate-based loans could be reduced by
up to 1% if certain performance tests are met. The facility is amortized by
quarterly principal payments of $3,463,000, which commenced March 31, 1994,
and are required through December 31, 1997. Thereafter, quarterly principal
payments of $4,700,000 are required until the facility is paid in full on
December 31, 1998.
The other $75 million term loan tranche bears interest at (i) the higher of
(a) the prime rate plus 1.75% or (b) the federal funds rate plus .5% or (ii)
LIBOR plus 3%. The facility is amortized by quarterly payments of $247,000,
which commenced March 31, 1994, and are required through December 31, 1998.
Quarterly payments of $8,287,000 are required during 1999, and $18,058,000 for
two quarters in calendar year 2000 until the facility is paid in full on June
30, 2000.
At December 31, 1994 and December 30, 1995, the Revolver limit was a maximum
of $50 million and $49.5 million, respectively, and bore interest at (i) the
higher of (a) the prime rate plus 1.25% or (b) the federal funds rate plus .5%
or (ii) LIBOR plus 2.5%. The rates on prime rate-based loans could be reduced
by up to 1% if certain performance tests are met. The Revolver is available
through December 31, 1998. There is an annual commitment fee of .5%, payable
quarterly, on the average daily unused portion of the Revolver. The Revolver
may also be used for letters of credit up to an aggregate amount of $15
million and at a fee payable quarterly equal to 2.5% of the daily average
amount of letters of credit outstanding. At December 31, 1994 and December 30,
1995, letters of credit in the amount of $6,453,000 and $5,433,000,
respectively, were outstanding.
In August 1994, the Credit Agreement was amended to provide an additional
$50 million of borrowing capacity in the form of an additional revolving
credit facility to fund future acquisitions (the "Acquisition Revolver"). In
April 1995, the borrowing capacity under the Acquisition Revolver was reduced
to $40 million. Draws on the Acquisition Revolver must be made in connection
with proposed acquisitions of target companies. Availability under the
Acquisition Revolver declines by $5 million on December 31, 1995 and 1996, and
by $20 million on December 31, 1997 and 1998. Borrowings under the Acquisition
Revolver may be LIBOR-based or prime rate-based, as defined in the Credit
Agreement. At December 31, 1994 and December 30, 1995, $0 and $40 million,
respectively, was outstanding. There is an annual commitment fee of .5%,
payable quarterly, on the average daily unused portion of the Acquisition
Revolver.
The agreements related to the term loans, senior subordinated notes,
Revolver and Acquisition Revolver contain certain provisions which, among
others, require attainment of minimum levels of consolidated net
F-13
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
income, maintaining certain financial ratios, limit capital expenditures and
additional investments, and limit the amount of additional indebtedness that
can be incurred. The Company was in compliance with all such provisions at
December 31, 1994 and December 30, 1995. These provisions also limit the
dividends that can be paid by the Company.
In accordance with the Credit Agreement, the Company is required, in certain
circumstances, to use excess cash flows, as defined, to make accelerated
principal payments. Some accelerated principal payments are also required in
the event that the Company or its subsidiaries sell amounts of property, plant
and equipment above a defined threshold or generate proceeds from the sale of
their capital stock that are not used to repay subordinated debt or to redeem
its preferred stock plus accrued dividends.
Excluding any accelerated principal payments and including maturity of the
Securitization in October 1999 (see Note 4), the aggregate principal repayment
required for each of the next five years and thereafter is as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------
<S> <C>
1996............................................................. $ 15,094
1997............................................................. 35,254
1998............................................................. 58,811
1999............................................................. 119,950
2000............................................................. 115,445
Thereafter....................................................... 741
--------
Total........................................................ $345,295
========
</TABLE>
7. EMPLOYEE BENEFIT PLANS:
Deferred Compensation Plan
The Company had deferred compensation agreements for certain management
personnel with benefits commencing at retirement or death. Obligations under
these agreements, which are unfunded, are included in other noncurrent
liabilities in the accompanying consolidated balance sheets. The Company has
purchased life insurance on management personnel that would fully or partially
fund such obligations in the event of death. Deferred compensation expense
under these agreements reflected in the accompanying consolidated statements
of operations was not material.
Postretirement Health Care Benefits
The Company provides postretirement health care benefits to certain former
salaried employees of Biggers Brothers, Inc., a wholly owned subsidiary of the
Company, who retired prior to November 1, 1990. Such benefits are not provided
to subsequent retirees or any current employees of the Company. In 1993, the
Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS
106"). The present value of future benefits to be paid to eligible retirees
amounted to $757,000 and $817,000 at December 31, 1994 and December 30, 1995,
respectively, and is included in other noncurrent liabilities in the
accompanying consolidated balance sheets. As the obligation for these benefits
is unfunded, the interest component of this expense will be recognized in
future periods. The postretirement benefit expense was approximately $60,000
in 1993, 1994 and 1995.
Defined Contribution Plans
Employees of the Company participate in a qualified 401(k) savings plan.
Participants can contribute up to 15% of their pretax compensation, and the
Company matches 50% of the first 6% of compensation that the employee
contributes to the plan. Expense for this plan was $756,000, $1,616,000 and
$2,011,000 in 1993, 1994 and 1995, respectively.
F-14
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Through February 28, 1994, WS Holdings had defined contribution savings
plans in place at two operating divisions. These plans covered substantially
all of the employees of these operating divisions. Under the first plan, the
Company matched 25% for every dollar contributed by the employee up to 6% of
the employee's annual salary, with additional contributions at the discretion
of the Board of Directors (the "Board"). The contributions under the second
plan were made at the discretion of the Board, and there were no employee
contributions. Total employer contributions to these plans were approximately
$297,000 and $36,000 for 1993 and 1994, respectively. Effective March 1, 1994,
these plans were terminated and all net assets of these plans became net
assets of the 401(k) plan of the Company. Also, effective March 1, 1994, all
participants of these plans became participants of the 401(k) plan of the
Company.
Defined Benefit Plan
WS Holdings has a defined benefit plan (the "Pension Plan") that covers
substantially all of its employees as of 1993. Benefits are based on years of
service and average monthly compensation. The WS Holdings funding policy is to
contribute the minimum required annual contribution. On November 17, 1993, the
Pension Plan was amended to indefinitely suspend the accrual of future
benefits under the Plan. This curtailment of the Pension Plan resulted in the
Company recording a loss of approximately $3,500,000 that has been included as
a component of restructuring and other charges in the accompanying
consolidated statement of operations for 1993 (see Note 14).
The funding status of the Pension Plan is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Projected benefit obligation (PBO)............. $9,589 $11,839
Estimated plan assets, at fair value........... 6,783 9,572
------ -------
Estimated plan assets, at fair value, less than
the PBO....................................... $2,806 $ 2,267
====== =======
</TABLE>
The above liability has been reflected in other noncurrent liabilities in
the accompanying consolidated balance sheets.
The weighted average discount rate used in determining the projected benefit
obligation was 8.5% and 7.5% at December 31, 1994 and December 30, 1995,
respectively. The effect of the change in the weighted average discount rate
has been reflected as an increase in noncurrent liabilities and a decrease in
stockholders' equity of $1,100,000 in the accompanying consolidated financial
statements at December 30, 1995. The expected long-term rate of return on
assets was 8% and 10% in 1994 and 1995, respectively.
8. MANDATORY REDEEMABLE PREFERRED STOCK:
10% Cumulative Redeemable Preferred Stock
The 10% cumulative redeemable preferred stock has a par value of $.01 per
share. At December 31, 1994 and December 30, 1995, 33,564 shares were
authorized and 26,024 and 28,633 shares were issued and outstanding,
respectively. The 10% cumulative redeemable preferred stock accrues dividends
at 10%, payable in additional shares, through September 1997, and at 14%,
payable in cash thereafter, through the mandatory redemption date of September
1999. The effective yield to maturity on the 10% cumulative preferred stock is
11.07%. The 10% cumulative redeemable preferred stock has a liquidation and
redemption value of $1,000 per share plus unpaid cash dividends (if any). All
outstanding shares are subject to mandatory redemption on September 30, 1999.
The Company has issued or accrued cumulative dividends payable in additional
10% cumulative preferred stock of $5,183,000 and $7,792,000 at December 31,
1994 and December 30, 1995, respectively. An additional cumulative dividend
accrual of $599,000 and $940,000 has been recorded in the accompanying
consolidated balance sheets at December 31, 1994 and December 30, 1995,
respectively, to give recognition to the increasing rate. At December 31, 1994
and December 30, 1995, the redemption value was equal to the carrying value
reflected in the accompanying consolidated balance sheets.
F-15
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Series A Cumulative Redeemable Exchangeable Preferred Stock
In connection with the Merger described in Note 1, 308,520 shares of
redeemable preferred stock of WS Holdings were exchanged for an equal number
of shares of Series A Cumulative Redeemable Exchangeable Preferred stock of
the Company (the "Redeemable Preferred"). The Redeemable Preferred has a par
value of $.01 and a stated value of $100 per share. At December 31, 1994 and
December 30, 1995, 314,000 shares were authorized; and 311,131 and 245,629
shares were outstanding, respectively. The Redeemable Preferred dividends were
"paid in-kind" through the issuance of additional shares of Redeemable
Preferred on a quarterly basis through October 15, 1993, at the quarterly rate
of .0375 shares per share. After October 15, 1993, dividends payable in cash
accrue at the quarterly rate of $3.75 per share. However, under the Company's
Credit Agreement (see Note 6), cash dividends are prohibited through October
1, 1997. The Company had issued or accrued cumulative dividends of $16,113,000
payable in additional Redeemable Preferred through October 15, 1993. The
Redeemable Preferred has a liquidation value of $100 per share. Cumulative
accrued but unpaid cash dividends on the Redeemable Preferred were $5,656,000
and $8,147,000 at December 31, 1994 and December 30, 1995, respectively.
Accrued dividends on the Redeemable Preferred must be paid prior to payment of
dividends on common stock. The Company, at its option, may redeem the
Redeemable Preferred prior to October 15, 2001. The Company is required to
redeem, or set aside a sum sufficient to redeem, 25% of the outstanding shares
on October 15, 2001 and 2002, and the remaining 50% on October 1, 2003, at a
price of $100 per share plus accrued and unpaid dividends. At December 31,
1994 and December 30, 1995, the redemption value, including accrued but unpaid
cash dividends reflected in other noncurrent liabilities in the accompanying
consolidated balance sheets, was approximately $36,769,000 and $25,500,000,
respectively.
The Company purchased 65,502 shares of its Redeemable Preferred in December
1995 (the "Repurchase") for $6,677,000. The face value of the purchased shares
of Redeemable Preferred was $6,550,000, which, together with accrued dividends
of $2,129,000, resulted in a discount on purchase of $2,002,000. This discount
has been reflected as additional paid-in capital in the accompanying
consolidated financial statements.
9. STOCKHOLDERS' EQUITY:
As part of the initial capitalization of the Company, 323,758 shares of
common stock (as adjusted for the .396-for-1 reverse stock split discussed in
Note 17) were issued to Unifax management in exchange for notes aggregating
$4,971,000. These notes are reflected as notes receivable from the sale of
stock as a reduction of equity in the accompanying consolidated balance
sheets. Based upon operations of the Company, the notes may be forgiven over a
five-year period through 1996. Operations for 1993, 1994 and 1995 were charged
$1,005,000, $1,012,000 and $980,000, respectively, related to forgiveness of a
portion of the notes.
In August 1994, 1,164,706 shares of common stock were sold at $21.46 per
share (as adjusted for the .396-for-1 reverse stock split discussed in Note
17) to an existing stockholder. Transaction costs of $103,000 have been netted
against the proceeds received from the issuance of the stock.
The Company has also authorized a series of "blank check" preferred stock.
No shares of "blank check" preferred stock are issued or outstanding at
December 31, 1994 or December 30, 1995.
In connection with the Merger described in Note 1, the Company has entered
into agreements with substantially all common stockholders whereby the Company
has the right of first refusal to purchase the stock of a stockholder who has
an acceptable bona fide offer for his shares. The agreements also provide for
the repurchase of shares from certain management stockholders by the Company
in the event of death, termination or resignation of the stockholder. The
purchase price to be paid is dependent upon several factors, as defined in the
agreements. The number of shares subject to this provision and the aggregate
redemption value was not material at December 31, 1994 or December 30, 1995.
F-16
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCK OPTIONS AND WARRANTS:
WS Holdings Management Stock Option Plan
In 1988, WS Holdings executed a Management Stock Option Plan whereby options
(the "WS Holdings Options") for 227,750 shares of the WS Holdings Class A
common stock were authorized and granted to employees of WS Holdings (as
adjusted for the .396 for 1 reverse stock split discussed in Note 17). The
purchase price of each share placed under option was not to be less than 100%
of the fair market value of the stock on the date of grant unless otherwise
determined by the Compensation Committee of WS Holdings. Options for 74,250
shares of WS Holdings Class A common stock ("Normal Options") were exercisable
immediately upon grant. Options for 148,500 shares of WS Holdings Class A
common stock ("Performance Options") were to become exercisable over the
period set forth in the terms of the respective grants based on attainment of
specified performance criteria. Different performance criteria was set for two
series of Performance Options ("Performance A Options" and "Performance B
Options"). As of September 22, 1993, 60% of the Performance A Options were
vested and 52% of the Performance B Options were vested.
As a result of an amendment to the WS Holdings Management Stock Option Plan
executed in connection with the Merger described in Note 1, the vested WS
Holdings Options (Normal and Performance) became options to purchase shares of
common stock of the Company. The amendment provided for an equitable
adjustment to be made to the WS Holdings Options based on the relative values
of common stock of the Company and WS Holdings Class A common stock. This
adjustment decreased the exercise price from $25.25 to $13.71 and increased
the number of shares covered by each WS Holdings Option to a number equal to
1.84165 times the number of shares for which the WS Holdings Option was
previously exercisable. In 1993, compensation expense related to the
Performance Options was fully offset by forfeitures from employee
terminations.
In November 1993, the Company made an offer to holders of unvested
Performance Options (the "Option Offer") whereby the Company would convert the
unvested Performance Options of WS Holdings into options to acquire common
stock of the Company. Under the Option Offer, the unvested Performance Options
would become vested at a revised vesting performance schedule based on the
Company as a whole, as opposed to the existing performance schedule for WS
Holdings. Additionally, the conversion rate was .9208 options of the Company
(exercise price of $13.71 per option) for every option of WS Holdings. As of
January 1, 1994, all holders of WS Holdings Performance Options had accepted
the Option Offer. All such unvested Performance Options were issued under the
amended WS Holdings Management Stock Option Plan executed by the Company in
connection with the Merger. At December 30, 1995, none of the options issued
under the Option Offer had vested. There was no compensation expense related
to the Performance Options in 1994 or 1995.
1992 US FOODSERVICE Option Plan
In connection with the 1992 acquisition of Unifax by the Company described
in Note 1, the Company established the Unifax Holdings, Inc. 1992 Stock Option
Plan (the "1992 Option Plan"). Under the 1992 Option Plan, management of the
Company was granted options to purchase shares of common stock of the Company
at $15.35 per share and $.05 per share, as adjusted for the one-for-two
reverse stock split, which occurred in September 1993 and the .396-for-1
reverse stock split discussed in Note 17. These options contain various
provisions restricting their exercise. Deferred compensation expense of
$635,000 related to the $.05 options was recorded upon their issuance. This
amount is being amortized over the nine-year vesting period of these options.
Approximately $71,000, $72,000 and $65,000 was expensed for 1993, 1994 and
1995, respectively.
1993 US FOODSERVICE Option Plan
In September 1993, the Company established the US FOODSERVICE INC. 1993
Stock Option Plan (the "1993 Option Plan"). Under the 1993 Option Plan,
options to purchase 422,370 shares of common stock of the
F-17
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company (as adjusted for the .396-for-1 reverse stock split discussed in Note
17) were authorized. At the discretion of the Board of Directors, the options
may be issued as Normal Options or Performance Options. The options will
become exercisable over a period not to exceed nine years from the date of
grant. These options contain various provisions, as defined, restricting their
exercise.
All options granted under this plan were designated to be Normal Options and
were granted at exercise prices ranging from $21.46 per share to $22.98 per
share, which was deemed to be not less than the fair value per share at the
respective dates of grant. Accordingly, no compensation expense was recorded
with respect to these option grants.
The following table summarizes the activity in each of the Company's three
option plans:
<TABLE>
<CAPTION>
WS HOLDINGS 1992 OPTION 1993 OPTION
OPTIONS PLAN PLAN
----------- ----------- -----------
<S> <C> <C> <C>
Balance, January 1, 1994.............. 234,001 285,365 77,996
Granted at $21.46-$22.98.............. -- -- 39,133
Forfeited............................. (35,777) (30,411) (14,621)
------- ------- -------
Balance, December 31, 1994............ 198,224 254,954 102,508
Granted at $5.05-$21.46............... 45,310 46,352 139,550
Forfeited............................. (14,054) (5,973) (21,282)
------- ------- -------
Balance, December 30, 1995............ 229,480 295,333 220,776
======= ======= =======
Vested................................ 204,567 140,658 102,373
======= ======= =======
</TABLE>
Since January 2, 1993, no options have been exercised.
Stock Purchase Warrants
Warrants for the purchase of 227,700 shares of common stock of the Company
at $15.35 per share (as adjusted for the .396-for-1 reverse stock split
discussed in Note 17) are held by former holders of $20.5 million of senior
subordinated notes, which were repaid in connection with the September 23,
1993 refinancing (see Note 6). The warrants were vested at the date of grant.
The warrants expire September 30, 2005.
11. INCOME TAXES:
The income tax provision (benefit) reflected in the consolidated statements
of operations, including the tax effect of the loss on the early
extinguishment of debt of $3,203,000 in 1993, is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------ ------
<S> <C> <C> <C>
Current provision................................ $ 1,118 $3,131 $1,589
Deferred provision (benefit)..................... (7,203) (219) 5,102
------- ------ ------
Net tax provision (benefit)...................... $(6,085) $2,912 $6,691
======= ====== ======
</TABLE>
The reconciliation of the federal statutory rates to the effective tax
(benefit) rates is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate................................... (34)% 34% 34%
Estimated IRS audit assessment and additional reserves... -- 28 --
Nondeductible amortization and write-off of goodwill..... 11 15 15
Change in deferred tax asset valuation allowance......... 18 (65) --
State tax expense (benefit) and other.................... (5) 6 8
Reversal of previously accrued taxes..................... -- -- (11)
--- --- ---
Effective tax (benefit) rate............................. (10)% 18% 46%
=== === ===
</TABLE>
F-18
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the net deferred tax asset (liabilities) included in the
accompanying consolidated balance sheets are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Depreciation.................................... $(13,202) $(13,195)
Net operating loss carryforwards................ 8,751 4,425
Treatment of capital and operating leases....... 4,961 4,217
Pension and insurance reserves.................. 1,978 933
Inventory and receivable reserves............... 1,971 2,268
LIFO inventory reserve.......................... (2,299) (2,278)
Alternative minimum tax credits................. -- 1,223
Other, net...................................... 106 (847)
-------- --------
2,266 (3,254)
Less--valuation allowance....................... (565) (1,787)
-------- --------
Net deferred tax asset (liability).............. $ 1,701 $ (5,041)
======== ========
</TABLE>
In 1995, the Company increased by approximately $1,222,000 the valuation
allowance against deferred tax assets. This increase is entirely attributable
to state net operating loss carryforwards generated at the Company's White
Swan subsidiary and the uncertainty regarding this subsidiary's ability to
create sufficient taxable income in future years to fully utilize the net
operating loss carryforwards. In 1994, the Company reduced by approximately
$10,324,000 the valuation allowance established in 1993. This reduction
reflects the fact that as of January 1, 1994, the ability to generate future
taxable income of sufficient levels to (i) utilize the deductions related to
the restructuring reserves recognized for financial reporting purposes in 1993
and (ii) utilize the net operating loss carryforwards, was not assured. The
results of operations and taxable income in 1994 were of sufficient levels to
(i) utilize the deductions realized from the restructuring reserve and (ii) to
provide additional assurance that the net operating loss carryforwards would
be realized. Certain of the net operating losses that are subject to
limitation as to use continued to be reserved for at December 31, 1994.
In 1992, White Swan received a notice of proposed adjustment and a 30-day
letter from the Internal Revenue Service ("IRS") related to its fiscal 1989
and 1990 federal income tax returns. The proposed adjustments would deny
certain deductions primarily related to the amortization of covenants not to
compete and other deferred charges. In January 1995, the Company negotiated a
settlement of this matter with the IRS. Based on agreed-upon amounts of
disallowed deductions for fiscal 1989 and 1990, tax rates in effect at the
time of the deductions, penalties and interest, the Company has estimated the
final settlement, including taxes and interest that will result from amending
subsequent federal and state returns. This amount, as well as additional
amounts for other future tax adjustments, has been reflected in income tax
provision and income taxes payable in the accompanying 1994 consolidated
financial statements.
12. CASH FLOW DISCLOSURES:
Supplemental disclosures of cash flow information (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Interest paid, net................................ $35,471 $33,782 $33,005
======= ======= =======
Income taxes paid................................. $ 1,730 $ -- $ 3,159
======= ======= =======
</TABLE>
F-19
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in certain claims and pending litigation arising in
the normal conduct of business. Based on the knowledge of the facts and, in
certain cases, opinions of outside counsel, the management of the Company
believes the resolution of claims and pending litigation will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
Lease Obligations
The Company leases real property and equipment under noncancelable lease
agreements that expire at various dates through 2047. Certain of these
arrangements qualify as capital leases and have been reflected as property
under capital leases, with the associated debt included as capital lease
obligations in the accompanying consolidated balance sheets. These leases have
been capitalized using interest rates ranging from 11.5% to 13%.
The future minimum lease payments as of December 30, 1995, under all leases
are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1996................................................... $ 2,497 $13,296
1997................................................... 2,302 10,130
1998................................................... 1,836 7,471
1999................................................... 1,817 5,276
2000................................................... 1,817 4,553
Thereafter............................................. 39,626 7,980
------- -------
49,895 48,706
Less--Amounts representing interest.................... (36,390) --
------- -------
Present value of future minimum lease payments......... $13,505 $48,706
======= =======
</TABLE>
14. NONRECURRING CHARGES:
In accordance with the Company's policy of reviewing the recoverability of
goodwill and other intangible assets for possible impairment as discussed in
Note 2, the goodwill attributable to three of the White Swan operating
divisions totaling $14,274,000 was written off during 1993. During 1993, these
three White Swan operating divisions operated at a loss before interest and
amortization of goodwill. In addition, projections of future results indicated
that such losses would continue and a decision was made to close these
divisions. Two of these divisions were closed in August and October 1993,
respectively, and the third operated at a loss during 1994 and was closed in
the first quarter of 1995. Based on the analysis performed in 1993 and the
resulting decision to close the three operating divisions, the Company wrote
off the goodwill specifically attributable to these divisions. In connection
with the Merger discussed in Note 1 and as a result of the decision to
consolidate two operating divisions of White Swan, as noted above, certain
nonrecurring expenses were incurred which have been classified as
restructuring and other charges in the accompanying consolidated statement of
operations for fiscal 1993. These charges include costs associated with the
merging of the two companies, the elimination of duplicate corporate offices,
the integration of the financial functions, the revaluation of certain assets,
lease termination costs, severance costs, the write-down of certain
inventories and receivables affected by the closing of the operating
divisions, and other costs directly attributable to this decision.
F-20
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of restructuring and other charges that are shown as a charge
to operations in fiscal 1993 are as follows (in thousands):
<TABLE>
<S> <C>
Consolidation of facilities and lease terminations............... $17,660
Severance and other personnel costs.............................. 4,950
Professional fees and other merger costs......................... 1,790
Asset revaluations............................................... 7,566
Other............................................................ 4,703
-------
Total restructuring and other charges........................ $36,669
=======
</TABLE>
The Company has recognized a credit of $3,425,000 in the accompanying
consolidated statement of operations for 1994. This credit resulted from the
reversal of certain restructuring and other charges taken in fiscal 1993
related primarily to the Company's ability to terminate a lease obligation on
terms more favorable than originally estimated. Actual costs incurred and
charged to the reserve for restructuring and other charges totaled $31,236,000
through December 30, 1995, resulting in a remaining reserve balance at
December 30, 1995, after the $3,425,000 reversal discussed above, of
$2,008,000.
15. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash, Receivables and Accounts Payable--The carrying amount approximates
fair value due to the short maturity of these instruments.
Interest Rate Exchange Agreement--The fair value of the interest rate
exchange agreement is based on an offer made by a bank to terminate the
Agreement. This value represents the estimated amount the Company would
receive or pay to terminate the Agreement taking into consideration current
and projected interest rates. The fair value of the agreement was not
significant at December 31, 1994. The fair value of the agreement was
approximately $1.7 million at December 30, 1995.
Long-Term Debt--The fair value of the Company's long-term debt is estimated
based on the quoted market prices for the same or similar issues based on the
current rates offered to the Company for debt of the same remaining maturity.
The carrying amount of long-term debt approximates the fair value at December
31, 1994 and December 30, 1995, respectively.
16. ACQUISITIONS:
In 1994 and 1995, the Company purchased certain assets and liabilities of
several competing companies in the foodservice industry in the southeastern
United States. The aggregate purchase price of the acquisitions was
approximately $36,212,000 and $38,663,000, plus transaction costs of
approximately $155,000 and $128,000, in 1994 and 1995, respectively. The 1994
acquisitions were financed with the proceeds from the sale of common stock
(see Note 9) and existing cash. The 1995 acquisitions were financed by draws
on the Acquisition Revolver. The excess of the purchase price over the fair
value of the assets acquired (goodwill) was approximately $4,530,000 and
$17,431,000 in 1994 and 1995, respectively. The impact on the consolidated
financial position and consolidated results of operations of the Company
related to these acquisitions was not significant; therefore, pro forma
financial information is not presented.
F-21
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
17. SUBSEQUENT EVENTS:
On February 2, 1996 the Company entered into an Agreement and Plan of Merger
with Rykoff-Sexton, Inc. (the "Rykoff-Sexton Merger Agreement"). Under the
terms of this agreement, shareholders of the Company will exchange their
shares of common stock of the Company for shares of Rykoff-Sexton, Inc. common
stock. Each share of common stock of the Company will be deemed to have a
value of $25 per share, which will be the basis on which the exchange ratio
will be calculated, subject to certain collar provisions included in the
Rykoff-Sexton Merger Agreement. In connection with or prior to the exchange,
all of the Company's existing bank debt, 14.25% senior subordinated guaranteed
notes, Redeemable Preferred and 10% cumulative redeemable preferred stock will
be refinanced, redeemed or purchased.
Pursuant to the Rykoff-Sexton Merger Agreement, on January 31, 1996, the
Company effected a reverse stock split, whereby all shares of US FOODSERVICE
INC. common stock were split on the basis of .396-for-1, maintaining a par
value of $.01 per share. Accordingly, all references in the financial
statements to the number of shares of common stock, number and price of
options and per share data have been restated to reflect this stock split.
In March, 1996, the Company purchased all of its outstanding 10% cumulative
redeemable preferred stock for $21,262,000. The purchase price represents a
discount from the liquidation and redemption value of $8,843,000. The discount
realized on the purchase of these shares will be recorded as an increase to
additional paid-in capital.
F-22
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
RYKOFF-SEXTON, INC.,
USF ACQUISITION CORPORATION
AND
US FOODSERVICE INC.
DATED FEBRUARY 2, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I DEFINITIONS................................................. A-1
ARTICLE II THE MERGER; EFFECTIVE TIME; CLOSING......................... A-6
2.1. The Merger.................................................. A-6
2.2. Effective Time.............................................. A-6
2.3. Closing..................................................... A-6
ARTICLE III TERMS OF MERGER............................................. A-6
3.1. Certificate of Incorporation................................ A-6
3.2. The By-Laws................................................. A-6
3.3. Directors................................................... A-6
3.4. Officers.................................................... A-6
ARTICLE IV MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES
IN THE MERGER............................................... A-7
Share Consideration; Conversion or Cancellation of Shares in
4.1. the Merger.................................................. A-7
4.2. Payment for Shares in the Merger............................ A-8
4.3. Fractional Shares........................................... A-9
4.4. Transfer of Shares after the Effective Time................. A-9
4.5. Dissenting Shares........................................... A-9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-10
5.1. Organization, Etc. of the Company........................... A-10
5.2. Subsidiaries................................................ A-10
5.3. Agreement................................................... A-11
5.4. Capital Stock............................................... A-11
5.5. Other Interests............................................. A-12
5.6. Litigation.................................................. A-12
5.7. Compliance with Other Instruments, Etc...................... A-12
5.8. Employee Benefit Plans...................................... A-12
5.9. Labor Matters............................................... A-14
5.10. Taxes....................................................... A-14
5.11. Intellectual Property....................................... A-15
5.12. Properties.................................................. A-16
5.13. Environmental Matters....................................... A-16
5.14. Registration Statement and Financial Statements............. A-16
5.15. Absence of Certain Changes or Events........................ A-17
5.16. Contracts and Leases........................................ A-17
5.17. Affiliated Transactions..................................... A-17
5.18. Brokers and Finders......................................... A-18
5.19. S-4 Registration Statement and Proxy Statement/ Prospectus.. A-18
5.20. Tax Matters................................................. A-18
5.21. Stockholders Agreement...................................... A-18
5.22. Opinion of Financial Advisor................................ A-18
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF RSI AND MERGER SUB........ A-18
6.1. Organization, Etc. of RSI................................... A-18
6.2. Subsidiaries................................................ A-19
6.3. Agreement................................................... A-19
6.4. Capital Stock............................................... A-20
6.5. Authorization for RSI Common Shares......................... A-20
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C> <C>
6.6. Other Interests................................................................... A-20
6.7. Litigation........................................................................ A-20
6.8. Compliance with Other Instruments, Etc............................................ A-20
6.9. Employee Benefit Plans............................................................ A-21
6.10. Labor Matters..................................................................... A-22
6.11. Taxes............................................................................. A-23
6.12. Intellectual Property............................................................. A-23
6.13. Properties........................................................................ A-24
6.14. Environmental Matters............................................................. A-24
6.15. Reports and Financial Statements.................................................. A-24
6.16. Absence of Certain Changes or Events.............................................. A-25
6.17. Contracts and Leases.............................................................. A-25
6.18. Affiliated Transactions........................................................... A-25
6.19. Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub................ A-25
6.20. Brokers and Finders............................................................... A-26
6.21. S-4 Registration Statement and Proxy Statement/ Prospectus........................ A-26
6.22. Tax Matters....................................................................... A-26
6.23. Company Management Loans.......................................................... A-26
6.24. Opinion of Financial Advisor...................................................... A-26
ARTICLE VII ADDITIONAL COVENANTS AND AGREEMENTS............................................... A-27
7.1. Conduct of Business of the Company................................................ A-27
7.2. Other Transactions................................................................ A-28
7.3. Stockholder Votes................................................................. A-28
7.4. Registration Statement............................................................ A-29
7.5. Reasonable Efforts................................................................ A-29
7.6. Access to Information; Confidentiality............................................ A-30
7.7. Listing of RSI Common Shares...................................................... A-30
7.8. Rule 145 Affiliates............................................................... A-30
7.9. Conduct of Business of RSI........................................................ A-30
7.10. Preferred Stock Redemption; Withdrawal of S-1 Registration Statement; USDA Matter. A-32
7.11. Commitment Letter................................................................. A-33
7.12. Publicity......................................................................... A-33
7.13. Director and Officer Indemnification.............................................. A-33
7.14. Conveyance Taxes.................................................................. A-33
7.15. Parachute Payments................................................................ A-34
7.16. RSI Loans......................................................................... A-34
7.17. RSI Change in Control Arrangements................................................ A-34
ARTICLE VIII CONDITIONS........................................................................ A-34
8.1. Conditions to Each Party's Obligations............................................ A-34
8.2. Conditions to Obligations of RSI and Merger Sub................................... A-35
8.3. Conditions to Obligations of the Company.......................................... A-36
ARTICLE IX TERMINATION....................................................................... A-37
9.1. Termination by Mutual Consent..................................................... A-37
9.2. Termination by Either RSI or the Company.......................................... A-38
9.3. Termination by RSI................................................................ A-38
9.4. Termination by the Company........................................................ A-38
9.5. Effect of Termination and Abandonment............................................. A-39
</TABLE>
A-ii
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE X MISCELLANEOUS AND GENERAL...................................... A-39
10.1. Expenses....................................................... A-39
10.2. Notices, Etc................................................... A-39
10.3. Amendments, Waivers, Etc....................................... A-40
10.4. No Assignment.................................................. A-40
10.5. Entire Agreement............................................... A-40
10.6. Specific Performance........................................... A-40
10.7. Remedies Cumulative............................................ A-40
10.8. No Waiver...................................................... A-41
10.9. No Third Party Beneficiaries................................... A-41
10.10. Jurisdiction................................................... A-41
10.11. Governing Law................................................. A-41
10.12. Name, Captions, Etc........................................... A-41
10.13. Counterparts.................................................. A-41
10.14. Knowledge..................................................... A-41
10.15. Nonsurvival of Representations and Warranties................. A-41
10.16. No Other Representations and Warranties....................... A-41
</TABLE>
Exhibits [omitted]
Disclosure Statements [omitted]
Company Disclosure Statement [omitted]
RSI Disclosure Statement [omitted]
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (hereinafter called this "Agreement"), dated
February 2, 1996, among Rykoff-Sexton, Inc., a Delaware corporation ("RSI"),
USF Acquisition Corporation, a Delaware corporation, and a direct Wholly-Owned
Subsidiary of RSI ("Merger Sub"), and US Foodservice Inc., a Delaware
corporation (the "Company").
Witnesseth:
Whereas, the Boards of Directors of RSI, Merger Sub and the Company each
have determined that it is in the best interests of their respective
stockholders for the Company to merge with and into Merger Sub, upon the terms
and subject to the conditions of this Agreement;
Whereas, as a condition to its willingness to enter into this Agreement, RSI
has required that, simultaneously with the execution hereof, the ML Entities
(as hereinafter defined) enter into the Agreement, dated as of the date hereof
(the "ML Agreement") with RSI pursuant to which the ML Entities are agreeing
to vote all of their Shares (as hereinafter defined) for approval and adoption
of this Agreement and the Merger (as hereinafter defined), and certain other
matters;
Whereas, RSI, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
Whereas, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code (as hereinafter defined).
Now, Therefore, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, RSI, Merger Sub and the Company
hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings set forth below:
"Affiliate": As defined in Rule 12b-2 under the Exchange Act.
"Affiliate Letter": As defined in Section 7.8.
"Alternative Sara Lee Bridge Financing": As defined in Section 7.10(a).
"Associate": As defined in Rule 12b-2 under the Exchange Act.
"Assumed Options": As defined in Section 4.1(e).
"Assumed Warrants": As defined in Section 4.1(e).
"Authorization": Any consent, approval or authorization of, expiration or
termination of any waiting period requirement (including pursuant to the HSR
Act) by, or filing, registration, qualification, declaration or designation
with, any Governmental Body.
"Benefit Arrangement": As defined in Section 5.8(a).
"Bridge Financing": As defined in Section 7.10(a).
A-1
<PAGE>
"Business Day": A day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or in the case of determining a
date on which any payment is due, a day other than Saturday, Sunday or any day
on which banks located in New York City are authorized or obligated by law to
close.
"Certificate of Merger": The certificate of merger with respect to the
merger of the Company with and into Merger Sub, containing the provisions
required by, and executed in accordance with, Section 251 of the DGCL.
"Certificates": As defined in Section 4.2(b).
"Class A Common Stock": Class A Common Stock, par value $.01 per share, of
the Company.
"Class B Common Stock": Class B Common Stock, par value $.01 per share, of
the Company.
"Closing": The closing of the Merger.
"Closing Date": The date on which the Closing occurs.
"Closing Date Market Price": With respect to one RSI Common Share, the
arithmetic average of the Closing Prices for such a share during the period of
the 20 most recent trading days ending on the third Business Day prior to the
Closing Date.
"Closing Price": On any day, the last reported sale price of one RSI Common
Share on the NYSE, as reported in the New York Stock Exchange Composite Tape.
"Code": The Internal Revenue Code of 1986, as amended, and all regulations
promulgated thereunder, as in effect from time to time.
"Commitment Letter": As defined in Section 7.11.
"Common Stock": The Class A Common Stock and Class B Common Stock.
"Company": US Foodservice Inc., a Delaware corporation.
"Company Alternative Proposal": As defined in Section 7.2.
"Company Charter": As defined in Section 7.10(d).
"Company Disclosure Statement": The disclosure statement dated the date of
this Agreement delivered by the Company to RSI.
"Company Management Loans": The loans made by the Company to certain members
of management of the Company or any of its Subsidiaries to enable them to the
purchase Shares, pursuant to the Non-Recourse Promissory Notes in the amounts
and to the individuals described in the Company Disclosure Statement.
"Company Material Adverse Effect": A material adverse effect on the
business, properties, operations or financial condition of the Company and its
Subsidiaries taken as a whole.
"Company Tax Matters Certificate": As defined in Section 5.20.
"Company Update Letter": As defined in Section 8.2(i).
"Continuing Director": As defined in Article Thirteenth of the Restated
Certificate of Incorporation of RSI, as amended from time to time.
"Controlled Group Liability": As defined in Section 5.8(e).
"Covered Company Proceeding": As defined in Section 8.2(i).
"Covered RSI Proceeding": As defined in Section 8.3(g).
"Dissenting Shares": As defined in Section 4.5.
"DGCL": The Delaware General Corporation Law.
A-2
<PAGE>
"Effective Time": As defined in Section 2.2.
"Employee Plan": As defined in Section 5.8(a).
"Employees": As defined in Section 5.8(a).
"Environmental Laws": As defined in Section 5.13.
"Equitable Entities": Equitable Deal Flow Fund, L.P., the Equitable Life
Assurance Society of the United States and Equitable Variable Life Insurance
Company.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended,
and all regulations promulgated thereunder, as in effect from time to time.
"ERISA Affiliate": Any trade or business, whether or not incorporated, that
is now or has at any time in the past been treated as a single employer with
the Company or RSI (as applicable) or any of their respective Subsidiaries
under Section 414(b), (c), (m) or (o) of the Code and the Treasury Regulations
thereunder.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Exchange Agent": As defined in Section 4.2(a).
"Exchange Fund": As defined in Section 4.2(a).
"Exchange Ratio": As defined in Section 4.1(a).
"Exchangeable Preferred Stock": Preferred Stock, par value $.01 per share,
designated as $15.00 Cumulative Exchangeable Redeemable Preferred Stock,
Series A, in Article Fourth B.3. of the Company's Restated Certificate of
Incorporation.
"Expenses": All out-of-pocket expenses (including, without limitation, all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto) incurred in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby.
"Goldman Sachs": As defined in Section 6.20.
"Governmental Body": Any Federal, state, municipal, political subdivision or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"HSR Act": The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Indemnified Party": As defined in Section 7.13(a).
"Intellectual Property": All industrial and intellectual property rights
including, but not limited to, Proprietary Technology, patents, patent
applications, trademarks, trademark applications and registrations, service
marks, service mark applications and registrations, copyrights, know-how,
licenses, trade secrets, proprietary processes, formulae and customer lists.
"Proprietary Technology" means all proprietary processes, formulae,
inventions, trade secrets, know-how, development tools and other proprietary
rights used by the Company and its Subsidiaries or RSI and its Subsidiaries,
as the case may be, pertaining to any product or service manufactured,
marketed, licensed or sold by the Company and its Subsidiaries or RSI and its
Subsidiaries, as the case may be, in the conduct of their business or used,
employed or exploited in the development, license, sale, marketing,
distribution or maintenance thereof, and all documentation and media
constituting, describing or relating to the above, including, but not limited
to, manuals, memoranda, know-how, notebooks, software, records and
disclosures.
"Liens": As defined in Section 5.12.
"Merger": The merger of the Company with and into Merger Sub as contemplated
by Section 2.1.
"Merger Sub": USF Acquisition Corporation, a Delaware corporation.
"Merrill Lynch": As defined in Section 5.18.
"ML Agreement": As defined in the second recital.
A-3
<PAGE>
"ML Entities": Merrill Lynch Capital Appreciation Partnership No. B-XVIII,
L.P., a Delaware limited partnership, ML Offshore LBO Partnership No. B-XVIII,
a Cayman Islands limited partnership, Merrill Lynch Capital Appreciation
Partnership No. XIII, L.P., a Delaware limited partnership, ML IBK Positions,
Inc., a Delaware corporation, Merrill Lynch KECALP L.P. 1991, a Delaware
limited partnership, Merrill Lynch KECALP L.P. 1994, a Delaware limited
partnership, MLCP Associates L.P. No. II, a Delaware limited partnership, MLCP
Associates L.P. No. IV, a Delaware limited partnership, ML Offshore LBO
Partnership No. XIII, a Cayman Islands limited partnership, ML Employees LBO
Partnership No. I, L.P., a Delaware limited partnership, Merchant Banking L.P.
No. II, a Delaware limited partnership, Merrill Lynch KECALP L.P. 1987, a
Delaware limited partnership, and MLCP.
"MLCP": Merrill Lynch Capital Partners, Inc., a Delaware corporation.
"NYSE": The New York Stock Exchange, Inc.
"Option": As defined in Section 4.1(e).
"Option Plans": As defined in Section 4.1(e).
"Person": Any individual or corporation, company, partnership, trust,
incorporated or unincorporated association, joint venture or other entity of
any kind.
"Preferred Stock": The 10% Preferred Stock and Exchangeable Preferred Stock.
"Preferred Stock Redemption Agreements": The Redemption Agreement dated as
of September 26, 1995 between Sara Lee Corporation and the Company, as amended
by the Amendment to Redemption Agreement dated November 20, 1995 and by the
Sara Lee Amendment (if executed), the Redemption Agreement dated as of
September 8, 1995 among ML IBK Positions, Inc., Merchant Banking L.P. No. IV
and the Company, as amended as of December 29, 1995 and February 2, 1996 and
the Redemption Agreement dated as of September 11, 1995 between Bankamerica
Capital Corporation and the Company.
"10% Preferred Stock": Preferred Stock, par value $.01 per share, designated
as "10.0% Preferred Stock" in Article Fourth B.2. of the Company's Restated
Certificate of Incorporation.
"Preliminary Prospectus": The Company's Preliminary Prospectus dated
November 21, 1995 relating to the Company's proposed Common Stock offering and
filed as a part of the Amendment No. 3 to the S-1 Registration Statement.
"Previous Company Auditor's Letter": As defined in Section 8.2(i).
"Previous RSI Auditor's Letter": As defined in Section 8.3(g).
"Proxy Statement/Prospectus": As defined in Section 7.4.
"Respective Representatives": As defined in Section 7.6.
"Registration Rights Agreement": The Registration Rights Agreement among RSI
and the other parties thereto in the form attached to the ML Agreement as
Exhibit A.
"Rights Agreement": The Rights Agreement, dated as of December 8, 1986, as
amended, between RSI and Bank of America National Trust and Savings
Association, as Rights Agent.
"RSI": Rykoff-Sexton, Inc., a Delaware corporation.
"RSI Alternative Proposal": A bona fide written offer submitted to RSI or
the holders of RSI Common Shares from any Person (other than the Company or
any Affiliate of the Company), unsolicited by RSI, for the acquisition or
purchase of all or a material amount of the assets or securities of, or any
merger, consolidation or business combination with, RSI or any Subsidiary of
RSI.
"RSI Benefit Arrangement": As defined in Section 6.09(a).
"RSI Common Shares": Shares of common stock, par value of $.10 per share, of
RSI.
"RSI Disclosure Statement": The disclosure statement dated the date of this
Agreement delivered by RSI to the Company.
A-4
<PAGE>
"RSI Employee Plan": As defined in Section 6.09(a).
"RSI Employees": As defined in Section 6.09(a).
"RSI Material Adverse Effect": A material adverse effect on the business,
properties, operations or financial condition of RSI and its Subsidiaries
taken as a whole.
"RSI SEC Reports": As defined in Section 6.15.
"RSI Stockholders Meeting": As defined in Section 7.3(b).
"RSI Tax Matters Certificate": As defined in Section 6.22.
"RSI Update Letter": As defined in Section 8.3(g).
"Rule 145 Affiliate": As defined in Section 7.8.
"S-1 Registration Statement": The Registration Statement of the Company on
Form S-1 (No. 33-96704) filed with the SEC on September 8, 1995 as amended by
Amendment No. 1 filed with the SEC on October 2, 1995, Amendment No. 2 filed
with the SEC on October 30, 1995 and Amendment No. 3 filed with the SEC on
November 21, 1995.
"S-4 Registration Statement": As defined in Section 7.4.
"Sara Lee": As defined in Section 7.10(a).
"Sara Lee Amendment": As defined in Section 7.10(a).
"Sara Lee Bridge Financing": As defined in Section 7.10(a).
"Sara Lee Redemption Agreement": As defined in Section 7.10(a).
"SEC": The Securities and Exchange Commission.
"Securities Act": The Securities Act of 1933, as amended.
"Share Consideration": As defined in Section 4.1(b).
"Shares": Collectively, the shares of Common Stock.
"Significant Subsidiary": As defined under Rule 12b-l of the Exchange Act.
"Standstill Agreement": The Standstill Agreement between RSI and the ML
Entities in the form attached to the ML Agreement as Exhibit B.
"Stock Split": The .396-for-1 reverse stock split of the Common Stock,
effective January 31, 1996.
"Stockholders Agreement": The Amended and Restated Stockholders Agreement,
dated September 22, 1993, among the Company, certain of the ML Entities, the
Equitable Entities, and the other signatories thereto.
"Subsidiary": As to any Person, any other Person of which at least 50% of
the equity or voting interests are owned, directly or indirectly, by such
first Person.
"Surviving Corporation": The surviving corporation in the Merger.
"Tax Agreement": The Agreement between RSI and each ML Entity and certain
other stockholders of the Company in the form attached as Exhibit C to the ML
Agreement.
"Tax Returns": As defined in Section 5.10.
"Termination Agreement": As defined in Section 5.21.
"Warrants": Warrants each dated September 4, 1992, for the purchase of an
aggregate of 227,700 shares of Common Stock exercisable at $15.35 per share
held by the Warrantholders.
"Warrantholders": Nippon Credit Bank, Ltd., Teachers Insurance and Annuity
Association of America, Dresdner Bank AG, New York Branch and Dresdner Bank
AG, Grand Cayman Branch.
"Wholly-Owned Subsidiary": A Subsidiary of which 100% of the equity interest
is owned directly or indirectly by the relevant parent company.
A-5
<PAGE>
ARTICLE II
THE MERGER; EFFECTIVE TIME; CLOSING
2.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time, the Company shall be merged with and into Merger Sub in
accordance with the provisions of Section 251 of the DGCL and with the effect
provided in Sections 259 and 261 of the DGCL. The separate corporate existence
of the Company shall thereupon cease and Merger Sub shall be the Surviving
Corporation and shall continue its corporate existence under the laws of the
State of Delaware.
2.2. Effective Time. The Merger shall become effective on the date and at
the time (the "Effective Time") that the Certificate of Merger shall have been
accepted for filing by the Secretary of State of the State of Delaware (or
such later date and time as may be specified in the Certificate of Merger as
may be permitted by such Secretary of State), which shall be the Closing Date
or as soon as practicable thereafter.
2.3. Closing. Subject to the fulfillment or waiver of the conditions set
forth in Article VIII, the Closing shall take place (i) at the offices of
Jones, Day, Reavis & Pogue, Chicago, Illinois, at 10:00 a.m. on the third
Business Day following the date of the RSI Stockholders Meeting or (ii) at
such other place and/or time and/or on such other date as RSI and the Company
may agree or as may be necessary to permit the fulfillment or waiver of the
conditions set forth in Article VIII.
ARTICLE III
TERMS OF MERGER
3.1. Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended
in accordance with the terms thereof and of the DGCL, except that Article
FIRST thereof shall be amended to read as follows:
"The name of the Corporation (which is hereinafter called the
"Corporation") is US Foodservice Inc."
3.2. The By-Laws. The By-Laws of Merger Sub in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, and in accordance with the Certificate of
Incorporation of the Surviving Corporation and the DGCL.
3.3. Directors. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
3.4. Officers. The officers of the Company at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
A-6
<PAGE>
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
4.1. Share Consideration; Conversion or Cancellation of Shares in the
Merger. Subject to the provisions of this Article IV, at the Effective Time,
by virtue of the Merger and without any action on the part of the holders
thereof, the shares of the constituent corporations shall be converted as
follows:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares, if any, held by RSI, Merger Sub or any other
Subsidiary of RSI) shall be converted into that number of RSI Common
Shares, rounded to the nearest thousandth of a share, or if there shall not
be a nearest thousandth of a share, to the next higher thousandth of a
share, equal to the quotient (the "Exchange Ratio") derived by dividing $25
by the Closing Date Market Price of one RSI Common Share; provided,
however, that (i) if the foregoing would result in an Exchange Ratio
greater than 1.457, the Exchange Ratio shall be deemed to be 1.457, and
(ii) if the foregoing would result in an Exchange Ratio less than 1.244 the
Exchange Ratio shall be deemed to be 1.244. If, prior to the Effective
Time, RSI should split, reclassify or combine the RSI Common Shares, or pay
a stock dividend or other stock distribution in RSI Common Shares, or
otherwise change or convert the RSI Common Shares into any other
securities, or make any other dividend or distribution on the RSI Common
Shares (other than normal cash dividends, subject to Section 7.9(c)), or if
a record date with respect to any of the foregoing shall have been set,
then the Exchange Ratio will be appropriately adjusted to reflect such
split, reclassification, combination, dividend or other distribution or
change.
(b) All Shares to be converted into RSI Common Shares pursuant to this
Section 4.1 shall cease to be outstanding, shall be canceled and retired
and shall cease to exist, and each holder of a certificate representing any
such Shares shall thereafter cease to have any rights with respect to such
Shares, except the right to receive for each of the Shares, upon the
surrender of such certificate in accordance with Section 4.2, the amount of
RSI Common Shares specified in accordance with Section 4.1(a) (the "Share
Consideration") and cash in lieu of fractional RSI Common Shares as
contemplated by Section 4.3.
(c) Shares, if any, held by RSI, Merger Sub or any other Subsidiary of
RSI and each Share held by the Company as treasury stock immediately prior
to the Effective Time shall cease to be outstanding, shall be canceled and
retired without payment of any consideration therefor, and shall cease to
exist.
(d) Each share of common stock, par value of $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall
continue to be one share of common stock of the Surviving Corporation, with
the same rights, powers and privileges as such share of common stock of
Merger Sub immediately prior to the Effective Time.
(e) (i) Each outstanding option to purchase Shares listed on Schedule
4.1(e) in the Company Disclosure Statement (each, an "Option") issued
pursuant to the Company's stock option plans (collectively, the "Option
Plans") filed as an exhibit to the S-1 Registration Statement, whether or
not vested or exercisable, shall be assumed by RSI and shall constitute an
option to acquire, on the same terms and conditions as were applicable
under such Option, a number of RSI Common Shares, rounded up or down to the
nearest thousandth of a share, or if there shall not be a nearest
thousandth of a share, to the next higher thousandth of a share, equal to
the product of the Exchange Ratio and the number of Shares subject to such
Option immediately prior to the Effective Time, at a price per share equal
to the aggregate exercise price for the Shares subject to such Option
divided by the number of RSI Common Shares deemed to be purchasable
pursuant to such Option ("Assumed Options"); provided that with respect to
those Options which are performance options, not vested in accordance with
their terms, the performance criteria shall be deemed satisfied on the
first anniversary of the Effective Time; provided further, that the
conversion of any Option into an Assumed Option with an exercise price less
than $.10 per RSI Common Share shall be subject to the optionee's agreement
that upon exercise, (x) to the extent RSI is holding RSI Common Shares as
treasury shares that are not reserved for any other purpose, RSI shall
issue the appropriate number of such treasury shares to the optionee and
(y) to the extent that no such treasury shares are available, such optionee
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shall pay an exercise price of $.10 per RSI Common Share; and (ii) each
Warrant shall be assumed by RSI and shall constitute a warrant to acquire,
on the same terms and conditions as were applicable under such Warrant, a
number of RSI Common Shares equal to the product of the Exchange Ratio and
the number of Shares subject to such Warrant at a price per share equal to
the aggregate exercise price for the Shares subject to such Warrant divided
by the number of RSI Common Shares deemed to be purchasable pursuant to
such Warrant ("Assumed Warrants"). At the Effective Time, RSI shall deliver
to holders of Assumed Options and Assumed Warrants appropriate option and
warrant agreements representing the right to acquire RSI Common Shares on
the same terms and conditions as contained in the Options and Warrants
(subject to any adjustments required by the preceding sentence), upon
surrender of the outstanding Options and Warrants. RSI shall comply with
the terms of the Option Plans as they apply to the Options assumed as set
forth above. RSI shall take all corporate action necessary to reserve for
issuance a sufficient number of RSI Common Shares for delivery upon
exercise of the Assumed Options and Assumed Warrants in accordance with
this Section 4.1(e). RSI shall file a registration statement on Form S-8
(or any successor form) or another appropriate form, effective as of the
Effective Time, with respect to RSI Common Shares subject to Assumed
Options and shall use commercially reasonable efforts to maintain the
effectiveness of such registration statement or registration statements
(and maintain the current status of the prospectus or prospectuses
contained therein) for so long as the Assumed Options remain outstanding.
RSI shall cause the Assumed Options to be administered by RSI's Management
Development--Compensation and Stock Option Committee or any successor
committee.
4.2. Payment for Shares in the Merger. The manner of making payment for
Shares in the Merger shall be as follows:
(a) At the Effective Time, RSI shall make available to an exchange agent
selected by RSI and reasonably acceptable to the Company (the "Exchange
Agent"), for the benefit of those Persons who immediately prior to the
Effective Time were the holders of Shares, for exchange in accordance with
this Article IV, a sufficient number of certificates representing RSI
Common Shares required to effect the delivery of the aggregate Share
Consideration required to be issued pursuant to Section 4.1 (the
certificates representing RSI Common Shares comprising such aggregate Share
Consideration being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions to be given by
RSI at or prior to the Effective Time following approval thereof by the
Company, such approval not to be unreasonably withheld, deliver the RSI
Common Shares contemplated to be issued pursuant to Section 4.1 out of the
Exchange Fund. Except as provided in Section 4.3, the Exchange Fund shall
not be used for any other purpose.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record (other than holders of certificates for Shares
referred to in Section 4.1(c)) of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") (i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the
surrender of the Certificates for payment therefor. Upon surrender of
Certificates for cancellation to the Exchange Agent, together with such
letter of transmittal duly executed and any other documents as may be
reasonably required, the holder of such Certificates shall be entitled to
receive for each of the Shares represented by such Certificates the Share
Consideration and the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, Certificates shall represent solely the
right to receive the Share Consideration and any cash in lieu of fractional
RSI Common Shares as contemplated by Section 4.3 with respect to each of
the Shares represented thereby. No dividends or other distributions that
are declared after the Effective Time on RSI Common Shares and payable to
the holders of record thereof after the Effective Time will be paid to
Persons entitled by reason of the Merger to receive RSI Common Shares until
such Persons surrender their Certificates. Upon such surrender, there shall
be paid to the Person in whose name the RSI Common Shares are issued any
dividends or other distributions having a record date after the Effective
Time and payable with respect to such RSI Common Shares between the
Effective Time and the time of such surrender. After such surrender there
shall be paid to the Person in
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whose name the RSI Common Shares are issued any dividends or other
distributions on such RSI Common Shares which shall have a record date
after the Effective Time and prior to such surrender and a payment date
after such surrender and such payment shall be made on such payment date.
In no event shall the Persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any cash or any certificate representing RSI Common
Shares is to be paid to or issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
Person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates
for such RSI Common Shares in a name other than that of the registered
holder of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor
any party hereto shall be liable to a holder of Shares for any RSI Common
Shares or dividends thereon or, in accordance with Section 4.3, cash in
lieu of fractional interests, delivered to a public official pursuant to
applicable escheat law. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the RSI Common Shares held
by it from time to time hereunder, except that it shall receive and hold
all dividends or other distributions paid or distributed with respect to
such RSI Common Shares for the account of the Persons entitled thereto.
(c) Certificates surrendered for exchange by any Person constituting a
Rule 145 Affiliate of the Company shall not be exchanged for certificates
representing RSI Common Shares until RSI has received an Affiliate Letter
from such Person as provided in Section 7.8.
(d) Any portion of the Exchange Fund which remains unclaimed by the
former stockholders of the Company for one year after the Effective Time
shall be delivered to RSI, upon demand of RSI, and any former stockholders
of the Company shall thereafter look only to RSI for payment of their claim
for the Share Consideration for the Shares or for any cash in lieu of
fractional RSI Common Shares.
(e) In the event any certificates representing Shares shall have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed certificates, upon the making of such
affidavit of that fact by the holder thereof or the delivery of such other
documents and instruments (including, without limitation, any indemnity
bond) as the Exchange Agent shall require, such RSI Common Shares as may be
required pursuant to Section 4.2.
4.3. Fractional Shares. No fractional RSI Common Shares shall be issued in
the Merger. In lieu of any such fractional securities, each holder of Shares
who would otherwise have been entitled to a fraction of an RSI Common Share
upon surrender of Certificates for exchange pursuant to this Article IV will
be paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (a) the Closing Date Market Price by (b) the
fractional interest to which such holder otherwise would be entitled. As soon
as practicable after the determination of the amount of cash to be paid to
former stockholders of the Company in lieu of any fractional interests, RSI
shall deposit with the Exchange Agent the cash necessary for this purpose.
4.4. Transfer of Shares after the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Company after the close of
business on the day prior to the date of the Effective Time.
4.5. Dissenting Shares. (a) Notwithstanding the provisions of Section 4.1 or
any other provision of this Agreement to the contrary, Shares that are issued
and outstanding immediately prior to the Effective Time and are held by
stockholders who have not voted such Shares in favor of the adoption of this
Agreement or consented thereto in writing and who properly demand appraisal of
such Shares in accordance with Section 262 of the DGCL (the "Dissenting
Shares") will not be converted as provided in Section 4.1(a) at or after the
Effective Date unless and until the holder of such Dissenting Shares fails to
perfect or effectively withdraws or loses such right to appraisal and payment
under the DGCL. If a holder of Dissenting Shares so fails to perfect or
effectively withdraws or loses such right to appraisal and payment, then, as
of the Effective Time or the occurrence of such event, whichever last occurs,
such holder's Dissenting Shares will be converted into and represent solely
the right provided in Section 4.1(a).
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(b) The Company will give RSI (i) prompt written notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to Section 262 of the DGCL and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under Section 262 of the DGCL. The
Company will not voluntarily make any payment with respect to any demands for
appraisals and will not, except with the prior written consent of RSI, settle
or offer to settle any such demands.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to RSI and Merger Sub that,
except as set forth in the S-1 Registration Statement or the Company
Disclosure Statement:
5.1. Organization, Etc. of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
by the Company to be conducted, to enter into this Agreement and to carry out
the provisions of this Agreement and consummate the transactions contemplated
hereby. The Company is duly qualified and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to be so qualified has or would be reasonably expected (so
far as can be foreseen at the time) to have a Company Material Adverse Effect.
The Company has obtained from the appropriate Governmental Bodies all
approvals and licenses necessary for the conduct of its business and
operations as currently conducted, which approvals and licenses are valid and
remain in full force and effect, except where the failure to have obtained
such approvals or licenses or the failure of such licenses and approvals to be
valid and in full force and effect does not have and would not be reasonably
expected (so far as can be foreseen at the time) to have a Company Material
Adverse Effect. The Company is not subject to any order, complaint, proceeding
or investigation pending or, to the knowledge of the Company, threatened,
which affects or would reasonably be expected (so far as can be foreseen at
the time) to affect the validity of any such approvals or licenses or impair
the renewal thereof, except where the invalidity of any such approvals or
licenses or the non-renewal thereof does not have and would not be reasonably
expected (so far as can be foreseen at the time) to have a Company Material
Adverse Effect.
5.2. Subsidiaries. Each Subsidiary of the Company (a) is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the full corporate
power and authority to own its properties and conduct its business and
operations as currently conducted, except where the failure to be duly
organized, validly existing and in good standing does not have, and would not
be reasonably expected (so far as can be foreseen at the time) to have, a
Company Material Adverse Effect, (b) is duly qualified and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have a Company
Material Adverse Effect, (c) has obtained from the appropriate Governmental
Bodies all approvals and licenses necessary for the conduct of its business
and operations as currently conducted, which licenses and approvals are valid
and remain in full force and effect, except where the failure to have obtained
such approvals and licenses or the failure of such licenses and approvals to
be valid and in full force and effect does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have a Company
Material Adverse Effect, and (d) is subject to no order, complaint, proceeding
or investigation pending or, to the knowledge of the Company or such
Subsidiary, threatened, which would be reasonably expected (so far as can be
foreseen at the time) to affect the validity of any such approvals or licenses
or impair the renewal thereof, except where the invalidity of any such
approvals or licenses or the non-renewal thereof does not have and would not
be reasonably expected (so far as can be foreseen at the time) to have a
Company Material Adverse Effect. Exhibit 22 to the S-1 Registration Statement
sets forth an accurate and complete list of all Subsidiaries of the Company.
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5.3. Agreement. The Board of Directors of the Company has approved, by the
unanimous vote of those directors present, the Merger, this Agreement and the
transactions contemplated hereby and have approved recommending approval of
the Merger, this Agreement and the transactions contemplated hereby to the
stockholders of the Company. This Agreement has been duly executed and
delivered by a duly authorized officer of the Company and constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
application which may affect the enforcement of creditors' rights generally
and by general equitable principles. The Company has delivered to RSI true and
correct copies of resolutions adopted by the Board of Directors of the Company
approving this Agreement.
5.4. Capital Stock. The authorized capital stock of the Company consists of
(a) 50,000,000 shares of Class A Common Stock, of which 8,019,037 shares are
issued and outstanding and 37,152 shares are held as treasury stock as of the
date hereof, (b) 50,000,000 shares of Class B Common Stock, of which 821,206
shares are issued and outstanding as of the date hereof and no shares are held
as treasury stock, (c) 2,000,000 shares of Preferred Stock, of which (i)
33,564.35 shares are designated as 10% Preferred Stock, of which 27,934 shares
are issued and outstanding as of the date hereof and no shares are held as
treasury stock, and (ii) 314,000 shares are designated as Exchangeable
Preferred Stock, of which 246,179 shares are issued and outstanding as of the
date hereof and no shares are held as treasury stock. Schedule 4.1(e) in the
Company Disclosure Statement sets forth a true, accurate and complete list of
(a) each holder of record of shares of Class A Common Stock and Class B Common
Stock and the number of such shares held of record by each such holder, (b)
each optionee under the Options and the number of shares of Class A Common
Stock or Class B Common Stock issuable upon exercise of such Options and (c)
each holder of record of Warrants, and the number of shares of Class A Common
Stock and Class B Common Stock issuable upon exercise of such Warrants. All of
the outstanding shares of Class A Common Stock and Class B Common Stock are
duly authorized, validly issued, fully paid and nonassessable. As of the date
hereof, the 64,952 shares of Exchangeable Preferred Stock formerly held by
Bankamerica Capital Corporation have been redeemed by the Company at a total
redemption price (including interest to the date of redemption) of
$6,677,395.09, and such redemption was made in accordance with the terms of
the Preferred Stock Redemption Agreement with Bankamerica Capital Corporation.
Schedule 7.10 in the Company Disclosure Statement sets forth true and accurate
redemption amounts for the 10% Preferred Stock and the Exchangeable Preferred
Stock as of the respective redemption dates set forth therein calculated in
accordance with the terms of the Company's Restated Certificate of
Incorporation. Other then pursuant to the Stockholders Agreement, no class of
capital stock of the Company is entitled to preemptive rights. No options,
warrants or other rights to acquire capital stock from the Company or any
stockholder of the Company are outstanding, other than (a) the right to
convert shares of Class B Common Stock into Class A Common Stock and the right
to convert Class A Common Stock into Class B Common Stock pursuant to the
Restated Certificate of Incorporation of the Company, (b) Options and Warrants
described on Schedule 4.1(e) in the Company Disclosure Statement representing
in the aggregate the right to purchase up to 973,290 shares of Common Stock
and (c) pursuant to Section VII of the Stockholders Agreement. Except as
described under the heading "Capitalization" as the Company's actual
capitalization in the Preliminary Prospectus, there are no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote or which are convertible into or exercisable for securities having the
right to vote with stockholders of the Company on any matter. All outstanding
shares of capital stock of the Subsidiaries of the Company are owned by the
Company or a direct or indirect Wholly-Owned Subsidiary of the Company, free
and clear of all liens, charges, encumbrances, claims and options of any
nature. The Company Disclosure Statement or the S-1 Registration Statement
list, and the Company has delivered to RSI true and complete copies of, all
agreements and contracts, whether oral or written, relating to shares of
capital stock of the Company or options, warrants or other rights to acquire
capital stock of the Company (including, without limitation, any rights of
first refusal), including the Preferred Stock Redemption Agreements and all
amendments thereto, and all such agreements and contracts are in full force in
effect. Subject to the redemption of the Preferred Stock in accordance with
the Preferred Stock Redemption Agreements or as otherwise contemplated by
Section 7.10, no approval or consent of securityholders of the Company is
required under the Company's Restated Certificate of Incorporation or Bylaws,
the DGCL, the Stockholders Agreement
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or any other agreement, with respect to this Agreement, the Merger and the
transactions contemplated hereby, other than (i) the execution by each party
to the Stockholders Agreement of the Termination Agreement, which has been
effected, (ii) the affirmative vote of 66 2/3% of the outstanding shares of
Class A Common Stock and Class B Common Stock voting together as a class and
(iii) the affirmative vote of a majority of the votes represented by the
outstanding shares of Class A Common Stock, Class B Common Stock and
Exchangeable Preferred Stock, voting together as a class. The ML Entities
collectively hold of record a sufficient number of shares of Class A Common
Stock to approve this Agreement, the Merger and the transactions contemplated
hereby in accordance with the Company's Restated Certificate of Incorporation
and Bylaws, the Stockholders Agreement and the DGCL. The Stock Split was
effective on January 31, 1996, and effected in accordance with the Company's
Restated Certificate of Incorporation and Bylaws, the Stockholders Agreement
and the DGCL.
5.5. Other Interests. Except for interests in the Company's Subsidiaries,
neither the Company nor any of the Company's Subsidiaries owns, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity (other than
(i) non-controlling investments in the ordinary course of business and
cooperative marketing and similar undertakings and arrangements entered into
in the ordinary course of business (ii) other investments, consisting of cash
equivalents and equity interests in former customers in settlement of
indebtedness, of less than $3,000,000 in the aggregate and (iii) Company
Management Loans and other loans to employees described in the Company
Disclosure Statement.
5.6. Litigation. There are no actions, suits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, or any property of the Company or any such Subsidiary
in any court or before any arbitrator of any kind or before or by any
Governmental Body, except actions, suits, investigations or proceedings which,
in the aggregate, do not have and would not be reasonably expected (so far as
can be foreseen at the time) to (a) have a Company Material Adverse Effect or
(b) have the effect of preventing or materially delaying the performance by
the Company of its obligations under this Agreement.
5.7. Compliance with Other Instruments, Etc. Neither the Company nor any
Subsidiary of the Company is in violation of any term of (a) its charter,
bylaws or other organizational documents, (b) any agreement or instrument
related to indebtedness for borrowed money or any other agreement to which it
is a party or by which it is bound, (c) any applicable law, ordinance, rule or
regulation of any Governmental Body, or (d) any applicable order, judgment or
decree of any court, arbitrator or Governmental Body, the consequences of
which violation, whether individually or in the aggregate, have or would be
reasonably expected (so far as can be foreseen at the time) to (i) have a
Company Material Adverse Effect or (ii) have the effect of preventing or
materially delaying the performance by the Company of its obligations under
this Agreement. The execution, delivery and performance of this Agreement by
the Company will not result in any violation of or conflict with, constitute a
default under, or require any consent under any terms of the charter, by-laws
or other organizational document of the Company (or any of its Subsidiaries)
or any such agreement, instrument, law, ordinance, rule, regulation, order,
judgment or decree or result in the creation of (or impose any obligation on
the Company or any of its Subsidiaries to create) any mortgage, lien, charge,
security interest or other encumbrance upon any of the properties or assets of
the Company or any of its Subsidiaries pursuant to any such term, except where
such violation, conflict or default, or the failure to obtain such consent,
individually or in the aggregate, does not have and would not be reasonably
expected (so far as can be foreseen at the time) to (i) have a Company
Material Adverse Effect or (ii) have the effect of preventing or materially
delaying the performance by the Company of its obligations under this
Agreement.
5.8. Employee Benefit Plans. (a) The Preliminary Prospectus, the "Exhibit
Index" to the S-1 Registration Statement or the Company Disclosure Statement
sets forth a true and complete list of all the following: (x) each "employee
benefit plan," as such term is defined in Section 3(3) of ERISA, pursuant to
which the Company or any of its Subsidiaries has (A) any liability in respect
of current or former employees, agents, directors, or independent contractors
of the Company or its Subsidiaries ("Employees") or any beneficiaries or
dependents of any Employees or (B) any obligation to issue capital stock of
the Company or any of its Subsidiaries (each,
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an "Employee Plan"), and (y) each other plan, program, policy, contract or
arrangement providing for bonuses, pensions, deferred pay, stock or stock
related awards, severance pay, salary continuation or similar benefits,
hospitalization, medical, dental or disability benefits, life insurance or
other employee benefits, or compensation to or for any Employees or any
beneficiaries or dependents of any Employees (other than directors' and
officers' liability policies), whether or not insured or funded, (A) pursuant
to which the Company or any of its Subsidiaries has any material liability or
(B) constituting an employment or severance agreement or arrangement with any
officer or director of the Company or any Subsidiary or with any holder of
Shares (each, a "Benefit Arrangement"). The Company has used its reasonable
efforts to provide to RSI with respect to each Employee Plan and Benefit
Arrangement: (i) a true and complete copy of all written documents comprising
such Employee Plan or Benefit Arrangement and any related trust agreement,
insurance contract or other funding vehicle (including amendments and
individual agreements relating thereto, or, if there is no such written
document, an accurate and complete description of such Employee Plan or
Benefit Arrangement); (ii) the most recent Form 5500 or Form 5500-C/R
(including all schedules thereto), if applicable; (iii) the most recent
financial statements and actuarial reports or valuations, if any; (iv) the
summary plan description currently in effect and all material modifications
thereof, if any; and (v) the most recent Internal Revenue Service
determination letter, if any. Any such Employee Plans and Benefit Arrangements
for which the Company has not so provided such documents after using its
reasonable efforts are not in the aggregate material to the Company and its
Subsidiaries taken as a whole.
(b) Each Employee Plan and Benefit Arrangement has been established,
operated and maintained in all material respects in accordance with its terms
and in material compliance with all applicable laws and the rules and
regulations thereunder, including, but not limited to, ERISA and the Code.
Neither the Company nor any of its Subsidiaries or former Subsidiaries nor any
of their respective current or former directors, officers, or employees, nor,
to the best knowledge of the Company, any other disqualified person or party-
in-interest with respect to any Employee Plan, have engaged directly or
indirectly in any "prohibited transaction," as such term is defined in Section
4975 of the Code or Section 406 of ERISA, with respect to which the Company or
its Subsidiaries could have or has any material liability. All contributions
and other payments required to be made for any period through the date to
which this representation speaks to the Employee Plans and Benefit
Arrangements (or to any person pursuant to the terms thereof) have been made
or paid in a timely fashion, or, to the extent not required to be made or paid
on or before the date to which this representation speaks, have been reflected
in the Company's financial statements. Each Employee Plan that is intended to
be qualified under Section 401(a) of the Code has, as amended or proposed to
be amended to comply with the Tax Reform Act of 1986 and subsequent
legislation, been determined by the Internal Revenue Service to be so
qualified or an application for such a determination, which was filed before
the expiration of the applicable remedial amendment period, is pending, and,
to the best knowledge of the Company, no circumstances exist that are
reasonably expected by the Company to result in the revocation of any such
determination.
(c) With respect to each Employee Plan that is subject to Title IV of ERISA:
(i) as of the last applicable annual valuation date, the present value of all
benefits under such Employee Plan did not exceed the value of the assets of
such Employee Plan allocable to such benefits, on a projected benefits basis,
using the actuarial methods, factors and assumptions used for the most recent
actuarial report with respect to such Employee Plan; and (ii) there has been
no termination, partial termination or "reportable event" (as defined in
Section 4043 of ERISA) with respect to any such Employee Plan. No Employee
Plan that is subject to Section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in Section 412 of the Code), whether or not
waived. No event has occurred, and, to the best knowledge of the Company,
there do not exist any circumstances, that could subject the Company or any
Subsidiary of the Company to any material liability arising under ERISA. With
respect to the Employee Plans and Benefit Arrangements, individually and in
the aggregate, no event has occurred, and, to the best knowledge of the
Company, there do not exist any circumstances, that could subject the Company
or any Subsidiary of the Company to any material liability under the Code or
other applicable law, or under any indemnity agreement to which the Company or
any Subsidiary of the Company is a party, excluding liability for benefit
claims, administrative expenses and funding obligations payable in the
ordinary course.
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(d) No Employee Plan is a "multiemployer plan" as that term is defined in
Section 3(37) of ERISA or a "multiple employer plan" described in Section
4063(a) of ERISA, nor has the Company or any ERISA Affiliate of the Company at
any time since January 1, 1992, contributed to or been obligated to contribute
to such a multiemployer plan or multiple employer plan.
(e) Except with respect to an Employee Plan, neither the Company nor any
ERISA Affiliate of the Company has any Controlled Group Liability, nor do any
circumstances exist that could result in any of them having any Controlled
Group Liability. "Controlled Group Liability" means any and all liabilities
under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and
4971 of the Code and (iv) the continuation coverage requirements of Section
601 et seq. of ERISA and Section 4980B of the Code.
(f) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby (either alone or together
with any additional or subsequent events), constitutes an event under any
Employee Plan, Benefit Arrangement, loan to, or individual agreement or
contract with, an Employee that may result in any payment (whether of
severance pay or otherwise), restriction or limitation upon the assets of any
Employee Plan or Benefit Arrangement, acceleration of payment or vesting,
increase in benefits or compensation, or required funding, with respect to any
Employee, or the forgiveness of any loan or other commitment of any Employees.
(g) There are no actions, suits, arbitrations, inquiries, investigations or
other proceedings (other than routine claims for benefits) pending or, to the
Company's knowledge, threatened, with respect to any Employee Plan or Benefit
Arrangement.
(h) No Employees and no beneficiaries or dependents of Employees are or may
become entitled under any Employee Plan or Benefit Arrangement to post-
employment or retiree welfare benefits of any kind, including without
limitation death or medical benefits, other than coverage mandated by Part 6
of Title I of ERISA or Section 4980B of the Code or other applicable law.
5.9. Labor Matters. There are no agreements with, or pending petitions for
recognition of, a labor union or association as the exclusive bargaining agent
for any of the employees of the Company or any of its Subsidiaries; no such
petitions have been pending at any time within two years of the date of this
Agreement and, to the best knowledge of the Company, there has not been any
organizing effort by any union or other group seeking to represent any
employees of the Company or any of its Subsidiaries as their exclusive
bargaining agent at any time within two years of the date of this Agreement.
There are no labor strikes, work stoppages or other labor troubles, other than
routine grievance matters, now pending, or, to the Company's knowledge,
threatened, against the Company or any of its Subsidiaries, nor have there
been any such labor strikes, work stoppages or other labor troubles, other
than routine grievance matters, with respect to the Company or any of its
Subsidiaries at any time within two years of the date of this Agreement.
5.10. Taxes. (a) The Company and its Subsidiaries have timely filed all
federal, state, county, local and foreign tax returns, reports, declarations
and forms ("Tax Returns") required to be filed by them, or requests for
extensions to file such Tax Returns have been timely filed and granted and
have not expired, and all Tax Returns are complete and accurate in all
respects, except to the extent that such failures to file or be complete and
accurate in all respects, as applicable, individually or in the aggregate do
not have and would not reasonably be expected (so far as can be foreseen at
the time) to have a Company Material Adverse Effect. The Company and each of
its Subsidiaries has paid (or the Company has paid on its behalf) or made
adequate provision for all taxes shown as due on such Tax Returns. The Company
and each of its Subsidiaries have paid or made adequate provision for all
taxes required to be paid without the filing of any Tax Returns which have
become due and payable. The most recent financial statements contained in the
Preliminary Prospectus reflect adequate reserves for all taxes payable by the
Company and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements, and no deficiencies for
any taxes have been proposed, asserted or assessed against the Company or any
of its Subsidiaries that are not adequately reserved for, except for
inadequately reserved taxes and inadequately reserved deficiencies that,
individually or in the aggregate, do not have and
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would not reasonably be expected (so far as can be foreseen at the time) to
have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has any reasonable basis to believe that any such deficiencies
exist in excess of such established reserves. The consolidated federal income
tax returns of the Company have been audited by the Internal Revenue Service
(or closed by applicable statute of limitations), and all liabilities in
respect thereof have been finally determined, for all taxable years up to and
including the taxable year ended December 31, 1991. Neither the Company nor
any of its Subsidiaries is a party to any pending or has knowledge of any
threatened action or proceeding by any taxing authority for the determination,
assessment or collection of any taxes of the Company or any of its
Subsidiaries or relating to their respective businesses and operations. There
are no liens for taxes (other than for current taxes not yet due and payable)
on the assets of the Company or its Subsidiaries. No requests for waivers of
the time to assess any taxes against the Company or any of its Subsidiaries
have been granted or are pending, except for requests with respect to such
taxes that have been adequately reserved for in the most recent financial
statements contained in the Preliminary Prospectus, or, to the extent not
adequately reserved, the assessment of which, individually or in the
aggregate, do not have and would not reasonably be expected (so far as can be
foreseen at the time) to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is a party to or bound by any agreement
providing for the allocation or sharing of taxes. Neither the Company nor any
of its Subsidiaries has filed a consent pursuant to or agreed to the
application of Section 341(f) of the Code. Each of the Company and its
Subsidiaries has disclosed on its federal income tax returns all positions
taken therein that could give rise to a substantial understatement of federal
income tax within the meaning of Section 6662 of the Code. All taxes that are
required by the laws of the United States, any state or political subdivision
thereof, or any foreign country to be withheld or collected by the Company or
any of its Subsidiaries have been duly withheld or collected and, to the
extent required, have been paid to the proper governmental authorities or
properly deposited as required by applicable laws. None of the Company and its
Subsidiaries (i) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent
of which was the Company), or (ii) has any liability for the taxes of any
Person (other than any of the Company and its Subsidiaries) under Treas. Reg.
(S) 1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract or otherwise. Neither the Company nor any
of its Subsidiaries will be required, as a result of a change in method of
accounting for a taxable year beginning on or before the Closing Date, to
include any adjustment under Section 481(a) of the Code in its taxable income
for any taxable year beginning after the Closing Date. Neither the Company nor
any of its Subsidiaries is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code. For purposes
of this Agreement, the term tax (including, with correlative meaning, the
terms "taxes" and "taxable") shall include all federal, state, local, and
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, and other taxes, duties, or
assessments of any nature whatsoever, together with all interest, penalties,
and additions imposed with respect to such amounts.
(b) The Company Disclosure Statement sets forth each state in which the
Company and its Subsidiaries (i) filed an income or franchise tax return,
whether on a consolidated, combined or separate return basis, for the taxable
year ended December 31, 1995, and (ii) collected or remitted any sales and/or
use taxes as of December 31, 1995.
(c) Neither the Company nor any of its Subsidiaries owns any real property
in the State of New York. The only real property leased by the Company or any
of its Subsidiaries in the State of New York consists of three offices,
designated as Office #100, Office #101B and Office #105, located in the
Pickard Office Building, 5858 East Molloy Road, Syracuse, New York 13211.
(d) Neither the Company nor any of its Subsidiaries has taken or agreed to
take any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
5.11. Intellectual Property. The Company and its Subsidiaries own, or
possess valid licenses or other valid rights to use, the Intellectual Property
used in the Company's business, except where the failure to own or have the
right to use such Intellectual Property, in the aggregate, does not have and
would not be reasonably expected (so far as can be foreseen at the time) to
have a Company Material Adverse Effect.
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5.12. Properties. Except as disclosed or reserved against in the most recent
financial statements contained in the Preliminary Prospectus, the Company and
each of its Subsidiaries have good and marketable title to all of the material
properties and assets, tangible or intangible, reflected in such financial
statements as being owned by the Company and each of its Subsidiaries as of
the dates thereof, free and clear of all liens, encumbrances, charges,
defaults or equities of whatever character except such imperfections or
irregularities of title, liens, encumbrances, charges or defaults that do not
affect the use thereof in any material respect and statutory liens securing
payments not yet due ("Liens"). All leased buildings and all leased fixtures,
equipment and other property and assets that are material to the Company's
business on a consolidated basis are held under leases or subleases that are
valid and binding instruments enforceable in accordance with their respective
terms, and there is not under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default), except where the lack of such
validity and binding nature or the existence of such default or event of
default does not have and would not reasonably be expected (so far as can be
foreseen at the time) to have a Company Material Adverse Effect.
5.13. Environmental Matters. Except in all cases that, in the aggregate,
have not had and would not reasonably be expected (so far as can be foreseen
at the time) to have a Company Material Adverse Effect, the Company and each
of its Subsidiaries (i) have obtained all applicable permits, licenses and
other authorizations which are required to be obtained under all applicable
federal, state, local or foreign laws or any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder relating to pollution or protection of the environment
("Environmental Laws"), including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or hazardous or
toxic materials or wastes into ambient air, surface water, ground water, or
land or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants or hazardous or toxic materials or wastes by the Company or its
Subsidiaries (or their respective agents); (ii) are in compliance with all
terms and conditions of such required permits, licenses and authorization, and
also are in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in applicable Environmental Laws; (iii) as of the date hereof, are
not aware of nor have received notice of any past or present violations of
Environmental Laws, or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or
prevent continued compliance with or which would give rise to any common law
or statutory liability, or otherwise form the basis of any claim, action, suit
or proceeding, against the Company or any of its Subsidiaries based on or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or
release into the environment, of any pollutant, contaminant or hazardous or
toxic material or waste; and (iv) have taken all actions necessary under
applicable Environmental Laws to register any products or materials required
to be registered by the Company or its Subsidiaries (or any of their
respective agents) thereunder.
5.14. Registration Statement and Financial Statements. The Company has
previously furnished or made available to RSI a true and complete copy of the
S-1 Registration Statement and all exhibits thereto that were filed with the
SEC. The S-1 Registration Statement, as of the date of the Preliminary
Prospectus, contained no untrue statement of material fact nor omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that RSI acknowledges that (i) the
Company's recapitalization, refinancing, initial public offering, new stock
option plan, option vesting and forgiveness of the Company Management Loans as
described in the S-1 Registration Statement have not been consummated, and
(ii) the descriptions of the amended and restated Stockholders Agreement, the
Company's Restated Certificate of Incorporation and the Company's Bylaws
contained in the S-1 Registration Statement reflect amendments which have not
been implemented. Each of the balance sheets (including the related notes)
included in the S-1 Registration Statement presents fairly, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof, and the other related
statements (including the related notes) included therein present fairly, in
all material respects, the results of operations, changes in shareholders
equity and cash flows of the Company and its Subsidiaries for the respective
periods or as of the respective dates set forth therein, all in conformity
with
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generally accepted accounting principles consistently applied during the
periods involved, except as otherwise noted therein, and subject, in the case
of the unaudited interim financial statements, to normal year-end adjustments
and any other adjustments described therein. The Company has provided to RSI
true and correct copies of the Company's unaudited consolidated financial
statements as of, and for the year ended, December 31, 1995. Such unaudited
financial statements present fairly in all material respects, the results of
operations and cash flows of the Company and its Subsidiaries as of, and for
the year ended, December 31, 1995, all in conformity with general accepted
accounting principles consistently applied during the period involved except
as otherwise noted therein and except for the absence of footnote disclosure,
and subject to normal audit adjustments and any other adjustments described
therein. The S-1 Registration Statement, as of its date, complied in all
material respects with the disclosure requirements of Form S-1 and Regulation
S-K under the Securities Act.
5.15. Absence of Certain Changes or Events. During the period since December
31, 1995, the business of the Company and its Subsidiaries has been conducted
only in the ordinary course, consistent with past practice, and neither the
Company nor any Subsidiary of the Company has entered into any material
transaction other than in the ordinary course, consistent with past practice,
and there has not been (a) any change in the business, financial condition,
results of operations, properties, assets or liabilities of the Company and
its Subsidiaries taken as a whole that, individually or in the aggregate, has
or would reasonably be expected to have (so far as can be foreseen at the
time) a Company Material Adverse Effect, (b) any damage, destruction or loss
(whether or not covered by insurance) with respect to any property or asset of
the Company or any of its Subsidiaries which, individually or in the
aggregate, has or would reasonably be expected (so far as can be foreseen at
the time) to have a Company Material Adverse Effect, (c) any change by the
Company in its accounting, methods, principles or practices, other than
immaterial changes consistent with generally accepted accounting principles,
(d) any declaration, setting aside or payment of any dividend or distribution
in respect of any capital stock of the Company or any of its Subsidiaries or
any redemption, purchase or other acquisition of any of their respective
securities other than dividends by any Subsidiary of the Company to the
Company and other than the redemption of the Preferred Stock held by
Bankamerica Capital Corporation for the amount of $6,677,395.09 which occurred
on December 15, 1995 in accordance with the Preferred Stock Redemption
Agreement with Bankamerica Capital Corporation, (e) except after the date
hereof as permitted by Section 7.1(d), any entering into, establishment or
amendment of, any Employee Plan or Benefit Arrangement (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), or any other increase (other
than ordinary course increases) in the compensation payable or to become
payable to any officers or key employees of the Company or any Subsidiary of
the Company, except for immaterial severance payments to departing employees
consistent with past practice.
5.16. Contracts and Leases. The S-1 Registration Statement and the Company
Disclosure Statement contain an accurate and complete listing of all
contracts, leases, agreements or understandings, whether written or oral,
required to be described in, or filed as exhibits to, the S-1 Registration
Statement pursuant to the Securities Act and the applicable rules and
regulations thereunder, or which are otherwise material to the business,
properties, operations or financial condition of the Company and its
Subsidiaries taken as a whole. Each of such contracts, leases, agreements and
understandings is in full force and effect and (a) none of the Company or its
Subsidiaries or, to the Company's best knowledge, any other party thereto, has
breached or is in default thereunder, (b) no event has occurred which, with
the passage of time or the giving of notice would constitute such a breach or
default, (c) no claim of default thereunder has, to the Company's best
knowledge, been asserted or threatened and (d) none of the Company or its
Subsidiaries or, to the Company's best knowledge, any other party thereto is
seeking the renegotiation thereof or substitute performance thereunder, except
where such breach or default, or attempted renegotiation or substitute
performance, individually or in the aggregate, does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have a Company
Material Adverse Effect. The Company has provided RSI or its representative
with accurate and complete copies of all such contracts, leases, agreements
and understandings.
5.17. Affiliated Transactions. The S-1 Registration Statement contains an
accurate and complete description of all contracts, leases, agreements or
understandings, whether written or oral, with or on behalf of any Affiliate
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of the Company, to which the Company or any of its Subsidiaries is a party or
is otherwise bound and which is required to be described in the S-1
Registration Statement pursuant to the Securities Act and the applicable rules
and regulations thereunder.
5.18. Brokers and Finders. Except for the fees and expenses payable to
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), which
fees and expenses are reflected in its agreement with the Company, a true and
complete copy of which has been furnished to RSI, the Company has not employed
any investment banker, broker, finder or intermediary in connection with the
transactions contemplated by this Agreement or any other transactions which
would be entitled to any investment banking, brokerage, finder's or similar
fee or commission in connection with this Agreement, the transactions
contemplated hereby or any other transactions.
5.19. S-4 Registration Statement and Proxy Statement/ Prospectus. None of
the information supplied or to be supplied by the Company for inclusion in the
S-4 Registration Statement or the Proxy Statement/Prospectus will (a) in the
case of the S-4 Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading or (b) in the case of the Proxy
Statement/Prospectus, at the time of the mailing of the Proxy
Statement/Prospectus and at the time of the RSI Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect
to the Company, its officers and directors or any of its Subsidiaries should
occur which is required to be described in an amendment of, or a supplement
to, the Proxy Statement/Prospectus or the S-4 Registration Statement, the
Company shall notify RSI thereof by reference to this Section 5.19 and such
event shall be so described to RSI.
5.20. Tax Matters. The representations set forth in the numbered paragraphs
of the form of Tax Matters Certificate of the Company attached to the Company
Disclosure Statement (the "Company Tax Matters Certificate") are true and
correct in all respects, and such representations are hereby incorporated
herein by reference with the same effect as if set forth herein in their
entirety.
5.21. Stockholders Agreement. The Company has delivered to RSI a true and
complete copy of an amendment to the Stockholders Agreement executed by each
stockholder of the Company and providing that immediately prior to the
Effective Time all terms and provisions of the Stockholders Agreement shall be
terminated and of no further force and effect (the "Termination Agreement").
As of the Effective Time, the Termination Agreement shall be in full force and
effect, and shall not have been amended or modified in any respect.
5.22. Opinion of Financial Advisor. Merrill Lynch has delivered to the Board
of Directors of the Company its written opinion to the effect that, as of the
date of such opinion, the Exchange Ratio was fair, from a financial point of
view, to the Company's stockholders.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF RSI AND MERGER SUB
RSI and Merger Sub each represents and warrants to the Company that, except
as set forth in the RSI SEC Reports or the RSI Disclosure Statement:
6.1. Organization, Etc. of RSI. RSI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now conducted and proposed by RSI to be conducted,
to enter into this Agreement and to carry out the provisions of this Agreement
and consummate the transactions contemplated hereby. RSI is duly qualified and
in good standing in each jurisdiction in which the property owned, leased or
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operated by it or the nature of the business conducted by it makes such
qualification necessary and where the failure to be so qualified has or would
be reasonably expected (so far as can be foreseen at the time) to have an RSI
Material Adverse Effect. RSI has obtained from the appropriate Governmental
Bodies all approvals and licenses necessary for the conduct of its business
and operations as currently conducted, which approvals and licenses are valid
and remain in full force and effect, except where the failure to have obtained
such approvals or licenses or the failure of such licenses and approvals to be
valid and in full force and effect does not have and would not be reasonably
expected (so far as can be foreseen at the time) to have an RSI Material
Adverse Effect. RSI is not subject to any order, complaint, proceeding or
investigation pending or, to the knowledge of RSI, threatened, which affects
or would be reasonably expected (so far as can be foreseen at the time) to
affect the validity of any such approvals or licenses or impair the renewal
thereof, except where the invalidity of any such approvals or licenses or the
non-renewal thereof does not have and would not be reasonably expected (so far
as can be foreseen at the time) to have an RSI Material Adverse Effect.
6.2. Subsidiaries. Each Subsidiary of RSI (a) is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the full corporate power
and authority to own its properties and conduct its business and operations as
currently conducted, except where the failure to be duly organized, validly
existing and in good standing does not have, and would not be reasonably
expected (so far as can be foreseen at the time) to have, an RSI Material
Adverse Effect, (b) is duly qualified and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have an RSI
Material Adverse Effect (c) has obtained from the appropriate Governmental
Bodies all approvals and licenses necessary for the conduct of its business
and operations as currently conducted, which licenses and approvals are valid
and remain in full force and effect, except where the failure to have obtained
such approvals and licenses or the failure of such licenses and approvals to
be valid and in full force and effect does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have an RSI
Material Adverse Effect, and (d) is subject to no order, complaint, proceeding
or investigation pending or, to the knowledge of RSI or such Subsidiary,
threatened, which would be reasonably expected (so far as can be foreseen at
the time) to affect the validity of any such approvals or licenses or impair
the renewal thereof, except where the invalidity of any such approvals or
licenses or the non-renewal thereof does not have and would not be reasonably
expected (so far as can be foreseen at the time) to have an RSI Material
Adverse Effect. RSI has no Subsidiaries other than Merger Sub, RSI, Inc., John
Sexton & Co. and Duke Associates.
6.3. Agreement. On February 2, 1996, the Board of Directors of RSI and
Merger Sub approved, by the unanimous vote of those directors present, the
Merger, this Agreement and the transactions contemplated hereby, and on such
date the Board of Directors of RSI approved recommending approval of the
issuance of RSI Common Shares in connection with the Merger to the
stockholders of RSI. RSI as sole stockholder of Merger Sub has approved the
Merger, this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by a duly authorized officer of
each of RSI and Merger Sub and constitutes a valid and binding agreement of
RSI and Merger Sub, enforceable against RSI and Merger Sub in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application which
may affect the enforcement of creditors' rights generally and by general
equitable principles. RSI has delivered to the Company true and correct copies
of resolutions adopted by the Board of Directors of each of RSI and Merger Sub
approving this Agreement. The Board of Directors of RSI has taken all
necessary action to cause the supermajority vote provisions of Section 203 of
the DGCL and Articles Twelfth and Fourteenth of RSI's Amended and Restated
Certificate of Incorporation to be inapplicable to the transactions
contemplated and authorized by this Agreement. The Board of Directors of RSI
has taken all necessary action to cause the dilution provisions of the Rights
Agreement to be inapplicable to the transactions contemplated and authorized
by this Agreement, without any payment to the holders of the rights issued
pursuant thereto. RSI has executed and delivered the Second Amendment and
Third Amendment to the Rights Agreement, true and complete copies of which
have been furnished to the Company. The Second Amendment to the Rights
Agreement is in full force and effect, and upon execution of the Third
Amendment to the Rights Agreement by
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the Rights Agent, will be superseded by the Third Amendment to the Rights
Agreement. No approval or consent of securityholders of RSI is required under
RSI's Amended and Restated Certificate of Incorporation or Bylaws, the DGCL,
RSI's NYSE listing agreement or any other agreement, with respect to this
Agreement, the Merger and the transactions contemplated and authorized hereby,
other than such vote required by NYSE Rule 312.05.
6.4. Capital Stock. The authorized capital stock of RSI consists of (a)
40,000,000,000 RSI Common Shares and (ii) 10,000,000 shares of preferred
stock, of the par value of $.10 per share, 50,000 of which have been
designated as Series A Junior Participating Preferred Stock. All of the
outstanding shares of capital stock of RSI are duly authorized, validly
issued, fully paid and nonassessable. As of the close of business on January
26, 1996, 14,796,516 RSI Common Shares and no shares of preferred stock were
issued and outstanding. No class of capital stock of RSI is entitled to
preemptive rights. No options, warrants or other rights to acquire capital
stock from RSI are outstanding, other than as set forth in the RSI SEC Reports
or as heretofore otherwise disclosed in writing to the Company. Except as set
forth in the RSI SEC Reports, there are no outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote or
which are convertible into or exercisable for securities having the right to
vote with stockholders of RSI on any matter. Except as disclosed in the RSI
SEC Reports, all outstanding shares of capital stock of the Subsidiaries of
RSI are owned by RSI, free and clear of all liens, charges, encumbrances,
claims and options of any nature. The RSI Disclosure Statement or the RSI SEC
Reports list, and RSI has delivered to the Company true and complete copies
of, all agreements, contracts or understandings, whether oral or written,
relating to shares of capital stock of RSI or options, warrants or other
rights to acquire capital stock of RSI (including, without limitation, any
rights of first refusal), and all such agreements, contracts and
understandings are in full force and effect.
6.5. Authorization for RSI Common Shares. Prior to the Effective Time, RSI
will have taken all necessary action to permit it to issue the number of RSI
Common Shares required to be issued pursuant to Article IV. The RSI Common
Shares issued pursuant to Article IV will, when issued, be duly authorized,
validly issued, fully paid and nonassessable and no stockholder of RSI will
have any preemptive right of subscription or purchase in respect thereof. The
RSI Common Shares will, when issued, be registered under the Securities Act
and the Exchange Act, and registered or exempt from registration under any
applicable state securities laws and listed on the New York Stock Exchange.
6.6. Other Interests. Except for interests in RSI's Subsidiaries, neither
RSI nor any of RSI's Subsidiaries owns, directly or indirectly, any interest
or investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than (i) non-controlling investments
in the ordinary course of business and cooperative marketing and similar
undertakings and arrangements entered into in the ordinary course of business
and (ii) other investments, consisting of cash equivalents and equity
interests in former customers in settlement of indebtedness, of less than
$3,000,000 in the aggregate).
6.7. Litigation. The RSI Disclosure Statement lists all actions, suits,
investigations or proceedings pending or, to the knowledge of RSI, threatened
against RSI or any of its Subsidiaries, or any property of RSI or any such
Subsidiary, in any court or before any arbitrator of any kind or before or by
any Governmental Body, except actions, suits, investigations or proceedings
which, in the aggregate, do not have and would not be reasonably expected (so
far as can be foreseen at the time) to (a) have an RSI Material Adverse Effect
or (b) have the effect of preventing or materially delaying the performance by
RSI of its obligations under this Agreement.
6.8. Compliance with Other Instruments, Etc. Neither RSI nor any Subsidiary
of RSI is in violation of any terms of (a) its charter, by-laws or other
organizational documents, (b) any agreement or instrument related to
indebtedness for borrowed money or any other agreement to which it is a party
or by which it is bound, (c) any applicable law, ordinance, rule or regulation
of any Governmental Body, or (d) any applicable order, judgment or decree of
any court, arbitrator or Governmental Body, the consequences of which
violation, whether individually or in the aggregate, have or would be
reasonably expected (so far as can be foreseen at the time) to (i) have an RSI
Material Adverse Effect or (ii) have the effect of preventing or materially
delaying the performance by RSI of its obligations under this Agreement. The
execution, delivery and performance of this Agreement by each of RSI and
Merger Sub will not result in any violation of or conflict with, constitute a
default
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under, or require any consent under any terms of the charter or by-laws of RSI
(or any of its Subsidiaries) or any such agreement, instrument, law,
ordinance, rule, regulation, order, judgment or decree or result in the
creation of (or impose any obligation on RSI or any of its Subsidiaries to
create) any mortgage, lien, charge, security interest or other encumbrance
upon any of the properties or assets of RSI or any of its Subsidiaries
pursuant to any such term, except where such violation, conflict or default,
or the failure to obtain such consent, individually or in the aggregate, does
not have and would not be reasonably expected (so far as can be foreseen at
the time) to (i) have an RSI Material Adverse Effect or (ii) have the effect
of preventing or materially delaying the performance by RSI of its obligations
under this Agreement.
6.9. Employee Benefit Plans. (a) The RSI SEC Reports or the RSI Disclosure
Statement sets forth a true and complete list of all the following: (x) each
"employee benefit plan," as such term is defined in Section 3(3) of ERISA,
pursuant to which RSI or any of its Subsidiaries has (A) any liability in
respect of current or former employees, agents, directors, or independent
contractors of RSI or its Subsidiaries ("RSI Employees") or any beneficiaries
or dependents of any RSI Employees or (B) any obligation to issue capital
stock of RSI or any of its Subsidiaries (each, an "RSI Employee Plan"), and
(y) each other plan, program, policy, contract or arrangement providing for
bonuses, pensions, deferred pay, stock or stock related awards, severance pay,
salary continuation or similar benefits, hospitalization, medical, dental or
disability benefits, life insurance or other employee benefits, or
compensation to or for any RSI Employees or any beneficiaries or dependents of
any RSI Employees (other than directors' and officers' liability policies),
whether or not insured or funded, (A) pursuant to which RSI or any of its
Subsidiaries has any material liability or (B) constituting an employment or
severance agreement or arrangement with any officer or director of RSI or any
Subsidiary or with any holder of RSI Common Shares (each, an "RSI Benefit
Arrangement"). RSI has used its reasonable efforts to provide to the Company
with respect to each RSI Employee Plan and RSI Benefit Arrangement: (i) a true
and complete copy of all written documents comprising such RSI Employee Plan
or RSI Benefit Arrangement and any related trust agreement, insurance contract
or other funding vehicle (including amendments and individual agreements
relating thereto, or, if there is no such written document, an accurate and
complete description of such RSI Employee Plan or RSI Benefit Arrangement);
(ii) the most recent Form 5500 or Form 5500-C/R (including all schedules
thereto), if applicable; (iii) the most recent financial statements and
actuarial reports or valuations, if any; (iv) the summary plan description
currently in effect and all material modifications thereof, if any; and (v)
the most recent Internal Revenue Service determination letter, if any. Any
such RSI Employee Plans and RSI Benefit Arrangements for which RSI has not so
provided such documents after using its reasonable efforts are not in the
aggregate material to RSI and its Subsidiaries taken as a whole.
(b) Each RSI Employee Plan and RSI Benefit Arrangement has been established,
operated and maintained in all material respects in accordance with its terms
and in material compliance with all applicable laws and the rules and
regulations thereunder, including, but not limited to, ERISA and the Code.
Neither RSI nor any of its Subsidiaries or former Subsidiaries nor any of
their respective current or former directors, officers, or employees, nor, to
the best knowledge of RSI, any other disqualified person or party-in-interest
with respect to any RSI Employee Plan, have engaged directly or indirectly in
any "prohibited transaction," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, with respect to which RSI or its Subsidiaries
could have or has any material liability. All contributions and other payments
required to be made for any period through the date to which this
representation speaks to the RSI Employee Plans and RSI Benefit Arrangements
(or to any person pursuant to the terms thereof) have been made or paid in a
timely fashion, or, to the extent not required to be made or paid on or before
the date to which this representation speaks, have been reflected in the RSI's
financial statements. Each RSI Employee Plan that is intended to be qualified
under Section 401(a) of the Code has, as amended or proposed to be amended to
comply with the Tax Reform Act of 1986 and subsequent legislation, been
determined by the Internal Revenue Service to be so qualified or an
application for such a determination, which was filed before the expiration of
the applicable remedial amendment period, is pending, and, to the best
knowledge of RSI, no circumstances exist that are reasonably expected by RSI
to result in the revocation of any such determination.
(c) With respect to each RSI Employee Plan that is subject to Title IV of
ERISA: (i) as of the last applicable annual valuation date, the present value
of all benefits under such RSI Employee Plan did not exceed the value
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of the assets of such RSI Employee Plan allocable to such benefits, on a
projected benefits basis, using the actuarial methods, factors and assumptions
used for the most recent actuarial report with respect to such RSI Employee
Plan; and (ii) there has been no termination, partial termination or
"reportable event" (as defined in Section 4043 of ERISA) with respect to any
such RSI Employee Plan. No RSI Employee Plan that is subject to Section 412 of
the Code has incurred any "accumulated funding deficiency" (as defined in
Section 412 of the Code), whether or not waived. No event has occurred, and,
to the best knowledge of RSI there do not exist any circumstances, that could
subject RSI or any Subsidiary of RSI to any material liability arising under
ERISA. With respect to the RSI Employee Plans and RSI Benefit Arrangements,
individually and in the aggregate, no event has occurred, and, to the best
knowledge of RSI there do not exist any circumstances, that could subject RSI
or any Subsidiary of RSI to any material liability arising under the Code or
other applicable law, or under any indemnity agreement to which RSI or any
Subsidiary of RSI is a party, excluding liabilities for benefit claims,
administrative expenses and funding obligations payable in the ordinary
course.
(d) No RSI Employee Plan is a "multiple employer plan" described in Section
4063(a) of ERISA, nor has RSI or any ERISA Affiliate of RSI at any time since
January 1, 1994, contributed to or been obligated to contribute to such a
multiple employer plan. With respect to any "multiemployer plan" as defined in
Section 3(37) of ERISA contributed to by RSI or any ERISA Affiliate, to the
best knowledge of RSI, after due inquiry, if RSI or any Subsidiary of RSI were
to have withdrawn from all such multiemployer plans during 1995, any
withdrawal liability that would have been assessed against RSI with respect to
such withdrawal would not have an RSI Material Adverse Effect.
(e) Except with respect to an RSI Employee Plan, neither RSI nor any ERISA
Affiliate of RSI has any Controlled Group Liability, nor do any circumstances
exist that could result in any of them having any Controlled Group Liability.
(f) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby (either alone or together
with any additional or subsequent events), constitutes an event under any RSI
Employee Plan, RSI Benefit Arrangement, loan to, or individual agreement or
contract with, an RSI Employee that may result in any payment (whether of
severance pay or otherwise), restriction or limitation upon the assets of any
RSI Employee Plan or RSI Benefit Arrangement, acceleration of payment or
vesting, increase in benefits or compensation, or required funding, with
respect to any RSI Employee, or the forgiveness of any loan or other
commitment of any RSI Employees.
(g) There are no actions, suits, arbitrations, inquiries, investigations or
other proceedings (other than routine claims for benefits) pending or, to
RSI's knowledge, threatened, with respect to any RSI Employee Plan or RSI
Benefit Arrangement.
(h) No RSI Employees and no beneficiaries or dependents of RSI Employees are
or may become entitled under any RSI Employee Plan or RSI Benefit Arrangement
to post-employment or retiree welfare benefits of any kind, including without
limitation death or medical benefits, other than coverage mandated by Part 6
of Title I of ERISA or Section 4980B of the Code or other applicable law.
6.10. Labor Matters. There are no agreements with, or pending petitions for
recognition of, a labor union or association as the exclusive bargaining agent
for any of the employees of RSI or any of its Subsidiaries; no such petitions
have been pending at any time within two years of the date of this Agreement
and, to the best knowledge of RSI, there has not been any organizing effort by
any union or other group seeking to represent any employees of RSI or any of
its Subsidiaries as their exclusive bargaining agent at any time within two
years of the date of this Agreement. There are no labor strikes, work
stoppages or other labor troubles, other than routine grievance matters, now
pending, or, to RSI's knowledge, threatened, against RSI or any of its
Subsidiaries, nor have there been any such labor strikes, work stoppages or
other labor troubles, other than routine grievance matters, with respect to
RSI or any of its Subsidiaries at any time within two years of the date of
this Agreement.
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6.11. Taxes. (a) RSI and its Subsidiaries have timely filed all Tax Returns
required to be filed by them, or requests for extensions to file such Tax
Returns have been timely filed and granted and have not expired, and all Tax
Returns are complete and accurate in all respects, except to the extent that
such failures to file or be complete and accurate in all respects, as
applicable, individually or in the aggregate, do not have and would not
reasonably be expected (so far as can be foreseen at the time) to have an RSI
Material Adverse Effect. RSI and each of its Subsidiaries has paid (or RSI has
paid on its behalf) or made adequate provision for all taxes shown as due on
such Tax Returns. RSI and each of its Subsidiaries have paid or made adequate
provision for all taxes required to be paid without the filing of any Tax
Return which have become due and payable. The most recent financial statements
contained in the RSI SEC Reports reflect adequate reserves for all taxes
payable by RSI and its Subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements, and no
deficiencies for any taxes have been proposed, asserted or assessed against
RSI or any of its Subsidiaries that are not adequately reserved for, except
for inadequately reserved taxes and inadequately reserved deficiencies that,
individually or in the aggregate, do not have and would not reasonably be
expected (so far as can be foreseen at the time) to have an RSI Material
Adverse Effect. Neither RSI nor any of its Subsidiaries has any reasonable
basis to believe that any such deficiencies exist in excess of such
established reserves. The consolidated federal income tax returns of RSI have
been audited by the Internal Revenue Service (or closed by applicable statute
of limitations), and all liabilities in respect thereof have been finally
determined, for all taxable years up to and including the taxable year ended
May 2, 1992. Neither RSI nor any of its Subsidiaries is a party to any pending
or has knowledge of any threatened action or proceeding by any taxing
authority for the determination, assessment or collection of any taxes of RSI
or any of its Subsidiaries or relating to their respective businesses and
operations. There are no liens for taxes (other than for current taxes not yet
due and payable) on the assets of RSI or its Subsidiaries. No requests for
waivers of the time to assess any taxes against RSI or any of its Subsidiaries
have been granted or are pending, except for requests with respect to such
taxes that have been adequately reserved for in the most recent financial
statements contained in the RSI SEC Reports, or, to the extent not adequately
reserved, the assessment of which, individually or in the aggregate, do not
have and would not reasonably be expected (so far as can be foreseen at the
time) to have an RSI Material Adverse Effect. Neither RSI nor any of its
Subsidiaries is a party to or bound by any agreements providing for the
allocation or sharing of taxes. Neither RSI nor any of its Subsidiaries has
filed a consent pursuant to or agreed to the application of Section 341(f) of
the Code. Each of RSI and its Subsidiaries has disclosed on its federal income
tax returns all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6662 of the
Code. All taxes that are required by the laws of the United States, any state
or political subdivision thereof, or any foreign country to be withheld or
collected by RSI or any of its Subsidiaries have been duly withheld or
collected and, to the extent required, have been paid to the proper
governmental authorities or properly deposited as required by applicable laws.
None of RSI and its Subsidiaries (i) has been a member of an affiliated group
filing a consolidated federal income tax return (other than a group the common
parent of which was RSI), or (ii) has any liability for the taxes of any
Person (other than any of RSI and its Subsidiaries) under Treas. Reg.
(S)1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise. Neither RSI nor any of its
Subsidiaries will be required, as a result of a change in method of accounting
for a taxable year beginning on or before the Closing Date, to include any
adjustment under Section 481(a) of the Code in its taxable income for any
taxable year beginning after the Closing Date.
(b) The RSI Disclosure Statement sets forth each state in which RSI and its
Subsidiaries (i) filed an income or franchise tax return, whether on a
consolidated, combined or separate return basis, for the taxable year ended
April 29, 1995, and (ii) collected or remitted any sales and/or use taxes as
of December 31, 1995.
(c) None of RSI, Merger Sub or any other Subsidiary of RSI has taken or
agreed to take any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
6.12. Intellectual Property. RSI and its Subsidiaries own, or possess valid
licenses or other valid rights to use, the Intellectual Property used in RSI's
business, except where the failure to own or have the right to use such
Intellectual Property, in the aggregate, does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have an RSI
Material Adverse Effect.
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6.13. Properties. Except as disclosed or reserved against in the most recent
financial statements contained in the RSI SEC Reports, RSI and each of its
Subsidiaries have good and marketable title to all of the material properties
and assets, tangible or intangible, reflected in such financial statements as
being owned by RSI and each of its Subsidiaries as of the dates thereof, free
and clear of all Liens. All leased buildings and all leased fixtures, equipment
and other property and assets that are material to RSI's business on a
consolidated basis are held under leases or subleases that are valid and
binding instruments enforceable in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default (or event which with notice or lapse of time, or both, would
constitute a material default), except where the lack of such validity and
binding nature or the existence of such default or event of default does not
have and would not reasonably be expected (so far as can be foreseen at the
time), to have an RSI Material Adverse Effect.
6.14. Environmental Matters. Except in all cases that, in the aggregate, have
not had and would not reasonably be expected (so far as can be foreseen at the
time) to have an RSI Material Adverse Effect, RSI and each of its Subsidiaries
(i) have obtained all applicable permits, licenses and other authorizations
which are required to be obtained under all applicable Environmental Laws,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or wastes
into ambient air, surface water, ground water, or land or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by RSI or its Subsidiaries (or their respective agents);
(ii) are in compliance with all terms and conditions of such required permits,
licenses and authorization, and also are in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in applicable Environmental
Laws; (iii) as of the date hereof, are not aware of nor have received notice of
any past or present violations of Environmental Laws, or any event, condition,
circumstance, activity, practice, incident, action or plan which is reasonably
likely to interfere with or prevent continued compliance with or which would
give rise to any common law or statutory liability, or otherwise form the basis
of any claim, action, suit or proceeding, against RSI or any of its
Subsidiaries based on or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste; and (iv) have taken all
actions necessary under applicable Environmental Laws to register any products
or materials required to be registered by RSI or its Subsidiaries (or any of
their respective agents) thereunder.
6.15. Reports and Financial Statements. RSI has filed all reports required to
be filed with the SEC since May 1, 1995 through the date hereof (collectively,
the "RSI SEC Reports"), and has previously furnished or made available to the
Company true and complete copies of all RSI SEC Reports. None of the RSI SEC
Reports, as of their respective dates (as amended through the date hereof),
contained any untrue statement of material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Each
of the balance sheets (including the related notes) included in the RSI SEC
Reports presents fairly, in all material respects, the consolidated financial
position of RSI and its Subsidiaries as of the respective dates thereof, and
the other related statements (including the related notes) included therein
present fairly, in all material respects, the results of operations, the
changes in shareholders equity and cash flows of RSI and its Subsidiaries for
the respective periods or as of the respective dates set forth therein, all in
conformity with generally accepted accounting principles consistently applied
during the periods involved, except as otherwise noted therein and subject, in
the case of the unaudited interim financial statements, to normal year-end
adjustments and any other adjustments described therein. RSI has provided to
the Company true and correct copies of RSI's unaudited consolidated statement
of operations and statement of cash flows for the eight months ended, and RSI's
consolidated balance sheet as of, December 30, 1995 (the "RSI Unaudited
Financial Statements"). Such RSI Unaudited Financial Statements present fairly
in all material respects the results of operations and cash flows for the eight
months ended, and the financial position of RSI and its Subsidiaries as of,
December 30, 1995, all in conformity with generally accepted accounting
principles consistently applied during the period involved except as otherwise
noted therein and except for the absence of footnote disclosure, and subject to
(x) normal year-end adjustments, (y) any adjustments required to reflect a
physical inventory for the months of November and December, 1995, and (z)
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any other adjustments described therein. All of the RSI SEC Reports, as of
their respective dates (as amended through the date hereof), complied in all
material respects with the requirements of the Exchange Act.
6.16. Absence of Certain Changes or Events. During the period since December
30, 1995, the business of RSI and its Subsidiaries has been conducted only in
the ordinary course, consistent with past practice, and neither RSI nor any
Subsidiary of RSI has entered into any material transaction other than in the
ordinary course, consistent with past practice, and there has not been (a) any
change in the business, financial condition, results of operations,
properties, assets or liabilities of RSI and its Subsidiaries taken as a whole
that, individually or in the aggregate, has or would reasonably be expected to
have (so far as can be foreseen at the time) an RSI Material Adverse Effect,
(b) any damage, destruction or loss, (whether or not covered by insurance)
with respect to any property or asset of RSI or any of its Subsidiaries which,
individually or in the aggregate, has or would reasonably be expected to have
(so far as can be foreseen at the time) an RSI Material Adverse Effect, (c)
any change by RSI in its accounting methods, principles or practices, other
than immaterial changes consistent with generally accepted accounting
principles, (d) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of RSI or any of its
Subsidiaries, or any redemption, purchase or other acquisition of any of their
respective securities, other than regular semi-annual dividends on RSI Common
Shares not in excess of $.03 per share and dividends by any Subsidiary of RSI
to RSI, (e) except after the date hereof as permitted by Section 7.9(d), any
entering into, establishment or amendment of, any RSI Employee Plan or RSI
Benefit Arrangement (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), or any other increase in the compensation payable or to become
payable to any officers or key employees of RSI or any Subsidiary of RSI,
except for immaterial severance payments to departing employees consistent
with past practice.
6.17. Contracts and Leases. The RSI SEC Reports and the RSI Disclosure
Statement contain an accurate and complete listing of all contracts, leases,
agreements or understandings, whether written or oral, required to be
described in, or filed as exhibits to, the RSI SEC Reports pursuant to the
Exchange Act and the applicable rules and regulations thereunder, or which are
otherwise material to the business, properties, operations, financial
condition of RSI and its Subsidiaries taken as a whole. Each of such
contracts, leases, agreements and understandings is in full force and effect
and (a) none of RSI or its Subsidiaries or, to RSI's best knowledge, any other
party thereto, has breached or is in default thereunder, (b) no event has
occurred which, with the passage of time or the giving of notice, would
constitute such a breach or default, (c) no claim of default thereunder has,
to RSI's best knowledge, been asserted or threatened and (d) none of RSI or
its Subsidiaries or, to RSI's best knowledge, any other party thereto is
seeking the renegotiation thereof or substitute performance thereunder, except
where such breach or default, or attempted renegotiation or substitute
performance, individually or in the aggregate, does not have and would not be
reasonably expected so far as can be foreseen at the time) to have an RSI
Material Adverse Effect. RSI has provided the Company or its representatives
with accurate and complete copies of all such contracts, leases, agreements
and understandings.
6.18. Affiliated Transactions. The RSI SEC Reports contain an accurate and
complete description of all contracts, leases, agreements or understandings,
whether written or oral, with or on behalf of any Affiliate of RSI, to which
RSI or any of its Subsidiaries is a party or is otherwise bound and which is
required to be described in any RSI SEC Report pursuant to the Exchange Act
and the applicable rules and regulations thereunder.
6.19. Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub.
(a) Merger Sub was formed by RSI solely for the purpose of engaging in the
transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital stock of
Merger Sub is and will be owned 100% by RSI directly. Further, there are not
as of the date hereof and there will not be at the Effective Time any
outstanding or authorized options, warrants, calls, rights, commitments or any
other agreements of any character which Merger Sub is a party to, or may be
bound by, requiring it to issue, transfer, sell, purchase, redeem or acquire
any shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of capital stock of Merger Sub.
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(c) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated thereby and hereby (including the refinancing of
all or any portion of the debt of the Company and its Subsidiaries), Merger
Sub has not and will not have incurred, directly or indirectly through any
Subsidiary or Affiliate, any obligations or liabilities or engaged in any
business or activities of any type or kind whatsoever or entered into any
arrangements or arrangements with any Person.
6.20. Brokers and Finders. Except for the fees and expenses payable to
Goldman, Sachs & Co. ("Goldman Sachs") and BA Partners, which fees and
expenses will be paid by RSI and are reflected in RSI's respective agreements
with each of Goldman Sachs and BA Partners, true and complete copies of which
have been furnished to the Company, RSI has not employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
6.21. S-4 Registration Statement and Proxy Statement/ Prospectus. Neither
the S-4 Registration Statement nor the Proxy Statement/Prospectus (including,
without limitation, unless otherwise modified in the S-4 Registration
Statement, the information contained in the RSI SEC Reports), will (a) in the
case of the S-4 Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading or (b) in the case of the Proxy
Statement/Prospectus, at the time the stockholders of the Company take action
to approve this Agreement and the Merger as contemplated by Section 7.3(a) and
at the time of the mailing of the Proxy Statement/Prospectus and at the time
of the RSI Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however,
that RSI makes no representation with respect to information supplied in
writing by the Company for inclusion in the S-4 Registration Statement or the
Proxy Statement/Prospectus. If at any time prior to the Effective Time any
event with respect to RSI, its officers and directors or any of its
Subsidiaries shall occur which is required to be described in the Proxy
Statement/Prospectus or the S-4 Registration Statement, such event shall be so
described, and an amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the stockholders of RSI and such
amendment or supplement shall comply with all provisions of applicable law.
The S-4 Registration Statement will, at the time it becomes effective, comply
as to form in all material respects with the provisions of the Securities Act.
6.22. Tax Matters. The representations set forth in the numbered paragraphs
of the form of Tax Matters Certificate of RSI attached to the RSI Disclosure
Statement (the "RSI Tax Matters Certificate") are true and correct in all
respects, and such representations are hereby incorporated herein by reference
with the same effect as if set forth herein in their entirety.
6.23. Company Management Loans. RSI acknowledges that the Company Management
Loans shall be forgiven in their entirety immediately prior to the Effective
Time, and consents to the forgiveness thereof, provided, that each management
employee of the Company subject to a Company Management Loan agrees that,
provided RSI complies with Section 7.16 hereof, the shares of Common Stock
purchased by management employees with the proceeds of the Company Management
Loans (and the RSI Common Shares issuable to such employee upon conversion of
such shares of Common Stock in the Merger) will not be sold for a period of
one year from the Effective Time or such earlier date on which such individual
ceases to be an employee due to resignation, retirement or termination.
6.24. Opinion of Financial Advisor. Goldman Sachs has delivered to the Board
of Directors of RSI its written opinion to the effect that, as of the date of
this Agreement, the aggregate number of RSI Common Shares to be issued as
consideration for the outstanding shares of Common Stock pursuant to this
Agreement is fair to RSI.
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ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
7.1. Conduct of Business of the Company. Except as contemplated by this
Agreement or the Commitment Letter, as set forth in the Company Disclosure
Statement or as otherwise permitted by the prior written consent of RSI,
during the period from the date of this Agreement to the Effective Time (i)
the Company will, and will cause each of its Subsidiaries to, conduct its
operations in the ordinary course of business consistent with past practice,
and (ii) the Company will not, and will cause each of its Subsidiaries not to,
enter into any material transaction other than in the ordinary course of
business consistent with past practice. Without limiting the generality of the
foregoing, and except as otherwise permitted in this Agreement or as
contemplated in the Commitment Letter, prior to the Effective Time, the
Company will not, and will not permit any of its Subsidiaries to, without the
prior written consent of RSI (except to the extent set forth in the Company
Disclosure Statement):
(a) except for Shares issued upon exercise of Options and Warrants
outstanding as of the date hereof and the issuance of Class A or Class B
Common Stock, as the case may be, upon the conversion of Class B or Class A
Common Stock as required by the Company's Restated Certificate of
Incorporation, issue, deliver, sell, dispose of, pledge or otherwise encumber,
or authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any shares of its capital stock of any class (including the
Shares), or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of its capital stock, or any
rights, warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of its capital stock, or (B) any other
securities in respect of, in lieu of, or in substitution for, Shares
outstanding on the date hereof;
(b) redeem, purchase or otherwise acquire, or propose to redeem, purchase or
otherwise acquire, any of its outstanding securities (including the Shares),
except for redemption of the Preferred Stock in accordance with the Preferred
Stock Redemption Agreements or as otherwise contemplated by Section 7.10;
(c) split, combine, subdivide or reclassify any shares of its capital stock
or declare, set aside for payment or pay any dividend, or make any other
actual, constructive or deemed distribution in respect of any shares of its
capital stock or otherwise make any payments to stockholders in their capacity
as such;
(d) (A) other than in the ordinary course of business consistent with past
practices, and as approved by the Board of Directors of the Company, (i) grant
any increases in the base compensation of any of its directors, officers or
key employees, or (ii) pay or agree to pay any material pension, retirement
allowance or other employee benefit not required by any of the Employee Plans
or Benefit Arrangements as in effect on the date hereof to any such director,
officer or key employees, whether past or present, or (B) (i) enter into any
new or amend any existing employment or severance agreement with any director,
officer or key employee of the Company or any Subsidiary of the Company,
except as permitted in the Company Disclosure Statement, or (ii) except as may
be required to comply with applicable law, become obligated under any new
Employee Plan or Benefit Arrangement which was not in existence on the date
hereof, or amend any such Employee Plan or Benefit Arrangement in existence on
the date hereof if such amendment would have the effect of accelerating or
materially enhancing any benefits thereunder;
(e) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries (other than the Merger);
(f) other than as disclosed in the Company's current capital budget, make
any acquisition or disposition, by means of merger, consolidation or
otherwise, of any material assets (other than sales of inventory in the
ordinary course of business, and the disposition of obsolete assets or assets
no longer used in the business) or other business enterprise or operation;
(g) adopt any amendments to its Restated Certificate of Incorporation or
Bylaws or alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any Subsidiary;
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(h) other than (i) borrowings under existing credit facilities, (ii) other
borrowings in the ordinary course in the aggregate at any time outstanding up
to $10 million after the date hereof, (iii) borrowings in connection with the
redemption of Preferred Stock to the extent permitted by Section 7.10 hereof,
and (iv) borrowings of up to $35 million to be used for construction of a new
operating facility for Biggers Brothers, Inc., incur any indebtedness for
borrowed money or guarantee any such indebtedness or, except in the ordinary
course consistent with past practice, make any loans, advances or capital
contributions to, or investments in, any other Person (other than to the
Company or any Wholly-Owned Subsidiary of the Company);
(i) enter into any agreement providing for acceleration of payment of any
material obligation or performance of any material benefit or payment or other
consequence as a result of a change of control of the Company or its
Subsidiaries;
(j) except as disclosed in the Company's current capital budget, a true and
complete copy of which has been delivered to RSI, enter into any contract,
arrangement or understanding requiring the lease or purchase of equipment,
materials, supplies or services over a period greater than 12 months, which is
not cancelable without penalty on 30 days' or less notice;
(k) take any actions, which would, or would be reasonably likely to,
adversely affect the qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, and the Company shall use all
reasonable efforts to achieve such result; or
(l) enter into any contract, agreement, commitment or arrangement to do any
of the foregoing.
7.2. Other Transactions. From the date hereof until the Effective Time,
neither the Company nor any of its Subsidiaries, employees, officers, agents
or representatives, shall, directly or indirectly (a) solicit or initiate any
inquiry, proposal or offer from any Person relating to any acquisition or
purchase of all or a material amount of the assets of, or any securities of,
or any merger, consolidation or business combination with, the Company or any
Subsidiary (any such inquiry, proposal or offer being hereinafter referred to
as a "Company Alternative Proposal"), or (b)(i) participate in any
negotiations with respect to a Company Alternative Proposal, (ii) furnish to
any other Person any confidential information with respect to the Company or
its business, or (iii) otherwise cooperate in any way with, or assist or
participate in, or facilitate any Company Alternative Proposal. The Company
shall promptly notify RSI if any Company Alternative Proposal is made.
7.3. Stockholder Votes. (a) As soon as practicable, and in any case within
ten Business Days after RSI has delivered to the Company copies of the Proxy
Statement/Prospectus in the form mailed to RSI stockholders and copies of the
RSI SEC Reports incorporated by reference into the Proxy Statement/Prospectus,
the Company will cause to be taken all stockholder action necessary in
accordance with applicable law, the Company's Restated Certificate of
Incorporation and Bylaws, the Stockholders Agreement and the DGCL to approve
this Agreement and the Merger. If such action is taken by less than unanimous
written consent of the stockholders of the Company, the Company will deliver
prompt notice of the taking of such action to all stockholders of the Company
who did not consent to such action, in accordance with DGCL Section 228. The
Board of Directors of the Company will recommend and declare advisable such
approval. Pursuant to the ML Agreement, each of the ML Entities have agreed to
vote all Shares owned by them or which they have the right to vote in support
and in favor of approval of the Merger and this Agreement, which vote the
Company represents and warrants shall be sufficient to obtain the requisite
approval of the Merger and this Agreement. The Company shall promptly provide
to RSI copies of all notices, letters and other materials delivered to the
stockholders of the Company (other than the Proxy Statement/Prospectus and the
RSI SEC Reports incorporated therein by reference) in connection with such
stockholder action, and will keep RSI apprised of the status of such
stockholder action.
(b) As soon as practicable after the effectiveness of the S-4 Registration
Statement, and following an appropriate notice period in accordance with
applicable law, RSI's Restated Certificate of Incorporation or RSI's Bylaws,
RSI will take all action necessary in accordance with applicable law and its
Restated Certificate of Incorporation and Bylaws to convene a meeting of its
stockholders (the "RSI Stockholders Meeting") to
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consider and vote upon the approval of the issuance of the RSI Common Shares
in connection with the Merger. The Board of Directors of RSI shall recommend
and declare advisable such approval and RSI shall take all lawful action to
solicit, and use all reasonable efforts to obtain, such approval. RSI, as the
sole stockholder of Merger Sub, has consented to the adoption of this
Agreement by Merger Sub and agrees that such consent shall be treated for all
purposes as a vote duly adopted at a meeting of the stockholders of Merger Sub
held for this purpose.
7.4. Registration Statement. RSI and the Company shall cooperate and
promptly prepare and RSI shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 under the Securities Act with respect to
the RSI Common Stock issuable in the Merger (the "S-4 Registration
Statement"), a portion of which Registration Statement shall also serve as the
proxy statement with respect to the RSI Stockholder Meeting (such proxy
statement/prospectus, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to stockholders, is herein
called the "Proxy Statement/Prospectus"). RSI will cause the Proxy
Statement/Prospectus and the S-4 Registration Statement to comply as to form
in all material respects with the applicable provisions of the Securities Act,
the Exchange Act and the rules and regulations thereunder. RSI shall use all
reasonable efforts, and the Company will cooperate with RSI, to have the S-4
Registration Statement declared effective by the SEC as promptly as
practicable and to keep the S-4 Registration Statement effective as long as is
necessary to consummate the Merger. RSI shall, as promptly as practicable,
provide the Company copies of any written, and will inform the Company of any
oral, comments on the S-4 Registration Statement received from the SEC. RSI
shall use its best efforts to obtain, prior to the effective date of the S-4
Registration Statement, all necessary state securities law or "Blue Sky"
permits or approvals required to carry out the transactions contemplated by
this Agreement and will pay all expenses incident thereto. RSI agrees that the
Proxy Statement/Prospectus and each amendment or supplement thereto at the
time of mailing thereof and at the time of the RSI Stockholders Meeting, or,
in the case of the S-4 Registration Statement, at the time it becomes
effective, as it may be amended or supplemented, will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
RSI in reliance upon and in conformity with written information concerning the
Company furnished to RSI by the Company for inclusion in the Proxy
Statement/Prospectus and the S-4 Registration Statement, as it may be amended
or supplemented. The Company agrees that the written information concerning
the Company, its Subsidiaries, and its officers and directors provided by it
for inclusion in the Proxy Statement/Prospectus and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the RSI
Stockholders Meeting, or, in the case of written information concerning the
Company provided by the Company for inclusion in the S-4 Registration
Statement or any amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus that amends or supplements information relating to the
Company will be made by RSI without the approval of the Company, such approval
not to be unreasonably withheld. RSI will advise the Company, promptly after
it receives notice thereof, of the time when the S-4 Registration Statement
has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of a qualification of the RSI
Common Shares issuable in connection with the Merger for offering or sale in
any jurisdiction, or any written request by the SEC for amendment of the Proxy
Statement/Prospectus or the S-4 Registration Statement or for additional
information. As soon as practicable after the S-4 Registration Statement has
become effective, RSI will provide the Company with sufficient copies of the
Proxy Statement/Prospectus in the form mailed to RSI stockholders, as well as
sufficient copies of the RSI SEC Reports incorporated by reference into the
Proxy Statement/Prospectus, to enable the Company to deliver a copy to each
stockholder of record of the Company.
7.5. Reasonable Efforts. The Company and RSI shall and shall use reasonable
best efforts to cause their respective Subsidiaries to: (i) promptly make all
filings and seek to obtain all Authorizations required under all applicable
laws with respect to the Merger and the other transactions contemplated hereby
and will cooperate
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with each other with respect thereto; and (ii) promptly take, or cause to be
taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate to satisfy the conditions set forth in
Article VIII and to consummate and make effective the transactions
contemplated by this Agreement on the terms and conditions set forth herein as
soon as practicable (including, without limitation, using their respective
reasonable best efforts to avoid the entry of (or, if entered, to have lifted,
vacated or reversed) any order, decree, judgment or ruling of any court or
Governmental Body restraining or preventing the consummation of the
transactions contemplated by this Agreement on the basis of any federal or
state antitrust laws or regulations; provided, however, that in connection
with any filing or submission required or action to be taken by either the
Company or RSI or any of their Subsidiaries to effect the Merger and to
consummate the other transactions contemplated hereby, (A) neither the Company
nor any of its Subsidiaries shall, without RSI's prior written consent, commit
to any divestiture or hold separate or similar transaction and (B) neither RSI
nor any of its Subsidiaries shall be required to divest or hold separate or
otherwise take or commit to take any action, in each case, that materially
limits its freedom of action with respect to, or its ability to retain, the
Company or any of its Subsidiaries or any material portion of the assets of
the Company and its Subsidiaries or any existing (as of the date hereof) and
material business, product line or asset of RSI or any of its Subsidiaries.
7.6. Access to Information; Confidentiality. (a) Upon reasonable notice,
each of the Company and RSI shall (and shall cause each of its Subsidiaries
to) afford to officers, employees, counsel, accountants and other authorized
representatives of the other party ("Respective Representatives") access,
during normal business hours throughout the period prior to the Effective
Time, to its properties, books and records (including, without limitation, the
work papers of independent accountants) and, during such period, shall (and
shall cause each of its Subsidiaries to) furnish promptly to such Respective
Representatives all information concerning its business, properties and
personnel as may reasonably be requested, provided that no investigation
pursuant to this Section 7.6 shall affect or be deemed to modify any of the
respective representations or warranties made by RSI or the Company.
(b) All confidential information obtained by the Company respecting RSI and
its Subsidiaries pursuant to this Section 7.6 or prior to the date hereof
shall be kept confidential in accordance with the Confidentiality Agreement
dated as of November 20, 1995 between RSI and the Company.
(c) All confidential information respecting the Company and its Subsidiaries
obtained by RSI pursuant to this Section 7.6 or prior to the date hereof shall
be kept confidential in accordance with the Confidentiality Agreement dated as
of December 11, 1995 between the Company and RSI.
7.7. Listing of RSI Common Shares. RSI will use its reasonable best efforts
to cause the RSI Common Shares to be issued pursuant to this Agreement, and
upon exercise of Assumed Options and Assumed Warrants, to be listed for
trading on the NYSE.
7.8. Rule 145 Affiliates. The Company shall use reasonable efforts to cause
each party (other than RSI and the ML Entities) to the Registration Rights
Agreement (the "Rule 145 Affiliates") or who may otherwise be deemed to be an
Affiliate of the Company to deliver to RSI on or prior to the Effective Time,
a written agreement, in the form attached as Exhibit A hereto, providing,
inter alia, that such Rule 145 Affiliate will not sell, pledge, transfer or
otherwise dispose of any shares of RSI Common Shares issued to such Rule 145
Affiliate pursuant to the Merger, except pursuant to an effective registration
statement or in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act ("Affiliate Letter"). Concurrently with the
execution of this Agreement, each of the ML Entities have agreed to execute
such Affiliate Letters.
7.9. Conduct of Business of RSI. Except as contemplated by this Agreement or
the Commitment Letter, as set forth in the RSI Disclosure Statement or as
otherwise permitted by the prior written consent of the Company, during the
period from the date of this Agreement to the Effective Time, (i) RSI will,
and will cause each of its Subsidiaries to, conduct its operations in the
ordinary course of business consistent with past practice, and (ii) RSI will
not, and will cause each of its Subsidiaries not to, enter into any material
transaction other than in the ordinary course of business consistent with past
practice. Without limiting the generality of the foregoing, and except as
otherwise permitted in this Agreement or as contemplated by the Commitment
Letter, prior to the
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Effective Time, RSI will not, and will not permit any of its Subsidiaries to,
without the prior written consent of the Company (except to the extent set
forth in the RSI Disclosure Statement):
(a) issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any shares of its capital stock of any class, or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for any shares of its capital stock, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of its capital stock, or (B) any other
securities in respect of, in lieu of, or in substitution for, shares of
capital stock outstanding on the date hereof;
(b) redeem, purchase or otherwise acquire, or propose to redeem, purchase
or otherwise acquire, any of its outstanding securities;
(c) split, combine, subdivide or reclassify any shares of its capital
stock or declare, set aside for payment or pay any dividend (other than
normal cash dividends in the ordinary course, but not in an amount to
exceed $.03 per share semi-annually, and other than dividends of
Subsidiaries of RSI to RSI), or make any other actual, constructive or
deemed distribution in respect of any shares of its capital stock or
otherwise make any payments to stockholders in their capacity as such;
(d) (A) other than in the ordinary course of business consistent with
past practices and as approved by the Board of Directors of RSI, (i) grant
any increases in the base compensation of any of its directors, officers or
key employees, or (ii) pay or agree to pay any material pension, retirement
allowance or other employee benefit not required by any of the RSI Employee
Plans or RSI Benefit Arrangements as in effect on the date hereof to any
such director, officer or key employees, whether past or present, or (B)
(i) enter into any new or amend any existing employment or severance
agreement with any such director, officer or key employee, except as
contemplated by Section 7.17 or as permitted in the RSI Disclosure
Statement, or (ii) except as may be required to comply with applicable law,
become obligated under any new RSI Employee Plan or RSI Benefit Arrangement
which was not in existence on the date hereof, or amend any such RSI
Employee Plan or RSI Benefit Arrangement in existence on the date hereof if
such amendment would have the effect of accelerating or materially
enhancing any benefits thereunder;
(e) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
RSI or any of its Subsidiaries (other than the Merger);
(f) other than as disclosed in RSI's current capital budget, make, engage
in negotiations with any third party respecting, or directly or indirectly
solicit or initiate any inquiry, proposal or offer respecting, the
acquisition or disposition, by means of merger, consolidation, business
combination or otherwise, all or a material amount of assets of, or any
securities of, RSI or any Subsidiary thereof (other than sales of inventory
in the ordinary course of business, the disposition of obsolete assets or
assets no longer used in the business or the sale of U.S. Lace Paperworks);
provided, however, that nothing contained in this Section 7.9(f) shall
require the Board of Directors of RSI to act or refrain from acting in
connection with taking and disclosing to RSI's stockholders a position
contemplated by Rules 14d-9 and 14e-2 under the Exchange Act;
(g) adopt any amendments to its Restated Certificate of Incorporation or
Bylaws (except for Bylaw amendments which are required in connection with
the performance by RSI of its obligations hereunder or under any other
agreement contemplated hereunder) or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any Subsidiary;
(h) other than (i) borrowings under existing credit facilities, (ii)
other borrowings in the ordinary course in the aggregate at any time
outstanding up to $10 million after the date hereof, incur any indebtedness
for borrowed money or guarantee any such indebtedness or, except in the
ordinary course consistent with past practice, make any loans, advances or
capital contributions to, or investments in, any other Person (other than
to RSI or any Wholly-Owned Subsidiary of RSI);
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(i) except in connection with modifications to RSI's Change in Control
Agreements as contemplated by Section 7.17 or otherwise on terms no more
favorable than contemplated by Section 7.17 for those executives not named
in such Section, enter into any agreement providing for acceleration of
payment of any material obligation or performance of any material benefit
or obligation or other consequence as a result of a change of control of
RSI or its Subsidiaries;
(j) except as disclosed in RSI's current budget, a true and complete copy
of which has been delivered to the Company, enter into any contract,
arrangement or understanding requiring the lease or purchase of equipment,
materials, supplies or services over a period greater than 12 months, which
is not cancelable without penalty on thirty (30) days or less notice;
(k) take any actions, which would, or would be reasonably likely to,
adversely affect the qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, and RSI shall use all reasonable
efforts to achieve such result; or
(l) enter into any contract, agreement, commitment or arrangement to do
any of the foregoing.
7.10. Preferred Stock Redemption; Withdrawal of S-1 Registration Statement;
USDA Matter. (a) The Company shall use its best efforts prior to February 16,
1996 (i) to obtain an amendment to the Redemption Agreement dated as of
September 26, 1995 between Sara Lee Corporation ("Sara Lee") and the Company,
as amended by the Amendment to Redemption Agreement dated November 20, 1995
(the "Sara Lee Redemption Agreement") to (x) extend the termination date set
forth in Section 7.1(b) thereof to at least the earlier of the Closing or July
31, 1996 ("Sara Lee Amendment"), and (y) acknowledge and agree that RSI or
Merger Sub shall be entitled to purchase the 10% Preferred Stock upon payment
of the purchase price therefor as set forth in the Sara Lee Redemption
Agreement and Sara Lee Amendment, and (ii) negotiate and arrange committed
bank loan financing (and any necessary consents) to enable the Company to fund
prior to March 15, 1996 the full purchase price for the purchase of the 10%
Preferred Stock as set forth in Section 1.2 of the Sara Lee Redemption
Agreement ("Sara Lee Bridge Financing"). "Best efforts" shall not require the
Company to make or agree to make any material payments to, or to be bound by
any material commitment with respect to, Sara Lee. If by February 16, 1996,
the Company shall not have obtained either the Sara Lee Amendment or Sara Lee
Bridge Financing on terms and conditions reasonably acceptable to RSI, RSI
shall be entitled to arrange for the Sara Lee Bridge Financing with such
Persons and on such terms as RSI may negotiate and which are as a whole more
favorable to the Company than the Sara Lee Bridge Financing and which are
reasonably acceptable to the Company ("Alternative Sara Lee Bridge Financing")
on the Company's behalf.
(b) If by March 10, 1996 the Company shall not have obtained the Sara Lee
Amendment, the Company shall execute and deliver such documents and perform
such acts as may be necessary to effect the Sara Lee Bridge Financing or the
Alternative Sara Lee Bridge Financing ("Bridge Financing") and shall effect
the purchase of the 10% Preferred Stock in accordance with the terms of the
Sara Lee Redemption Agreement. The Company shall have complied with its
obligations under subsections (a) and (b) of this Section 7.10 if by March 15,
1996 it shall have either (a) obtained the Sara Lee Amendment, or (b) redeemed
the 10% Preferred Stock in accordance with the Sara Lee Redemption Agreement.
(c) Except as expressly provided by this Section 7.10, the Company shall not
amend any of the Preferred Stock Redemption Agreements or redeem the Preferred
Stock prior to the earlier of the Closing Date or July 31, 1996 without the
prior written consent of RSI.
(d) If prior to March 15, 1996 the Company shall not have obtained the Sara
Lee Amendment or effected the Bridge Financing and purchased the 10% Preferred
Stock, at the Closing (i) the 10% Preferred Stock shall be redeemed in
accordance with Article Fourth, Paragraph (B)(2)(4) of the Company's Restated
Certificate of Incorporation ("Company Charter"), and (ii) the Exchangeable
Preferred Stock shall be acquired by RSI or Merger Sub for a price equal to
the price payable upon redemption by the Company in accordance with Article
Fourth, Paragraph (B)(3)(5) of the Company Charter; provided, however, that in
no event shall the redemption amount or the price payable for such Preferred
Stock exceed the amounts set forth on Schedule 7.10. Nothing set forth in this
Section 7.10(d) shall be deemed to have had a Company Material Adverse Effect.
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(e) Any redemption of Preferred Stock after March 15, 1996 pursuant to this
Agreement shall be deemed to occur immediately prior to the Effective Time.
(f) In the event that the Preferred Stock is redeemed on the Closing Date
and in connection with the consummation of the transactions contemplated by
this Agreement, RSI and the Company agree that RSI shall make, on behalf of
the Company, all the required payments under the Preferred Stock Redemption
Agreements directly to the respective holders of the Preferred Stock.
(g) No later than one Business Day after the date of this Agreement, the
Company shall request the withdrawal of the S-1 Registration Statement from
the SEC in accordance with the Securities Act.
(h) The Company shall keep RSI apprised of the status of, and new
developments concerning, the USDA matter referred to in the S-1 Registration
Statement, including, without limitation, promptly providing copies of all
notices, orders, proposals or other material correspondence to or from the
USDA regarding such matter and promptly providing RSI with prior notice of,
and a reasonable opportunity to comment on, any proposed settlement of such
matter.
7.11. Commitment Letter. RSI and the Company shall use their respective
reasonable best efforts to consummate the transactions set forth in the
commitment letter dated February 2, 1996 from Bank of America National Trust
and Savings Association, BA Securities, Inc., The Chase Manhattan Bank, N.A.,
and Chase Securities, Inc. to RSI and the Company (the "Commitment Letter")
which has been executed and delivered by RSI and which, to the best knowledge
of each of RSI and the Company, remains in full force and effect.
7.12. Publicity. The initial press release relating to this Agreement shall
be a joint press release and thereafter the Company and RSI shall, subject to
their respective legal obligations, consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to
the transactions contemplated hereby and in making any filings with any
federal or state governmental or regulatory agency or with any national
securities exchange with respect to the transactions contemplated hereby.
7.13. Director and Officer Indemnification. (a) Subject to the receipt by
RSI of a waiver and release by the ML Entities, in the form attached to the ML
Agreement, and by any officer or director of the Company who is also a
stockholder of the Company, in substantially the same form, of any claims
against present or former directors and officers of the Company arising from
or pertaining to acts or omissions, or alleged acts or omissions, occurring
prior to the Effective Time, from and after the Effective Time, RSI will, and
will cause the Surviving Corporation to, indemnify and hold harmless each
person who is now, or has been at any time prior to the date hereof, an
officer or director of the Company (individually, an "Indemnified Party", and
collectively, the "Indemnified Parties") with respect to acts or omissions
occurring prior to the Effective Time to the extent required by Article VIII
of the Company's By-Laws as filed as Exhibit 3.12 to the S-1 Registration
Statement.
(b) After the Effective Time, RSI shall cause the directors and officers of
the Surviving Corporation and its Subsidiaries to be covered by directors' and
officers' liability insurance maintained by RSI on terms and conditions no
less favorable to such directors and officers as are applicable to similarly
situated directors and officers of Subsidiaries of RSI; provided that such
insurance shall not include coverage for any acts or omissions occurring prior
to the Effective Time.
7.14. Conveyance Taxes. RSI and the Company will cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees and any similar taxes which become
payable in connection with the transactions contemplated by this Agreement
that are required or permitted to be filed on or before the Effective Time and
each party will pay any such tax or fee which becomes payable by it on or
before the Effective Time. RSI agrees to assume liability for and hold
stockholders of the Company harmless against liability for real property
transfer or gain tax imposed on such stockholders by the State of New York as
a result of the Merger.
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7.15. Parachute Payments. With respect to any "payments" required to be made
by the Company to "disqualified persons" pursuant to any employment,
severance, supplemental retirement, stock option or loan agreement or in
connection with the cancellation thereof which may constitute a "parachute
payment" with respect to the transactions contemplated by this Agreement (as
such terms are defined by Section 280G of the Code), the Company shall (i) in
consultation with RSI, obtain stockholder approval of such payments in
accordance with Section 280G (b)(5)(B) of the Code and the regulations
(including any proposed or temporary regulations) thereunder and (ii) at least
15 days prior to the Closing Date, provide evidence satisfactory to RSI that
such approval has been obtained.
7.16. RSI Loans. After the Effective Time, RSI shall extend loans to those
management employees of the Company for whom Company Management Loans were
forgiven at the Effective Time and whose RSI Common Shares are subject to
restriction as provided in Section 6.23, in an amount sufficient to cover the
federal and state income tax due from such management employees as a result of
such forgiveness. Such loans shall be made pursuant to terms and documentation
reasonably satisfactory to RSI, shall bear interest at a rate not less than
that prescribed by Section 7872 of the Code and shall be due and payable in
full ninety days after the expiration of the restrictions on the RSI Common
Shares referred to in Section 6.23 (whether such expiration occurs because of
the passage of one year from the Effective Time or because of the resignation,
retirement or termination of such employee).
7.17. RSI Change in Control Arrangements. Pursuant to Amended and Restated
Change in Control Agreements in the form of Schedule 7.17 hereto, RSI has
taken such action as may be necessary so that the consummation of the
transactions contemplated by this Agreement does not result in a "Change in
Control", as such term is defined in individual agreements with Messrs. Van
Stekelenburg, Harter, Martin, Feather and Giuliani, subject to the
satisfaction of the terms of such Amended and Restated Change in Control
Agreements.
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations. The respective obligations of
each party to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived in whole or in part by
the party being benefitted thereby, to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the transactions contemplated
hereby shall have been duly approved by the requisite holders of Shares in
accordance with applicable law, the Restated Certificate of Incorporation and
Bylaws of the Company, and the Stockholders Agreement; and the issuance of RSI
Common Shares in connection with the Merger shall have been duly approved by
the requisite holders of RSI Common Shares in accordance with the rules of the
NYSE.
(b) Government Consents, Etc. Except for the filing of a certificate of
merger in accordance with the DGCL, all Authorizations required in connection
with the execution and delivery of this Agreement and the performance of the
obligations hereunder shall have been made or obtained, except where the
failure to have made or obtained any such Authorizations would not have a
material adverse effect on the business, properties, operations or financial
condition of RSI and its Subsidiaries (including the Surviving Corporation)
following the Effective Time.
(c) No Injunction. There shall not be in effect any judgment, writ, order,
injunction or decree of any court of Governmental Body of competent
jurisdiction, restraining, enjoining or otherwise preventing consummation of
the transactions contemplated by this Agreement.
(d) Registration Statement. The S-4 Registration Statement shall have been
declared effective by the SEC under the Securities Act and shall be effective
at the Effective Time, and no stop order suspending effectiveness shall have
been issued, no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness thereof shall have been initiated and be continuing,
and all necessary approvals under state securities laws or the Securities Act
or Exchange Act relating to the issuance or trading of the RSI Common Shares
to be issued in the Merger shall have been received.
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(e) Listing of RSI Common Shares on NYSE. The RSI Common Shares required to
be issued hereunder (including upon exercise of Options and Warrants as
provided in Section 4.1(e)) shall have been approved for listing on the NYSE,
subject only to official notice of issuance.
(f) Financing. All conditions precedent to the closing of the financing
described to in the Commitment Letter shall have been satisfied, and the
transactions contemplated by such commitment letter shall have been
consummated.
(g) Redemption of Preferred Stock. (i) All shares of Exchangeable Preferred
Stock shall have been purchased by RSI or Merger Sub pursuant to the
Redemption Agreement dated as of September 8, 1995 among ML IBK Positions,
Inc., Merchant Banking L.P. No. IV and the Company, as amended as of December
29, 1995 and February 2, 1996 or otherwise in accordance with the terms of
Section 7.10; and (ii) all shares of 10% Preferred Stock shall have been
redeemed in accordance with the terms and conditions set forth in the Sara Lee
Redemption Agreement or otherwise in accordance with the terms of Section
7.10, or redeemed by the Company or purchased by RSI or Merger Sub pursuant to
the Sara Lee Amendment.
(h) Tax Opinion. The Company shall have received an opinion of Morgan, Lewis
& Bockius LLP, dated the Closing Date, in substantially the form attached
hereto as Exhibit E-1, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, Morgan, Lewis & Bockius LLP may
receive and rely upon the representations of certain stockholders of the
Company contained in the Tax Agreement and representations contained in
certificates of the Company, stockholders of the Company, RSI, Merger Sub and
others, including without limitation the Company Tax Matters Certificate and
the RSI Tax Matters Certificate.
(i) Tax Opinions. RSI shall have received an opinion of Jones, Day, Reavis &
Pogue (addressed to RSI) in substantially the form attached hereto as Exhibit
E-2, dated the Closing Date, to the effect that the Merger should be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. RSI shall have received an opinion of Shearman &
Sterling (addressed to the ML Entities) in substantially the form attached
hereto as Exhibit E-3, dated the Closing Date, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinions, Jones, Day,
Reavis & Pogue and Shearman & Sterling may receive and rely upon the
representations of certain stockholders of the Company contained in the Tax
Agreement and representations contained in certificates of the Company,
stockholders of the Company, RSI, Merger Sub and others, including without
limitation the Company Tax Matters Certificate and the RSI Tax Matters
Certificate.
8.2. Conditions to Obligations of RSI and Merger Sub. The respective
obligations of RSI and Merger Sub to consummate the transactions contemplated
by this Agreement are subject to the fulfillment at or prior to the Effective
Time of each of the following conditions, any or all of which may be waived in
whole or part by RSI and Merger Sub, as the case may be, to the extent
permitted by applicable law:
(a) Representations and Warranties True. (i) The representations and
warranties of the Company contained in Article V or otherwise required hereby
to be made after the date hereof in a writing expressly referred to herein by
or on behalf of the Company pursuant to this Agreement shall have been true in
all material respects when made and at the time of the Closing with the same
effect as though such representations and warranties had been made at such
time, except (x) for changes specifically permitted by this Agreement or
resulting from the consummation of the transactions contemplated hereby, and
(y) that those representations and warranties which address matters only as of
a particular date shall remain true and correct in all material respects as of
such date, and (ii) the representations and warranties of each of the ML
Entities contained in the ML Agreement or otherwise required hereby or thereby
to be made by any ML Entity after the date hereof in a writing expressly
referred to herein or in the ML Agreement by or on behalf of any ML Entity
pursuant to this Agreement or the ML Agreement shall have been true in all
material respects when made and at the time of the Closing with the same
effect as though such representations and warranties had been made at such
time, except for changes specifically permitted by this Agreement or the ML
Agreement or resulting from the consummation of the transactions contemplated
hereby or by the ML Agreement.
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(b) Performance. (i) The Company shall have performed or complied in all
material respects with all agreements and conditions contained herein required
to be performed or complied with by it prior to or at the time of the Closing,
and (ii) each ML Entity shall have performed or complied in all material
respects with all agreements and conditions contained in the ML Agreement
required to be performed or complied with by it prior to or at the time of the
Closing.
(c) Compliance Certificate. (i) The Company shall have delivered to RSI a
certificate, dated the date of the Closing, signed by the President or any
Vice President of the Company, certifying as to the fulfillment of the
conditions specified in Section 8.2(a)(i) and (b)(i) and (ii) each ML Entity
shall have delivered to RSI a certificate, dated the date of the Closing,
signed by a duly authorized representative of such ML Entity, certifying as to
the fulfillment of the conditions specified in Section 8.2(a)(ii) and (b)(ii).
(d) Opinion of Counsel for the Company. RSI shall have received from Morgan,
Lewis & Bockius LLP and/or other counsel for the Company satisfactory to RSI
an opinion, dated the Closing Date, covering the items specified in Exhibit B
attached hereto.
(e) Standstill Agreement. RSI shall have received the Standstill Agreement
executed by each ML Entity, together with the opinion of Shearman & Sterling
or other counsel for the ML Entities satisfactory to RSI, dated the Closing
Date, covering the items specified in Exhibit E attached to the ML Agreement.
(f) Fairness Opinion. The opinion of Goldman Sachs dated the date of this
Agreement shall not have been withdrawn, or materially modified or amended, on
or prior to the date of the Proxy Statement/Prospectus.
(g) Stockholders Agreement. The Stockholders Agreement shall have been
terminated and be of no further force and effect.
(h) Tax Agreement. RSI shall have received a Tax Agreement executed by each
ML Entity and the other parties thereto.
(i) Legal Proceedings. With respect to any action, suit, arbitration or
other proceeding pending against the Company or any Subsidiary thereof as of
the date of this Agreement where the amount in controversy exceeds $10.0
million ("Covered Company Proceeding"), (i) a final non-appealable judgment or
award shall have been entered in such Covered Company Proceeding, or a binding
settlement agreement of such Covered Company Proceeding shall have been
executed and delivered, providing in each such case for (A) a judgment or
award in favor of the Company or such Subsidiary, or (B) payment by the
Company or such Subsidiary of, or the imposition of fines or other remedies
against the Company or such Subsidiary involving, an amount (I) not in excess
of the range specified in any letter or opinion of the Company's counsel in
such Covered Company Proceeding to the Company's auditors during the 12 months
preceding the date of this Agreement ("Previous Company Auditor's Letter") or
(II) if such amount is in excess of such range, the payment of such amount
does not have, or would not reasonably be expected to have (so far as can be
foreseen at the time), a Company Material Adverse Effect, or (ii) if such
Covered Company Proceeding has not been finally resolved, (x) the Company
shall have received an update ("Company Update Letter") to the Previous
Company Auditor's Letter which specifies a range above which an award or
judgment is not favored by the balance of probabilities, and (y) (A) such
range shall not exceed that specified in the Previous Company Auditor's
Letter, or (B) if such range as set forth in the Company Update Letter exceeds
the range set forth in the Previous Company Auditor's Letter, an award or
judgment in such range would not have, or would not reasonably be expected to
have so far as can be foreseen at the time, a Company Material Adverse Effect.
8.3. Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of
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each of the following conditions, any or all of which may be waived in whole
or in part by the Company to the extent permitted by applicable law:
(a) Representations and Warranties True. The representations and warranties
of RSI and Merger Sub contained in Article VI or otherwise required hereby to
be made after the date hereof in a writing expressly referred to herein by or
on behalf of RSI and Merger Sub pursuant to this Agreement shall have been
true in all material respects when made and at the time of the Closing with
the same effect as though such representations and warranties had been made at
such time, except (i) for changes specifically permitted by this Agreement or
resulting from the consummation of the transactions contemplated hereby and
(ii) that those representations and warranties which address matters only as
of a particular date shall remain true and correct in all material respects as
of such date.
(b) Performance. RSI and Merger Sub shall have performed or complied in all
material respects with all agreements and conditions contained herein required
to be performed or complied with by them prior to or at the time of the
Closing.
(c) Compliance Certificate. RSI shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or any
Vice President of RSI, certifying as to the fulfillment of the conditions
specified in Section 8.3(a) and (b).
(d) Opinions of Counsel for RSI. The Company shall have received from Jones,
Day, Reavis & Pogue and Maslon Edelman Borman & Brand, or other counsel for
RSI satisfactory to the Company, opinions, dated the Closing Date, covering
the items specified in Exhibit C attached to this Agreement.
(e) Registration Rights Agreement. The Registration Rights Agreement, duly
executed by RSI, shall have been received by the other parties thereto.
(f) Employment Agreements. The individuals listed on the employment
agreements included as Exhibit D hereto shall have received executed
employment agreements from RSI in the respective forms of such exhibit.
(g) Legal Proceedings. With respect to any action, suit, arbitration or
other proceeding pending against RSI or any Subsidiary thereof as of the date
of this Agreement where the amount in controversy exceeds $10.0 million
("Covered RSI Proceeding"), (i) a final non-appealable judgment or award shall
have been entered in such Covered RSI Proceeding, or a binding settlement
agreement of such Covered RSI Proceeding shall have been executed and
delivered, providing in each such case for (A) a judgment or award in favor of
RSI or such Subsidiary, or (B) payment by RSI or such Subsidiary of, or the
imposition of fines or other remedies against RSI or such Subsidiary
involving, an amount (I) not in excess of the range specified in any letter or
opinion of RSI's counsel in such Covered RSI Proceeding to RSI's auditors
during the 12 months preceding the date of this Agreement ("Previous RSI
Auditor's Letter") or (II) if such amount is in excess of such range, the
payment of such amount does not have, or would not reasonably be expected to
have (so far as can be foreseen at the time), an RSI Material Adverse Effect,
or (ii) if such Covered RSI Proceeding has not been finally resolved, (x) RSI
shall have received an update ("RSI Update Letter") to the Previous RSI
Auditor's Letter which specifies a range above which an award or judgment is
not favored by the balance of probabilities, and (y) (A) such range shall not
exceed that specified in the Previous RSI Auditor's Letter, or (B) if such
range as set forth in the RSI Update Letter exceeds the range set forth in the
Previous RSI Auditor's Letter, an award or judgment in such range would not
have, or would not reasonably be expected to have so far as can be foreseen at
the time, an RSI Material Adverse Effect.
ARTICLE IX
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after approval of matters presented in connection with the Merger by holders
of RSI Common Shares or holders of the Shares, by the mutual written consent
of the Boards of Directors of each of RSI and the Company.
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9.2. Termination by Either RSI or the Company. This Agreement may be
terminated (upon notice from the terminating party to the other parties) and
the Merger may be abandoned by action of the Board of Directors of either RSI
or the Company at any time prior to the Effective Time, before or after
approval of the issuance of RSI Common Shares in connection with the Merger by
holders of the Shares or holders of the RSI Common Shares, if (a) the Merger
shall not have been consummated by July 31, 1996 (provided that the right to
terminate this Agreement under this clause (a) shall not be available to any
party whose failure to perform its covenants set forth in this Agreement has
been the cause of or resulted in the failure of the Merger to occur on or
before such date), (b) any court of competent jurisdiction in the United
States or Governmental Body in the United States shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; provided, that the party
seeking to terminate this Agreement pursuant to this clause (b) shall have
used all reasonable efforts to remove such order, decree, ruling or other
action, or (c) the approval of RSI's stockholders required by Section 8.1(a)
is not obtained at the RSI Stockholders Meeting or at any adjournment thereof.
9.3. Termination by RSI. This Agreement may be terminated (upon notice from
RSI to the Company) and the Merger may be abandoned at any time prior to the
Effective Time, before or after approval of the issuance of RSI Common Shares
in connection with the Merger by holders of RSI Common Shares, by action of
the Board of Directors of RSI, if (i) the Company shall have failed to comply
in any material respect with any of the covenants, conditions or agreements
contained in this Agreement to be complied with or performed by the Company at
or prior to such date of termination, which failure to comply has not been
cured within thirty Business Days following receipt by the Company of notice
of such failure to comply, (ii) any of the ML Entities shall have failed to
comply in any material respect with any of the covenants, conditions or
agreements contained in the ML Agreement to be complied with or performed by
any of the ML Entities at or prior to the such date of termination, which
failure to comply has not been cured by such ML Entity within thirty Business
Days following receipt by such ML Entity of notice of such failure to comply,
(iii) any representation or warranty of the Company contained in this
Agreement shall not be true in all material respects when made (provided such
breach has not been cured within thirty Business Days following receipt by the
Company of notice of the breach) or on and as of the Effective Time as if made
on and as of the Effective Time, except that those representations and
warranties which address matters only as of a particular date shall remain
true in all material respects as of such date, or (iv) any representation or
warranty of any ML Entity contained in the ML Agreement shall not be true in
all material respects when made (provided such breach has not been cured
within thirty Business Days following receipt by such ML Entity of notice of
the breach) or on and as of the Effective Time as if made on and as of the
Effective Time, except that those representations and warranties which address
matters only as of a particular date shall remain true in all material
respects as of such date.
9.4. Termination by the Company. This Agreement may be terminated (upon
notice from the Company to RSI) and the Merger may be abandoned at any time
prior to the Effective Time, before or after the approval by holders of the
Shares, by action of the Board of Directors of the Company, if (i) RSI or
Merger Sub shall have failed to comply in any material respect with any of the
covenants, conditions or agreements contained in this Agreement to be complied
with or performed by RSI or Merger Sub at or prior to such date of
termination, which failure to comply has not been cured with thirty Business
Days following receipt by the breaching party of notice of such failure to
comply, or (ii) any representation or warranty of RSI or Merger Sub contained
in this Agreement shall not be true in all material respects when made
(provided such breach has not been cured within thirty Business Days following
receipt by the breaching party of notice of the breach) or on and as of the
Effective Time as if made on and as of the Effective Time, except that those
representations and warranties which address matters only as of a particular
date shall remain true in all material respects as of such date.
Notwithstanding anything to the contrary contained in this Section 9.4, the
Company may terminate this Agreement if, (x) as permitted pursuant to the
proviso to Section 7.5, RSI has refused to consent to any divestiture, hold
separate or similar transaction on the part of the Company, or RSI refuses to
take or commit to take any action referred to in such proviso, in each case
that is required, in the reasonable opinion of the Company, for the
consummation of the transactions contemplated by this Agreement, and (y) RSI
has failed to
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make such consent or to take or commit to be taken such action, within ten
Business Days following receipt by RSI of notice of the Company's intention to
terminate this Agreement on that basis.
9.5. Effect of Termination and Abandonment. In the event of termination of
this Agreement and abandonment of the Merger pursuant to this Article IX, no
party hereto (or any of its directors or officers) shall have any liability or
further obligation under this Agreement, except the obligations of the parties
pursuant to Sections 7.6(b) and (c), 7.12, 10.1, 10.2, 10.4, 10.5, 10.6, 10.7,
10.9, 10.10, 10.11, 10.12 and 10.13, except that nothing herein will relieve
any party from liability for any wilful breach of any of its representations
and warranties, covenants or other agreements set forth in this Agreement;
provided, however, that the failure of RSI or the Company to close the
transactions contemplated by the Commitment Letter shall not be deemed to be a
wilful breach of any of its representations and warranties, covenants or other
agreements set forth in this Agreement; provided, further, however, that the
payment by RSI of the amounts referred to in Section 10.1(b) shall be
liquidated damages and following the payment of such amounts, RSI shall have
no liability or further obligation under this Agreement except pursuant to
Section 7.6(c), 7.12, 10.1, 10.2, 10.4, 10.5, 10.6, 10.7, 10.9, 10.10, 10.11,
10.12 and 10.13.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1. Expenses. (a) Except as set forth in this Section 10.1, each party
shall bear its own Expenses, except that in the event of a dispute concerning
the terms or enforcement of this Agreement, the prevailing party in any such
dispute shall be entitled to reimbursement of reasonable legal fees and
disbursements from the other party or parties to such dispute.
(b) RSI agrees that if (i) an RSI Alternative Proposal shall have been
publicly announced or sent to holders of RSI Common Shares after the date of
this Agreement and prior to the RSI Stockholders Meeting, and (ii) the
issuance of the RSI Common Shares in connection with the Merger shall not have
been approved by the requisite holders of RSI Common Shares in accordance with
the rules of the NYSE at the RSI Stockholders Meeting and (iii) within 12
months of the date on which such meeting is held a definitive agreement with
respect to such RSI Alternative Proposal is executed by RSI, then simultaneous
with the execution of such definitive agreement, unless RSI shall have
properly terminated this Agreement pursuant to Section 9.2(a) or (b), or
Section 9.3, RSI shall pay to the Company an amount equal to $4,500,000 plus
all Expenses (not to exceed $1,000,000) incurred by the Company.
10.2. Notices, Etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing
and shall be deemed to have been duly given to any party when delivered
personally (by courier service or otherwise), when delivered by telecopy and
confirmed by return telecopy, or seven days after being mailed by first-class
mail, postage prepaid and return receipt requested in each case to the
applicable addresses set forth below:
If to the Company:
US Foodservice Inc.
1065 Highway 315
Crosscreek Pointe
Wilkes-Barre, PA 18702
Attn: Frank H. Bevevino, Chairman of the Board
and Chief Executive Officer
Telecopy: (717) 822-0909
with a copy to:
Philip H. Werner, Esq.
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Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Telecopy: (212) 309-6273
If to RSI:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive
Officer
Telecopy: (708) 971-6588
with a copy to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 W. Wacker
Chicago, IL 60601-1692
Telecopy: (312) 782-8585
or to such other address as such party shall have designated by notice so
given to each other party.
10.3. Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified except by an instrument in writing
signed by all the parties hereto. This Agreement may be amended by the parties
hereto, by action taken by their respective Board of Directors, at any time
before or after approval of matters presented in connection with the Merger by
the stockholders of the Company, Merger Sub and RSI, but after any such
stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval.
10.4. No Assignment. This Agreement shall be binding upon and shall inure to
the benefit of and be enforceable by the parties and their respective
successors and assigns; provided that, except as otherwise expressly set forth
in this Agreement, neither the rights nor the obligations of any party may be
assigned or delegated without the prior written consent of the other party.
10.5. Entire Agreement. This Agreement (together with the ML Agreement, the
Exhibits and Schedules hereto and thereto, the Company Disclosure Statement,
the RSI Disclosure Statement and the Confidentiality Agreements dated as of
November 20, 1995 and December 11, 1995, between RSI and the Company) embodies
the entire agreement and understanding between the parties relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. There are no representations, warranties or
covenants by the parties hereto relating to such subject matter other than
those expressly set forth in this Agreement (including the Company Disclosure
Statement and the RSI Disclosure Statement) and any writings expressly
required hereby.
10.6. Specific Performance. The parties acknowledge that money damages are
not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
10.7. Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
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10.8. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
10.9. No Third Party Beneficiaries. Except as provided in Sections 7.13,
7.14 and 7.16, the provisions of which may be enforced by the intended
beneficiaries thereof, this Agreement is not intended to be for the benefit of
and shall not be enforceable by any Person who or which is not a party hereto.
10.10. Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
venue therein); provided, however, that such consent to jurisdiction is solely
for the purpose referred to in this Section 10.10 and shall not be deemed to
be a general submission to the jurisdiction of said Court other than for such
purpose. RSI and the Company hereby waive any right to a trial by jury in
connection with any such action, suit or proceeding.
10.11. Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Delaware, without regard to principles of conflict of laws that
would apply the laws of any other jurisdiction.
10.12. Name, Captions, Etc. The name assigned this Agreement and the section
captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Unless otherwise specified,
(a) the terms "hereof", "herein" and similar terms refer to this Agreement as
a whole and (b) references herein to Articles or Sections refer to articles or
sections of this Agreement.
10.13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by
all, the parties hereto.
10.14. Knowledge. The term "knowledge" or "best knowledge" and any
derivatives thereof when applied to any party to this Agreement shall refer
only to the actual knowledge of that party (or in the case of a corporation,
partnership or other entity, the actual knowledge of its executive officers),
but no information known by any other employee, or any attorney, accountant or
other representative, of such party shall be imputed to such party.
10.15. Nonsurvival of Representations and Warranties. All representations
and warranties and agreements in this Agreement or in any certificate
delivered pursuant to this Agreement (a) shall be deemed to the extent
expressly provided herein to be conditions to the Merger and (b) shall not
survive the Merger, provided, however, that the agreements contained in
Article IV, this Article X and Sections 7.13, 7.14 and 7.16 shall survive the
Merger and Section 9.5 shall survive termination.
10.16. No Other Representations and Warranties. Without limiting the
generality of Section 10.5, each party agrees that neither it nor any
Affiliate or stockholder thereof, nor any of their respective partners,
officers, directors, employees or representatives makes, has made or shall be
deemed to have made, any representation or warranty, express or implied, to
any other party or to any Affiliate or stockholder thereof or any of their
respective partners, officers, directors, employees or representatives with
respect to (a) the execution and delivery of this Agreement or the
transactions contemplated hereby; (b) any financial projections heretofore or
hereafter delivered to or made available to any such Persons or their counsel,
accountants, advisors, representatives or Affiliates, and agrees that it has
not and will not rely on such financial projections in connection with its
evaluation of any other party or the Merger; or (c) any information, statement
or document heretofore or hereafter delivered to or made available to any such
Persons or their counsel, accountants, advisors, representatives or Affiliates
with respect to any other party or the businesses, operations or affairs of
any other party, except (with respect to clauses (a) and (c) only), to the
extent and as expressly covered by a representation and warranty contained in
Articles V or VI hereof or contained in the ML Agreement or the other
agreements expressly referred to herein or therein.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties set forth below.
US Foodservice Inc.
/s/ Frank H. Bevevino
By: _________________________________
Name: Frank H. Bevevino
Title:Chairman and Chief
Executive Officer
Rykoff-Sexton, Inc.
/s/ Mark Van Stekelenburg
By: _________________________________
Name: Mark Van Stekelenburg
Title:Chairman, President and
Chief Executive Officer
USF Acquisition Corporation
/s/ Mark Van Stekelenburg
By: _________________________________
Name: Mark Van Stekelenburg
Title:President
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- --------------------------------------------------------------------------------
Goldman, Sachs & Co. | 85 Broad Street | New York, New York 10004
Tel: 212-902-1000
APPENDIX B
[LOGO OF GOLDMAN SACHS]
- --------------------------------------------------------------------------------
, 1996
Board of Directors
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532
Gentlemen:
You have requested our opinion as to the fairness to Rykoff-Sexton, Inc. (the
"Company") of the aggregate number of shares of the Common Stock, par value
$.10 per share (the "Shares"), of the Company to be paid as consideration (the
"Common Stock Consideration") for the outstanding Common Stock, par value $.01
per share ("US Foodservice Common Stock"), of US Foodservice Inc. ("US
Foodservice") pursuant to the merger (the "Merger") contemplated by the
Agreement and Plan of Merger dated as of February 2, 1996 among the Company,
USF Acquisition Corporation, a wholly-owned subsidiary of the Company, and US
Foodservice (the "Agreement"). Pursuant to the Agreement, the aggregate number
of shares to be included in the Common Stock Consideration will be determined
by reference to the ratio (the "Exchange Ratio") of Shares to be paid by the
Company for each issued and outstanding share of US Foodservice Common Stock.
The Exchange Ratio will be determined by dividing $25.00 by the average of the
closing prices of the Shares as reported in the New York Stock Exchange
Composite Tape during the period of the twenty most recent trading days ending
on the third business day prior to the Merger, provided that in no event will
the Exchange Ratio be less than 1.244 or greater than 1.457.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with the Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-4, including the Proxy
Statement/Prospectus relating to the Special Meeting of Stockholders of the
Company to be held in connection with the Agreement; Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company for the five fiscal
years ended April 30, 1995; certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of the Company; certain other communications
from the Company to its stockholders; audited financial statements of US
Foodservice for the three fiscal years ended December 30, 1995 and the twenty-
seven weeks ended
B-1
<PAGE>
Rykoff-Sexton, Inc.
, 1996
Page Two
January 2, 1993; certain internal financial analyses and forecasts for the
Company and US Foodservice prepared by their respective managements; and
certain internal forecasts for the Company and US Foodservice on a combined
basis, after giving effect to the Merger, prepared by management of the
Company and US Foodservice. We also have held discussions with members of the
senior managements of the Company and US Foodservice regarding the past and
current business operations, financial condition, future prospects of their
respective companies and the potential future prospects of their respective
companies on a combined basis, after giving effect to the Merger. In addition,
we have reviewed the reported price and trading activity for the Shares,
compared certain financial and stock market information for the Company with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the food service distribution industry specifically and in
other industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have relied on the managements of
the Company and US Foodservice as to the reasonableness and achievability of
the financial and operating forecasts (and the assumptions and bases
therefore) provided to us, and with your consent we have assumed that such
forecasts, including without limitation projected cost savings and operating
synergies resulting from the Merger, reflect the best currently available
estimates and judgments of such respective managements and that such
projections and forecasts will be realized in the amounts and time periods
currently estimated by the managements of the Company and US Foodservice.
Further, in our evaluation of the fairness of the Common Stock Consideration,
we have assumed, with your permission, that the consummation of the Merger
will not result in a change of control of the Company. In addition, we have
not made an independent evaluation or appraisal of the assets and liabilities
of the Company or US Foodservice or any of their subsidiaries and we have not
been furnished with any such evaluation or appraisal.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the Common
Stock Consideration to be paid by the Company pursuant to the Agreement is
fair to the Company.
Very truly yours,
- -----------------------
GOLDMAN, SACHS & CO.
B-2
<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 Appraisal Rights--(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S) 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251 (other than a merger effected pursuant to
subsection (g) of (S) 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)(S)
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares of fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all
C-1
<PAGE>
or substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the County of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition
C-2
<PAGE>
by registered or certified mail to the surviving or resulting corporation and
to the stockholders shown on the list at the addresses therein stated. Such
notice shall also be given by 1 or more publications at least 1 week before
the day of the hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court deems advisable.
The forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholder entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expense incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
written approval of the corporation, then the right of such stockholder to an
appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
C-3
<PAGE>
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
C-4
<PAGE>
APPENDIX TO THE ELECTRONIC FILING
PROXY
RYKOFF-SEXTON, INC.
1050 WARRENVILLE ROAD
LISLE, ILLINOIS 60532-5201
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mark Van Stekelenburg, Robert J. Harter, Jr.
and Richard J. Martin as proxies, each with the power to appoint his substi-
tute, and hereby authorizes each of them to represent and vote, as designated
on the other side, all the shares of Common Stock of Rykoff-Sexton, Inc. held
of record by the undersigned on April 2, 1996, at the Special Meeting of
Stockholders of Rykoff-Sexton, Inc. to be held at One Sexton Drive, Glendale
Heights, Illinois on May 8, 1996, at 10:00 a.m. local time, and any adjourn-
ments or postponements thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
<PAGE>
Please mark your votes as indicated in this example [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Proposal to approve the issuance of shares of Common Stock of Rykoff-
Sexton, Inc., par value $.10 per share, in connection with an Agreement and
Plan of Merger, dated February 2, 1996, among Rykoff-Sexton, Inc., US
Foodservice Inc. and USF Acquisition Corporation, a wholly-owned subsidiary
of Rykoff-Sexton, Inc., the provisions of which are described in the enclosed
Proxy Statement/Prospectus.
FOR AGAINST ABSTAIN
[_] [_] [_]
2. In their discretion, the Proxies are authorized to transact such other
matters as may arise relating to the conduct of the Special Meeting of
Stockholders of Rykoff-Sexton, Inc. or any adjournments or postponements
thereof.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1, AND IN THE DISCRETION OF THE PROXIES ON THE MATTERS
DESCRIBED IN PROPOSAL 2.
Do you plan to attend this meeting? YES NO
[_] [_]
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s) ___________________________ Date ______________________________
NOTE: Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, administrator,
trustee or guardian, please give your full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign the partnership's name
by an authorized person.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law Provides that a
corporation may indemnify directors and officers as well as other employees
and individuals against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation--a "derivative action"),
or if they acted in good faith in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. A similar standard is applicable in the case of
derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of such action, and the statute requires court approval before
there can be any indemnification where the person seeking indemnification has
been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, disinterested director vote, stockholder vote, agreement or
otherwise.
Rykoff-Sexton's Certificate of Incorporation, as amended, requires that
Rykoff-Sexton provide for indemnification of directors, officers, employees
and agents (each an "Indemnified Party") of Rykoff-Sexton to the fullest
extent permitted by Delaware law. Rykoff-Sexton will indemnify any Indemnified
Party who is, or is threatened to be made, party to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in right of such
corporation), by reason of the fact that such person is or was a director or
officer of Rykoff-Sexton or for serving at the request of Rykoff-Sexton as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgment, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, if such person acted in
good faith and in a manner reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal proceeding, had
no reasonable cause to believe that his conduct was unlawful. Delaware law
further provides for the indemnification of its directors and officers in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the director
or officer is adjudged to be liable to the corporation. Any indemnification
must be authorized based on a determination that the indemnification is proper
as the applicable standard of conduct has been met by the Indemnified Party.
Such determination will be made by a majority vote of a quorum of the Board
consisting of directors not a party to the suit, action, or proceeding, by a
written opinion of independent legal counsel or by the stockholders. Expenses
incurred by an officer or director may be paid by Rykoff-Sexton in advance of
the final disposition of an action, suit or proceeding upon the undertaking of
such person to repay Rykoff-Sexton any amount it is ultimately determined that
he or she is not entitled to receive indemnity.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) The following exhibits, as required by Item 601 of Regulation S-K, are
filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated February 2, 1996 among Rykoff-Sexton,
Inc., USF Acquisition Corporation and US Foodservice Inc. (included as
Appendix A to the Prospectus/Proxy Statement that is part of this
Registration Statement)(1)
3.1 Restated Certificate of Incorporation of Rykoff-Sexton, Inc., as amended
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended May 1, 1993, as amended)
3.2 Certificate of Correction
3.3 Amended and Restated By-Laws of Rykoff-Sexton, Inc.
4.1 Specimen of Certificate representing Rykoff-Sexton, Inc. Common Stock,
$.10 par value
4.2 Indenture, dated as of November l, 1993, between Rykoff-Sexton, Inc. and
Norwest Bank Minnesota, N.A., as trustee (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-Q for the quarter ended October
30, 1993)
4.3 Rights Agreement, dated as of December 8, 1986, by Rykoff-Sexton, Inc. and
Bank of America National Trust & Savings Association (incorporated by
reference from Rykoff-Sexton, Inc.'s Report on Form 10-Q for the quarter
ended May 1, 1993, as amended)
4.3.1 Amendment to Rights Agreement, dated as of October 5, 1989, by Rykoff-
Sexton, Inc. and Bank of America National Trust & Savings Association
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-Q
for the quarter ended October 30, 1993)
4.3.2 Second Amendment to Rights Agreement, dated as of December 4, 1995, by
Rykoff-Sexton, Inc. and Chemical Trust Company of California
4.3.3 Third Amendment to Rights Agreement, dated as of January 31, 1996, by
Rykoff-Sexton, Inc. and Chemical Bank
4.4 Form of Common Stock Purchase Warrant expiring September 30, 2005
5.1 Legal opinion of Jones, Day, Reavis & Pogue with respect to the securities
registered hereby
8.1 Legal opinion of Jones, Day, Reavis & Pogue with respect to certain tax
matters
10.1 1980 Stock Option Plan (incorporated by reference from Rykoff-Sexton,
Inc.'s Report on Form 10-K for the fiscal year ended May 1, 1993, as
amended)
10.1.1 Form of Incentive Stock Option Agreement
10.2 1988 Stock Option and Compensation Plan, as amended on September 13, 1991
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended May 1, 1993, as amended)
10.2.1 Form of Restricted Stock Agreement (incorporated by reference from Rykoff-
Sexton, Inc.'s Report on Form 10-K for the fiscal year ended May 1, 1993,
as amended)
10.2.2 Form of Non-Qualified Stock Option Agreement (incorporated by reference
from Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended
May l, 1993, as amended)
</TABLE>
- --------
(1) Rykoff-Sexton, Inc. agrees to furnish supplementally a copy of any omitted
schedule or similar attachment to the Commission upon its request.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.2.3 Form of Converging Non-Qualified Stock Option Agreement (incorporated by
reference from Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal
year ended May l, 1993, as amended)
10.2.4 Form of Performance Share Plan Agreement
10.3 Rykoff-Sexton, Inc. 1989 Director Stock Option Plan (incorporated by
reference from Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal
year ended April 28, 1990, Commission File No. 0-7380)
10.3.1 Form of Non-Qualified Stock Option Agreement
10.4 Rykoff-Sexton, Inc. 1993 Director Stock Option (incorporated by reference
from Rykoff-Sexton, Inc.'s Report on Form 10-Q for the quarter ended
October 30, 1993)
10.4.1 First Amendment to the Rykoff-Sexton, Inc. 1993 Director Stock Option Plan
10.4.2 Form of Non-Qualified Stock Option Agreement
10.5 1995 Key Employees Stock Option and Compensation Plan
10.6 Rykoff-Sexton, Inc. Convertible Award Plan (Officer and Key Employee
Edition)
10.7 Rykoff-Sexton, Inc. Convertible Award Plan (Director Edition)
10.8 The Management Stock Option Plan of WS Holdings Corporation
10.8.1 Form of Normal Option Agreement
10.8.2 Form of Performance Option Agreement
10.8.3 Form of WS Holdings Option Agreement Amendment Agreement
10.9 US Foodservice Inc. 1992 Stock Option Plan
10.9.1 Form of Normal Option Agreement
10.9.2 Form of Performance Option Agreement
10.10 US Foodservice Inc. 1993 Stock Option Plan
10.10.1 Form of Normal Option Agreement
10.11 Amended and Restated Employment Agreement dated as of February 2, 1996
between Mark Van Stekelenburg and Rykoff-Sexton, Inc.
10.12 Letter Agreement between Harold E. Feather and Rykoff-Sexton, Inc. as of
June 20, 1994 (incorporated by reference from Rykoff-Sexton, Inc.'s
Report on Form 10-K for the fiscal year ended April 30, 1994)
10.13 Letter Agreement dated July 18, 1994 between Harold E. Feather and Rykoff-
Sexton, Inc.
10.14 Letter Agreement dated December 10, 1993 between Rykoff-Sexton, Inc. and
Donald E. Willis, Jr.
10.15 Form of Employment Agreement between Frank H. Bevevino and Rykoff-Sexton,
Inc.
10.16 Form of Employment Agreement between Thomas G. McMullen and Rykoff-Sexton,
Inc.
10.17 Form of Employment Agreement between David F. McAnally and Rykoff-Sexton,
Inc.
10.18 Second Amended and Restated Change in Control Agreement dated as of
February 1, 1996 by Mark Van Stekelenburg and Rykoff-Sexton, Inc.
10.19 Form of Amended and Restated Change in Control Agreement, dated as of
February 2, 1996 for Harold E. Feather, Alan V. Giuliani, Robert J.
Harter, Jr. and Richard J. Martin
10.20 Form of Change in Control Agreements for Victor B. Chavez and Thomas R.
Rykoff (incorporated by reference from Rykoff-Sexton, Inc.'s Report on
10-K for the fiscal year ended April 28, 1990, Commission File No. 0-7380)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.21 Change in Control Agreement, dated December 11, 1989, by Rykoff-Sexton,
Inc. and Chris G. Adams (incorporated by reference from Rykoff-Sexton,
Inc.'s Report on Form 10-K for the fiscal year ended April 28, 1990,
Commission File No. 0-7380)
10.22 Change in Control Agreement, dated June 22, 1992, by Rykoff-Sexton, Inc.
and Andre Mills
10.23 Form of Indemnity Agreement (incorporated by reference from Rykoff-Sexton,
Inc.'s Report on Form 10-K for the fiscal year ended May 1, 1993, as
amended)
10.24 Rykoff-Sexton, Inc. Supplemental Executive Retirement Plan for Mark Van
Stekelenburg as of July 20, 1994, as amended June 19, 1995
10.25 Form of Amended and Restated Supplemental Executive Retirement Plans for
Robert J. Harter, Jr., Harold E. Feather, Richard J. Martin, Alan V.
Giuliani and Donald E. Willis, Jr.
10.26 Form of Severance Agreement dated as of February 2, 1996 for Harold E.
Feather, Alan V. Giuliani, Robert J. Harter, Jr. and Richard Martin
10.27 Deferred Compensation Plan Master Plan Document
10.28 Amendment to Rykoff-Sexton, Inc. Deferred Compensation Plan
10.29 Rykoff-Sexton, Inc. Master Trust Document for Executive Deferral Plans
10.30 Amendment to Rykoff-Sexton, Inc. Master Trust Document
10.31 Junior Demand Promissory Note dated March 31, 1995 by Mark Van
Stekelenburg and Mirjam Van Stekelenburg (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended April
29, 1995)
10.32 Form of Fiduciary Indemnity Agreement (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended May
l, 1993, as amended)
10.33 Participation Agreement, entered into among Rykoff-Sexton, Inc., as Lessee
("Lessee"),
Tone Brothers, Inc., as Sublessee ("Sublessee"), BAS Leasing & Capital
Corporation, as Agent ("Agent"), and BA Leasing & Capital Corporation,
Manufacturers Bank and Pitney Bowes Credit Corporation, as Lessors (the
"Lessors"), dated as of April 29, 1994 (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended April
30, 1994)
10.33.1 Lease Intended as Security, among Lessee, Agent and the Lessors, dated as
of April 29, 1994 (incorporated by reference from Rykoff-Sexton, Inc.'s
Report on Form 10-K for the fiscal year ended April 30, 1994)
10.33.2 Sublease, between Lessee and Sublessee, dated as of April 29, 1994
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended April 30, 1994)
10.33.3 Lease supplement, among Lessee and the Lessors, dated as of April 29, 1994
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended April 29, 1995)
10.33.4 Lease supplement, among Lessee and the Lessors, dated as of January 27,
1995 (incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form
10-K for the fiscal year ended April 29, 1995)
10.33.5 Lease supplement, among Lessee and the Lessors, dated as of April 18, 1995
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended April 29, 1995)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.34 Stock Purchase Agreement dated September 8, 1994 by Rykoff-Sexton, Inc.,
Tone Brothers and Burns Philip Food Inc. (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 8-K dated October 27, 1994)
10.35 USFAR Master Trust Amended and Restated Pooling and Servicing Agreement,
dated October 27, 1994 among USFAR Inc., US Foodservice Inc., the
servicers named therein and Chemical Bank, as Trustee on behalf of the
Certificateholders (the "Pooling and Servicing Agreement")
10.36 Series 1994-1 Supplement to the Amended and Restated Pooling and Servicing
Agreement, dated October 27, 1994 (the "Series 1994-1 Supplement")
10.37 Amended and Restated Receivables Purchase Agreement, dated as of October
27, 1994, among US Foodservice Inc., the subsidiaries of US Foodservice
Inc. named therein, and USFAR Inc. (the "Receivables Purchase Agreement")
10.38 Modification No. 1 as of June 23, 1995 to the Pooling and Servicing
Agreement, Series 1994-1 Supplement and Receivables Purchase Agreement
10.39 Modification No. 2 dated as of June 26, 1995 to the Pooling and Servicing
Agreement, Series 1994-1 Supplement and the Receivables Purchase
Agreement
10.40 Commitment Agreement dated as of August 10, 1992 between BRB Holdings,
Inc. and its subsidiaries and Sara Lee Corporation
10.41 Amendment Number One to BRB Holdings Commitment Agreement dated as of
September 27, 1995 by Sara Lee Corporation and BRB Holdings, Inc. and
guaranteed by US Foodservice Inc.
10.42 Commitment Agreement dated as of August 10, 1992 between WS Holdings
Corporation and its subsidiaries and Sara Lee Corporation
10.43 Amendment Number One to WS Holdings Commitment Agreement dated as of
September 27, 1995 by Sara Lee Corporation and WS Holdings Corporation
and guaranteed by US Foodservice Inc.
10.44 Agreement of Lease, dated February 28, 1996, by Paul-Francis Realty, L.P.
and US Foodservice Inc.
10.45 Agreement dated as of February 2, 1996 by and among Rykoff-Sexton, Inc.
and the persons set forth on the signature pages thereto
10.46 Form of Registration Rights Agreement by Rykoff-Sexton, Inc. and the other
signatories listed on the signature pages thereto
10.47 Form of Standstill Agreement by Rykoff-Sexton, Inc. and the persons set
forth on the signature pages thereto
10.48 Form of Tax Agreement by Rykoff-Sexton, Inc. and the persons listed on the
signature pages thereof
21.1 Subsidiaries of Rykoff-Sexton, Inc. (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended April
29, 1995)
23.1 Consents of Arthur Andersen LLP
23.2 Consents of Jones, Day, Reavis & Pogue (contained in its opinions filed as
Exhibits 5.1 and 8.1)
24.1 Power of Attorney of Rykoff-Sexton, Inc.
24.2 Power of Attorney of Mark Van Stekelenburg
24.3 Power of Attorney of James I. Maslon
24.4 Power of Attorney of James P. Miscoll
24.5 Power of Attorney of Neil I. Sell
24.6 Power of Attorney of Bernard Sweet
24.7 Power of Attorney of Jan W. Jeurgens
24.8 Power of Attorney of Richard J. Martin
99.1 Consent of Frank H. Bevevino
</TABLE>
II-5
<PAGE>
All other exhibits have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
exhibit, or because the information required is included in the consolidated
financial statements or the notes thereto.
(b) Financial Statement Schedules:
The following Report and Financial Statement Schedules of US Foodservice
Inc. for the years ended December 31, 1994 and December 31, 1995 are included
herein:
1. Report of Independent Public Accountants on Consolidated Financial
Statement Schedules
2. Schedule II--Valuation and Qualifying Accounts
(c) The opinion of Goldman, Sachs & Co. (filed herewith as Appendix B to the
Proxy Statement/Prospectus)
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus that is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such offering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(d) The undersigned Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (c) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the
II-6
<PAGE>
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statements through
the date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by a means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON BEHALF OF THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN LISLE, ILLINOIS, ON APRIL 2, 1996.
Rykoff-Sexton, Inc.
/s/ Mark Van Stekelenburg
By: _________________________________
Mark Van Stekelenburg
President, Chairman and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mark Van Stekelenburg President, Chairman and April 2, 1996
____________________________________ Chief Executive Officer of
Mark Van Stekelenburg Rykoff-Sexton, Inc. and
Director (Principal
Executive Officer)
/s/ Richard J. Martin Senior Vice President and April 2, 1996
____________________________________ Chief Financial Officer
Richard J. Martin (Principal Financial
Officer and Principal
Accounting Officer)
* Director April 2, 1996
____________________________________
Neil I. Sell
* Director April 2, 1996
____________________________________
Jan W. Jeurgens
* Director April 2, 1996
____________________________________
James P. Miscoll
* Director April 2, 1996
____________________________________
James I. Maslon
* Director April 2, 1996
____________________________________
Bernard Sweet
</TABLE>
*The undersigned by signing his name hereunto has hereby signed this
Registration Statement on behalf of the above-named officers and directors, on
April 2, 1996, pursuant to a power of attorney executed on behalf of each such
director and officer and filed with the Securities and Exchange Commission.
/s/ Richard J. Martin
By: _________________________________
Richard J. Martin,
Attorney-in-fact
II-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To US Foodservice Inc.
We have audited in accordance with generally accepted auditing standards,
the consolidated balance sheets as of December 31, 1994 and December 30, 1995
and the consolidated statements of operations, mandatory redeemable preferred
stock and stockholders' equity (deficit) and cash flows for the fiscal years
ended January 1, 1994, December 31, 1994 and December 30, 1995 of US
Foodservice Inc. included in this Registration Statement and have issued our
report thereon dated March 1, 1996. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed
in Item 21(b) is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basis financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA.,
March 1, 1996
S-1
<PAGE>
US FOODSERVICE INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGE TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNT OTHER PERIOD
---------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended
December 30, 1995:
Allowance for doubtful
accounts............. $ 3,805 $3,380 $-- $ (3,381)(1) $ 3,804
------- ------ ---- -------- -------
Valuation allowance
for deferred income
taxes................ $ 565 $ -- $-- $ 1,222 (3) $ 1,787
======= ====== ==== ======== =======
Fiscal Year Ended
December 31, 1994:
Allowance for doubtful
accounts............. $ 3,605 $2,670 $-- $ (2,470)(1) $ 3,805
------- ------ ---- -------- -------
Valuation allowance
for deferred income
taxes................ $10,889 $ -- $-- $(10,324)(2) $ 565
======= ====== ==== ======== =======
Fiscal Year Ended
January 1, 1994:
Allowance for doubtful
accounts............. $ 2,664 $4,441 $-- $ (3,500)(1) $ 3,605
------- ------ ---- -------- -------
Valuation allowance
for deferred income
taxes................ $ 2,100 $8,789 $-- $ -- $10,889
======= ====== ==== ======== =======
</TABLE>
- --------
(1) Uncollectible accounts written off, net of recoveries
(2) Reversal of valuation allowances due to realization of deferred tax assets
to which the allowances related
(3) Amount represents valuation allowance recorded in 1995 against previously
unrecorded deferred tax assets which were recorded in 1995
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated February 2, 1996 among Rykoff-Sexton,
Inc., USF Acquisition Corporation and US Foodservice Inc. (included as
Appendix A to the Prospectus/Proxy Statement that is part of this
Registration Statement)(1)
3.1 Restated Certificate of Incorporation of Rykoff-Sexton, Inc., as amended
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended May 1, 1993, as amended)
3.2 Certificate of Correction
3.3 Amended and Restated By-Laws of Rykoff-Sexton, Inc.
4.1 Specimen of Certificate representing Rykoff-Sexton, Inc. Common Stock,
$.10 par value
4.2 Indenture, dated as of November l, 1993, between Rykoff-Sexton, Inc. and
Norwest Bank Minnesota, N.A., as trustee (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-Q for the quarter ended October
30, 1993)
4.3 Rights Agreement, dated as of December 8, 1986, by Rykoff-Sexton, Inc. and
Bank of America National Trust & Savings Association (incorporated by
reference from Rykoff-Sexton, Inc.'s Report on Form 10-Q for the quarter
ended May 1, 1993, as amended)
4.3.1 Amendment to Rights Agreement, dated as of October 5, 1989, by Rykoff-
Sexton, Inc. and Bank of America National Trust & Savings Association
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-Q
for the quarter ended October 30, 1993)
4.3.2 Second Amendment to Rights Agreement, dated as of December 4, 1995, by
Rykoff-Sexton, Inc. and Chemical Trust Company of California
4.3.3 Third Amendment to Rights Agreement, dated as of January 31, 1996, by
Rykoff-Sexton, Inc. and Chemical Bank
4.4 Form of Common Stock Purchase Warrant expiring September 30, 2005
5.1 Legal opinion of Jones, Day, Reavis & Pogue with respect to the securities
registered hereby
8.1 Legal opinion of Jones, Day, Reavis & Pogue with respect to certain tax
matters
10.1 1980 Stock Option Plan (incorporated by reference from Rykoff-Sexton,
Inc.'s Report on Form 10-K for the fiscal year ended May 1, 1993, as
amended)
10.1.1 Form of Incentive Stock Option Agreement
10.2 1988 Stock Option and Compensation Plan, as amended on September 13, 1991
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended May 1, 1993, as amended)
10.2.1 Form of Restricted Stock Agreement (incorporated by reference from Rykoff-
Sexton, Inc.'s Report on Form 10-K for the fiscal year ended May 1, 1993,
as amended)
10.2.2 Form of Non-Qualified Stock Option Agreement (incorporated by reference
from Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended
May l, 1993, as amended)
10.2.3 Form of Converging Non-Qualified Stock Option Agreement (incorporated by
reference from Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal
year ended May l, 1993, as amended)
</TABLE>
- --------
(1) Rykoff-Sexton, Inc. agrees to furnish supplementally a copy of any omitted
schedule or similar attachment to the Commission upon its request.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.2.4 Form of Performance Share Plan Agreement
10.3 Rykoff-Sexton, Inc. 1989 Director Stock Option Plan (incorporated by
reference from Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal
year ended April 28, 1990, Commission File No. 0-7380)
10.3.1 Form of Non-Qualified Stock Option Agreement
10.4 Rykoff-Sexton, Inc. 1993 Director Stock Option (incorporated by reference
from Rykoff-Sexton, Inc.'s Report on Form 10-Q for the quarter ended
October 30, 1993)
10.4.1 First Amendment to the Rykoff-Sexton, Inc. 1993 Director Stock Option Plan
10.4.2 Form of Non-Qualified Stock Option Agreement
10.5 1995 Key Employees Stock Option and Compensation Plan
10.6 Rykoff-Sexton, Inc. Convertible Award Plan (Officer and Key Employee
Edition)
10.7 Rykoff-Sexton, Inc. Convertible Award Plan (Director Edition)
10.8 The Management Stock Option Plan of WS Holdings Corporation
10.8.1 Form of Normal Option Agreement
10.8.2 Form of Performance Option Agreement
10.8.3 Form of WS Holdings Option Agreement Amendment Agreement
10.9 US Foodservice Inc. 1992 Stock Option Plan
10.9.1 Form of Normal Option Agreement
10.9.2 Form of Performance Option Agreement
10.10 US Foodservice Inc. 1993 Stock Option Plan
10.10.1 Form of Normal Option Agreement
10.11 Amended and Restated Employment Agreement dated as of February 2, 1996
between Mark Van Stekelenburg and Rykoff-Sexton, Inc.
10.12 Letter Agreement between Harold E. Feather and Rykoff-Sexton, Inc. as of
June 20, 1994 (incorporated by reference from Rykoff-Sexton, Inc.'s
Report on Form 10-K for the fiscal year ended April 30, 1994)
10.13 Letter Agreement dated July 18, 1994 between Harold E. Feather and Rykoff-
Sexton, Inc.
10.14 Letter Agreement dated December 10, 1993 between Rykoff-Sexton, Inc. and
Donald E. Willis, Jr.
10.15 Form of Employment Agreement between Frank H. Bevevino and Rykoff-Sexton,
Inc.
10.16 Form of Employment Agreement between Thomas G. McMullen and Rykoff-Sexton,
Inc.
10.17 Form of Employment Agreement between David F. McAnally and Rykoff-Sexton,
Inc.
10.18 Second Amended and Restated Change in Control Agreement dated as of
February 1, 1996 by Mark Van Stekelenburg and Rykoff-Sexton, Inc.
10.19 Form of Amended and Restated Change in Control Agreement, dated as of
February 2, 1996 for Harold E. Feather, Alan V. Giuliani, Robert J.
Harter, Jr. and Richard J. Martin
10.20 Form of Change in Control Agreements for Victor B. Chavez and Thomas R.
Rykoff (incorporated by reference from Rykoff-Sexton, Inc.'s Report on
10-K for the fiscal year ended April 28, 1990, Commission File No. 0-7380)
10.21 Change in Control Agreement, dated December 11, 1989, by Rykoff-Sexton,
Inc. and Chris G. Adams (incorporated by reference from Rykoff-Sexton,
Inc.'s Report on Form 10-K for the fiscal year ended April 28, 1990,
Commission File No. 0-7380)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.22 Change in Control Agreement, dated June 22, 1992, by Rykoff-Sexton, Inc.
and Andre Mills
10.23 Form of Indemnity Agreement (incorporated by reference from Rykoff-Sexton,
Inc.'s Report on Form 10-K for the fiscal year ended May 1, 1993, as
amended)
10.24 Rykoff-Sexton, Inc. Supplemental Executive Retirement Plan for Mark Van
Stekelenburg as of July 20, 1994, as amended June 19, 1995
10.25 Form of Amended and Restated Supplemental Executive Retirement Plans for
Robert J. Harter, Jr., Harold E. Feather, Richard J. Martin, Alan V.
Giuliani and Donald E. Willis, Jr.
10.26 Form of Severance Agreement dated as of February 2, 1996 for Harold E.
Feather, Alan V. Giuliani, Robert J. Harter, Jr. and Richard Martin
10.27 Deferred Compensation Plan Master Plan Document
10.28 Amendment to Rykoff-Sexton, Inc. Deferred Compensation Plan
10.29 Rykoff-Sexton, Inc. Master Trust Document for Executive Deferral Plans
10.30 Amendment to Rykoff-Sexton, Inc. Master Trust Document
10.31 Junior Demand Promissory Note dated March 31, 1995 by Mark Van
Stekelenburg and Mirjam Van Stekelenburg (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended April
29, 1995)
10.32 Form of Fiduciary Indemnity Agreement (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended May
l, 1993, as amended)
10.33 Participation Agreement, entered into among Rykoff-Sexton, Inc., as Lessee
("Lessee"),
Tone Brothers, Inc., as Sublessee ("Sublessee"), BAS Leasing & Capital
Corporation, as Agent ("Agent"), and BA Leasing & Capital Corporation,
Manufacturers Bank and Pitney Bowes Credit Corporation, as Lessors (the
"Lessors"), dated as of April 29, 1994 (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended April
30, 1994)
10.33.1 Lease Intended as Security, among Lessee, Agent and the Lessors, dated as
of April 29, 1994 (incorporated by reference from Rykoff-Sexton, Inc.'s
Report on Form 10-K for the fiscal year ended April 30, 1994)
10.33.2 Sublease, between Lessee and Sublessee, dated as of April 29, 1994
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended April 30, 1994)
10.33.3 Lease supplement, among Lessee and the Lessors, dated as of April 29, 1994
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended April 29, 1995)
10.33.4 Lease supplement, among Lessee and the Lessors, dated as of January 27,
1995 (incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form
10-K for the fiscal year ended April 29, 1995)
10.33.5 Lease supplement, among Lessee and the Lessors, dated as of April 18, 1995
(incorporated by reference from Rykoff-Sexton, Inc.'s Report on Form 10-K
for the fiscal year ended April 29, 1995)
10.34 Stock Purchase Agreement dated September 8, 1994 by Rykoff-Sexton, Inc.,
Tone Brothers and Burns Philip Food Inc. (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 8-K dated October 27, 1994)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.35 USFAR Master Trust Amended and Restated Pooling and Servicing Agreement,
dated October 27, 1994 among USFAR Inc., US Foodservice Inc., the
servicers named therein and Chemical Bank, as Trustee on behalf of the
Certificateholders (the "Pooling and Servicing Agreement")
10.36 Series 1994-1 Supplement to the Amended and Restated Pooling and Servicing
Agreement, dated October 27, 1994 (the "Series 1994-1 Supplement")
10.37 Amended and Restated Receivables Purchase Agreement, dated as of October
27, 1994, among US Foodservice Inc., the subsidiaries of US Foodservice
Inc. named therein, and USFAR Inc. (the "Receivables Purchase Agreement")
10.38 Modification No. 1 as of June 23, 1995 to the Pooling and Servicing
Agreement, Series 1994-1 Supplement and Receivables Purchase Agreement
10.39 Modification No. 2 dated as of June 26, 1995 to the Pooling and Servicing
Agreement, Series 1994-1 Supplement and the Receivables Purchase
Agreement
10.40 Commitment Agreement dated as of August 10, 1992 between BRB Holdings,
Inc. and its subsidiaries and Sara Lee Corporation
10.41 Amendment Number One to BRB Holdings Commitment Agreement dated as of
September 27, 1995 by Sara Lee Corporation and BRB Holdings, Inc. and
guaranteed by US Foodservice Inc.
10.42 Commitment Agreement dated as of August 10, 1992 between WS Holdings
Corporation and its subsidiaries and Sara Lee Corporation
10.43 Amendment Number One to WS Holdings Commitment Agreement dated as of
September 27, 1995 by Sara Lee Corporation and WS Holdings Corporation
and guaranteed by US Foodservice Inc.
10.44 Agreement of Lease, dated February 28, 1996, by Paul-Francis Realty, L.P.
and US Foodservice Inc.
10.45 Agreement dated as of February 2, 1996 by and among Rykoff-Sexton, Inc.
and the persons set forth on the signature pages thereto
10.46 Form of Registration Rights Agreement by Rykoff-Sexton, Inc. and the other
signatories listed on the signature pages thereto
10.47 Form of Standstill Agreement by Rykoff-Sexton, Inc. and the persons set
forth on the signature pages thereto
10.48 Form of Tax Agreement by Rykoff-Sexton, Inc. and the persons listed on the
signature pages thereof
21.1 Subsidiaries of Rykoff-Sexton, Inc. (incorporated by reference from
Rykoff-Sexton, Inc.'s Report on Form 10-K for the fiscal year ended April
29, 1995)
23.1 Consents of Arthur Andersen LLP
23.2 Consents of Jones, Day, Reavis & Pogue (contained in its opinions filed as
Exhibits 5.1 and 8.1)
24.1 Power of Attorney of Rykoff-Sexton, Inc.
24.2 Power of Attorney of Mark Van Stekelenburg
24.3 Power of Attorney of James I. Maslon
24.4 Power of Attorney of James P. Miscoll
24.5 Power of Attorney of Neil I. Sell
24.6 Power of Attorney of Bernard Sweet
24.7 Power of Attorney of Jan W. Jeurgens
24.8 Power of Attorney of Richard J. Martin
99.1 Consent of Frank H. Bevevino
</TABLE>
<PAGE>
Exhibit 3.2
CERTIFICATE OF CORRECTION
RYKOFF-SEXTON, INC.
The Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock originally filed on December 10, 1986 by
Rykoff-Sexton, Inc. ("Company"), was inadvertently omitted from ARTICLE FOURTH
of the Company's Restated Certificate of Incorporation filed on September 16,
1987. Attached for filing is a corrected copy of Article Fourth of the
Company's Restated Certificate of Incorporation. In all other respects the
Restated Certificate of Incorporation remains unchanged.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
31st day of January, 1996 but effective as of the 16th day of September, 1987.
/s/ Mark Van Stekelenburg
-------------------------
Mark Van Stekelenburg
Chairman, President and Chief
Executive Officer
Attest:
/s/ Robert J. Harter
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Robert J. Harter, Jr.
Senior Vice President--Human Resources,
General Counsel, Secretary
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FOURTH: The total number of shares of capital stock which the
corporation has authority to issue is 50,000,000 shares, consisting of:
(a) 10,000,000 shares shall be Preferred Stock, issuable in series, of
the par value of $.10 per share; and
(b) 40,000,000 shares shall be Common Stock of the par value of $.10
per share.
The designations, powers, preferences and rights, and the qualifications,
limitations or restrictions of the Preferred Stock and the Common Stock are as
follows:
A. PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series
and with such designation for each such series as shall be stated and expressed
in the resolution or resolutions providing for the issue of each such series
adopted by the Board of Directors. The Board of Directors in any such resolution
or resolutions is expressly authorized to state and express for each such
series:
1. Voting rights, if any, including, without limitation, the
authority to confer multiple votes per share, voting rights as to specified
matters or issues or, subject to the provisions of this Restated
Certificate of Incorporation, as amended, voting rights to be exercised
either together with holders of Common Stock as a single class, or
independently as a separate class;
2. The rate per annum and the times at and conditions upon which the
holders of shares of such series shall be entitled to receive dividends,
the conditions and the dates upon which such dividends shall be payable and
whether such dividends shall be cumulative or noncumulative, and, if
cumulative, the terms upon which such dividends shall be cumulative;
3. Redemption, repurchase, retirement and sinking fund rights,
preferences and limitations, if any, the amount payable on shares of such
series in the event of such redemption, repurchase or retirement, the terms
and conditions of any sinking fund, the manner of creating such fund or
funds and whether any of the foregoing shall be cumulative or
noncumulative;
4. The rights to which the holders of the shares of such series shall
be entitled upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation;
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5. The terms, if any, upon which the shares of such series shall be
convertible into, or exchangeable for, shares of stock of any other class
or classes or of any other series of the same or any other class or
classes, including the price or prices or the rate or rates of conversion
or exchange and the terms of adjustment, if any; and
6. Any other designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof so far as they are not inconsistent with the
provisions of this Restated Certificate of Incorporation, as amended, and
to the full extent now or hereafter permitted by the laws of the State of
Delaware.
All shares of the Preferred Stock of any one series shall be identical
to each other in all respects, except that shares of any one series issued
at different times may differ as to the dates from which dividends thereon,
if cumulative, shall be cumulative.
B. COMMON STOCK
1. Whenever dividends upon the Preferred Stock at the time
outstanding shall have been paid in full for all past dividend periods or
declared and set apart for payment, such dividends as may be determined by
the Board of Directors may be declared by the Board of Directors and paid
from time to time to the holders of the Common Stock.
2. In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the assets
and funds of the Corporation remaining after the payment to the holders of
the Preferred stock at the time outstanding of the full amounts to which
they shall be entitled shall be distributed among the holders of the Common
Stock according to their respective shares.
3. The shares of Common Stock shall entitle the holders of record
thereof to one vote for each share upon all matters upon which stockholders
have the right to vote, subject only to any exclusive voting rights which
may vest in holders of the Preferred Stock under the provisions of any
series of the Preferred Stock established by the Board of Directors
pursuant to the authority provided in this Article FOURTH.
C. SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the
number of shares constituting such series shall be fifty thousand (50,000).
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2. Dividends and Distributions.
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(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior
to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, the holders of shares of Series A Junior
Participating Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the
last day of February, May, August and November in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $20 or (b) subject to the
provision for adjustment hereinafter set forth, 200 times the
aggregate per share amount of all cash dividends, and 200 times the
aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common
Stock, $.10 par value, of the Corporation (the "Common Stock") since
the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior
Participating Preferred Stock. In the event the Corporation shall at
any time declare or pay any dividend on Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of
Series A Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Junior Participating Preferred Stock as provided in
paragraph (A) above immediately after it declares a dividend or
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distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $20 per
share on the Series A Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock
from the Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series A Junior Participating Preferred Stock,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock
shall entitle the holder thereof to 200 votes on all matters submitted
to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time declare or pay any dividend on Common
Stock payable in shares of Common Stock; or effect a subdivision or
combination of the outstanding shares of Common Stock (by
reclassification
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or otherwise) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Junior Participating Preferred Stock
were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the
holders of shares of Common Stock shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
4. Certain Restrictions.
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(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred
Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Junior Participating Preferred Stock
outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock, except
dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to
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which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Participating Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Junior
Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine
in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. Upon any voluntary
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the
Series A
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Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Series A Junior Participating Preferred Stock shall have received
$200 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such
payment, provided that the holders of shares of Series A Junior
Participating Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 200 times the aggregate amount to be distributed per share
to holders of Common Stock, or (2) to the holders of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Junior Participating Preferred Stock, except
distributions made ratably on the Series A Junior Participating Preferred
Stock and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the
shares of Series A Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to 200 times the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share
of Common Stock is changed or exchanged. In the event the Corporation
shall at any time declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in
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each such case the amount set forth in the preceding sentence with respect
to the exchange or change of shares of Series A Junior Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
9. Ranking. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.
10. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding
shares of Series A Junior Participating Preferred Stock, voting separately
as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in liquidating distributions and to have
the-benefit of all other rights of holders of Series A Junior Participating
Preferred Stock.
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Exhibit 3.3
RYKOFF-SEXTON, INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in Lisle, Illinois, at such place as may be fixed from
time to time by the board of directors, or at such other place either within or
without the State of Delaware as shall be designated from time to time by the
board of directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at such date
and time as shall be designated from time to time by the board of directors and
stated in the notice of the meeting, at which the stockholders shall elect, by a
plurality vote, a board of directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
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notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute may be called by the chairman
of the board, and shall be called by the chairman of the board at the request in
writing of a majority of the directors then in office. Such requests shall
state the purpose or purposes of the proposed meeting. Stockholders of the
corporation shall not have the right to request or call a special meeting of the
stockholders.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
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Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provided for a longer period.
ARTICLE III
DIRECTORS
Section 1. The management of the corporation shall be vested in a
board of directors consisting of not less than three (3) nor more than fifteen
(15) directors, the exact number of directors to be determined from time to
time, after the 1984 annual meeting of stockholders, by the board of directors
by the affirmative vote of a majority of the entire board. The directors shall
be divided into three classes, designated Class A, Class B and Class C.
Directors shall be elected in accordance with the certificate of incorporation
of the corporation at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director shall hold office until the
annual meeting for the year in which his term expires and until his successor
shall be elected and shall qualify; subject, however, to prior death,
resignation, retirement, disqualification, or removal for cause. Stockholders
may remove a director from office only for cause, in accordance with the
certificate of incorporation of the corporation. Directors need not be
stockholders.
Section 2. Any vacancy occurring on the board of directors for
whatever reason, including any vacancy resulting from an increase in the number
of directors, shall be filled by the affirmative vote of a majority of the
Continuing Directors at which a Continuing Director Quorum shall have been
present. The terms Continuing Directors and Continuing Director Quorum shall be
defined in the manner provided in Article Thirteenth of the certificate of
incorporation of the corporation.
Section 3. The business of the corporation shall be managed by its
board of directors, which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
Section 3a. Notification of Nominations. Nominations for the
election of directors may be made by the board of directors or a proxy committee
appointed by the board of directors or by any stockholder entitled to vote in
the election of directors generally. However, any stockholder entitled to vote
in the election of directors generally may nominate one or more persons for
election as directors at a meeting only if
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written notice of such stockholder's intent to make such nomination or
nominations had been given, either by personal delivery or by United States
Mail, postage prepaid to the Secretary not later than (a) with respect to an
election to be held at an annual meeting of stockholders, ninety (90) days in
advance of such meeting, and (b) with respect to an election to be held at a
special meeting of stockholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to stockholders. Each such notice shall set forth: (i) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (ii) a representation that the stockholder is
a holder of record of stock of the corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (iii) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (iv) such other
information regarding each nominee proposed by such stockholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission, had the nominee been nominated,
or intended to be nominated, by the board of directors; and (v) the consent of
each nominee to serve as a director of the corporation if so elected. The
Chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The newly-elected board of directors shall meet
immediately following the annual stockholders' meeting, for the purpose of
organization or otherwise, and no notice of such meeting shall be necessary to
the newly-elected directors in order legally to constitute the meeting;
provided, however, that a majority of the whole board of directors shall be
present; or it may meet at such place and time as shall be fixed by the consent
in writing of all the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the chief
executive officer on twenty-four hours' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
chief executive officer, president or secretary in like manner and on like
notice
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on the written request of a majority of the directors then in office.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute, these by-laws or the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
COMMITTEES OF DIRECTORS
Section 10. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided by resolution
of the board of directors, shall have and may exercise all the powers and
authorities of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
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committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 12. Unless otherwise restricted by the certificate of
incorporation, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States Mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a chairman of the board, chief executive
officer, president, a vice-president, a secretary and a treasurer. The board of
directors may also choose additional vice-presidents and one or more assistant
secretaries and assistant treasurers. Any number of offices may
6
<PAGE>
be held by the same person, unless the certificate of incorporation or these by-
laws otherwise provide.
Section 2. The board of directors shall each year choose a chairman
of the board, chief executive officer, president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board shall be the chief executive
officer of the corporation and, subject to the control of the board of
directors, shall preside at all meetings of the stockholders and the board of
directors. As chief executive officer of the corporation, he shall have active
management of the business of the corporation, shall see that all orders and
resolutions of the board of directors are carried into effect and shall have
such other duties as may be prescribed, from time to time, by the board of
directors. If the board of directors has not separately chosen a president,
then the chief executive officer shall be the president.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE PRESIDENT
Section 8. The president shall, in the absence of the chief executive
officer, perform the duties of the chief executive officer and when so acting,
shall have all powers of the chief executive officer, and shall have such other
duties as the chief executive officer or the board of directors may from time to
time prescribe.
7
<PAGE>
THE VICE-PRESIDENTS
Section 9. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the president, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. The vice-presidents
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 10. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
chairman of the board and chief executive officer, under whose supervision he
shall be. He shall have custody of the corporate seal of the corporation and
he, or an assistant secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his signature
or by the signature of such assistant secretary. The board of directors may
give general authority to any other officer to affix the seal of the corporation
and to attest the affixing by his signature.
Section 11. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 13. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking
8
<PAGE>
proper vouchers for such disbursements, and shall render to the chief executive
officer and the board of directors, at its regular meetings, or when the board
of directors so requires, an account of all his transactions as treasurer and of
the financial condition of the corporation.
Section 14. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 15. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors, if any, or the president or
a vice-president and the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation.
Section 2. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When
9
<PAGE>
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representatives, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent at
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect to any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall be not more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
executive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
10
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced.
11
<PAGE>
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new by-
laws be contained in the notice of such special meeting. Any alteration,
amendment, repeal or adoption of new by-laws by the board of directors shall be
approved by the affirmative vote of a majority of the directors then in office.
12
<PAGE>
Exhibit 4.1
[Specimen of Common Stock Certificate]
Number Shares
- ------ ------
SFS
RYKOFF-SEXTON, INC.
Incorporated Under the Laws of Common Stock
the State of Delaware
See Reverse Side for Certain Definitions
Cusip 783759 10 3
This Certificate is transferable in San Francisco, Los Angeles and the City of
New York
This Certifies that __________________________________ is the owner of
fully paid and non-assessable shares of the Common Stock of the Par Value of Ten
Cents Per Share of Rykoff-Sexton, Inc., transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
the surrender of this Certificate properly endorsed. This Certificate is not
valid unless countersigned by the Transfer Agent and registered by the
Registrar.
Witness, the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
Secretary President
Rykoff-Sexton, Inc.
Corporate Seal
Delaware
1961
Countersigned and Registered.
Chemical Trust Company of California
Transfer Agent and Registrar
By
Authorized Officer
<PAGE>
[Reverse of Certificate]
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement, dated as of December 8, 1996,
between Rykoff-Sexton, Inc. and Chemical Trust Company of California, as
successor Rights Agent, as amended by the Amendment, dated as of October 5, 1989
(the "Rights Amendment"), the terms of which are hereby incorporated by
reference and a copy of which is on file at the principal executive offices of
Rykoff-Sexton, Inc. Under certain circumstances, as set forth in the Rights
Agreement, such rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. Rykoff-Sexton, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without charge
promptly after a receipt of a written request therefor. Under certain
circumstances, Rights issued to, or held by, Acquiring Persons or Affiliates or
Associates thereof (as such terms are defined in the Rights Agreement) and any
subsequent holder of such Rights may become null and void.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT-_____________ Custodian _______________
(Cust) (Minor)
under Uniform Gift to Minors Act _____________________
(State)
UNIF TRF MIN ACT-_____________ Custodian (until age______)
______________ under Uniform Transfers to Minors Act________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,_______________hereby sell, assign and transfer unto
Please insert Social Security or Other Identifying Number of Assignee _________
_________________________________________________________________
(Please print or typewrite name and address, including zip code, of Assignee)
Shares of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint __________________________________ Attorney
to transfer the said stock on the books of the within Corporation with full
power of substitution in the premises.
Dated_______________________
x___________________________
(Signature)
x___________________________
(Signature)
NOTICE: The signature(s) to this Assignment must correspond with the name(s) as
written upon the face of the Certificate in every particular, without alteration
or enlargement or any change whatever.
Signature(s) Guaranteed
By_______________________
The Signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee Medallion Program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
Exhibit 4.3.2
Second Amendment to Rights Agreement
------------------------------------
This Second Amendment (the "Second Amendment"), dated as of December 4,
1995, between Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), and
Chemical Trust Company of California (the "Rights Agent"), amends the Rights
Agreement, dated as of December 8, 1986, by the Company and Bank of America
National Trust & Savings Association (as original Rights Agent), as previously
amended by that certain Amendment, dated as of October 5, 1989 (the "Rights
Agreement").
W I T N E S S E T H
-------------------
WHEREAS, officers, representatives and agents of the Company have been and
are exploring the possibility of a strategic merger of US Foodservice Inc., a
Delaware corporation (the "Target"), with the Company (the "Potential Merger"),
and the Company has been engaged in preliminary negotiations with the Target and
its stockholders;
WHEREAS, the Board of Directors of the Company (the "Board") desires to
authorize the execution of a draft letter of intent (the "Letter of Intent") to
be executed by the Company, the Target and the Target's stockholders, relating
to the Potential Merger;
WHEREAS, the Company, by action of its Board, a majority of which consists
of Continuing Directors, has determined that, in connection with the approval
and authorization of the execution and delivery of the Letter of Intent, it is
desirable to amend the Rights Agreement to effectuate the purposes thereof;
<PAGE>
WHEREAS, the Distribution Date (as defined in the Rights Agreement) has not
occurred;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendments to Rights Agreement.
------------------------------
(a) Section 1(a) of the Rights Agreement is hereby amended by
inserting at the end thereof the following:
; provided, however, that the negotiation and execution of the
Letter of Intent (as defined in the Second Amendment) and the
preliminary negotiations with respect to the Potential Merger (as
defined in the Second Amendment) shall not cause any Person to be
deemed an Acquiring Person.
(b) Section 1(d)(iii) of the Rights Agreement is hereby amended by
inserting at the end thereof the following:
; provided, however, that the negotiation and execution of the
Letter of Intent and the preliminary negotiations with respect to the
Potential Merger shall not cause any Person to be deemed to be the
Beneficial Owner of, or to "beneficially own," any Common Stock.
2. Miscellaneous.
-------------
(a) Except as otherwise expressly provided, or unless the context
otherwise requires, all terms used herein have the meanings assigned to them in
the Rights Agreement.
(b) Each party hereto waives any requirement under the Rights
Agreement that any additional notice be provided to it pertaining to the matters
covered by this Amendment.
(c) This Amendment may be executed in any number of counterparts,
each of which shall be deemed any original, but all of which counterparts shall
together constitute but one and the same document.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and attested, all as of the day and year first written above.
ATTEST: RYKOFF-SEXTON, INC.
By: /s/ Robert J. Harter, Jr. By: /s/ Harold E. Feather
------------------------- ---------------------
Name: Robert J. Harter, Jr. Name: Harold E. Feather
Title: Senior Vice President - Human Title: Senior Vice President -
Resources and General Counsel Corporate Planning
CHEMICAL TRUST COMPANY OF CALIFORNIA
ATTEST: (as Rights Agent)
By: /s/ Michael Dzieciolowski By: /s/ Sharon Magidson
------------------------- ---------------------
Name: Michael Dzieciolowski Name: Sharon Magidson
Title: Assistant Vice President Title: Vice President
3
<PAGE>
Certificate of Officer
----------------------
The undersigned, being a duly authorized officer of Rykoff-Sexton,
Inc., a Delaware corporation (the "Company") hereby certifies to Chemical Trust
Company of California, as rights agent (the "Rights Agent") under the Rights
Agreement, dated as of December 8, 1986, as previously amended, between the
Company and Bank of America National Trust & Savings Association (the "Rights
Agreement"), as follows:
1. I am the Senior Vice President -- Human Resources and General Counsel
of the Company.
2. The attached Second Amendment to the Rights Agreement is in compliance
with the terms of Section 26 of the Rights Agreement.
Dated: December 4, 1995
/s/ Robert J. Harter, Jr.
-------------------------
Robert J. Harter, Jr.
4
<PAGE>
203 Resolution rider
- --------------------
FURTHER RESOLVED, that upon consummation of the [merger] pursuant to the
[merger agreement], [Stockholder] x gany acquisition of shares of Common
Stock or Units pursuant to and in accordance with the transactions
contemplated by the Securities Purchase Agreement, neither Individual nor
Investor shall be deemed to be an "Interested Stockholder" for purposes of
Section 203 of the General Corporation Law of the State of Delaware.
an express purpose of the foregoing approval is to provide such approval as may
be necessary under Section 203(a)(1) of the Delaware General Corporation Law
(the "DGCL") or under any provision of the Company's Restated Certificate of
Incorporation (the "Restated Certificate") with respect to any transaction that
may be deemed to have occurred by reason of the negotiation and execution of the
Letter of Intent or the preliminary negotiations with respect to the Potential
Merger; provided, however, that the foregoing shall not be deemed to constitute
authorization or approval of the Potential Merger, with such authorization and
approval hereby expressly reserved, and shall not be deemed to constitute a
determination that approval of the negotiation and execution of the Letter of
Intent or the preliminary negotiations with respect to the Potential Merger is
required under Section 203 of the DGCL or under any provision of the Restated
Certificate; and
FURTHER RESOLVED, that neither the negotiation and execution of the Letter
of Intent nor the preliminary negotiations with respect to the Potential
Merger shall be considered to cause the Target or any of the Target's
stockholders, or any affiliate or associate of the Target or any of its
stockholders, (i) to be an "interested stockholder" of the Company within
the meaning of Section 203 of the DGCL, or (ii) to be a "Related Person" or
"beneficial owner" of shares of the Company's Common Stock, $.10 par value
("Common Stock"), or to have "Beneficial Ownership" of shares of Common
Stock, within the meaning of any provision of the Restated Certificate.
5
<PAGE>
Exhibit 4.3.3
THIRD AMENDMENT TO RIGHTS AGREEMENT
This Third Amendment (the "Amendment"), dated as of January 31, 1996,
is entered into by and between RYKOFF-SEXTON, INC., a Delaware corporation (the
"Company"), and CHEMICAL BANK, a New York banking corporation and successor to
Chemical Trust Company of California, which was successor to Bank of America
National Trust & Savings Association, as original Rights Agent (the "Rights
Agent").
WHEREAS, the Company and the Rights Agent have entered into a Rights
Agreement, dated as of December 8, 1986, as amended by the Amendment to Rights
Agreement dated as of October 5, 1989 and the Second Amendment to Rights
Agreement dated as of December 4, 1995 (the "Agreement");
WHEREAS, the Company wishes to amend the Agreement; and
WHEREAS, Section 26 of the Agreement provides, among other things,
that prior to the Distribution Date (as such term is defined in the Agreement)
the Company and the Rights Agent shall, if the Company so directs, change or
supplement any provision of the Agreement without the approval of any holders of
Right Certificates.
NOW, THEREFORE, the Company and the Rights Agent hereby amend the
Agreement as follows:
1. Section 1(a) of the Agreement is hereby amended and restated to
read in its entirety as follows:
"(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as
such term is hereinafter defined) and Associates (as such term is
hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 15% or more of the shares of
Common Stock then outstanding, but shall not include (i) the Company,
(ii) any Subsidiary of the Company, (iii) any employee benefit plan of
the Company or of any Subsidiary of the Company, or any entity
organized, appointed or established by the Company for or pursuant to
the terms of any such plan, or (iv) Merrill Lynch Capital Partners,
Inc., Merrill Lynch Capital Appreciation Partnership No. B-XVIII,
L.P., Merrill Lynch Kecalp L.P. 1994, ML Offshore LBO Partnership No.
B-XVIII, ML IBK Positions, Inc., MLCP Associates L.P. No. II,
<PAGE>
MLCP Associates L.P. No. IV, Merrill Lynch Kecalp L.P. 1991, Merrill
Lynch Capital Appreciation Partnership No. XIII, L.P., ML Offshore LBO
Partnership No. XIII, ML Employees LBO Partnership No. I, L.P.,
Merrill Lynch Kecalp L.P. 1987, and Merchant Banking L.P. No. II
(each, an "ML Entity" and collectively the "ML Entities"), if the ML
Entities shall have executed a written agreement with the Company (and
approved by the Company's Board of Directors) on or prior to the date
on which the ML Entities (together with its Affiliates) became the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, which agreement imposes one or more limitations on the
amount of the ML Entities' Beneficial Ownership of shares of Common
Stock, and if, and so long as, such written agreement (or any
amendment thereto approved by at least a majority of the members of
the Board of Directors who are not Affiliates or Associates of an ML
Entity, or representatives or nominees of an ML Entity or any such
Affiliates or Associates ("ML Directors") continues to be in effect
and binding on the ML Entities and the ML Entities are in compliance
(as determined by the Company's Board of Directors in its discretion
by at least a majority of the members of the Board of Directors who
are not ML Directors) with the terms of such written agreement
(including any such amendment); provided, however, that no amendment
of any such agreement shall cure any prior breach of such agreement or
any amendment thereto."
2. Section 11(a)(ii)(B) of the Agreement is hereby amended and
restated to read in its entirety as follows:
"(B) any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, or any entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan), alone or
together with its Affiliates and Associates, shall become the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, unless the event causing the 15% threshold to be crossed
is (1) an acquisition of shares of Common Stock by the ML Entities, if
the ML Entities
2
<PAGE>
shall have executed a written agreement with the Company (and approved
by the Company's Board of Directors) on or prior to the date on which
the ML Entities became the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding, which agreement imposes one
or more limitations on the amount of the ML Entities' Beneficial
Ownership of shares of Common Stock, and if, and so long as, such
written agreement (or any amendment thereto approved by at least a
majority of the members of the Board of Directors who are not ML
Directors) continues to be in effect and binding on the ML Entities
and the ML Entities are in compliance (as determined by the Company's
Board of Directors in its discretion by at least a majority of the
members of the Board of Directors who are not ML Directors) with the
terms of such written agreement (including any such amendment);
provided, however, that no amendment of any such agreement shall cure
any prior breach of such agreement or any amendment thereto; (2) a
transaction set forth in Section 13(a) hereof, or (3) an acquisition
of shares of Common Stock pursuant to a tender offer or an exchange
offer for all outstanding shares of Common Stock at a price and on
terms determined by at least a majority of the members of the Board of
Directors who are not (x) officers of the Company, (y)
representatives, nominees, Affiliates or Associates of an Acquiring
Person, or (z) ML Directors, after receiving advice from one or more
investment banking firms, to be (a) at a price that is fair to
stockholders (taking into account all factors which such members of
the Board deem relevant including, without limitation, prices that
could reasonably be achieved if the Company or its assets were sold on
an orderly basis designed to realize maximum value) and (b) otherwise
in the best interests of the Company and its stockholders, or;".
3. Section 25 of the Agreement is hereby amended to provide that the
address for notices or demands authorized under the Agreement shall henceforth
be directed to the Company at:
3
<PAGE>
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532
Attention: Chairman of the Board and
Chief Executive Officer
4. Miscellaneous.
(a) Except as otherwise expressly provided, or unless the context
otherwise requires, all terms used herein have the meanings assigned to them in
the Agreement.
(b) Each party hereto waives any requirement under the Agreement that
any additional notice be provided to it pertaining to the matters covered by
this Amendment.
(c) This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which counterparts shall
together constitute but one and the same document.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and attested, all as of the day and year first written above.
ATTEST: RYKOFF-SEXTON, INC.
By: /s/ Thomas F. Flanagan By: /s/ Richard J. Martin
----------------------- --------------------------
Name: Thomas F. Flanagan Name: Richard J. Martin
Title: Assistant Secretary Title: Senior Vice President -
Chief Financial Officer
ATTEST: CHEMICAL BANK (as Rights Agent)
By: /s/ Laurence Curley By: /s/ Eric Leason
----------------------- --------------------------
Name: Laurence Curley Name: Eric Leason
Title: Assistant Vice President Title: Vice President
5
<PAGE>
Exhibit 4.4
The issuance and sale of shares upon the exercise of
this Warrant have not been registered under the Securities
Act of 1933, as amended, and accordingly neither this
Warrant nor any such shares may be transferred in the
absence of such registration or an exemption therefrom
under such Act. This Warrant and such shares may be
transferred only in compliance with the conditions
specified in this Warrant.
RYKOFF-SEXTON, INC.
Form of Common Stock Purchase Warrant
Expiring September 30, 2005
No. W-__ ____________, 1996
_______________ No. _____* __
RYKOFF-SEXTON, INC., a Delaware corporation (herein, together with its
successors and assigns, the "Company"), for value received, hereby certifies
that ________________________________________________, or registered assigns, is
entitled to purchase from the Company __________________ duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock, par value
$.10 per share (the "Common Stock") of the Company at the purchase price per
share of $10.54, at any time or from time to time prior to 5:00 p.m., New York
City time, on September 30, 2005 (or such other date as may be determined
pursuant to section 16), all subject to the terms, conditions and adjustments
set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants", such term to include all such warrants issued in exchange or
substitution therefor) originally issued by the Company in connection with the
transactions contemplated by the Agreement and Plan of Merger dated February 2,
1996 among the Company, USF Acquisition Corporation and US Foodservice Inc. In
connection with such transactions, the Warrants were issued in replacement of
Common Stock Purchase Warrants dated September 4, 1992 of US Foodservice Inc.
(f/k/a Unifax Holdings, Inc.) evidencing the right to purchase an aggregate of
227,700 shares of common stock of US Foodservice Inc. The Warrants originally
so issued evidence rights to purchase an aggregate of 331,761 shares of Common
Stock subject to adjustment as provided herein. Certain capitalized terms used
in this Warrant are defined in section 12; references to a "section" are, unless
otherwise specified, to one of the sections of this Warrant.
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1. Exercise of Warrant. 1.1. Manner of Exercise. This Warrant may
be exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
principal office maintained pursuant to section 11.2(a), accompanied by (i) a
subscription in substantially the form attached to this Warrant (or a reasonable
facsimile thereof) duly executed by such holder, (ii) payment, in cash or by
certified or official bank check payable to the order of the Company in the
amount obtained by multiplying (a) the number of shares of Common Stock (without
giving effect to any adjustment thereof) designated in such subscription by (b)
$10.54, whereupon such holder shall be entitled to receive the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities determined as provided in sections 2 through 4) and (iii)
the written representation by such holder that: (a) such holder is acquiring
the Common Stock being acquired by it pursuant to the exercise of this Warrant
for its own account for investment and not with a view to the distribution of
such Common Stock in violation of the Securities Act; and (b) (A) if such holder
is an insurance company, such holder is not acquiring the Common Stock or any
interest therein with assets allocated to any separate account maintained by
such holder in which any employee benefit plan (or its related trust) has any
interest or (B) if such holder is a bank, no part of the funds used to acquire
the Common Stock will be drawn from any trust fund or other account held by such
holder in which any employee benefit plan has any interest. As used in this
section, the terms "employee benefit plan" and "separate account" shall have the
respective meanings assigned thereto in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders or record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable
after the exercise of this Warrant, in whole or in part, and in any event within
ten Business Days thereafter, the Company at its expense (including the payment
by it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 8, as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, (a) a
certificate or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities) to
which such holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such holder would otherwise
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be entitled, cash in an amount equal to the same fraction of the Market Price
per share on the Business Day next preceding the date of such exercise and (b)
in case such exercise is in part only, a new Warrant or Warrants of like tenor,
calling in the aggregate on the face or faces thereof for issuance of the number
of shares of Common Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of this Warrant
minus the number of such shares so designated by such holder upon such exercise
as provided in section 1.1.
2. Adjustment of Common Stock Issuable Upon Exercise. 2.1.
General; Warrant Price. The number of shares of Common Stock which the holder
of this Warrant shall be entitled to receive upon each exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to section 1.1, by a
fraction of which (a) the numerator is $10.54 and (b) the denominator is the
Warrant Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $10.54 per share, shall be adjusted and readjusted from time to
time as provided in this section 2 and, as so adjusted or readjusted, shall
remain in effect until a further adjustment or readjustment thereof is required
by this section 2.
2.2. Adjustment of Warrant Price; Issuance of Additional Shares of
Common Stock and Dividends. (a) In case the Company at any time or from time to
time after the date hereof shall issue or sell Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
section 2.3 or 2.4) without consideration or for a consideration per share less
than the Current Market Price, then, and in each such case, subject to section
2.7, such Warrant Price shall be reduced, concurrently with such issue or sale,
to a price (calculated to the nearest .001 of a cent) determined by multiplying
such Warrant Price by a fraction
(i) the numerator of which shall be (A) the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus
(B) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at
the Current Market Price per share, and
(ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this section 2.2, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such
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Additional Shares of Common Stock shall be deemed to be outstanding, and (y)
treasury shares shall not be deemed to be outstanding and the disposition of any
thereof by the Company shall be considered an issuance or sale of Additional
Shares of Common Stock for purposes of this section 2.
(b) Extraordinary Dividends and Other Distributions. In case the
Company at any time or from time to time after the date hereof shall declare,
order, pay or set apart any sum or property for or make a dividend or other
distribution (including, without limitation, any distribution of other or
additional stock or other securities or property or Options by way of dividend
or spinoff, reclassification, recapitalization or similar corporate
rearrangement) on the Common Stock, other than any regular periodic dividend,
payable in cash out of earned surplus or net profits for the year in which the
dividend is incurred or the previous year, and other than a dividend payable in
Additional Shares of Common Stock (in which case the provisions of section 2.4
shall apply), then, and in each such case, subject to section 2.7, at the
irrevocable option of the Company made at the time of the notice referred to in
section 6(a), either
(A) the Warrant Price in effect immediately prior to the close
of business on the record date fixed for the determination
of holders of any class of securities entitled to receive
such dividend or distribution shall be reduced, effective as
of the close of business on such record date, to a price
(calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction:
(x) the numerator of which shall be the Current Market
Price in effect on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior
to the commencement of ex-dividend trading, less the
amount of such dividend or distribution (as determined
in good faith in accordance with section 2.5 by a
resolution of the Board of Directors of the Company)
applicable to one share of Common Stock, and
(y) the denominator of which shall be such Current Market
Price in effect on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior
to the commencement of ex-dividend trading; or
(B) the Company shall pay over to each holder of Warrants,
immediately upon exercise thereof
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by such holder on or after the payment date for such
dividend or distribution, the securities and other property
(including cash) which such holder would have received
(together with all distributions thereon) if such holder had
exercised, immediately prior to the record date fixed in
connection with such dividend, the Warrants held by it, and
the Company shall take whatever steps are necessary or
appropriate to keep in reserve at all times such securities
and other property (including cash) as shall be required to
fulfill its obligations hereunder in respect of the shares
issuable upon the exercise of all the Warrants.
2.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue, sale, grant or assumption or, in case
such a record date shall have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the date
prior to the commencement of ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to section 2.5) of such shares
would be less than the Current Market Price on the date of and immediately prior
to such issue, sale, grant, or assumption or immediately prior to the close of
business on such record date (or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement, of ex-dividend basis, on the date
prior to the commencement of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which Additional Shares of Common
Stock are deemed to be issued,
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of shares of Common Stock upon the exercise of
such Options or the conversion or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock
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issuable, upon the exercise, conversion or exchange thereof (by change of
rate or otherwise), the Warrant Price computed upon the original issue,
sale, grant or assumption thereof (or upon the occurrence of the record
date, or date prior to the commencement of ex-dividend trading, as the case
may be, with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options, or the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and any
cancellation or retirement of any such Convertible Security the rights of
conversion or exchange under which) shall not have been exercised, the
Warrant Price computed upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration (or such cancellation or retirement, as the case may be), be
recomputed as if (i) in the case of such Convertible Securities or Options
for Common Stock, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or sold
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Company for the issue, sale, grant
or assumption of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for
the issuance or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange; and (ii) in the
case of such Options for Convertible Securities, only the Convertible
Securities, if any, actually issued or sold upon the exercise thereof were
issued at the time of the issuance, sale, grant or assumption of such
Options, and the consideration received by the Company for the Additional
Shares of Common Stock deemed to have then been issued was the
consideration actually received by the Company for the issuance, sale,
grant or assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Company (pursuant to
section 2.5) upon the issuance or sale of the Convertible Securities with
respect to which such Options were actually exercised;
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(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
provided, however, that this provision shall take into account intervening
adjustments made to the Warrant Price pursuant to other provisions of
section 2; and
(e) in the case of any such Options which expire by their terms not
more than 45 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5. Computation of Consideration. For the purposes of this
section 2,
(a) the consideration for the issuance or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting treatment of
such consideration:
(i) insofar as it consists of cash, be computed at the net amount
of cash received by the Company,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair market value thereof at the
time of such issuance or sale, as determined in good faith by a
resolution of the Board of Directors of the Company, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such
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Additional Shares of Common Stock, all as determined in good faith by
a resolution of the Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion of exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and
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adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one percent (1%) of such
Warrant Price; provided, however, that upon the exercise of any Warrant, all
necessary adjustments (calculated to the nearest .001 of a cent) not theretofore
made to the Warrant Price relating thereto by reason of the initial clause of
this sentence, up to and including the date of such exercise, shall be made.
3. Consideration, Merger, etc. 3.1. Adjustments for Consolidation,
Merger, Sale of Assets, Reorganization, etc. In case the Company after the date
hereof (a) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (c) shall sell, lease or transfer or otherwise dispose of all or
substantially all of its properties or assets to any other Person and thereafter
shall be dissolved, or (d) shall effect a capital reorganization or
reclassification (other than a reclassification described in Section 2.4 or 2.6)
of the Common Stock then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the holder of this Warrant, upon the exercise hereof
at any time after the consummation of such transaction, shall be entitled to
receive (at the aggregate Warrant Price in effect at the time of such
consummation for all Common Stock issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock issuable upon such exercise
prior to such consummation, the stock and other securities, cash and property to
which such holder would have been entitled upon such consummation if such holder
had exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in section 2 and this
section 3.
3.2. Assumption of Obligations. Notwithstanding anything contained in
the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (a) through (d) of section 3.1 unless, prior
to the consummation thereof, each Person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the holders of at least a majority of the
shares of Common Stock issuable upon exercise of all the then outstanding
Warrants, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such
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assumption shall be in addition to, and shall not release the Company from, any
continuing obligations of the Company under this Warrant), and (b) the
obligation to deliver to such holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this section 3, such
holder may be entitled to receive, and such Person shall have similarly
delivered to such holder an opinion of counsel for such Person, which counsel
shall be reasonably satisfactory to the holders of at least a majority of the
shares of Common Stock issuable upon exercise of all the then outstanding
Warrants, stating that this Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without limitation, all of the
provisions of this section 3) shall be applicable to the stock, securities, cash
or property which such Person may be required to deliver upon any exercise of
this Warrant or the exercise of any rights pursuant hereto.
3.3. Other Dilutive Events. In case any event shall occur as to which
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not, in the reasonable opinion of the
holders of a majority of the shares of Common Stock issuable upon exercise of
the Warrants or the Company, fairly protect the purchase rights represented by
any Warrant in accordance with the essential intent and principles of such
sections, then, in each such case, upon the written request of the holders of a
majority of the shares of Common Stock issuable upon exercise of the Warrants,
the Company shall, at its cost and expense, appoint a firm of independent
certified public accountants of national standing (which may be the regular
auditors of the Company), which shall give their opinion upon the adjustment, if
any, on a basis consistent with the essential intent and principles established
in sections 2 and 3, necessary to preserve, without dilution, the purchase
rights represented by such Warrant. Upon receipt of such opinion, the Company
will promptly mail a copy thereof to each holder of Warrants and upon the
request of the holders of a majority of the shares of Common Stock issuable upon
exercise of the Warrants, shall make the adjustments described therein.
4. Prohibited Actions. The Company will not, by amendment of its
certificate or articles of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issuance or sale of securities
or any other voluntary action, avoid the observance or performance of any of the
terms of this Warrant. Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares of Common Stock
receivable upon the exercise of this Warrant to exceed the amount payable
therefor upon such exercise, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock on the exercise of the Warrants
from time to time outstanding and (c) will not take any action which results in
any adjustment of the Warrant Price if the total number of shares of Common
Stock (or Other
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Securities) issuable after the action upon the exercise of all of the Warrants
would exceed the total number of shares of Common Stock (or Other Securities)
then authorized by the Company's certificate or articles of incorporation and
available for the purpose of issue upon such exercise.
5. Report as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company will promptly compute such adjustment
or readjustment in accordance with the terms of this Warrant and prepare a
report setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the number of
shares of Common Stock outstanding or deemed to be outstanding, (b) the Warrant
Price in effect immediately prior to such adjustment and as adjusted and
readjusted (if required by section 2) on account thereof, and (c) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued. The
Company will mail, within 30 days of such event requiring such adjustment, a
copy of each such report to each holder of a Warrant and will, upon the written
request at any time of any holder of a Warrant, furnish to such holder a like
report setting forth the Warrant Price at the time in effect and showing in
reasonable detail how it was calculated. The Company will also keep copies of
all such reports and the reports referred to in the last sentence of this
section 5 at its principal office and will cause the same to be available for
inspection at such office during normal business hours by any holder of a
Warrant or its representatives or any prospective purchaser of a Warrant
designated by the holder thereof. In addition to the report referred to above,
the holders of not less than a majority of the Common Stock issuable upon
exercise of the outstanding Warrants may request the Company, at the Company's
cost and expense, to cause independent certified public accountants of national
standing (which may be the regular auditors of the Company) to verify such
computation and will deliver to each holder a report showing in reasonable
detail how such verification was effected.
6. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a regular periodic dividend,
payable in cash out of earned surplus or net profits for the year in which
the dividend is incurred or the previous year) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive any
other right, which notice in the case of a dividend or distribution
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of the type described in section 2.2 shall inform each holder of a Warrant
of the Company's option under such section, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding up. Such notice shall be
mailed at least 20 days prior to the date therein specified.
7. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be. At any such time, but only for so long, as Common Stock is
registered under the Exchange Act and listed on any national securities
exchange, the Company will, at its expense, obtain promptly and maintain the
approval for listing in each such exchange, upon official notice of issuance,
the shares of Common Stock issuable upon exercise of the then outstanding
Warrants and maintain the listing of such shares after their issuance; and the
Company will also list on such national securities exchange, will register under
the Exchange Act and will maintain, for so long as any shares of Common Stock
are listed, such listing of, any Other Securities that at any time are issuable
upon exercise of the Warrants, if and at the time that any securities of the
same class shall be listed on such national securities exchange by the Company.
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8. Restrictions on Transfer. 8.1. Restrictive Legends. Except as
otherwise permitted by this section 8, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"The issuance and sale of shares upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and accordingly neither this Warrant nor any such shares may
be transferred in the absence of such registration or any exemption
therefrom under such Act. This Warrant and such shares may be
transferred only in compliance with the conditions specified in this
Warrant."
Except as otherwise permitted by this section 8, each certificate for
Common Stock (or Other Securities) issued upon the exercise of any Warrant,
and each certificate issued upon the transfer of any such Common Stock (or
Other Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The issuance and sale of the securities represented by this
certificate have not been registered under the Securities Act of 1933,
as amended, and such securities may not be transferred except pursuant
to an effective registration statement, or an exemption from
registration, under said Act."
8.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this section 8.2. Each
such notice (1) shall describe the manner and circumstances of the proposed
transfer and (2) be accompanied by (a) an opinion of counsel for the holder or,
if agreed to by the Board of Directors of the Company, an opinion of counsel to
the Company, which opinion shall be reasonably satisfactory to the Company or
(b) a no-action letter from the Commission addressed to the Company, such holder
or either of their counsel to the effect that no registration statement is
required because of the availability of an exemption from registration under the
Securities Act.
8.3. Termination of Restrictions. The restrictions imposed by this
section 8 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act or (b) when, in
the opinion of counsel for the holder thereof, which opinion shall be reasonably
satisfactory to the Company, such
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restrictions are no longer required in order to insure compliance with the
Securities Act. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense (other than applicable transfer taxes, if any), new
securities of like tenor not bearing the applicable legends required by section
8.1.
8.4. Expenses; Benefits to Certain Transferees. The Company will pay
the reasonable fees, expenses and disbursements of counsel for the holder of
Restricted Securities (other than in-house counsel) and counsel for the Company
in connection with all opinions rendered pursuant to this section 8.
9. Availability of Information. The Company will comply with the
reporting requirements of Section 13 and 15(d) of the Exchange Act and will
comply with all other public information reporting requirements of the
Commission (including Rule 144 promulgated by the Commission under the
Securities Act) from time to time in effect and relating to the availability of
an exemption from the Securities Act for the sale of any Restricted Securities.
The Company will also cooperate with each holder of any Restricted Securities in
supplying such information as may be necessary for such holder to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any Restricted Securities. The Company will
furnish to each holder of any Warrants, within 15 days upon their becoming
available, copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its stockholders,
and copies of all regular and periodic reports filed by the Company with any
securities exchange or with the Commission.
10. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
such securities issuable upon exercise of any Warrants shall be duly authorized
and, when issued upon such exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on the part of the
holders thereof.
11. Ownership, Transfer and Substitutions of Warrants. 11.1.
Ownership of Warrants. The Company may treat the person in whose name any
Warrant is registered on the register kept at the principal office of the
Company as the owner and holder thereof for all purposes, notwithstanding any
notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. Subject to
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section 8, a Warrant, if properly assigned, may be exercised by a new holder
without a new Warrant first having been issued.
11.2. Office; Transfer and Exchange of Warrants.
(a) The Company will maintain its principal office within the
continental boundaries of the United States and all notices, presentations
and demands in respect of this Warrant may be made upon it at such
location.
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the principal office of the
Company, the Company at its expense will (subject to compliance with
section 8, if applicable) execute and deliver to or upon the order of the
holder thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.
11.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant (which, in the case of a holder of a Warrant which is an insurance
company (as defined in the Securities Act), an investment company registered
under the Investment Company Act of 1940, any employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of 1974, any
domestic or foreign bank, savings and loan association (as defined in Section
(a)(1)(vi) of Rule 144A under the Securities Act) or a Purchaser and its nominee
(an "institutional holder"), may be a written statement as to such loss, theft,
destruction or mutilation, which statement shall be reasonably satisfactory in
form and substance to the Company) and, in the case of any such loss, theft or
destruction of any Warrant, upon delivery of indemnity (which, in the case of an
institutional holder of a Warrant, may be such holder's unsecured written
agreement of indemnity) reasonably satisfactory to the Company in form and
amount or, in the case of any such mutilation, upon surrender of such Warrant
for cancellation at the principal office of the Company, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or deemed issued or sold pursuant to
section 2.3 or 2.4) by the Company after the date hereof, whether or not
subsequently
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reacquired or retired by the Company, other than shares issued upon the exercise
of the Warrants.
Affiliate: With respect to a Person, any other Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless Business Days are specified)
shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of
stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Independent Financial Expert: A nationally recognized investment
banking firm that does not have a direct or indirect
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financial interest in the Company or any of its affiliates and has not been and,
at the time it is called upon to give independent financial advice to the
Company, is not (and none of whose directors, officers, employees or affiliates
is) a promoter, director or officer of the Company or any of its affiliates, and
has not been retained to provide, within the past two years, any advice or
opinions to the Company or any of its affiliates except as an Independent
Financial Expert.
Initiating Holders: Any holder or holders of Registrable Securities
holding at least a majority of the Registrable Securities by number of shares at
the time and initiating a request pursuant to section 20.1 for the registration
of all or part of such holder's or holders' Registrable Securities.
Market Price: On any date specified herein, the amount per share of
the Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the over-
the-counter market, the fair value thereof determined in good faith by the Board
of Directors of the Company as of the last day of the most recently completed
fiscal quarter of the Company; provided that, at the request of the holders of a
majority of the outstanding Warrants, such fair value determined by the Board of
Directors must be confirmed in writing to the holders by an Independent
Financial Expert, which shall be selected by the Board of Directors of the
Company, and retained on customary terms and conditions and at the expense of
the Company, the Independent Financial Expert shall use one or more valuation
methods that the Independent Financial Expert, in its best professional
judgment, determines to be most appropriate. The Independent Financial Expert
shall consult with management of the Company in order to allow management to
comment on the Independent Financial Expert's valuation.
NASD: The National Association of Securities Dealers, Inc.
Options: Rights, options and warrants, except for any rights, options
or warrants distributed to members of the management of the Company or any
direct or indirect subsidiary of
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the Company, to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Person: A corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
Registrable Securities: All shares of Common Stock issued or issuable
upon exercise of the Warrants and any other securities of the Company or any of
its subsidiaries issued in exchange for, upon a reclassification, combination or
subdivision of, or in a distribution with respect to, such Common Stock or in
connection with a merger, consolidation or other reorganization of the Company.
As to any particular Registrable Securities that have been issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) such securities have been distributed
to the public pursuant to Rule 144 promulgated under the Securities Act, (iii)
such securities shall have been otherwise transferred or disposed of, new
certificates therefor not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent transfer or disposition of
such securities shall not require registration or qualification of such
securities under the Securities Act or any similar state law the in force, or
(iv) such securities shall have ceased to be outstanding.
Registration Expenses: Any and all out-of-pocket expenses incident to
the Company's performance of or compliance with section 20 hereof, including,
without limitation, all Commission, stock exchange or NASD registration, filing
and listing fees, all fees and expenses of complying with securities and blue
sky laws (including the reasonable fees and disbursements of counsel in
connection with blue sky qualifications and NASD filings), all fees and expenses
of the transfer agent and registrar for the Common Stock, all printing expenses,
the fees and disbursements of counsel for the Company and the Company's
independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, and the reasonable fees and disbursements of one counsel retained by
the holders of Registrable Securities being registered to represent such group
of holders (which counsel shall be
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satisfactory to the holders of a majority of the shares of Registrable
Securities being registered), but excluding underwriting discounts and
commissions and applicable transfer and documentary stamp taxes, if any, which
shall be borne by the seller of the securities in all cases.
Registration Rights Agreement: The Registration Rights Agreement
dated as of _____________________, 1996 among the Company, Merrill Lynch Capital
Appreciation Partnership No. B-XVIII, L.P., Merrill Lynch KECALP L.P. 1994, ML
Offshore LBO Partnership No. B-XVIII, ML IBK Positions, Inc., MLCP Associates
L.P. No. II, Merrill Lynch KECALP L.P. 1991, Merrill Lynch Capital Appreciation
Partnership No. XIII, L.P., ML Offshore LBO Partnership No. XIII, ML Employees
LBO Partnership No. I, L.P., Merrill Lynch KECALP L.P. 1987, Merchant Banking
L.P. No. II, MLCP Associates L.P. No. IV, The Equitable Life Assurance Society
of the United States, Equitable Deal Flow Fund, L.P., Equitable Variable Life
Insurance Company and Frank H. Bevevino.
Restricted Securities: All of the following: (a) any Warrants bearing
the applicable legend or legends referred to in section 8.1, (b) any shares of
Common Stock which have been issued upon the exercise of Warrants and which are
evidenced by a certificate or certificates bearing the applicable legend or
legends referred to in such section and (c) any shares of Common Stock which are
at the time issuable upon the exercise of Warrants and which, when so issued,
will be evidenced by a certificate or certificates bearing the applicable legend
or legends referred to in such section.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Stockholders Securities: Securities proposed to be sold by those
stockholders who exercise their registration rights pursuant to section 4 of the
Registration Rights Agreement.
Warrant Price: As defined in section 2.1.
Warrants: As defined in the introduction to this Warrant.
13. No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be construed as conferring upon the holder hereof any rights
as a stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
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14. Notices. All notices and other communications under this Warrant
shall be in writing and shall be mailed by registered or certified mail, return
receipt requested, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its principal office, provided that the exercise of any Warrant
shall be effective in the manner provided in section 1.
15. Miscellaneous. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of New York. The section
headings in this Warrant are for purposes of convenience only and shall not
constitute a part hereof. In case any provision in this Warrant shall be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
16. Expiration. The right to exercise this Warrant shall expire at
5:00 p.m., New York City time, on the earlier of (i) September 30, 2005 and (ii)
the registration of all of the shares of Common Stock issuable upon exercise of
this Warrant or the termination of the restrictions on such shares described in
section 8.3(b), provided the holders of the Warrants receive 30 days' notice of
the termination of such restrictions. The Company shall give notice to the
holder of this Warrant on September 30, 2004 and September 1, 2005 if the right
to exercise this Warrant will expire pursuant to paragraph (i); provided that,
if the Company shall fail to give notice on September 1, 2005, this Warrant
shall not expire until 5:00 p.m., New York City time, on a date 30 days after
the date the Company shall give such notice of the expiration of the right to
exercise this Warrant.
17. Persons Benefitting. This Warrant shall be binding upon and
inure to the benefit of the Company and its respective successors, assigns,
beneficiaries, executors and administrators, and the holder from time to time of
this Warrant. Nothing in this Agreement is intended or shall be construed to
confer upon any Person, other than the Company and the holder of this Warrant,
any right, remedy or claim under or by reason of this Warrant or any part
hereof.
18. Amendments. The Company may, with the consent of the holders of
at least 75% of the outstanding Warrants, by supplemental agreement or
otherwise, make any amendments to this Warrant, including section 3.3; provided,
however, without the consent of every holder affected thereby, the Company may
not amend the definition of Warrant Price or amend Sections 2 or 3 (except
section 3.3) of this Warrant.
19. Payments to Warrantholders. Any payment by the Company with
respect to the Warrants shall be made at the
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principal office of the Company, located on the date hereof, at 1050 Warrenville
Road, Lisle, Illinois 60532-5201.
20. Registration Rights. 20.1. Registration on Request.
(a) Request. Upon the written request of one or more Initiating
Holders, requesting that the Company effect the registration under this
Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying in intended method of disposition thereof, the
Company will promptly give written notice of such requested registration to
all registered holders of Registrable Securities, and thereupon the Company
will use its best efforts to effect the registration under the Securities
Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request,
(ii) all other Registrable Securities the holder of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of
such Registrable Securities), and
(iii) all shares of Common Stock which the Company or any other
holder of Common Stock may elect to register in connection with the
offering of Registrable Securities pursuant to this section 20.1,
all to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities
and the additional shares of Common Stock, if any, so to be registered.
No written request may be made pursuant to this section 20.1 prior to
the eighth anniversary of September 4, 1992. Subject to section 20.1(e),
the Company shall not be obligated to effect more than one registration
pursuant to this paragraph whether or not all outstanding Registrable
Securities are included in such registration.
(b) Expenses. The Company will pay all Registration Expenses incurred
in connection with any registration requested pursuant to this section
20.1, and underwriting discounts and commissions and transfer taxes and
documentary stamp taxes, if any, relating to the sale or disposition by a
holder of Registrable Securities shall be paid by such holder.
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(c) Effective Registration Statement. A registration requested
pursuant to this section 20.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective
and remained effective for the period set forth in section 20.3(ii),
provided that a registration which does not become effective after the
Company has filed a registration statement with respect thereto solely by
reason of the refusal to proceed of the Initiating Holders (other than any
refusal to proceed based upon advice of their counsel that the registration
statement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein not
misleading) shall be deemed to have been effected by the Company at the
request of such Initiating Holders, (ii) if after it has become effective,
such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or
court for any reason, or (iii) if the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection
with such registration are not satisfied, other than by reason of some act
or omission by such Initiating Holders.
(d) Selection of Underwriters. If a requested registration pursuant
to this section 20.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company, provided, that each
managing underwriter shall be a nationally recognized investment banking
firm.
(e) Priority in Requested Registrations. If a requested registration
pursuant to section 20.1 involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering (i)
within a price range acceptable to the holders of majority of the
Registrable Securities so requested to be included or (ii) without
otherwise materially and adversely affecting the offering of the shares
being sold, then the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (A) first, all Registrable Securities requested to be registered,
and second, securities the Company proposes to sell and other securities of
the Company included in such registration by the holders thereof and (B) in
case the number of Registrable Securities the registration of which shall
have been requested by all holders thereof shall in the aggregate exceed
the maximum number of shares specified by such managing underwriter, the
Registrable Securities the
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registration of which shall have been requested by each holder thereof
shall be included in such registration on a pro rata basis in the
proportion that such Registrable Securities the registration of which shall
have been requested by such holder bears to the aggregate Registrable
Securities the registration of which shall have been requested by all
holders thereof. To the extent Registrable Securities are not included in
the registration as a result of this section 20.1(e), the right of the
holders thereof to register such Registrable Securities pursuant to this
section 20.1 shall not be deemed to have been effected.
20.2. Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its Common Stock under the Securities Act
(other than a registration (i) on Form S-4, S-8 or any similar forms, (ii)
in connection with the acquisition by the Company of another company or
(iii) relating to shares of Common Stock issuable upon exercise of employee
stock options or in connection with any employee benefit or similar plan of
the Company), for sale, whether or not for its own account, on a form and
in a manner that would permit registration of Registrable Securities for
sale to the public under the Securities Act, it will give notice (the
"Registration Notice") to the holders of Registrable Securities at least 40
calendar days prior to the anticipated filing date of the registration
statement relating to such registration of its intention to do so,
describing such securities and specifying the form and manner of the
proposed registration (including, without limitation, (x) whether such
registration will be in connection with an underwritten offering of the
Common Stock and, if so, the identity of the investment banker (or
investment bankers) managing the offering (collectively, the "managing
underwriter") and whether such offering will be pursuant to a "best
efforts" or "firm commitment" underwriting and (y) the price (net of any
underwriting commissions, discounts and the like) at which the Registrable
Securities, if any, are reasonably expected to be sold if disclosure of
such price is acceptable to the managing underwriter). Upon the written
request of any such holder of Registrable Securities (a "Requesting
Holder") to include in such proposed registration Registrable Securities
for sale for his account, which notice is delivered to the Company within
30 calendar days after the Registration Notice is deemed to be given and
which request shall specify the number of Registrable Securities intended
to be disposed of by such Requesting Holder, the Company will effect the
registration under the Securities Act of all of the Registrable Securities
that the Company has been so requested to register; provided, however,
that:
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(i) if, at any time after giving such written notice of its
intention to register any securities and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such securities, the Company shall give written notice of
such determination to each Requesting Holder, and thereupon shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay
the Registration Expenses in connection therewith);
(ii) if such registration involves a firm commitment or best
efforts underwritten offering (an "Underwritten Offering"), all
Requesting Holders must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions
as apply to the Company or the other selling stockholders and must
enter into the underwriting agreement which the Company or the other
selling stockholders enter into and any other related agreements; and
(iii) in case of a determination by the Company or the other
selling stockholders to delay the registration of its equity
securities, the Company shall be permitted to delay the registration
of such Registrable Securities for the same period as the delay in
registering such other equity securities.
(b) Expenses. The Registration Expenses incurred in connection with
each registration of Registrable Securities requested pursuant to this
section 20.2 shall be paid by the Company, and each Requesting Holder shall
pay all underwriting discounts and commissions and transfer taxes and
documentary stamp taxes, if any, relating to the sale or disposition by
such holder of Registrable Securities pursuant to a registration statement
effected pursuant to this section 20.2.
(c) Priority in Incidental Registration. If a registration pursuant
to this section 20.2 involves an Underwritten Offering and the managing
underwriter advises the Company that, in its judgment, the number of shares
proposed to be included in such offering (including all Registrable
Securities) exceeds the number which can be sold without having an adverse
effect on such offering, including the price at which such securities can
be sold, then the Company will promptly so advise each Requesting Holder
and will include in such registration (i) first, the securities the Company
or the person initiating such registration proposes to sell and (ii)
second, the number of such Registrable Securities and the number of
Stockholders
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Securities, if any, requested to be included in such registration that, in
the opinion of such managing underwriter, can be sold without having the
adverse effect referred to above, such amount to be allocated pro rata
among all such Requesting Holders and the holders of Stockholders
Securities.
(d) Selection of Underwriters. In connection with any Underwritten
Offering pursuant to this section 20.2, the Company shall have the right to
select the managing underwriter with respect to the offering.
(e) No registration effected under this section 20.2 shall relieve the
Company of its obligations to effect any registration pursuant to section
20.1.
20.3. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in section 20.1 or
20.2, the Company will, as expeditiously as possible:
(i) prepare and file with the Commission, in the case of a
registration pursuant to section 20.1, within 150 days after the
request by the Initiating Holders to register their Registrable
Securities, a registration statement with respect to such Registrable
Securities on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate, as the case may be,
and which form shall be available for the sale of the Registrable
Securities in accordance with the intended methods of distribution
thereof, and use its best efforts to cause such registration statement
to become and remain effective; provided that before filing with the
Commission a registration statement or prospectus or any amendments or
supplements thereto, the Company will (A) furnish to one counsel,
selected by the holders of a majority of the Registrable Securities
covered by such registration statement, copies of all such documents
proposed to be filed, which documents will be subject to the timely
review of such counsel, and (B) notify each holder of Registrable
Securities covered by such registration statement of (x) any request
by the Commission to amend such registration statement or amend or
supplement any prospectus, or (y) any stop order issued or threatened
by the Commission, and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statements and the prospectus used in
connection therewith as may be necessary to keep such registration
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statement effective for a period of not less than 180 days or such
shorter period which will terminate when all Registrable Securities
covered by such registration statement have been sold (but not before
the expiration of the 90-day period referred to in Section 4(3) of the
Securities Act and Rule 174, or any successor thereto, thereunder, if
applicable) and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement;
(iii) furnish to each seller of Registrable Securities covered by
the registration statement and to each underwriter, if any, of such
Registrable Securities, without charge, such number of copies of such
registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto), and the prospectus included in
such registration statement (including each preliminary prospectus),
and such other documents, as such holder may reasonably request, in
order to facilitate the public sale or other disposition of the
Registrable Securities owned by such holder;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as any seller
thereof, and underwriter, if any, of Registrable Securities covered by
such Registrable Securities reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable
to enable such seller and each underwriter, if any, to consummate the
disposition in such jurisdictions of the Registrable Securities owned
by such holder; provided, however, that the Company shall not for any
such purpose be required to (A) qualify to do business as a foreign
corporation in any jurisdiction where, but for the requirements of
this section 20.3(iv), it is not then so qualified, (B) subject itself
to taxation in any such jurisdiction, or (C) take any action which
would subject it to consent to general or unlimited service or process
in any such jurisdiction where it is not then so subject;
(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable the seller or sellers thereof to
26
<PAGE>
consummate the disposition of such Registrable Securities;
(vi) immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event which comes to the Company's attention
if, as a result of such event, the prospectus included in such
registration statement, as then in effect, includes any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading and,
at the request of any such seller, deliver a reasonable number of
copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include any untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements made therein, in the light of the circumstances
under which they were made, not misleading;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available
to its security holders, in each case as soon as practicable, an
earnings statement covering a period of at least twelve months,
beginning with the first day of the Company's first full fiscal
quarter after the effective date of the registration statement (as the
term "effective date" is defined in Rule 158(c) under the Securities
Act), which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act including, at the option of the Company,
Rule 158 thereunder;
(viii) use its reasonable best efforts to cause all such
Registrable Securities to be listed on a national securities exchange
or the National Association of Securities Dealers National Market
System, as the case may be, and to enter into such customary
agreements including a listing application and indemnification
agreement in customary form, provided that the applicable listing
requirements are satisfied, and to provide a transfer agent and
registrar for such Registrable Securities covered by such registration
statement no later than the effective date of such registration
statement;
(ix) use its best efforts to obtain a "cold comfort" letter from
the independent public accountants for the Company in customary form
and covering matters
27
<PAGE>
of the type customarily covered by such letters as the holders of a
majority of the Registrable Securities being sold reasonably request
and provided that such request is reasonable in the managing
underwriter's point of view;
(x) execute and deliver all instruments and documents
(including, in an Underwritten Offering, an underwriting agreement in
customary form) and take such other actions and obtain such
certificates and opinions as the holders of a majority of the
Registrable Securities being sold reasonably request in order to
effect an underwritten public offering of such Registrable Securities;
the Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company
such information regarding such seller and the distribution of such
Registrable Securities as the Company may from time to time reasonably
request in writing in connection with effecting such offering;
(xi) permit any seller which the Board of Directors determines
in good faith after consultation with such seller and its advisors to
be a controlling person of the Company (within the meaning of the
Securities Act or the Exchange Act) to participate in the preparation
of such registration statement and to include therein material,
furnished to the Company in writing, which in the reasonable judgment
of such seller should be included and which is acceptable to the
Company.
Each seller of Registrable Securities will, upon receipt of any notice
from the Company of the happening of any event of the kind described in
section 20.3(vi), forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such seller's receipt of the copies of the supplemented or
amended prospectus contemplated by section 20.3(vi), and, if so directed by
the Company, such seller will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such
seller's possession, of the prospectus covering such Registrable Securities
at the time of receipt of such notice.
20.4. Underwritten Offerings.
(a) If a registration pursuant to section 20.1 or 20.2 involves an
Underwritten Offering, each holder of Registrable Securities agrees,
whether or not such holder's Registrable Securities are included in such
registration, not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the Securities Act, of any
28
<PAGE>
Registrable Securities, or of any security convertible into or exchangeable
or exercisable for any Registrable Securities (other than as part of such
Underwritten Offering), without the consent of the managing underwriter,
during a period commencing seven calendar days before and ending 90
calendar days (or such number of days as the managing underwriter shall
designate, but not more than 180 days) after the effective date of such
registration.
(b) The Company agrees, if so required by the managing underwriter,
not to effect any public sale or distribution of Common Stock or securities
convertible into Common Stock during the seven days prior to and the 60
days after any Underwritten Offering pursuant to section 20.1 has become
effective, except as part of such Underwritten Offering and except pursuant
to registrations on Form S-4 or S-8 or any similar forms.
(c) If requested by the underwriters for any underwritten offering by
holders of Registrable Securities pursuant to a registration requested
under section 20.1, the Company will enter into an underwriting agreement
with such underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Company, each such holder and the
underwriters, and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of
this type, including, without limitation, indemnities to the effect and to
the extent provided in section 20.5. The holders of the Registrable
Securities will cooperate with the Company in the negotiation of the
underwriting agreement and will give consideration to the reasonable
suggestions of the Company regarding the form thereof. The holders of
Registrable Securities to be distributed by such underwriters shall be
parties to such underwriting agreement.
20.5. Indemnification.
(a) Indemnification by the Company. In the event of any registration
of any securities of the Company under the Securities Act pursuant to
section 20.1 or 20.2, the Company will, and it hereby does, indemnify and
hold harmless, to the extent permitted by law, the holders of any
Registrable Securities covered by such registration statement, its
directors, trustees and officers or general and limited partners (and
directors, trustees and officers thereof and, if such holder is a portfolio
or investment fund, its investment advisors or agents), each other Person
who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such holder or any
such underwriter within the meaning of the Securities Act, as follows:
29
<PAGE>
(i) against any and all loss, liability, claim, damage or
expense, joint or several, arising out of or based upon an untrue
statement or alleged untrue statement of a material fact contained, on
the effective date thereof, in any registration statement (or any
amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense, joint or several, to the extent of the aggregate amount paid
in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or alleged untrue statement or omission or alleged omission made
in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any underwriter or such holder expressly for
use in the preparation of any registration statement (or any amendment
thereto) or any preliminary prospectus or prospectus (or any amendment or
supplement thereto); and provided, further, that the Company will not be
liable to (i) any Person who participates as an underwriter in the offering
or sale of Registrable Securities or any other Person, if any, who controls
such underwriter within the meaning of the Securities Act or (ii) any such
holder, in each case, under the indemnity agreement in this section
20.5(a), with respect to any preliminary prospectus or the final prospectus
or the final prospectus as amended or supplemented, as the case may be, to
the extent that any such loss, liability, claim, damage or expense of such
underwriter or controlling Person or such
30
<PAGE>
holder results from the fact that such underwriter or holder sold
Registrable Securities to a Person to whom there was not sent or given, at
or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented,
whichever is most recent, if the Company has previously furnished copies
thereof to such underwriter or holder. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
such holder or any such director, trustee, officer, general or limited
partner, investment advisor or agent, underwriter or controlling Person and
shall survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed in accordance with section 20.1 or 20.2, that it shall have
received an undertaking, reasonably satisfactory to it, from the
prospective seller of such Registrable Securities or any underwriter, to
indemnify and hold harmless (in the same manner and to the same extent as
set forth in section 20.5(a)) the Company and its directors, officers and
controlling Persons, and their respective directors, officers, general and
limited partners, managing directors, and, in the case of an undertaking
from a prospective seller of Registrable Securities, any underwriter, and
their respective controlling Persons with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
seller or underwriter, specifically stating that it is for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
the Company, any seller, or any underwriter, as the case may be, or any of
their respective directors, trustees, officers, controlling Persons,
general or limited partners or managing directors and shall survive the
transfer of such securities by such underwriter. The obligations of the
Company and such sellers pursuant to this section 20.5 are to be several;
provided, however, that, with respect to each claim pursuant to this
section 20.5, the Company shall be liable for the full amount of such claim
and each such seller's maximum liability under this section shall be
limited to an amount equal to the net proceeds actually received by such
seller (after deducting any underwriting discount and expenses) from the
sale of Registrable Securities being sold
31
<PAGE>
pursuant to such registration statement or prospectus by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding involving a claim referred to in this section 20.5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this section 20.5, except to
the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate
in and to assume the defense thereof, jointly with any other indemnifying
party similarly notified, to the extent that it may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, unless in
such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such
claim, in which case the indemnifying party shall not be liable for the
fees and expenses of (i) more than one counsel for all holders of
Registrable Securities selected by a majority of the holders of Registrable
Securities being registered, (ii) more than one counsel for the
underwriters or (iii) more than one counsel for the Company in connection
with any one action or separate but similar or related actions. An
indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying
party with respect to such claim; unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim,
in which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
The indemnifying party will not, without the prior written consent of
each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not
such indemnified party or any Person who controls such indemnified party is
a party to such claim, action, suit or proceeding), unless such settlement,
32
<PAGE>
compromise or consent includes an unconditional release of such indemnified
party from all liability arising out of such claim, action, suit or
proceeding.
Notwithstanding anything to the contrary set forth herein, and without
limiting any of the rights set forth above, in any event any party will
have the right to retain, at its own expense, counsel with respect to the
defense of a claim; provided, however, that such counsel shall be required
to cooperate with any counsel retained by the Company, unless they are
adverse parties.
(d) Other Indemnification. The Company and each seller of Registrable
Securities shall provide for the foregoing indemnity (with appropriate
modifications) in any underwriting agreement with respect to any required
registration or other qualification of securities under any federal or
state law or regulation of any governmental authority other than the
Securities Act.
20.6. Contribution. If the indemnification provided for in section
20.5 is unavailable or insufficient to hold harmless an indemnified party under
section 20.5(a) or (b), then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in section 20.5(a) or (b) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other in connection with
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations,
including, without limitation, the relative benefits received by each party from
the offering of the Registrable Securities, the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted and the opportunity to correct and prevent any statement or omission.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statements or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this section 20.6
were to be determined by pro rata or per capita allocation (even if the
underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first sentence of this section 20.6. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this section 20.6 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in
33
<PAGE>
connection with investigating or defending any action or claim (which shall be
limited as provided in section 20.5(c) if the indemnifying party has assumed the
defense of any such action in accordance with the provisions thereof) which is
the subject of this section 20.6. Promptly after receipt by an indemnified
party under this section 20.6 of notice of the commencement of any action
against such party in respect of which a claim for contribution may be made
against an indemnifying party under this section 20.6, such indemnified party
shall notify the indemnifying party in writing of the commencement thereof if
the notice specified in section 20.5(c) has not been given with respect to such
action; provided that the omission so to notify the indemnifying party shall not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise under this section 20.6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
The Company and each holder of Registrable Securities agrees with each other and
the underwriters of the Registrable Securities, if requested by such
underwriters, that (i) the underwriters' portion of such contribution shall not
exceed the underwriting discount and (ii) the amount of such contribution of a
seller of Registrable Securities shall not exceed an amount equal to the net
proceeds actually received by such seller from the sale of Registrable
Securities in the offering to which the losses, liabilities, claims, damages or
expenses of the indemnified parties relate. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
RYKOFF-SEXTON, INC.
By:___________________________________
Title:
[Seal]
___________________
34
<PAGE>
FORM OF SUBSCRIPTION
--------------------
[To be executed only upon exercise of Warrant]
To RYKOFF-SEXTON, INC.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder,
shares of Common Stock of RYKOFF-SEXTON, INC. and herewith makes payment of
$ therefor, and requests that the certificates for such shares be issued
in the name of, and delivered to , whose address is .
Dated: ______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of
Warrant)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
35
<PAGE>
FORM OF ASSIGNMENT
------------------
[To be executed only upon transfer of Warrant]
For valued received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto the rights
represented by such Warrant to purchase shares of Common Stock of
RYKOFF-SEXTON, INC. to which such Warrant relates, and appoints
Attorney to make such transfer on the books of RYKOFF-SEXTON, INC. maintained
for such purpose, with full power of substitution in the premises.
Dated: ______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of
Warrant)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
Signed in the presence of:
__________________________
36
<PAGE>
Exhibit 5.1
-----------
[LETTERHEAD OF JONES, DAY, REAVIS & POGUE]
___________, 1996
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532
Re: 14,296,723 shares of Common Stock, par value $.10 per share, of
Rykoff-Sexton, Inc. to be issued in connection with the merger of US
Foodservice Inc. into USF Acquisition Corporation
Ladies/Gentlemen:
We have acted as your counsel in connection with the Agreement and
Plan of Merger (the "Merger Agreement") dated February 2, 1996 among Rykoff-
Sexton, Inc., a Delaware corporation (the "Company"), USF Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company
("Merger Sub"), and US Foodservice Inc., a Delaware corporation ("US
Foodservice"), pursuant to which (i) US Foodservice will be merged into Merger
Sub (the "Merger"), (ii) 8,019,254.8759 shares of Class A Common Stock, par
value $.01 per share ("Class A Common Stock"), and 821,206.2466 shares of Class
B Common Stock, par value $.01 per share ("Class B Common Stock" and, together
with the Class A Common Stock, "US Foodservice Common Stock"), of US Foodservice
will be converted into a maximum of 12,880,552 shares of Common Stock, par value
$.10 per share, of the Company (the "Merger Shares"), (iii) options to purchase
a total of 744,275 shares of Class A Common Stock (the "USF Options") issued
pursuant to the US Foodservice Inc. 1993 Stock Option Plan, the US Foodservice
Inc. 1992 Stock Option Plan (as amended) and the Management Stock Option Plan of
WS Holdings Corporation (as amended) (collectively, the "Plans") will be assumed
by the Company and converted into options to purchase a maximum of 1,084,410
shares of Common Stock, par value $.10 per share, of the Company (the "Option
Shares"), and (iv) warrants to purchase a total of 227,700 shares of Class A
Common Stock ("USF Warrants") will be assumed by the Company and converted into
warrants (the "RSI Warrants") to purchase a maximum of 331,761 shares of Common
Stock, par value $.10 per share, of the Company (the "Warrant Shares").
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion, and based thereupon and upon the
<PAGE>
Rykoff-Sexton, Inc.
, 1996
Page 2
assumptions identified herein, and subject to the qualifications set forth
herein, we are of the opinion that:
1. The Merger Shares are duly authorized and, when issued in
accordance with the Merger Agreement and upon the completion of the filing
contemplated by the General Corporation Law of the State of Delaware, or at
such later date and time as may be specified in such filing and accepted by
the Secretary of State of the State of Delaware (the "Effective Time"), will
be validly issued, fully paid and nonassessable.
2. The Option Shares to be issued and sold pursuant to the Plans
(and the authorized forms of stock option agreements thereunder) are duly
authorized and, when issued and sold following the Effective Time in accordance
with such Plans and agreements, validly issued, fully paid and nonassessable.
3. The Warrant Shares to be issued and sold pursuant to the RSI
Warrants are duly authorized and, when issued and sold following the Effective
Time in accordance with the RSI Warrants, will be validly issued, fully paid and
nonassessable.
In rendering the opinions in paragraph 1 above, we have assumed that
the shares of US Foodservice Common Stock to be converted into Merger Shares are
duly authorized, validly issued, fully paid and nonassessable.
In rendering the opinions in paragraph 2 above, we have assumed that
(i) the Plans and the forms of stock option agreements thereunder have been or
will be prior to the Effective Time duly authorized and approved, (ii) the forms
of stock option agreements evidencing the USF Options assumed by the Company
shall have been duly approved by the Board of Directors of the Company prior to
the Effective Time, and (iii) either payment of at least $.10 per share will be
made to the Company upon the sale of the Option Shares or that the Option Shares
sold will be treasury shares.
In rendering the opinions in paragraph 3 above, we have assumed that
(i) the USF Warrants have been or will be prior to the Effective Time duly
authorized and approved, (ii) the RSI Warrants shall have been duly approved by
the Board of Directors of the Company prior to the Effective Time, and (iii)
each holder of USF Warrants shall have duly consented to the issuance of the RSI
Warrants and the form of legal opinion delivered to such holders pursuant to the
terms of the USF Warrants.
With respect to all of the documents reviewed by us in connection with
this opinion, we have assumed, without investigation, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as certified or
reproduced copies. In rendering our opinion set forth above, we have relied as
to factual matters upon information obtained from the Company and US Foodservice
(and their respective officers and representatives) and public officials.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement on Form S-4 (the "Registration Statement") filed by you
to effect registration under the Securities Act of 1933, as amended, of the
Merger Shares, the Option Shares and the Warrant Shares and to the reference to
us under the caption "Validity of Common Shares" in the prospectus comprising a
part of the Registration Statement.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
<PAGE>
Exhibit 8.1
[LETTERHEAD OF JONES, DAY, REAVIS & POGUE]
March __, 1996
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532-5201
Ladies & Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of Rykoff-Sexton, Inc., a Delaware corporation
("RSI"), relating to the merger of US Foodservice Inc., a Delaware corporation,
with and into USF Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of RSI (the "Merger"). We have acted as special counsel to RSI
in connection with the Merger.
We have participated in the preparation of the discussion set forth
under the heading "THE MERGER -- Certain Federal Income Tax Consequences" in the
proxy statement and prospectus that is part of the Registration Statement. In
our opinion, such discussion is accurate in all material respects.
We hereby consent to the use of this opinion as Exhibit ___ to the
Registration Statement and to the reference to our firm under the heading "THE
MERGER -- Certain Federal Income Tax Consequences" in the proxy statement and
prospectus that is part of the Registration Statement. In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations promulgated thereunder.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
<PAGE>
Exhibit 10.1.1
RYKOFF-SEXTON, INC.
FORM OF INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT by and between the undersigned (the
"Optionee") and Rykoff-Sexton, Inc., a Delaware corporation, having a place of
business at ____________________, (the "Company").
W I T N E S S E T H :
WHEREAS, the Company has adopted a 1980 Stock Option Plan, as amended, (the
"Plan") and the Stock Option Committee appointed pursuant to the Plan has
granted an incentive stock option pursuant to (S)422A of the Internal Revenue
Code to the Optionee, subject to the execution of this Stock Option Agreement.
NOW, THEREFORE, it is agreed as follows:
1. The terms and conditions of the Plan, a copy of which has been
delivered to the Optionee, are hereby incorporated herein and made a part
hereof by reference as if set forth in full. In the event of any conflict
or inconsistency between the provisions of this Agreement and those of the
Plan, the provisions of the Plan shall govern and control.
2. The number of shares of Common Stock of the Company subject to the
incentive stock option provided for by this Agreement and the purchase
price of each such share are set forth at the end of this Agreement after
"Number of Shares:" and "Purchase Price:", respectively.
3. If the Optionee is awarded stock appreciation rights equal to the
number of shares of Common Stock of the Company subject to this incentive
stock option, the word "yes" will be set forth at the end of the Agreement
after "Stock Appreciation Rights Granted:". If, on the other hand, the
word "none" is set forth in such space, the Optionee shall not be entitled
to any stock appreciation rights in connection with the incentive stock
option granted herein.
4. No incentive stock option (or any related stock appreciation
rights) provided for by this Agreement is exercisable after the expiration
of ten (10) years from the date as of which this Agreement is executed.
5. Except as provided in paragraph 6, the incentive stock option (and
any related stock appreciation rights)
<PAGE>
provided for by this Agreement is exercisable in cumulative installments
not in excess of 25% on or after the first anniversary of the date as of
which this Agreement is executed, and 25% on or after each of the next
three (3) successive anniversaries of such date.
6. The incentive stock option (or any related stock appreciation
rights) provided for by this Agreement shall be exercisable with respect to
all shares subject thereto upon the disability, normal retirement or death
of the Optionee. Upon termination of employment for any reason other than
disability, normal retirement, or death, the incentive stock option (or any
related stock appreciation rights) provided for by this Agreement is
exercisable only to the extent the same was exercisable immediately prior
to such termination of employment.
7. The Plan provides that no incentive stock option (or any related
stock appreciation rights) granted thereunder shall be transferable other
than by will or the laws of descent and distribution and an incentive stock
option (or any related stock appreciation rights) may be exercised during
the lifetime of the Optionee thereof only by the Optionee or the Optionee's
guardian or legal representative.
8. In consideration of the granting of the incentive stock option (or
any related stock appreciation rights) and regardless of whether or not the
incentive stock option (or any related stock appreciation rights) shall be
exercised, the Optionee will remain in the employ of the Company or its
subsidiaries for a period of at least one (l) year from the date hereof.
Such employment, subject to the provisions of any contract between Company
and Optionee, shall be at the pleasure of the Board of Directors of the
Company or other employing corporation.
9. Subject to the terms and conditions of this Agreement and the
Plan, the incentive stock option or stock appreciation rights may be
exercised by giving written notice of exercise signed by the Optionee to
the Secretary of the Company at its principal office and, in the case of
the incentive stock option, specifying the number of shares to be purchased
and by paying in full the purchase price of the number of shares of stock
with respect to which the incentive stock option is exercised, in cash
and/or, with the consent of the Committee, shares of Common Stock of the
Company or other property, and, in the case of stock appreciation rights,
specifying the number of stock appreciation rights being exercised. In
addition, the Optionee shall, upon notification of the amount due and prior
to or concurrently with the delivery to the Optionee of a certificate
representing shares issued pursuant to the incentive stock option or stock
appreciation rights
2
<PAGE>
exercised, pay promptly an amount sufficient to satisfy applicable federal,
state or local tax requirements. The payment of any cash to Optionee
pursuant to his exercise of any stock appreciation rights shall be reduced
by an amount sufficient to satisfy applicable federal, state or local tax
requirements. In the event the incentive stock option or stock
appreciation rights shall be exercised by any person other than the
Optionee, such notice shall be accompanied by appropriate proof of the
right of such person to exercise the incentive stock option. The Company
has no obligation to deliver shares or cash upon exercise of any incentive
stock option or stock appreciation rights until qualified for delivery
under such laws and regulations as may be deemed by the Company applicable
thereto.
10. Any stock appreciation right granted in conjunction with an
incentive stock option may only be exercisable when the market value of the
Common Stock exceeds the option price of the related incentive stock
option.
11. Pursuant to paragraph 14 of the Plan, under certain circumstances
therein set forth, the Company shall have the right but not the obligation
to reacquire shares purchased or received by the Optionee or other
consideration received by the Optionee pursuant to his exercise of the
incentive stock option or stock appreciation rights.
12. Nothing herein expressed or implied is intended or shall be
construed as conferring upon or giving to any person, firm or corporation
other than the parties hereto any rights or benefits under or by reason of
this Agreement.
13. Each party hereto agrees to execute such further papers,
agreements, assignments or documents of title as may be necessary or
desirable to effect the purposes of this Agreement and carry out its
provisions.
14. This Agreement embodies the entire agreement made between the
parties hereto with respect to the matters covered herein and shall not be
modified except by a writing signed by the party to be charged.
15. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which shall
constitute but one and the same agreement.
16. This Agreement, in its interpretation and effect, shall be
governed by the laws of the State of California applicable to contracts
executed and to be performed therein.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
September 14, 1987, the date upon which the incentive stock option provided for
by this Agreement was granted.
NAME OF HOLDER: OPTIONEE
________________________________________ _____________________________________
NUMBER OF SHARES: RYKOFF-SEXTON, INC.
________________________________________ _____________________________________
Its President and Chief
Executive Officer
PURCHASE PRICE:
________________________________________
STOCK APPRECIATION RIGHTS GRANTED:
________________________________________
("Yes" or "None")
APPROVED:
By _________________________________________
Its President and Chief
Executive Officer
4
<PAGE>
Exhibit 10.2.4
RYKOFF-SEXTON, INC.
LONG-TERM PERFORMANCE COMPENSATION PROGRAM
FORM OF PERFORMANCE SHARE PLAN AGREEMENT
1.0 DECLARATIONS This Agreement, dated September 15, 1995, is
made by and between Rykoff-Sexton, Inc.,
hereinafter referred to as the "Company", and
_________________, an individual hereinafter
referred to as "Participant":
WHEREAS, the Company wishes to provide to the
Participant a competitive long-term compensation
program that rewards Participant for improvements
in the Company's financial performance relative to
its ranking in its competitor peer group under its
1988 Stock Option and Compensation Plan,
hereinafter referred to as the "Plan"; and
WHEREAS, the Management Development -Compensation
and Stock Option Committee of the Company's Board
of Directors, hereinafter referred to as the
"Committee", appointed to administer said Plan,
has determined that it would be to the advantage
and best interest of the Company and its
shareholders to grant the Performance Shares to
the Participant as an inducement to remain in the
service of the Company and as an incentive for
increased efforts during such service, and has
advised the Company thereof and instructed the
undersigned officers to issue an Award;
NOW, THEREFORE, the Company does hereby grant up
to 50,000 performance shares to the participant on
the terms and conditions stated herein;
2.0 DEFINITIONS Whenever the following terms are used herein, they
shall have the meaning specified below unless the
context clearly indicates to the contrary. The
masculine pronoun shall include the feminine and
neuter, and the singular the
<PAGE>
plural, except where the context explicitly
indicates otherwise.
2.1 Award
-----
"Award" shall refer to payment in Company common
stock or cash, at the election of the Committee,
under this Plan.
2.2 Board of Directors
------------------
"Board of Directors" or "Board" means the Board of
Directors of Rykoff-Sexton, Inc..
2.3 Committee
---------
"Committee" means the Management Development -
Compensation and Stock Option Committee of the
Board of Directors.
2.4 Company
-------
"Company" means Rykoff-Sexton, Inc. and its
subsidiaries.
2.5 Executive Management Committee
------------------------------
"Executive Management Committee" shall mean that
group consisting of the President and Chief
Executive Officer; Senior Vice President,
Corporate Planning; Senior Vice President,
Finance, and Chief Financial Officer; Senior Vice
President and Chief Information Officer; Senior
Vice President, Human Resources, and General
Counsel; President, Distribution Division; and
President, Manufacturing Division.
2.6 Maximum Ranking
---------------
"Maximum Ranking" shall mean being ranked,
pursuant to Section 4.2 herein, with the least
number of points.
2.7 Minimum Ranking
---------------
2
<PAGE>
"Minimum Ranking" shall mean being ranked,
pursuant to Section 4.2 herein, in fourth place.
2.8 Net Income
----------
"Net Income" shall mean the income or loss of the
respective company from continuing operations
before extraordinary items.
2.9 Participant
-----------
"Participant" means any Executive Management
Committee member of the Company approved for
participation by the Committee.
2.10 Peer Group
----------
"Peer Group" means a group of competitor companies
conducting their primary business in the same
lines of business as the Company. For purposes of
this agreement, the initial Peer Group under the
Plan shall include: JP Food Service, McCormick &
Company, Nash Finch, Performance Food Group,
Richfood Holdings, Smart & Final and SYSCO. If as
a result of merger or otherwise, including a
merger through a pooling of interests, any of
these companies ceases to exist as a publicly-held
company or if its primary business changes, that
company will be excluded from the peer group
calculation for the Performance Cycle in which
such event occurs. If companies are removed from
the list of Peer Group companies as provided
above, they may be replaced, at the discretion of
the Committee, with other companies that were not
included in the Peer Group listed above, provided
such replacement companies conduct their primary
business in the same lines of business as the
Company.
2. 11 Performance Cycle
-----------------
"Performance Cycle" means the three-year period
commencing on April 30, 1995 and concluding on May
2, 1998. No new Performance Cycle shall begin
before the completion of the previous Performance
Cycle.
3
<PAGE>
2.12 Performance Share
-----------------
"Performance Share" means an Award under the Plan
as defined in Section 9 of the 1988 Stock Option
and Compensation Plan.
2.13 Plan
----
"Plan" shall mean the 1988 Stock Option and
Compensation Plan.
2.14 Revenue Growth Percentage
-------------------------
"Revenue Growth Percentage" shall mean the
percentage increase in Total Revenues each year in
the Performance Cycle.
2.15 Return on Average Capital
-------------------------
"Return on Average Capital" (ROAC) is defined as
Net Income for each year in the Performance Cycle
divided by the annual average of the total long-
term debt, including current portion, long-term
leases and other long-term financing obligations
and shareholders equity for each year in the
Performance Cycle.
2.16 Target Ranking
--------------
"Target Ranking" shall mean being ranked pursuant
to Section 4.2 herein, in third place.
2.17 Total Revenue
-------------
"Total Revenues" shall mean the net sales of the
respective company before reduction for cost-of-
sales.
3.0 PERFORMANCE SHARE GRANTS
The Participant is hereby granted up to 50,000
Performance Shares in an amount to be determined
based upon the Company's relative ranking compared
to the results of the Peer
4
<PAGE>
Group. No Award shall be made for performance
below Minimum Ranking.
4.0 PERFORMANCE 4.1 Performance Criteria
--------------------
The criteria for Company performance shall be
relative cumulative ranking of Revenue Growth
Percentage and ROAC for each fiscal year in the
Performance Cycle.
4.2 Ranking of Company Performance
------------------------------
The Revenue Growth Percentage and ROAC shall be
calculated for each of the three fiscal years for
all companies in the Peer Group and the Company.
The companies will then be ranked by performance
according to Revenue Growth Percentage and ROAC in
each fiscal year.
One point shall be assigned to each position
determined by the relative ranking for the Company
and each Peer Group company for each performance
criteria for each fiscal year. Therefore, the
first place ranking in a performance criteria
would receive the least points and the last place
would receive the most points. The points assigned
to each company would then be totaled to determine
the total scores during the Performance Cycle.
Exhibit A details the steps in calculating the
Awards.
5.0 GRANT OF SHARES 5.1 Grant of Performance Shares
---------------------------
Performance Shares shall be granted to the
President and Chief Executive Officer and to the
remaining Participants in accordance with the
following:
Award Grant to:
<TABLE>
<S> <C> <C> <C>
Award Level President and CEO Other Participants Total
- -------------- ----------------- ------------------ -------
Minimum 25,000 12,500 100,000
Target 50,000 25,000 200,000
Maximum 100,000 50,000 400,000
</TABLE>
5
<PAGE>
6.0 OTHER PROVISIONS 6. 1 Performance Shares Not Transferable
-----------------------------------
Neither the Performance Shares nor any interest or
right therein or part thereof shall be liable for
the debts, contracts or engagements of the
Participant or his successors in interest nor
shall be subject to disposition by transfer,
alienation anticipation, pledge, encumbrance,
assignment or any other means whether such
disposition be voluntary or involuntary or by
operation of law by judgment, levy attachment,
garnishment or any legal or equitable proceedings
(including bankruptcy), and any attempted
disposition thereof shall be null and void and of
no effect; provided, however, that this section
6.1 shall not prevent transfers by will or by the
applicable laws of descent and distribution.
6.2 Notices
-------
Any notice to be given under the terms of this
Agreement
to the Company shall be addressed as follows:
Office of the Senior Vice-President-Human
Resources
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532
Attention: Mr. Robert J. Harter, Jr.
Any notice to be given to the Participant shall be
addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to
this Section 5.2, either party may hereafter
designate a different address for notices to be
given to him. Any notice which is required to be
given to the Participant's personal representative
if such representative has previously informed the
Company of his status and address by written
notice under this Section 6.2 shall be deemed duly
given when enclosed in a properly sealed envelope
or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post
office regularly maintained by the United States
Postal Service.
6
<PAGE>
6.3 Paragraph Titles
----------------
Titles are provided herein for convenience only
and are not to serve as a basis for interpretation
or construction of this Agreement.
6.4 Construction
------------
This Agreement shall be administered, interpreted
and enforced under the laws of the State of
Illinois.
6.5 Forfeiture of Interest
----------------------
Except as provided in Section 11.12 of the Plan,
termination of employment for any reason,
including death, disability, retirement, voluntary
termination of employment by the Participant, and
termination by the Company without cause, will
result in a forfeiture of Participant's rights
under this Agreement.
6.6 Neither the Agreement nor any grant made under the
Agreement shall create any employment contract or
relationship between Rykoff-Sexton and any
Participant.
6.7 This Agreement has been created pursuant to the
provisions of the Rykoff-Sexton, Inc. 1988 Stock
Option and Compensation Plan (As Amended September
13, 1991) (the "1988 Plan"). Accordingly the
provisions of the 1988 Plan, specifically
including (but not limited to) Section 9 entitled
"Performance Shares", Section 11.5 entitled
"Additionally Condition", Section 11.6 entitled
"Adjustment", Section 1.8 entitled "Withholding",
and Section 11.12 entitled "Immediate Acceleration
of Incentives", are incorporated herein by
reference.
7
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
- -------------------
Participant
- -------------------
- -------------------
Address
Participant's Social Security Number:
- -------------------
RYKOFF-SEXTON, INC.
By ________________________________________
President and Chief Executive Officer
By ________________________________________
Neil I. Sell, Secretary
8
<PAGE>
EXHIBIT A
Steps in calculating the Awards for an Executive Management Committee Member:
Step One Each year calculate the ROAC and Revenue Growth
Percentage for Rykoff and each company in the Peer
Group. In this example a total of eight companies have
been ranked, including the Company.
Step Two Rank each company's results from high to low (1=best
performance, 2=next best, etc.) and assign points to
each company for its relative ranking.
Step Three At the end of the Performance Cycle total the points
for the results of all companies and rank them by
points from fewest to most points.
Step Four Determine Award to Rykoff Participants according to the
following total ranking:
<TABLE>
<S> <C>
Ranking Award for President and CEO
------------- ----------------------------
1/8 100,000 shares
2/8 75,000 shares
3/8 50,000 shares
4/8 25,000 shares
5/8 and below no Award
Ranking Award for other Participants
------------- ----------------------------
1/8 50,000 shares
2/8 37,500 shares
3/8 25,000 shares
4/8 12,500 shares
5/8 and below no Award
</TABLE>
9
<PAGE>
Exhibit 10.3.1
RYKOFF-SEXTON, INC.
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT by and between the undersigned
(the "Optionee") and Rykoff-Sexton, Inc., a Delaware corporation, having a place
of business at _______________________________________________________, (the
"Company").
W I T N E S S E T H:
WHEREAS, the Company has adopted a 1989 Director Stock Option Plan
(the "Plan") and pursuant to the Plan the undersigned has granted a non-
qualified stock option to the Optionee, subject to the execution of this Non-
Qualified Stock Option Agreement (the "Agreement").
NOW, THEREFORE, it is agreed as follows:
1. The terms and conditions of the Plan, a copy of which has been
delivered to the Optionee, are hereby incorporated herein and made a part hereof
by reference as if set forth in full. In the event of any conflict or
inconsistency between the provisions of this Agreement and those of the Plan,
the provisions of the Plan shall govern and control.
2. The number of shares of Common Stock of the Company subject to the
stock option provided for by this Agreement and the purchase price of each such
share are set forth at the end of this Agreement after "Number of Shares:" and
"Purchase Price:", respectively.
3. No stock option provided for by this Agreement is exercisable
after the expiration of ten (10) years from the date as of which this Agreement
is executed.
4. In the event of the termination of services of Optionee (for any
reason or no reason) prior to the date on which an option granted becomes
exercisable as provided in paragraph 5, such option shall become exercisable on
the date determined in accordance with paragraph 5, but only with respect to a
number of shares determined by reference to the compensation earned prior to
such termination.
5. All stock options provided for by this Agreement shall become
immediately exercisable in full on the first anniversary of the date hereof. No
stock option provided for by this Agreement shall be exercisable after the first
to occur of (a) the expiration of ten years from the date upon which such option
was granted; (b) in the case
1
<PAGE>
of termination of service of the Optionee for reasons other than death, total
and permanent disability, or retirement, the expiration of six months after the
later of (i) the date of such termination or (ii) the date on which such option
first became exercisable, provided, however, that if the death of the Optionee
occurs within six months of such termination service, clause (c) shall be
applicable; or (c) in the case of termination of service of the Optionee by
reason of death, total and permanent disability, or retirement (or in case of
death of the Optionee in the circumstances described in clause (b)), the
expiration of one year after the later of (i) the date of such termination or
(ii) the date on which such option first became exercisable.
6. The Plan provides that no stock option granted thereunder may be
transferred, pledged or assigned (except, in the event of the Optionee's death,
by will or the laws of descent and distribution). A stock option may be
exercised during the lifetime of the Optionee thereof only by the Optionee or
the Optionee's guardian or legal representative.
7. Subject to the terms and conditions of this Agreement and the
Plan, the stock option may be exercised by giving written notice of exercise
signed by the Optionee to the Secretary of the Company at its principal office
and, specifying the number of shares to be purchased and by paying in full the
purchase price of the number of shares of stock with respect to which the stock
option is exercised in cash and/or, with the consent of the Stock Option
Committee of the Board of Directors of the Company, shares of Common Stock of
the Company or other property. In addition, the Optionee shall, upon
notification of the amount due and prior to or concurrently with the delivery to
the Optionee of a certificate representing shares issued pursuant to the stock
option exercised, pay promptly an amount sufficient to satisfy applicable
federal, state or local tax requirements. In the event the stock option shall be
exercised by any person other than the Optionee, such notice shall be
accompanied by appropriate proof of the right of such person to exercise the
stock option. The Company has no obligation to deliver shares or cash upon
exercise of any stock option until qualified for delivery under such laws and
regulations as may be deemed by the Company applicable thereto.
8. Nothing herein expressed or implied is intended or shall be
construed as conferring upon or giving to any person, firm or corporation other
than the parties hereto any rights or benefits under or by reason of this
Agreement.
9. Each party hereto agrees to execute such further papers,
agreements, assignments or documents of title as may be necessary or desirable
to effect the purposes of this Agreement and carry out its provisions.
10. This Agreement embodies the entire agreement made between the
parties hereto with respect to the matters covered herein and shall not be
modified except by a writing signed by the party to be charged.
11. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute but
one and the same agreement.
2
<PAGE>
12. This Agreement, in its interpretation and effect, shall be
governed by the laws of the State of California applicable to contracts executed
and to be performed therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
May 2, 1993, the date upon which the non-qualified stock option provided for by
this Agreement was granted.
NUMBER OF SHARES: OPTIONEE:
- -----------------
---------------------------------
PURCHASE PRICE: RYKOFF-SEXTON, INC.
- -----------------
By
------------------------------
Mark Van Stekelenburg
President and Chief Executive
Officer
3
<PAGE>
Exhibit 10.4.1
FIRST AMENDMENT TO THE
RYKOFF-SEXTON, INC.
1993 DIRECTOR STOCK OPTION PLAN
THIS AMENDMENT is made effective as of October 1, 1994, by RYKOFF-SEXTON,
INC., a Delaware corporation (the "Company"), with respect to the Rykoff-Sexton,
Inc. 1993 Director Stock Option Plan (the "Plan").
RECITALS:
--------
WHEREAS, by an instrument in writing effective as of the date of the
Company's 1993 Annual Meeting and entitled "Rykoff-Sexton, Inc. 1993 Director
Stock Option Plan", the Company did create and establish the Plan for the
benefit of the members of its Board of Directors (the "Board");
WHEREAS, Section 8 of the Plan provides for the amendment thereof by the
Board in the manner and upon the terms and conditions therein recited;
WHEREAS, the Board has been advised by counsel that it would be advisable
to amend the Plan to facilitate compliance with an amendment to Rule 16b-3 that
was adopted by the Securities and Exchange Commission in Exchange Release Number
28869; and
WHEREAS, the Board has also been advised by counsel that such amendment may
be adopted without shareholder approval;
NOW, THEREFORE, in accordance with the provisions of the Plan and as
provided for thereby, the Plan is hereby amended in the following manner:
1. Effective October 1, 1994, Section 8 is hereby revoked and a new
Section 8 is hereby adopted in lieu thereof, reading as follows:
8. Amendment or Discontinuance. The Plan may be amended at any time
and from time to time by the Board as the Board shall deem advisable;
provided, however, that:
(a) no amendment shall become effective without shareholder
approval if such shareholder approval is required by law, rule or
regulation;
(b) no amendment shall materially and adversely affect any right
of any participant with respect to any Option theretofore granted,
without such participant's written consent; and
(c) the following Plan provisions shall not be amended more than
once every six (6) months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act or
the rules thereunder:
(i) those designating the categories of individuals eligible
to participate;
(ii) those stating the amount and price of securities to be
awarded; and
(iii) those specifying the timing of awards.
<PAGE>
2. Save as herein expressly amended, all of the terms and covenants of,
and Options awarded under the Plan shall remain in full force and effect.
The Secretary of the Company hereby certifies that this Amendment was duly
adopted by the Board on the ______ day of __________, 1994.
By /s/ Neil I. Sell
-----------------------------------
Neil I. Sell, Secretary
2
<PAGE>
Exhibit 10.4.2
RYKOFF-SEXTON, INC.
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement (the "Agreement") is
executed by and between _______________ (the "Optionee") and Rykoff-Sexton,
Inc., a Delaware corporation, (the "Company") pursuant to the terms of the
Company's 1993 Director Stock Option Plan (as the same may be amended, modified
or supplemented from time to time, the "Plan").
1. The Optionee is hereby granted the right and option to purchase
1,000 shares of the Company's common stock (the "Common Stock") at an option
price per share of $17.375 (the "Option") in accordance with the Plan.
2. The terms and conditions of the Plan, a copy of which has been
delivered to the Optionee, are hereby incorporated herein and made a part hereof
by reference as if set forth in full. In the event of any conflict or
inconsistency between the provisions of this Agreement and those of the Plan,
the provisions of the Plan shall govern and control.
3. The Option shall expire ten (10) years from September 14, 1993,
the date of the grant of the Option (the "Grant Date"), unless otherwise
terminated pursuant to the provisions of the Plan.
4. Except as provided in the Plan, the Option is exercisable in full
on or after the first anniversary of the Grant Date.
5. Except for any transfer pursuant to the Plan, the Option may not
be transferred, pledged or assigned. The Option may be exercised during the
lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative.
6. Subject to the terms and conditions of this Agreement and the
Plan, the Option may be exercised by giving written notice of exercise signed by
the Optionee to the Secretary of the Company at its principal office specifying
the number of shares to be purchased and by paying in full the purchase price
for the number of shares of stock with respect to which the Option is exercised.
Such purchase price shall be paid in cash and/or in shares of Common Stock of
the Company. In addition, the Optionee shall, upon notification of the amount
due and prior to or concurrently with the delivery to the Optionee of a
certificate representing shares issued pursuant to the Option exercised, pay
promptly an amount sufficient to satisfy applicable federal, state and local tax
requirements. In the event the Option shall be exercised by any person other
than the Optionee, such notice shall be accompanied by appropriate proof of the
right of such person to exercise the Option. The Company has no obligation to
deliver shares upon exercise of the Option until
<PAGE>
such shares are qualified for delivery under such laws and regulations as may be
deemed by the Company to be applicable thereto.
7. Nothing contained herein is intended or shall be construed as
conferring upon or giving to any person, firm or corporation other than the
parties hereto any rights or benefits under or by reason ot this Agreement.
8. This Agreement embodies the entire agreement made between the
parties hereto with respect to the matters covered herein and shall not be
modified except by a writing signed by the party to be charged.
9. This Agreement, in its interpretation and effect, shall be
governed by the laws of the State of California applicable to contracts executed
and to be performed therein.
10. This Agreement shall not be effective until executed by the
Optionee and returned to the Company. By executing this Agreement, the Optionee
hereby acknowledges that the Optionee has read and agreed to all the terms and
conditions of this Agreement.
The parties have executed this Agreement as of September 14, 1993.
OPTIONEE: RYKOFF-SEXTON, INC.
- --------------------------- -----------------------------
Optionee By: Mark Van Stekelenburg
President and Chief
Executive Officer
<PAGE>
Exhibit 10.5
RYKOFF-SEXTON, INC.
1995 KEY EMPLOYEES STOCK OPTION AND COMPENSATION PLAN
1. PURPOSE. The purpose of the 1995 Key Employees Stock Option and
Compensation Plan (the "Plan"), of Rykoff-Sexton, Inc. ("Rykoff-Sexton") is to
increase stockholder value and to advance the interests of Rykoff-Sexton and its
subsidiaries (collectively, the "Company") by furnishing a variety of economic
incentives ("Incentives") designed to attract, retain, and motivate employees.
Incentives may consist of opportunities to purchase or receive shares of common
stock, $.10 par value, of Rykoff-Sexton ("Common Stock"), monetary payments or
both on terms determined under this Plan.
2. ADMINISTRATION. The Plan shall be administered by the Management
Development - Compensation and Stock Option Committee (the "Committee") of the
Board of Directors of Rykoff-Sexton (the "Board of Directors"). The Committee
shall consist of not less than three directors of Rykoff-Sexton and shall be
appointed from time to time by the Board of Directors. Each member of the
Committee shall be a "disinterested person" within the meaning of Rule 16b-3 of
the Securities Exchange Act of 1934, and the regulations promulgated thereunder
(the "1934 Act"). The Board of Directors may from time to time appoint members
of the Committee in substitution for, or in addition to, members previously
appointed, and may fill vacancies, however caused, in the Committee. The
Committee shall select one of its members as its chairman and shall hold its
meetings at such times and places as it shall deem advisable. A majority of the
Committee's members shall constitute a quorum. All action of the Committee shall
be taken by the majority of its members. Any action may be taken by a written
instrument signed by a majority of the members and actions so taken shall be
fully effective as if it had been made by a majority vote at a meeting duly
called and held. The Committee may appoint a secretary, shall keep minutes of
its meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable. The Committee shall have authority to award
Incentives under the Plan, to interpret the Plan, and to make any other
determination which it believes necessary and advisable for the proper
administration of the Plan. The Committee's decisions and matters relating to
the Plan shall be final and conclusive on the Company and its participants.
3. ELIGIBLE EMPLOYEES. Employees of the Company other than executive
officers as determined by the Company's Board of Directors shall become eligible
to receive Incentives under the Plan when designated by the Committee. Employees
may be designated individually or by groups or categories (for example, by pay
grade) as the Committee deems appropriate.
<PAGE>
4. TYPES OR INCENTIVES. Incentives under the Plan may be granted in any
one or a combination of the following forms; (a) incentive stock options and
nonstatutory stock options (section 6); (b) stock appreciation rights ("SARs")
(section 7); (c) stock awards (section 8); (d) restricted stock (section 8); (e)
performance shares (section 9); and (f) cash awards (section 10).
5. SHARES SUBJECT TO THE PLAN.
5.1 Number of Shares. Subject to adjustment as provided in Section
11.6, the number of shares of Common Stock which may be issued under the
Plan shall not exceed ________ shares of Common Stock
5.2 Cancellation. To the extent that cash in lieu of shares of
Common Stock is delivered upon the exercise of a SAR pursuant to Section
7.4, the Company shall be deemed, for purposes of applying the limitation
on the minter of shares, to have issued the greater of the number of shares
of Common Stock which it was entitled to issue upon such exercise or on the
exercise of any related option. In the event that a stock option or SAR
granted hereunder expires or is terminated or cancelled unexercised as to
any shares of Common Stock, such shares may again be issued under the Plan
either pursuant to stock options, SARs or otherwise. In the event that
shares of Common Stock are issued as restricted stock or pursuant to stock
options, SARs or otherwise. In the event that shares of Common Stock are
issued as restricted stock pursuant award and thereafter are forfeited or
reacquired by the Company pursuant to rights reserved upon issuance
thereof, such forfeited and reacquired shares may again be issued under the
Plan, either as restricted stock, pursuant to stock awards or otherwise.
The Committee may also determine to cancel, and agree to the cancellation
of, stock options in order to make a participant eligible for the grant of
stock option at a lower price than the option to be cancelled.
5.3 Type of Common Stock. Common Stock issued under the Plan in
connection with stock options, SARs performance shares, restricted stock or
stock awards shall be limited to shares purchased on the open market and/or held
as treasury shares which have previously been listed on the New York Stock
Exchange.
6. STOCK OPTIONS. A stock option is a right to purchase shares of Common
Stock from the Company. Each stock option granted by the Committee under this
Plan shall be subject to the following terms and conditions:
6.1 Price. The option price per share shall be determined by the
Committee, subject to adjustment under Section 11.6.
6.2 Number. The number of shares of Common Stock subject to the
option shall be determined by the Committee, subject to adjustment as
provided in Section 11.6. The number of shares of Common Stock subject to
a stock
<PAGE>
option shall be reduced in the same proportion that the holder thereof
exercises a SAR if any SAR is granted in conjunction with or related to the
stock option.
6.3 Duration and Time for Exercise. Subject to earlier termination
as provided in Section 11.4, the term of each stock option shall be
determined by the Committee but shall not exceed ten years and one day from
the date of grant. Each stock option shall become exercisable at such
times or times during its term as shall be determined by the Committee at
the time of grant. No stock option may be exercised during the first
twelve months of its term. Except as provided by the preceding sentence,
the Committee may accelerate the exerciseability of any stock option.
Subject to the foregoing and with the approval of the Committee, all or any
part of the shares of Common Stock with respect to which the right to
purchase has accrued may be purchased by the Company at the time of such
accrual or at any time or times thereafter during the term of the option.
6.4 Repurchase. Upon approval of the Committee, the Company may
repurchase a previously granted stock option from a participant by mutual
agreement before such option has been exercised by payment to the
participant of the amount per share by which: (i) the Fair Market Value (as
defined in Section 11.13) of the Common Stock subject to the option on the
date of purchase exceeds (ii) the option price. The Company shall have the
right but not the obligation to repurchase all shares of Common Stock that
were purchased pursuant to an option exercised within six months prior to
the participant's termination of employment, that is either for cause or
voluntary on the part of the participant and without the written consent of
the Company, for the total amount paid by the participant for such shares
on such other terms as may be established by the Committee. The Company
shall have 60 days from the date of the participant's termination of
employment to exercise its rights to repurchase such shares of Common
Stock.
6.5 Manner of Exercise. A stock option may be exercised, in whole or
in part, by giving written notice to the Company, specifying the number or
shares of Common Stock to be purchased and accompanied by the full purchase
price for such shares. The option price shall be payable in the United
States dollars upon exercise of the option and may be paid by cash, bank
draft or uncertified or certified check; by delivery of shares of Common
Stock in payment of all or any part of the option price, which shares shall
be valued for this purpose at the Fair Market Value on the date such option
is exercised; or in such manner as may be authorized from time to time by
the Committee. Prior to the issuance of shares of Common Stock upon the
exercise of a stock option, a participant shall have no rights as a
stockholder with respect to the shares covered by such option.
7. STOCK APPRECIATION RIGHTS. A SAR is a right to receive, without
payment to the Company, a number of shares of Common Stock, cash or any
combination thereof, the amount of which is determined pursuant to the formula
set forth in Section 7.4. A SAR may be granted (a) with respect to any stock
option granted under this Plan, either
<PAGE>
concurrently with the grant of such stock option or at such later time as
determined by the Committee (as to all or any portion of shares of Common Stock
subject to the stock option), or (b) alone, without reference to any related
stock option. Each SAR granted by the Committee under this Plan shall be
subject to the following terms and conditions:
7.1 Number. Each SAR granted to any participant shall relate to such
number of shares of Common Stock as shall be determined by the Committee,
subject to adjustment as provided in Section 11.6. In this case of a SAR
granted with respect to a stock option, the number of shares of Common
Stock to which the SAR pertains shall be reduced in the same proportion
that the holder of the option exercises the related stock option.
7.2 Duration. Subject to earlier termination as proved in Section
11.4, the term of each SAR shall be determined by the Committee but shall
not exceed ten years and one day from the date of grant. Unless otherwise
provided by the Committee, each SAR shall become exercisable at such time
or times, to such extent and upon such conditions as the stock option, if
any, to which it relates is exercisable. No SAR may be exercised during
the first twelve months of its term. Except as provided in the preceding
sentence, the Committee may in its discretion accelerate the
exerciseability of any SAR.
7.3 Exercise. A SAR may be exercised, in whole or in part, by giving
written notice to the Company, specifying the number of SARs which the
holder wishes to exercise. Upon receipt of such written notice, the
Company shall, within 90 day thereafter, deliver to the exercising holder
certificates for the shares of Common Stock or cash or both, as determined
by the Committee, to which the holder is entitled pursuant to Section 7.4.
7.4 Payment. Subject to the right of the Committee to deliver cash
in lieu of shares of Common Stock, the number or shares of Common Stock
which shall be issuable upon the exercise of a SAR shall be determined by
dividing;
(a) the number of shares of Common Stock as to which the SAR is
exercised multiplied by the amount of appreciation in such shares (for
the purpose, the "appreciation" shall be the amount by which Fair
Market Value of the shares of Common Stock subject to the SAR on the
exercise date exceeds (1) in the case of a SAR related to a stock
option, the purchase price of the shares of Common Stock under the
stock option or (2) in the case of a SAR granted along, without
reference to a related stock option, an amount which shall be
determined by the Committee at the time of grant, subject to
adjustment under Section 11.6); by
(b) the Fair Market Value of a share of Common Stock on the
exercise date.
<PAGE>
In lieu of issuing shares of Common Stock upon the exercise of a SAR,
the Committee may elect to pay the holder of the SAR cash equal to the Fair
Market Value on the exercise date of any or all of the shares which would
otherwise be issuable. No fractional shares of Common Stock shall be
issued upon the exercise of a SAR; instead, the holder of the SAR shall be
entitled to receive a cash adjustment equal to the same fraction of the
Fair Market Value of a share of Common Stock on the exercise date or to
purchase the portion necessary to make a whole share at its Fair Market
Value on the date of exercise.
7.5 Repurchase. The Company shall have the right but not the
obligation to require a participant to return all shares of Common Stock or
cash received by a participant pursuant to the exercise of a SAR within
six months prior to the date of termination of employment, that is either
for cause or voluntary on the part of the participant and without the
written notice of the Company. The Company shall have 60 days from the
date of termination of employment to exercise its right to reacquire such
shares of Common Stock or cash.
8. STOCK AWARDS AND RESTRICTED STOCK. A stock award consists of the
transfer by the Company to a participant of shares of Common Stock, without
other payment therefor, as additional compensation for services to the Company.
A share of restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant. The transfer
of Common Stock pursuant to stock awards and the transfer and sale of restricted
stock shall be subject to the following terms and conditions:
8.1 Numbers of Shares. The number or shares to be transferred or
sold by the Company to a participant pursuant to the stock award or as
restricted stock shall be determined by the Committee.
8.2 Sale Price. The Committee shall determine the price, if any, at
which shares of restricted stock shall be sold to a participant, which may
from time to time and among participants and which may be below the Fair
Market Value of such shares of Common Stock at the date of sale.
8.3 Restrictions. All shares of restricted stock transferred or sold
hereunder shall be subject to such restrictions as the Committee may
determine, including, without limitation any or all of the following:
(a) a prohibition against the sale, transfer, pledge or other
encumbrance of the shares of restricted stock, such prohibition to
lapse at such time or times as the Committee shall determine (whether
in annual or more frequent installments, at the time of death,
disability or retirement of the holder of such shares, or otherwise);
<PAGE>
(b) a requirement that the holder of shares of restricted stock
forfeit, or (in the case of shares sold to a participant) resell back
the Company at his cost, all or part of such shares in the event of
termination of his employment during any period in which such shares
are subject to restrictions; and
(c) such other conditions or restrictions as the Committee may
deem advisable..
8.4 Escrow. In order to enforce the restrictions imposed by the
Committee pursuant to Section 8.3, the participant receiving restricted
stock shall enter into an agreement with the Company setting forth the
conditions of the grant. Shares of restricted stock shall be registered in
the name of the participant and deposited, together with a stock power
endorsed in blank, with the Company. Each such certificate shall bear a
legend in substantially the following form:
The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions (including conditions
of forfeiture) contained in the 1988 Stock Option and Compensation Plan of
Rykoff-Sex:ton, Inc. (the "Company"), and an agreement entered into between the
registered owner and the Company. A copy of the Plan and the agreement is on
file in the of office of the secretary of the Company.
8.5 End of Restrictions. Subject to Section 11.5, at the end of any
time period during which the shares of restricted stock are subject to
forfeiture and restrictions on transfer, such shares will be delivered flee
of all restrictions to the participant or to the participants legal
representative, beneficiary or heir.
8.6 Stockholder. Subject to the terms and conditions of the Plan,
each participant receiving restricted stock shall have all the rights of a
stockholder with respect to shares of stock during any period in which such
shares are subject to the forfeiture and restrictions on transfer,
including without limitation, the right to vote such shares. Dividends paid
in cash or property other than Common Stock with respect to shares of
restricted stock shall be paid to the participant currently.
9. PERFORMANCE SHARES. A performance share consists of an award which
shall be paid in shares of Common Stock, as described below. The grant of
performance share shall be subject to such terms and conditions as the Committee
deems appropriate, including the following:
9.1 Performance Objective. Each performance share will be subject to
performance objectives for the Company or one of its operating units to be
achieved by the end of the specified period. The number of performance
shares granted shall be determined by the Committee and may be subject to
such terms and conditions, as the Committee shall determine. If the
performance objectives are achieved, each participant will be paid in
shares of Common Stock or cash. If
<PAGE>
such objectives are not met, each grant of performance share may provide
for lessor payments in accordance with the formulas established in the
award.
9.2 Not Stockholder. The grant of performance shares to a
participant shall not create any rights in such participant as a
stockholder of the Company, until the payment of shares of Common Stock
with respect to an award.
9.3 No Adjustments. No adjustment shall be made in performance
shares granted on account of cash dividends which may be paid or other
rights which may be issued to the holders of Common Stock to the end of any
period for which performance objectives were established.
9.4 Expiration of Performance Share. If a participant's employment
with the Company is terminated for any reason other than normal retirement,
death or disability prior to the achievement of the participant's stated
performance objectives, all the participant's right on the performance
shares shall expire and terminate unless otherwise determined by the
Committee. In the event of termination of employment by reason of death,
disability, or normal retirement, the Committee, in its own discretion may
determine what portions, if any, of the performance shares should be paid
to the participant.
10. CASH AWARDS. A cash award consists of a monetary payment made by the
Company to a participant as additional compensation for his services to the
Company. Payment of a cash award will normally depend on achievement of
performance objectives by the Company or by individuals. The amount of any
monetary payment constituting a cash award shall be determined by the Committee
in its sole discretion. Cash awards may be subject to other terms and
conditions, which may vary from time to time and among participants, as the
Committee determines to be appropriate.
11. GENERAL.
11.1 Effective Date. The Plan will become effective upon its
approval by the Board of Directors.
11.2 Duration. The Plan shall remain in effect until all Incentives
granted under the Plan have either been satisfied by the issuance of shares
of Common Stock or the payment of cash or been terminated under the terms
of the Plan and all restrictions imposed on shares of Common Stock in
connection with their issuance under the Plan have lapsed.
11.3 Nontransferability of Incentives. No stock option, SAR,
restricted stock or performance award may be transferred, pledged or
assigned by the holder thereof (except, in the event of the holder's death,
by will or the laws of descent and distribution to the limited extent
provided in the Plan or in the Incentive) and the Company shall not be
required to recognize any attempted assignment of such
<PAGE>
rights by any participant. During the participant's lifetime, an Incentive
may be exercised only by him or by his guardian or legal representative.
11.4 Effect of Termination of Employment or Death. In the event that
a participant ceases to be an employee of the Company for any reason,
including death, any Incentives may be exercised or shall expire at such
times as may be determined by the Committee.
11.5 Additional Condition. Notwithstanding anything in this Plan to
the contrary: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of award of any Incentive or the
issuance of any shares of Common Stock pursuant to any Incentive, require
the recipient of the Incentive, as a condition to the receipt thereof or to
the receipt of shares of Common Stock issued pursuant thereto, to deliver
to the Company a written representation of present intention to acquire the
Incentive or the share of Common Stock issued pursuant thereto for his own
account for investment and not for distribution; and (b) if at any time the
Company further determines, in its sole discretion, that the registration
or qualification (or any updating of any such document) of any Incentive or
the shares of Common Stock issuable pursuant thereto is necessary on any
securities exchange or under any federal or state securities or blue sky
law, or that the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with the award
of any Incentive, the issuance of shares of Common Stock pursuant thereto,
or the removal of any restrictions imposed on such shares, such Incentive
shall not awarded or such shares of Common Stock shall not be issued or
such restriction shall not be removed, as the case may be, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable
to the Company.
11.6 Adjustment. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations,
there shall be substituted for each of the shares of Common Stock then
subject to the Plan, including shares subject to restrictions, options, or
achievement of performance share objectives, the number and kind of shares
of stock or other securities to which the holders of shares of Common Stock
will be entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock split, combination of shares or
other change in the Common Stock, the number of shares of Common Stock then
subject to the Plan, including shares subject to restrictions, options or
achievements of performance shares, shall be adjusted in proportion to the
change in outstanding shares of Common Stock. In the event of any such
adjustments, the purchase price or any option, the performance objectives
of any Incentive, and the shares of Common Stock issuable pursuant to any
Incentive shall be adjusted as and to the extent appropriate, in the
discretion of the Committee, to provide participants with the same relative
rights before and after such adjustment.
<PAGE>
11.7 Incentive Plans and Agreements. Except in the case of stock
awards or cash awards, the terms of each Incentive shall be stated in a
plan or agreement approved by the Committee. The Committee may also
determine to enter into agreements with holders of options to reclassify or
convert certain outstanding options, within the terms of the Plan SARs with
respect to all or part of such options and any other previously issued
options.
11.8 Withholding.
(a) The Company shall have the right to withhold from any
payments made under the Plan or to collect as a condition of payment,
any taxes required by law to be withheld. At any time when a
participant is required to pay to the Company an amount required to be
withheld under applicable income tax laws in connection with a
distribution of Common Stock or upon exercise of an option or SAR, the
participant may satisfy this obligation in whole or in part by
electing (the "Election") to have the Company withhold from the
distribution shares of Common Stock having a value up to the amount
required to be withheld. The value of the shares to be withheld shall
be based on the Fair Market Value of the Common Stock on the date that
the amount of tax to be withheld shall be determined ("Tax Date").
(b) Each Election must be made prior to the Tax Date. The
Committee may disapprove or any Election, may suspend or terminate the
right to make Elections, or may provide with respect to any Incentive
that the right to make Elections shall not apply to such Incentive.
An Election is irrevocable.
11.9 No Continued Employment or Right to Corporate Assets. No
participant under the Plan shall have the right, because of his or her
participation, to continue in the employ of the Company for any period of
time or any right to continue his or her present or any other rate of
compensation. Nothing contained in the Plan shall be construed as giving
an employee, the employee's beneficiaries or any other person any equity or
interest of any kind in the assets of the Company or creating a trust of
kind or a fiduciary relationship of any kind between the Company and any
such person.
11.10 Deferral Permitted. Payment of cash or distribution of any
shares of Common Stock to which a participant is entitled under any
Incentive shall be made as provided in the Incentive. Payment may be
deferred at the option of the participant if provided in the Incentive.
11.11 Amendment of the Plan. The Board of Directors may amend or
discontinue the Plan at any time. However, no such amendment or
discontinuance shall, subject to adjustment under Section 11.6, change or
impair, without the consent of the recipient, an Incentive previously
granted.
<PAGE>
11.12 Immediate Acceleration of Incentives. Notwithstanding any
provision in this Plan or in any Incentive to the contrary, (a) the
restrictions on all shares of restricted stock award shall lapse
immediately, (b) all outstanding options and SARs will become exercisable
immediately, and (c) all performance shares shall be deemed to be met and
payable made immediately if any of the following events occur unless
otherwise determined by the Board of Directors and a majority of the
Continuing Directors (as defined below):
(a) any person or group of persons becomes the beneficial owner
of 30% or more of any equity security of Rykoff-Sexton entitled to
vote for the election of directors;)
(b) a majority of the members of the Board of Directors of is
replaced within the period of less than two years by directors not
nominated and approved by the Board of Directors; or
(c) the stockholders of Rykoff-Sexton approve an agreement to
merge or consolidate with or into another corporation or an agreement
to sell or otherwise dispose of all or substantially all of the
Company's assets (including a plan of liquidation).
For purposes of this Section 11.12, beneficial ownership by a person or
group of persons shall be determined in accordance with Regulation 13D (or any
similar successor regulation) promulgated by the Securities and Exchange
Commission pursuant to the 1934 Act. Beneficial ownership of more than 30% of
an equity security may be established by any reasonable method, but shall be
presumed conclusively as to any person who files a Schedule 13D report with the
Securities and Exchange Commission reporting such ownership. If the
restrictions and forfeitability periods are eliminated by reason of provision
(a), the limitations of this Plan shall not become applicable again should the
person cease to own 30% or more of any equity security of Rykoff-Sexton.
For purposes of this Section 11.12, "Continuing Directors" are directors
(i) who were in office prior to the time any of provision (a), (b) or (c)
occurred or any person publicly announced an intention to acquire 20% or more of
any equity security of Rykoff-Sexton, (ii) directors in office for a period of
more than two years, and (iii) directors nominated and approved by the
Continuing Directors.
11.13 Definition of Fair Market Value. Whenever "Fair Market Value"
of Common Stock shall be determined for purposes of this Plan, it shall be
determined by reference to the closing sale price of a share of Common
Stock on the New York Stock Exchange ("NYSE") on the applicable date. If
the NYSE is closed for trading on such date, or if the Common Stock does
not trade on such date, then the closing sale price used shall be the one
on the date the Common Stock last traded on the NYSE.
<PAGE>
EXHIBIT 10.6
RYKOFF-SEXTON, INC. CONVERTIBLE AWARD PLAN
(OFFICER AND KEY EMPLOYEE EDITION)
(As amended, June 19, 1995)
I. INTRODUCTION
The Rykoff-Sexton, Inc. Convertible Award Plan (the "Plan") is designed to
encourage Company executives to acquire a substantial ownership interest in the
Common Stock of Rykoff-Sexton, Inc. ("Rykoff-Sexton" or the "Company"). The
objective of the Plan is to offer a competitive stock-based compensation program
to Rykoff-Sexton executives to ensure that the interests of the Company's
management are closely aligned to the interests of its shareholders. The Plan
seeks to achieve this objective by granting shares of the Company's Common Stock
(the "Common Stock") to Plan participants who convert a portion of their annual
cash incentive awards to Common Stock or who purchase the Common Stock in open
market transactions. This Plan document sets forth all terms and conditions of
the Plan as approved by the Board of Directors of Rykoff-Sexton.
II. DEFINITIONS
For the purposes of the Plan, the following terms shall have the meanings set
forth below:
(a) "Award" means the annual cash incentive to which a Participant is
entitled under the Rykoff-Sexton Management Incentive Plan.
(b) "Board of Directors" or "Board" means the Board of Directors of
Rykoff-Sexton.
(c) "Cause" means, in connection with the termination of employment of a
Participant:
(i) the willful and continued figure by the Participant to
substantially perform its duties (other than any such failure
resulting from the Participant's incapacity due to physical or mental
illness) after demand for substantial performance is delivered by the
Company that specifically identifies the manner in which the Company
believes the Participant has not substantially performed his duties;
or
(ii) the willful engaging by the Participant in misconduct which
is materially injurious to the Company, monetarily or otherwise. No
act, or failure to act, on the Participant's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was in the
best interest of the Company.
<PAGE>
(d) "Committee" means the Compensation Committee of the Board of
Directors.
(e) "Company" means Rykoff-Sexton, Inc..
(f) "Converted Shares" means the shares of stock purchased by a
Participant upon the conversion of a portion of an Award into shares
of Common Stock.
(g) "Conversion Date" means, with respect to a Plan Cycle, the fourth
business day following the date the Company announces its annual
earnings for the fiscal year constituting such Plan Cycle by means of
the Company's earnings press release. It is the date as of which a
portion of the Participant's Award is converted into shares of the
Company's Common Stock. On the "Conversion Date," the portion of a
Participant's Award to be converted into Common Stock is converted
into the number of shares of Common Stock equal to (A) the dollar
amount of the portion of the Award to be converted divided by (B) the
Conversion Price.
(h) "Conversion Price" means, with respect to a Plan Cycle, the closing
price of the Company's Common Stock as reported in the New York Stock
Exchange Composite Index on the fourth business day following the date
the Company announces its annual earnings for the fiscal year
immediately preceding such Plan Cycle by means of the Company's
earnings press release. An appropriate adjustment in the Conversion
Price will be made in the event of a stock split or other change in
the Company's outstanding shares in accordance with the procedure set
forth in the Company's Stock Option Plans.
(i) "Holding Period" means the three year period, commencing on the
Conversion Date or Purchase Date, during which a Participant cannot
sell either the Converted Shares acquired on a pre-tax basis or
Premium Shares.
(j) "Participant" means an officer or key employee of the Company approved
for participation by the Committee. For purposes of this Plan, the
term "Participant" shall also include a trust established for the
benefit of an officer or key employee of the Company approved for
participation by the Committee, or for the benefit of members of his
or her immediate family. For purposes of this Plan the term
"Participant" shall also include an Individual Retirement Account, as
that term is defined in Internal Revenue Code Section 408, established
for the benefit of an officer or key employee of the Company approved
for participation by the Committee, or an Individual Retirement
Account established for the benefit of the spouse of an officer or key
employee approved for participation but only if said officer or key
employee retains a present interest under applicable local
2
<PAGE>
law in the assets of the spouse's Individual Retirement account such
as would exist under California's community property or IllInois
marital property laws.
(k) "Plan" means the Rykoff-Sexton Convertible Award Plan.
(l) "Plan Cycle" means any fiscal year during which an executive
participates in the Plan. A Plan Cycle begins on the beginning date
of a fiscal year and ends on the ending date of that fiscal year.
(m) "Plan Shares" means Converted Shares and Premium Shares.
(n) "Premium Shares" means the shares of restricted stock granted to a
Participant as a bonus for participating in the Plan.
(o) "Purchased Shares" means any shares of the Company's Common Stock
purchased in open market transactions by the executive with the intent
to hold such shares for the Holding Period.
(p) "Purchase Date" means the date on which the executive purchases
Purchased Shares.
(q) "Stock Plans" means the Company's 1988 Stock Option and Compensation
Plan and the Company's 1995 Key Employee Stock Option and Compensation
Plan.
(r) "Target Award" has the meaning set forth in the Management Incentive
Plan, as the same may be amended from time to time.
III. PLAN OPERATION
A. Converted Shares
A Participant may convert up to 50% of an Award, on a pre-tax or after-tax
basis, to Converted Shares. The number of Converted Shares received by the
Participant is a function of the percentage of an Award to be converted,
specified by the Participant within the period established by the Plan and the
Conversion Price. Premium Shares will be granted to the Participant on a one-
for-three basis with respect to Converted Shares except to the extent the
participant is entitled to the one-for-one match described below.
Each participant must specify whether the Award is to be converted on a pre-tax
or after-tax basis. Converted Shares purchased on a pre-tax basis and the
Premium Shares issued in respect of such converted shares are subject to
forfeiture during the Holding Period applicable to such shares. Converted
Shares purchased on an after-tax basis shall
3
<PAGE>
vest on the Conversion Date and not be subject to forfeiture. Premium Shares
issued in respect of such vested Converted Shares, but not the vested Converted
Shares, are subject to forfeiture during the Holding Period applicable to such
shares.
The following is an example of how the Plan operates on a pre-tax basis in such
a situation:
<TABLE>
<CAPTION>
<S> <C>
Hypothetical annual Award at Target $12,000
50% Award converted to Common Stock $ 6,000
Conversion Price $20 per share
Market price of Common Stock on Conversion Date $25 per share
Number of shares of Common Stock converted* 300 shares
Number of Premium Shares granted* 100 shares
Total number of Plan shares 400 shares
Dollar value on Conversion Date
of Converted Shares and Premium Shares $10,000
</TABLE>
*Note: Only whole shares shall be awarded to Participants in this Plan.
If the above example involved the conversion of shares on a pre-tax basis, 400
shares would be subject to forfeiture during the Holding Period. If the above
example involved the conversion of shares on an after-tax basis, the Premium
Shares granted in respect of Converted Shares would be subject to forfeiture
during the Holding Period.
In order to be eligible for a one-for-one matching grant, a Participant must
elect to convert 50% of the Award. If such a Participant receives an Award that
exceeds the Participant's Target Award, the Participant will be granted Premium
Shares on a one-for-three basis with respect to 50% of the amount of the Target
Award and will be granted Premium Shares on a one-for-one basis with respect to
50% of all amounts of the Award above the Participant's Target Award.
The following is an example of how the Plan operates on a pre-tax basis when a
Participant receives a one-for-one matching grant:
<TABLE>
<CAPTION>
<S> <C>
Hypothetical annual Award at 200% of Target $24,000
50% Award converted to Common Stock $12,000
Conversion Price $20 per share
Market price of Common Stock on Conversion Date $25 per share
Number of shares of Common Stock converted 600 shares
Number of Premium Shares granted in respect of Converted
Shares on a one-for-three basis 100 shares
Number of Premium Shares granted in respect of Converted
Shares on a one-for-one basis 300 shares
Total number of Plan shares 1,000 shares
Dollar value on Conversion Date
of Converted Shares and Premium Shares $25,000
</TABLE>
4
<PAGE>
B. Purchased Shares
Premium Shares will be granted on a one-for-three basis to a Participant who has
purchased shares of Common Stock in open market transactions with the intent to
hold such shares for the minimum three-year Holding Period, provided that on the
date the Purchased Shares are acquired, and throughout the subsequent Holding
Period, the participant owns no less than the number of shares of Common Stock
owned on June 19, 1995 plus shares acquired since that date and less shares sold
to enable the participant to exercise Company stock options or to pay the taxes
arising out of the purchase or vesting of shares of Company stock pursuant to
the Company's Stock Plans. Premium Shares issued in respect of such Purchased
Shares are subject to forfeiture during the Holding Period if the Participant's
ownership of Common Stock declines below the level required to be maintained
throughout the Holding Period, or if the Participant's employment terminates as
provided in Section VII herein.
The following is an example of how the Plan operates in this situation:
<TABLE>
<CAPTION>
<S> <C>
Total shares owned as of 6/19/95 8,000
Number of shares of Common Stock
converted on a pre-tax basis (see above example) 600
Number of Premium shares granted in respect
of Converted Shares on a one-for-three basis 100
Number of Premium Shares granted in respect
of Converted Shares on a one-for-one basis 300
Total number of Plan shares 1,000
Total number of shares owned after conversion,
600 of which are Converted Shares and 400 of
which are Premium Shares issued in respect of
Converted Shares 9,000
Number of Purchased Shares acquired
through open market transactions 600
Number of Premium Shares granted
in respect of Purchased Shares 200
Total shares owned after open market purchases 9,800
Shares sold to fund payment of tax upon
expiration of the Holding Period in
respect of Converted Shares and Premium Shares (500)
Total shares owned after sale to pay tax 9,300
Number of Premium shares issued in respect of
Purchased Shares subject to forfeiture during
Holding Period 200
</TABLE>
In the above example, the 200 Premium Shares granted in respect of Purchased
Shares acquired through open market transactions are subject to forfeiture
should the Participant's holdings fall below 9,300 shares during the Holding
Period. Moreover, in this example, should the Participant's holdings fall below
9,300 shares, the Participant
5
<PAGE>
will not be granted Premium Shares in respect of shares purchased in open market
transactions. In order to again receive Premium Shares in respect of open
market transaction, the Participant must increase the Participant's holdings to
at least 9,300 shares.
Each Participant shall provide the Company's Senior Vice President - Human
Resources such evidence as the Company shall require for the purpose of
administering the above provisions and shall certify a record of the
Participant's stockholding as and whenever requested by the Senior Vice
President - Human Resources.
C. Voting and Dividend Rights
All Plan Shares shall maintain full voting rights, and Participants will be
entitled to receive dividend payments with respect to such Plan Shares if, and
to the extent, such dividends are declared and paid during the Holding Period.
IV. ELIGIBILITY
Participation in the Plan shall be restricted to the Executives and key
employees who have a significant impact on the growth and profitability of the
Company. Although the Committee shall select and approve eligible employees on
the basis of the recommendations of the Company's Chief Executive Officer,
participation in the Plan is voluntary. The participants are listed in Exhibit
"A". Each participant under this Plan is subject to the requirements of the
Rykoff-Sexton Executive Stock Ownership Guidelines.
V. CONVERSION SPECIFICATION BY PARTICIPANTS
Except as otherwise provided, each Participant must specify the portion of an
Award to be converted to Common Stock within three months of the beginning of
each Plan Cycle. During the initial Plan Cycle such specification must be made
within six months of the beginning of the Plan Cycle. During the second Plan
Cycle a Participant must specify the percentage of an Award to be converted on
or before August 15, 1995. Once made, this decision is irrevocable and will be
executed as specified with respect to the Award earned during such Plan Cycle.
A separate decision may be made within the first three months of each subsequent
Plan Cycle as to the percentage of the Award to be converted for such Plan
Cycle.
VI. HOLDING PERIOD FOR PLAN SHARES
Except as otherwise provided, Converted Shares converted on a pre-tax basis and
Premium Shares will be subject to forfeiture and cannot be sold until the
expiration of the Holding Period. Converted Shares converted on an after-tax
basis and Purchased Shares may be sold during the Holding Period. However, upon
any such sale, the
6
<PAGE>
Premium Shares granted with respect to such Converted Shares and Purchased
Shares will be forfeited by the Participant. The Holding Period applicable to
Converted Shares begins on the Conversion Date. The HoldIng Period applicable
to the Purchased Shares begins on the Purchase Date. Under current Internal
Revenue Service rules, the compensation attributable to Converted Shares
converted on a pre-tax basis and Premium Shares will not be subject to tax until
the expiration of the Holding Period in respect of such shares under normal
circumstances. Once the Holding Period has expired, both Converted Shares
converted on a pre-tax basis and Premium Shares will be subject to tax based
upon the then fair market value of such shares. Each Participant must consult
with their own tax advisor to determine the tax consequences of the
Participant's participation in this Plan.
VII. SEPARATION OF EMPLOYMENT
Except for death, disability, retirement, or termination by the Company other
than for Cause, termination of employment prior to the expiration of the Holding
Period, applicable to any Converted Shares or Premium Shares, including
voluntary termination by the Participant without the Company's prior approval,
will result in complete forfeiture of the Converted Shares and Premium Shares
subject to the Holding Period. Should employment end by reason of death,
disability, retirement, or termination by the Company other than for Cause
during the Holding Period, all Converted Shares and Premium Shares shall cease
to be subject to a risk of forfeiture and be vested on the effective termination
date.
If an executive is terminated by the Company on account of the executive's
decision not to relocate at the Company's request, the termination will be
treated as a voluntary termination by the participant without the Company's
prior approval
VIII. MISCELLANEOUS
(a) Term And Adoption Of The Plan. The Plan, effective on August 1, 1994, has
been restated in its entirety, as amended by action of the Board of Directors on
June 20, 1995. The Plan shall remain in effect until it is terminated pursuant
to Subsection (b) below. The adoption of this Plan or any modification hereof
does not imply any commitment to continue or adopt the same Plan, or any
modification thereof, or any other Plan for incentive compensation for any
succeeding year. Neither the Plan nor any grant made under the Plan shall
create any employment contract or relationship between Rykoff-Sexton and any
Participant.
(b) Right To Amend Or Terminate The Plan. The Board can amend, suspend, or
terminate the Plan at any time and for any reason, except that the provisions of
the Plan pertaining to the amount, price, and timing of grants shall not be
amended more than once in any 12-month period.
7
<PAGE>
(c) Plan Agreement. Within the time period specified in Section V, each
Participant must sign the Rykoff-Sexton Convertible Award Plan Agreement
(Attachment I - Purchase with Pre-Tax Dollars or Attachment II - Purchase with
After-Tax Dollars) to indicate his or her participation in the Plan under all
terms and conditions set forth herein. A new agreement must be signed for each
Plan Cycle.
(d) Additional Provisions. This Plan has been created pursuant to the
provisions of the Rykoff-Sexton, Inc. 1988 Stock Option and Compensation Plan
(As Amended September 13, 1991) [the "1988 Plan"] and the Rykoff-Sexton, Inc.
1995 Key Employees Stock Option Plan [the "1995 Plan"]. Accordingly the
provisions of the 1988 Plan and the 1995 Plan, specifically including (but not
limited to) Section 8 entitled "Stock Awards and Restricted Stock", Section 11.5
entitled "Additional Condition", Section 11.6 entitled "Adjustment", Section
11.8 entitled "Withholding", and Section 11.12 entitled "Immediate Acceleration
of Incentives", are incorporated herein by reference.
8
<PAGE>
ATTACHMENT I
RYKOFF-SEXTON, INC.
CONVERTIBLE AWARD PLAN AGREEMENT
[PURCHASE WITH PRE-TAX DOLLARS]
This document shall constitute the agreement between Rykoff-Sexton, Inc. (the
"Company") and ______________ (the "Participant"), which confirms your elections
under the Rykoff-Sexton, Inc. Convertible Award Plan (the "Plan"). Capitalized
terms used herein and defined in the Plan have the meanings set forth in the
Plan.
Subject to the terms and conditions of the Plan, you are a Participant in the
199__ Fiscal Year Award Plan Cycle beginning __________ and ending ___________.
For this Plan Cycle, you have elected to convert, on a pre-tax basis, ______ %
(not to exceed 50%) of any Award you may receive under the Company's Management
Incentive Plan to Common Stock under the provisions of the Plan. This election
applies only to the Plan Cycle described above and is irrevocable. For each
three (3) shares of Common Stock that you receive by converting an award into
Common Stock under the terms of this Plan, the Company will grant you one (l)
share of Common Stock, subject to the restrictions set forth in the Plan, and
except as provided in the following paragraph.
If you have elected to convert 50% of your Award into Common Stock and your
Award is above your Target Award as set forth in the Management Incentive Plan,
50% of your Award above target will be converted into Common Stock and the
Company will grant you one (l) Premium Share for each one (l) Converted Share
purchased upon such conversion.
The Conversion Price applicable to this Agreement is $__________.
Further, subject to the terms of the Plan, for each three (3) Shares of Common
Stock that you purchase during the Plan Cycle described above, the Company will
grant you one (l) Premium Share.
Converted Shares and Premium Shares acquired under the terms of this Plan are
subject to forfeiture as described in the Plan. You are not permitted to sell
such shares during the Holding Period, except as described in the Plan.
9
<PAGE>
Please read the Plan documents carefully and retain a copy of the Plan and this
Agreement for your reference. Indicate your acknowledgment that this Agreement
accurately reflects the terms of your elections under the Plan by signing in the
space provided below.
Accepted: Rykoff-Sexton, Inc.
__________________________ _______________________________________
Participant Mark Van Stekelenburg
President and Chief Executive Officer
Date: ____________________ Date: _________________________________
10
<PAGE>
ATTACHMENT II
RYKOFF-SEXTON, INC.
CONVERTIBLE AWARD PLAN AGREEMENT
[PURCHASE WITH AFTER-TAX DOLLARS]
This document shall constitute the agreement between Rykoff-Sexton, Inc. (the
"Company") and ___________ (the "Participant"), which confirms your elections
under the Rykoff-Sexton Convertible Award Plan (the "Plan"). Capitalized terms
used herein and defined in the Plan have the meanings set forth in the Plan.
Subject to the terms and conditions of the Plan, you are a Participant in the
199__ Fiscal Year Award Plan Cycle beginning __________ and ending
________________. For this Plan Cycle, you have elected to convert, on a after-
tax basis, _____ % (not to exceed 50%) of any Award you may receive under the
Company's Management Incentive Plan to Common Stock under the provisions of the
Plan. This election applies only to the Plan Cycle described above and is
irrevocable. For each three (3) shares of Common Stock that you receive by
converting an award into Common Stock under the terms of this Plan, the Company
will grant you one (1) share of Common Stock, subject to the restrictions set
forth in the Plan, and except as provided in the following paragraph.
If you have elected to convert 50% of your Award into Common Stock and your
Award is above your Target Award as set forth in the Management Incentive Plan,
50% of your Award above target will be converted into Common Stock and the
Company will grant you one (1) Premium Share for each one (1) Converted Share
purchased upon such conversion.
The Conversion Price applicable to this Agreement is $___________.
Further, subject to the terms of the Plan, for each three (3) Shares of Common
Stock that you purchase during the Plan Cycle described above, the Company will
grant you one (l) Premium Share.
Premium Shares acquired under the terms of this Plan are subject to forfeiture
as described in the Plan. You are not permitted to sell such shares during the
Holding Period, except as described in the Plan.
11
<PAGE>
Please read the Plan documents carefully and retain a copy of the Plan and this
Agreement for your reference. Indicate your acknowledgment that this Agreement
accurately reflects the terms of your elections under the Plan by signing in the
space provided below.
Accepted: Rykoff-Sexton, Inc.
_________________________ _______________________________________
Participant Mark Van Stekelenburg
President and Chief Executive Officer
Date: ___________________ Date: _________________________________
12
<PAGE>
EXHIBIT A
INITIAL PARTICIPANTS
TITLE
================================================================================
Rykoff-Sexton, Inc.:
--------------------
Mark Van Stekelenburg
Victor B. Chavez
Harold E. Feather
Robert J. Harter, Jr.
Richard J. Martin
Donald E. Willis
Distribution Division:
----------------------
Gary L. Cooper
Chris G. Adams
Kevin Kenney
Jay Moore
David Rattray
Billy J. Strong
P. Michael Taschler
Ivan TeBrake
Manufacturing Division:
-----------------------
Alan V. Giuliani
13
<PAGE>
Exhibit 10.7
RYKOFF-SEXTON, INC. CONVERTIBLE AWARD PLAN
(DIRECTOR EDITION)
(As adopted June 19, 1995, and revised in January, 1996)
I. INTRODUCTION
This Plan is called the Rykoff-Sexton, Inc. Convertible Award Plan (Director
Edition). The Plan is designed to encourage non-management members of the Board
of Directors to acquire or increase their ownership interests in Common Stock of
Rykoff-Sexton, Inc. This objective is achieved by granting restricted shares of
such Common Stock to eligible Directors who elect to purchase Common Stock from
Rykoff-Sexton, Inc. with some or all of their Annual Retainer. This Plan
document sets forth all terms and conditions of the Plan as approved by the
Board of Directors, subject to approval by the shareholders of Rykoff-Sexton,
Inc.
II. DEFINITIONS
For the purposes of the Plan, the following terms have the meanings stated
below:
a. "Annual Retainer" means a Director's annual cash retainer fee for a
Fiscal Year, ordinarily payable to the Director in four equal cash
installments as of the date of each scheduled quarterly meeting of the
Board. For purposes of this Plan, the Annual Retainer earned by a
Director as of the date of a quarterly meeting is the amount that the
Director is entitled to by reason of his or her status as a member of
the Board at that time, whether or not the Director attends the
meeting. A Director's Annual Retainer does not include any meeting
fees or any other special fees for serving as a Director of the
Company.
b. "Board" means the Board of Directors of the Company.
c. "Company" means Rykoff-Sexton, Inc.
d. "Conversion Price" means, for a Fiscal Year, the average of the
closing prices of the Company's Common Stock, as reported in the New
York Stock Exchange Composite Index on the last business day of each
calendar week during the three month period ending six months from the
end of the first month of that Fiscal Year. If there is a stock split
or other change in the outstanding Common Stock during that six month
period, an appropriate adjustment in the Conversion Price will be made
in accordance with the procedure set forth in the Company's Stock
Option Plan for Directors. (See the attached Supplement for the
delayed pricing process used in the Fiscal Year beginning in 1995).
<PAGE>
e. "Delivery Date" means, for a Fiscal Year, the date of the last
quarterly Board meeting of the Fiscal Year; provided, however, that
actual delivery of Purchased Shares and Premium Shares may be made as
soon as practical thereafter. (See the attached Supplement for the
delayed Delivery Date used for the Fiscal Year beginning in 1995).
f. "Director" means an individual member of the Board.
g. "Fiscal Year" means any fiscal year of the Company during which a
Participant is eligible to participate in the Plan. The first Fiscal
Year of the Plan is the Company's fiscal year that began in May, 1995.
h. "Holding Period" means, with respect to any Purchased Shares and
related Premium Shares, the two year period commencing on the
scheduled Delivery Date of those shares; provided, however, that in
some cases the Holding Period may be shortened as provided in Section
IV B below. (See the attached Supplement for the special Holding
Period used for the Fiscal Year beginning in 1995).
i. "Participant," with respect to a Fiscal Year, means only those
individuals who are Directors on the last day of the first month of
that Fiscal Year and have not been employees of the Company at any
time during that month. (See the attached Supplement for delayed
eligibility rules for the Fiscal Year that began in 1995).
j. "Plan" means this Rykoff-Sexton Convertible Award Plan (Director
Edition).
k. "Premium Shares" means any shares of the Company's Common Stock
granted to a Participant by the Company as a bonus for purchasing
Purchased Shares; provided however, that all Premium Shares shall be
subject to transferability and forfeiture restrictions under this
Plan.
l. "Purchased Shares" means the shares of the Company's Common Stock
purchased by a Participant with any part of his or her Annual Retainer
for a Fiscal Year; provided, however, that the Participant shall not
be entitled to receive such Purchased Shares until the Delivery Date
for that Fiscal Year.
III. ELIGIBILITY AND PLAN OPERATION
A. Election to Defer Annual Retainer and Purchase Purchased Shares
2
<PAGE>
At any time during the first month of each Fiscal Year, each Director who is
eligible to be a Participant for that Fiscal Year may elect in writing to:
(1) defer payment of any part of his or her Annual Retainer for that Fiscal
Year until the Delivery Date for that Fiscal Year; and
(2) receive such payment in the form of a number of Purchased Shares based
on the Conversion Price for that Fiscal Year.
See the attached Supplement for a delayed election process for the Fiscal Year
beginning in 1995.
Purchased Shares earned and purchased under this Plan shall vest and become
transferable by the Participant as of the Delivery Date, subject to shareholder
approval of the Plan and any restrictions under applicable securities laws, and
shall not be subject to forfeiture under Section III.
B. Procedures for Election and Pricing of Purchased Shares
Within a reasonable time before the end of the first month of each Fiscal Year,
the Company will provide each Participant with an election form similar to the
form attached hereto and identified as "Attachment 1." Any Participant making
a conversion election for a Fiscal Year must complete and sign that form to
indicate his or her election and acceptance of all terms and conditions of the
Plan. On the form, the Participant must specify the percentage or dollar amount
of his or her Annual Retainer to be used to buy Purchased Shares.
A Participant's election to buy Purchased Shares for a Fiscal Year must be made
and delivered to the Company on or before the last day of the first month of the
Fiscal Year. Once made, this election is irrevocable and will be carried out by
the Company with respect to the amount of Annual Retainer actually earned by
the Participant during such Fiscal Year. A new election form must be signed for
each Fiscal Year, unless the Participant chooses not to buy Purchased Shares for
a Fiscal Year.
If a Participant elects to buy Purchased Shares for a Fiscal Year, the chosen
dollar amount of the Participant's Annual Retainer will be converted into
Purchased Shares, except that the dollar amount will be reduced to the extent
the Participant does not earn all of the Annual Retainer he or she elected to
convert. The Annual Retainer amount elected by the Participant is converted
into a number of Purchased Shares that is equal to (A) the dollar amount of
Annual Retainer to be converted, divided by (B) the Conversion Price for that
Fiscal Year. However, cash will be paid to the Participant in lieu of any
fractional shares. The Company will deliver any such cash and a certificate
representing the Purchased Shares to the Participant on the Delivery Date for
that Fiscal Year.
3
<PAGE>
C. Contingent Award of Premium Shares
On each Delivery Date, each Participant who receives Purchased Stock on that
date will also receive from the Company one Premium Share for each three shares
of Purchased Stock delivered on that date; provided, however, that no
fractional Premium Shares (or cash in lieu thereof) may be issued under this
Plan. A certificate representing those Premium Shares shall be delivered to the
Participant by the Company on the Delivery Date.
All Premium Shares issued under this Plan with respect to Purchased Shares shall
be subject to transfer restrictions and forfeiture under Section III during the
Holding Period that applies to such shares. Each certificate representing
Premium Shares shall contain a notice stating that the Premium Shares are
subject to transfer restrictions and forfeiture under this Plan.
D. Voting and Dividend Rights
A Participant who receives Purchased Shares and Premium Shares on a Delivery
Date will be entitled to vote all of such shares immediately; and will also be
entitled to receive dividend payments with respect to all of such shares, to the
extent such dividends are declared and paid; provided, however, that all of such
rights shall terminate with respect to Premium Shares on the date (if any) on
which they are forfeited under Section III.
E. Deferred Annual Retainer and Purchase Rights Are Not Assignable
No part of a Participant's Annual Retainer deferred by an election under this
Plan, nor his or her right to receive Purchased Shares and Premium Shares as a
result of that election, may be assigned or otherwise transferred by the
Participant, except for a transfer resulting from his or her death. Prior to
any delivery of Purchased Shares and Premium Shares, a Participant's rights, if
any, to those shares shall not be secured by any Company property, and shall
entitle the Participant only to the rights of a creditor of the Company.
IV. RISKS OF PREMIUM SHARE FORFEITURE DURING HOLDING PERIOD
A. General Transfer Restrictions and Forfeiture upon Sale of Purchased Shares
Until the expiration or early termination of the Holding Period, Premium Shares
cannot be sold or otherwise transferred by a Participant and will be subject to
forfeiture as set forth below. However, Purchased Shares may be sold during
the Holding Period to the extent permitted by applicable securities laws.
However, upon the date of any sale or other voluntary transfer of Purchased
Shares before the end of the Holding Period for such
4
<PAGE>
shares, all of the Premium Shares granted with respect to such Purchased Shares
shall be forfeited by the Participant.
B. Forfeiture Upon Certain Terminations of Board Membership
If a Participant's membership on the Board terminates before the end of a
Holding Period that continues to apply to any of his or her Premium Shares, they
shall be completely forfeited as of the effective date of such termination,
unless it is caused by one or more of the reasons set forth below:
(1) The Participant's death or long-term disability (as determined in the
discretion of the majority of the remaining Directors);
(2) The removal of the Participant from the Board without cause;
(3) The Participant is not re-nominated or re-elected as a Director;
(4) A "change in control" of the Company, as defined in the existing
agreements (if any) between the Company and its senior officers; or
(5) The Participant voluntarily resigns, if a majority of the Board
(excluding the Participant) agrees to waive the balance of the Holding
Period and determines in good faith that such waiver is in the best
interest of the Company.
If a Participant's membership on the Board terminates before the normal
expiration of the Holding Period of any Premium Shares, as a result of one of
the excepted causes listed above in subparagraphs (1) through (5), then the
Holding Period will end, all Premium Shares will be freed from any further risk
of forfeiture and those shares will become fully transferable, subject to
applicable securities laws, as of the effective termination date.
C. Procedure for Forfeiture
If any Premium Shares are forfeited, such shares shall be void and the
Participant holding such Premium Shares shall promptly endorse the certificates
of those Premium Shares to the Company and return them to the Company without
any consideration.
V. MISCELLANEOUS
A. Term and Adoption of the Plan
The Plan has been adopted by the Board as of June 19,1995, subject to its
approval by counsel and the shareholders of the Company. The Plan includes the
attached Supplement describing special rules for the initial Fiscal Year, which
began in 1995.
5
<PAGE>
The Plan shall remain in effect until it is terminated pursuant to Paragraph B
below. The adoption of this Plan or any modification of the Plan does not imply
any commitment to continue the same Plan, or any modification thereof, or any
other Plan for any succeeding year. Neither the Plan, nor any election or sale
or grant of stock made under the Plan, shall create for any Participant any
employment contract or right to continued membership on the Board.
B. Plan Amendment or Discontinuance
The Plan may be amended at any time and from time to time by the Board as it may
deem advisable; provided, however, that no amendment shall become effective
without shareholder approval if such shareholder approval is required by any
law, rule or regulation; and provided further that the Plan shall not be amended
more than once every six months, except to comport with changes in the Internal
Revenue Code (as amended from time to time), the Employee Retirement Income
Security Act of 1974 (as amended from time to time) or the rules thereunder. No
amendment of the Plan shall materially and adversely affect any right of any
Participant with respect to any shares previously granted, unless such
Participant gives his or her written consent.
As Secretary of the Company, I hereby certify that this Plan was adopted in
final form by its Board of Directors on the 15th day of January, 1996, subject
to approval by the shareholders of the Company.
/s/ Robert J. Harter, Jr.
-------------------------
Robert J. Harter, Jr.
Secretary
6
<PAGE>
SUPPLEMENT TO THE
RYKOFF-SEXTON, INC. CONVERTIBLE AWARD PLAN
(DIRECTOR EDITION)
SPECIAL RULES FOR THE 1995-96 FISCAL YEAR
A. Election Date and Eligibility for the First Fiscal Year
For the Fiscal Year beginning in May of 1995 (the "first Fiscal Year"), the
final date for a Participant's election to buy Purchased Shares has been delayed
from May 31, 1995, until January 31, 1996. This delay has allowed time for Plan
revisions required by tax and securities laws.
A Director is an eligible Participant for the first Fiscal Year if he has not
been a Company employee at any time between the beginning of the Fiscal Year and
the January 31, 1996 final election date, and also remains a Director on that
date.
B. Delayed Conversion of Annual Retainer and Grant of Premium Shares for the
First Fiscal Year
As of the beginning of 1996, Directors have already received 75% of their Annual
Retainer fees for the first Fiscal Year of the Plan. Thus, a Participant may
still elect to use the remaining 25% of his Annual Retainer to buy Purchased
Shares for the first Fiscal Year.
In addition, a Participant may also choose to convert into Purchased Shares all
or any part of the Annual Retainer fee he previously received for the first
Fiscal Year. In that case, the Director may elect a conversion percentage
higher than 25% and repay to the Company the necessary part of the Annual
Retainer already received during the Fiscal Year. The repaid amount will used
to buy Purchased Shares for that Fiscal Year. Any such repayment must be made
on or before JULY 31, 1996, when the pricing of Purchased Shares will be
completed for the first Fiscal Year of the Plan. The pricing process must be
delayed until six months after the January 31, 1996 election date to comply with
Federal securities laws.
For the first Fiscal Year of the Plan, the scheduled delivery date for both
Purchased Shares and Premium Shares will be July 31, 1996. However, if the Plan
were not approved by the Company's shareholders at the 1996 annual meeting, the
Purchased Shares and Premium Shares would have to be returned to the Company and
the conversion price of the Purchased Shares would be refunded to the Directors
who had purchased them.
7
<PAGE>
Exhibit 10.8
THE MANAGEMENT STOCK OPTION PLAN
OF WS HOLDINGS CORPORATION
Section 1. Purpose. The purpose of this Plan is to further the best
interests of WS Holdings Corporation and its Subsidiaries by encouraging its key
employees to continue association with the Corporation and by providing
additional incentive for unusual industry and efficiency through offering an
opportunity to acquire a proprietary stake in the Corporation and its future
growth. The Corporation believes that this goal may best be achieved by
granting stock options to eligible key employees of the Corporation and its
Subsidiaries from time to time.
Section 2. Certain Definitions. For purposes of the Plan, the
following terms shall be defined as set forth below:
(a) "Acquisition" means the acquisition of all of the stock of White
Swan, Inc., a Texas corporation, by the Corporation from Fleming Companies,
Inc., an Oklahoma corporation, pursuant to a Stock Purchase Agreement dated as
of September 16, 1988.
(b) "Adjusted EBIT" shall mean, for any period, 6.5 times GAAP
earnings from continuing operations for such period before (x) interest expense
for such period, (y) Accounting Procedures Bulletin 16 and 17 adjustments
(including, without limitation, goodwill amortization and transactional expense
amortization) for such period and (z) taxes from operations, and adjusted to
exclude any extraordinary or non-recurring items, including, without limitation,
any gain or loss resulting from any sales of assets of the Corporation or its
Subsidiaries other than sales in the ordinary course of business for such
period.
(c) "Adjusted Price" shall mean an amount equal to the exercise price
of an Option plus an annual compound increase from the date of grant of such
Option equal to the average time-weighted reference rate of Bank of America
National Trust and Savings Association from the date of grant of such Option to
the date on which such calculation is being made.
(d) "Board" means the Board of Directors of Foodservice.
(e) "Cause" as used herein with respect to the discharge by
Foodservice of one of its subsidiaries of any Employee, means either:
<PAGE>
(A) the willful and continued failure by such Employee to perform
substantially his or her duties with Foodservice or one of its
Subsidiaries (other than any such failure resulting from his
Disability) within a reasonable period of time after a written
demand for substantial performance is delivered to such Employee
by the Board, which demand specifically identifies the manner in
which the Board believes that such Employee has not substantially
performed his or her duties;
(B) the willful engaging by the Employee in conduct which is
demonstrably and materially injurious to Foodservice or one of
its Subsidiaries, monetarily or otherwise, after a written demand
for cessation of such conduct is delivered to such Employee by
the Board, which demand identifies the manner in which the Board
believes that such Employee has engaged in such conduct and the
injury to the Corporation or one of its Subsidiaries; or
(C) the conviction (including, without limitation, the entry of a
plea of guilty) or confession to fraud, misappropriation,
embezzlement or any felony by such Employee.
For purposes of this definition, no act, or failure to act, on the part of an
Employee shall be deemed willful unless knowingly done, or omitted to be done,
by such Employee not in good faith and without reasonable belief that such
action or omission was in the best interests of Foodservice or one of its
Subsidiaries.
(f) "Change in Control" means a transaction which, if the Corporation
were then a corporation subject to the reporting requirements of Section 13, 14
or 15(d) of the Securities Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder, would result in the Corporation being
required to file a report of Form 8-K under Item 1 of Form 8-K (or any successor
form or section thereof).
(g) "Class B Common Stock" shall mean Class B Common Stock, par value
$.01 per share of the Corporation.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(i) "Committee" means the Compensation Committee of the Board, or any
other committee the Board may subsequently appoint to administer the Plan. The
Committee shall be composed entirely of directors who meet the qualifications
referred to in Section 5 of the Plan. If at any time no Committee shall be in
office, then the functions of the Committee specified in the Plan shall be
exercised by the Board.
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(j) "Corporation" means the WS Holdings Corporation, a corporation
organized under the laws of the State of Delaware (or any successor
corporation).
(k) "Disability" means, the respect to an Employee, the inability of
such Employee to perform substantially such Employee's duties and
responsibilities to Foodservice or any of its Subsidiaries by reason of a
physical or mental disability or infirmity (i) for a continuous period of six
months or (ii) at such earlier time as such Employee submits satisfactory
medical evidence that such Employee has a physical or mental disability or
infirmity that will likely prevent such Employee from substantially performing
such Employee's duties and responsibilities for six months or longer. The date
of such Disability shall be on the last day of such six-month period or the day
on which such Employee submits such evidence, as the case may be.
(l) "Disinterested Persons" shall have the meaning set forth in Rule
16b-3(d) (3) as promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, or any successor definition adopted by the
Commission.
(m) "Employee" means an employee of Foodservice as described in
Section 6.
(n) "Fair Market Value" shall mean a valuation equal to the greater of
(1) the accounting book value (calculated on a fully diluted basis and after
taking into account the exercise price of any options or the conversion price of
convertible securities) of each share of Stock as of the close of business on
the day prior to the date of the Merger (adjusted to exclude, on a cumulative
basis, any accounting adjustments arising from the Acquisition and any
extraordinary or non-recurring items, including, without limitation, any gain or
loss resulting from any sales of assets of the Corporation or its subsidiaries,
other than sales in the ordinary course of business) as adjusted to reflect any
increase or decrease in the accounting book value (calculated on a fully diluted
basis after taking into account the exercise of any options or warrants or the
conversion price of convertible securities) of each share of Stock following the
Merger (adjusted to exclude, on a cumulative basis, any extraordinary or non-
recurring items, including without limitation, any gain or loss resulting from
any sale of assets of the Corporation or its Subsidiaries other than sales in
the ordinary course of business and any adjustments resulting from the Merger)
resulting from retained earnings or retained losses divided by 1.84165 and (2)
the quotient of (A)(i) 0.5 times the Adjusted EBIT of the Corporation for the
prior fully completed fiscal year, plus 0.3 times the Adjusted EBIT of the
Corporation for the second prior fully completed fiscal year, plus 0.2 times the
Adjusted EBIT for the third prior fully competed fiscal year of the Corporation;
minus (ii) Indebtedness
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at the close of business on the day prior to the date of the Merger; and (B) the
product of (i) the number of shares of Stock then outstanding (calculated on a
fully diluted basis) and (ii) 1.84165; provided, however, that the Board of
Directors, may in its sole discretion, adjust upward the fair market value of
shares based on the facts and circumstances in any particular repurchase.
(o) "GAAP" means Generally Accepted Accounting Principles, as in
effect on the date hereof, applied on a consistent basis.
(p) "Good Reason" means, with respect to termination of employment by
the Employee, (a) a reduction, without Employee's consent, in such Employee's
base or aggregate compensation other than an across-the-board reduction in the
compensation of substantially all Employees; (b) a reduction in such Employee's
responsibilities with Foodservice or any successor thereto or any of its
Subsidiaries, or a change in such Employee's title to one of less status, in
either case, without such Employee's consent; or (c) such other events of
hardship as the Board shall determine on a case by case basis.
(q) (V) "Indebtedness" means all indebtedness for borrowed money,
including capitalized leases, and the liquidation value of all the then
outstanding preferred stock in each case, of the Corporation and its
Subsidiaries as determined by the Board.
(q) (X) "Merger" means the Merger of WS Investments Corporation, a
Delaware corporation, with and into, the Corporation.
(r) "Option" means any option to purchase shares of Stock granted
pursuant to Section 7.
(s) "Plan" means the Management Stock Option Plan of WS Holdings
Corporation.
(t) "Public Distribution" means a public offering of Stock at the
conclusion of which the aggregate number of shares of Stock that have been sold
to the public pursuant to one or more registration statements under the
Securities Act of 1933, as amended, and all rules and regulations promulgated
thereunder, equals at least 25% of the shares of Stock and Class B Common Stock
then outstanding.
(u) "Retirement" shall mean the Employee's termination of employment
with Foodservice or its Subsidiaries which constitutes retirement under the
Corporation's retirement plan; provided, however, that if any employment
agreement between Foodservice or any of its Subsidiaries and the Employee
contains a different definition, the term "Retirement" as used herein with
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respect to such Employee shall have the meaning ascribed to it therein.
(v) "Stock" means the Class A Common Stock, par value $.01 per share,
of Foodservice except that, unless the holder of an Option shall have otherwise
agreed in writing, for purposes of Sections 2(n) and 2(t) the term "Stock" shall
mean the Class A Common Stock, par value $.01 per share, of WS Holdings as of
the close of business on the day prior to the date of the Merger.
(w) "Subsidiary" means any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the subject corporation if each
of the subject corporation (other than the last subject corporation in the
unbroken chain) owns stock possession 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
(x) "Foodservice" means US Foodservice Inc., a Delaware corporation.
Section 3. Option Shares. The shares of Stock which may be made
subject to Options granted pursuant to this Plan shall be no more than a total
of 562,500 shares of Stock except as such number may be adjusted as provided in
Section 15. Any shares of Stock remaining unissued at the termination of this
Plan shall cease to be reserved for the purpose of the Plan, but until
termination of the Plan, Foodservice shall at all times reserve a sufficient
number of shares of Stock to meet the requirements of the Plan. To the extent
that an Option expires or is otherwise terminated without being exercised, such
shares shall again be available for issuance in connection with future grants
under the Plan.
Section 4. Effective Date of Plan. The Plan shall take effect upon
its adoption by the Board, provided that it is approved by the stockholders of
the Corporation within twelve (12) months after the date of its adoption by the
Board.
Section 5. Administration of the Plan. The Plan shall be
administered by the Board or by the Committee composed of not less than three
Disinterested Persons, provided that if three Disinterested Persons are not
available then the Plan shall be administered by the Board or such other
committee as determined by the Board. The Board may authorized the Committee to
exercise any and all of the powers and functions of the Board pursuant to the
Plan. The interpretation and construction by the Committee or the Board of any
provisions of the Plan or of any Options granted under it shall be final and
conclusive. No member of the Committee or of the Board shall be personally
liable for any action or determination made in good faith with respect to the
Plan or any Options granted under it.
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Section 6. Eligibility. The persons eligible to participate in the
Plan as recipients of Options shall include only the employees of Foodservice or
of any Subsidiary who hold executive or other responsible positions in the
management of the affairs of Foodservice and of its Subsidiaries. The term
Employee does not include directors of Foodservice as such, but does include
directors of Foodservice who are otherwise employed by Foodservice or its
Subsidiaries.
Section 7. Grant of Options. The Corporation, by action of the
Committee and subject to the provisions of this Plan, may, from time to time,
grant Options to purchase shares of Stock to such Employees as may be selected
by the Committee and for such number or numbers of shares of Stock as may be
determined by the Committee. Options to be granted pursuant to this Plan are
not intended to qualify as "incentive stock options" within the meaning of
Section 422A of the Code but are intended to constitute non-statutory stock
options. Each grant of an Option pursuant to this Plan shall be made in writing
and upon such terms and conditions as may be determined by the Committee at the
time of grant, subject to the provisions and limitations set forth in this Plan.
The grant of such Option shall be evidenced by written notice executed by the
proper officer of the Corporation so long as such officer is not the recipient
of the Option.
Section 8. Option Price. The purchase price for each share of Stock
placed under Option pursuant to this Plan (hereinafter called the "Option
Price") shall be determined by the Committee on the date of grant but unless the
Board otherwise determines in its discretion, shall not be less than 100% of the
Fair Market Value of the stock on such date.
Section 9. Exercisability of Options. Subject to Section 11 hereof,
an Option granted pursuant to this Plan may be exercised only within the time
limits and subject to the terms prescribed by the Committee in the grant of the
particular Option. Options for 187,500 shares of Stock ("Normal Options"),
shall be exercisable immediately upon grant. Options for 375,000 shares of
Stock ("Performance Options") will become exercisable over the period set forth
in the terms of the grant of each such Performance Option as certain performance
targets set forth therein are attained. The Committee will designate each
Option as a Normal Option or Performance Option at the time of grant.
Notwithstanding anything to the contrary contained herein and unless
otherwise determined by the Committee, in the event of a Change in Control or
Public Distribution at any time prior to the tenth anniversary of the date of
grant of the Performance Option, as a result of which stockholders of the
Corporation realize value in excess of targets set forth in the terms of the
grant, such performance Option shall become immediately exercisable.
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Section 10. Procedure for Exercise and Payment for Shares. Exercise
of an Option shall be made by the giving of written notice to Foodservice by the
Optionee. Such written notice shall be deemed sufficient for this purpose only
if delivered to Foodservice at its principal office and only if such written
notice states the number of shares of stock with respect to which the Option is
being exercised and, further, states the date, not more than ninety (90) days
after the date of such notice, upon which the shares of Stock shall be purchased
and payment therefore shall be made. The payments for shares of Stock purchased
pursuant to exercise of an Option shall be made at the principal offices of
Foodservice. An Optionee may specify in any exercise notice that only shares of
Stock shall be issued and that if Foodservice may not then issue shares of Stock
the effectiveness of such exercise shall be delayed until such time as
Foodservice may issue shares of Stock. Upon the exercise of any Option, in
compliance with the provisions of this Section and upon receipt by Foodservice
of the payment for the Stock so purchased together with the payment of the
amount of any taxes required to be collected or withheld as a result of the
exercise of this Option, Foodservice shall deliver or cause to be delivered to
the Optionee so exercising an Option a certificate or certificates for the
number of shares of Stock with respect to which the Option is so exercised and
payment is so made. The shares of Stock shall be registered in the name of the
exercising Employee, provided that, in no event, shall any shares of Stock be
issued pursuant to exercise of an Option until full payment therefore shall have
been made by cash or certified or bank cashier's check and not until the shares
of Stock have been issued shall the exercising Optionee have any of the rights
of a shareholder of Foodservice. For purposes of this Section, the date of
issuance shall be the date upon which payment in full has been received by
Foodservice as provided herein.
Section 11. Duration of Options. The period for which each Option
granted hereunder shall be effective shall commence upon the date of the grant
of the Option and shall continue until such Option shall be terminated according
to its terms or as hereinafter provided, but in no event shall such period
exceed ten (10) years and one (1) day (the "Option Period"). In addition to and
in limitation of the above, the Option Period of any Option granted pursuant to
this Plan shall terminate upon the earliest of the following dates:
(a) Prior to the third anniversary of the date of grant of the Option,
the date upon which the Employee holding such Option (hereinafter called the
"Optionees") ceases to be an employee of Foodservice or one of its Subsidiaries,
or, after such third anniversary, three months after the Optionee ceases to be
an employee of Foodservice or one of its Subsidiaries unless such Optionee
ceases to be an employee by reason of the Optionee's death, Disability,
Retirement, voluntary termination with Good Reason or termination for Cause;
provided, however, that during such period after the Optionee ceases to be an
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employee, such Option shall be exercisable only to the extent it was exercisable
on the date of such Optionee's cessation of employment.
(b) Twelve (12) months or, if prior to the occurrence of a Public
Distribution, three (3) months, after the Optionee ceases to be an employee by
reason of the Optionee's death, Disability, Retirement, or voluntary termination
with Good Reason; provided, however, that during such period after the Optionee
ceases to be an employee, such Option shall be exercisable only to the extent it
was exercisable on the date of such Optionee's cessation of employment.
(c) At the time of the Optionee's termination for Cause.
Nothing contained herein shall limit whatever right Foodservice or its
Subsidiaries might otherwise have to terminate the employment of any Employee.
Successive Options may be granted to the same Employee whether or not
the Option or Options first granted to such Employee remain unexercised.
Section 12. Put and Call Rights.
If, prior to the earlier of a Public Distribution, or the fifth
anniversary of the Acquisition, the employment of the Optionee with Foodservice
and its Subsidiaries terminates for any reason, in the Committee's sole
discretion, Foodservice may, for a period of 180 days beginning on the date of
termination elect to pay such Optionee the difference (the "Spread"), if any,
between the Option Price and the Call Price (as specified in the following two
sentences) with respect to any Options that are vested on the date of
termination. If such termination is for Cause or is a voluntary termination by
the Optionee without Good Reason, the Call Price will be equal to (i) in the
first year after the Acquisition, the Option Price of such shares and (ii) in
any subsequent year, the lower of the Fair Market Value applicable to shares of
Stock on the date of termination and the Option Price of such shares. In all
other cases (including without limitation, Retirement, death, Disability or
voluntary termination with Good Reason), the Call Price will be (i) in the first
year after the Acquisition, the Adjusted Price applicable to shares of Stock on
the date of termination and (ii) in any subsequent year, the greater of the Fair
Market Value and the Adjusted Price applicable to shares of Stock on the date of
termination.
If, prior to the earlier of a Public Distribution, or the fifth
anniversary of the Acquisition, the employment of the Optionee with Foodservice
and its Subsidiaries terminates for any reason other than a termination by
Foodservice or one of its Subsidiaries for Cause or a voluntary termination by
the Optionee
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without Good Reason, the Optionee can require Foodservice to pay him the Spread,
if any, between the Option Price and a price (the "Put Price") equal to (i) in
the first year after the Acquisition, the Adjusted Price applicable to shares of
Stock on the date of determination and (ii) in any subsequent year, the greater
of the Adjusted Price and the Fair Market Value applicable to shares of Stock on
the date of termination, for a period of 180 days beginning on the date of
termination with respect to any Options that are vested on the date of
termination.
Foodservice may elect to pay a portion, not to exceed one half (or
such greater percentage as may be required to avoid the occurrence of a default,
cause a concurrent default or an event which, with the passage of time or giving
of notice or both would become an event of default under any of the financing
agreements to which Holdings or any of its subsidiaries is a party), of the
Spread in the form of an unsecured junior subordinated promissory note made by
Foodservice and payable to the Optionee (a "Corporation Note") or in other
securities of Foodservice. Each Corporation Note will mature on the later to
occur of the second anniversary of the date such Corporation Note was issued and
the date payment of such Corporation Note is permitted under all of the other
financing agreements to which Foodservice or any of its Subsidiaries is a party.
Each Corporation Note will bear interest at a rate equal to the lower of (i) 10%
per annum or (ii) the average time-weighted reference rate of Bank of America
National Trust and Savings Association, payable annually in arrears.
If, within the twelve months following any payment of the Spread
pursuant to this Section 12 there is a closing with respect to a Change in
Control or Public Distribution in either case at a value per share of Stock in
excess of the Call Price or the Put Price used to calculate such Spread,
Foodservice shall pay such Optionee the amount of such difference multiplied by
the number of shares of Stock with respect to which the Spread was paid.
Foodservice may elect to pay a portion, not to exceed one half (or such greater
percentage as may be required to avoid the occurrence of a default, cause a
concurrent default or an event which, with the passage of time or giving of
notice or both would become an event of default under any of the financing
agreements to which Foodservice or any of its Subsidiaries is a party), of such
amount pursuant to the provisions of the preceding paragraph.
Section 13. Non-Transferability. No Option granted pursuant to this
Plan may be transferred by the Optionee except to the estate of a deceased
Optionee, and, further, during the lifetime of the Optionee, the Option may be
exercised only by such Optionee.
Section 14. Requirements of Law and of Certain Agreements. If any
law or any regulation of any commission or
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agency having jurisdiction shall require Foodservice or the exercising Optionee
to take any action with respect to the shares of Stock acquired by the exercise
of an Option, then the date upon which Foodservice shall issue or cause to be
issued the certificate or certificates of the shares of Stock shall be postponed
until full compliance has been made with all such requirements of law or
regulation provided, that Foodservice shall use its best efforts to take all
necessary action to comply with such requirements of law or regulation.
Further, if requested by Foodservice, at or before the time of the issuance of
the shares of Stock with respect to which exercise of an Option has been made,
the exercising Optionee shall deliver to Foodservice such Optionee's written
statement satisfactory in form and content to Foodservice, that such Optionee
intends to hold the shares of Stock so acquired by such Optionee on exercise of
such Optionee's Option, for investment and not with a view to resale or other
distribution thereof to the public in violation of the Securities Act of 1933.
Moreover, in the event that Foodservice shall determine that, in compliance with
the Securities Act of 1933 or other applicable statutes or regulations, it is
necessary to register any of the shares of Stock with respect to which an
exercise of an Option has been made, or to qualify any such shares of Stock for
exemption from any of the requirements of the Securities Act of 1933 or any
other applicable statute or regulation, no Options may be exercised and no
shares of Stock shall be issued to the exercising Optionee until the required
action has been completed; provided, that Foodservice shall use its best efforts
to take all necessary action to comply with such requirements of law or
regulation. The terms of the grant of any Option shall require the Optionee to
agree to be bound by the terms and conditions of the "Stockholders Agreement"
dated as of September 4, 1992, between Foodservice and its stockholders, as
amended and restated from time to time (the "Stockholders Agreement"), to the
extent then applicable, with respect to the shares of Stock deliverable as a
result of such exercise, whether such Optionee is a party thereto or not, as
fully as if such Optionee were a party thereto.
Section 15. Adjustments. In the event of the declaration of any
stock dividend on the Stock or in the event of any reorganization, merger,
consolidation, acquisition, separation, recapitalization, split-up, combination
or exchange of the Stock or like adjustment, the number of shares of Stock and
the class of shares of stock available pursuant to this Plan and the number and
class of shares of Stock subject to any Option granted pursuant to this Plan,
and the Option Prices, shall be adjusted by appropriate change in this Plan and
in any Options outstanding pursuant to this Plan. Any such adjustment to the
plan or to Options or Option Prices shall be made by action of the Board or the
Committee, whose determination shall be conclusive.
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Section 16. Amendment or Discontinuance of the Plan. The Board may,
insofar as permitted by law, amend, suspend, or discontinue this Plan at any
time without restriction, provided, however, that the Board may not alter or
amend or discontinue or revoke or otherwise impair any outstanding Options which
have been granted pursuant to this Plan and which remain unexercised, except in
the event of a merger, reorganization, or other adjustment referred to in
Section 15 above, or except in the event that there is secured the written
consent of the holder of the outstanding Option proposed to be so altered or
amended and, without approval of the stockholders, the Board may not amend,
alter or revise the Plan to change the number of shares of Stock subject to the
Plan, change the description of the class of employees eligible to receive
Options or decrease the price at which Options may be granted except as provided
in Section 15. The Option Period of any outstanding Option shall not be
extended by any amendment or suspension or discontinuance of the Plan.
Section 17. Liquidation of Foodservice. In the event of the complete
liquidation or dissolution of Foodservice other than as an incident to a merger,
reorganization, or other adjustment referred to in Section 15 above, any Options
granted pursuant to this Plan and remaining unexercised shall be deemed
cancelled without regard to or limitation by any other provision of this Plan.
Section 18. Term of Plan.
No Option shall be granted pursuant to the Plan on or after the tenth
anniversary of the date of Board approval, but Options theretofore granted may
be extended beyond that date.
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EXHIBIT B TO WS HOLDINGS
OPTION AGREEMENT
AMENDMENT AGREEMENT
-------------------
WS Holdings Management Stock Option Plan
Option Offer Amendment Resolutions
- ----------------------------------
1. RESOLVED, that Section 2(c) of the WS Holdings Option Plan be
renumbered Section 2(c)(X), and that a new Section 2(c) (Y) be added to the WS
Holdings Option Plan as follows:
(c) (Y) "Average Four Quarter Net Working Capital" means the sum of Net
Working Capital on the last day of the relevant fiscal quarter and the last
day of each of the three preceding fiscal quarters divided by four.
; and further
2. RESOLVED, that all occurrences of the words "the Corporation" in
Section 2(g) and the second paragraph of Section 9 of the WS Holdings Option
Plan be replaced with the word "Foodservice"; and further
3. RESOLVED, that Section 2(e) of the WS Holdings Option Plan be
amended and restated to read in its entirety as follows:
(e) "Cause" means, with respect to any Optionee, the termination of
employment of such Optionee due to (i) after notice, a material neglect of
such Optionee's duties to Foodservice or any Subsidiary, (ii) willful
engagement by such Optionee in conduct which is materially and demonstrably
injurious to Foodservice or any Subsidiary, (iii) the commission of an act
of fraud, subversion, misappropriation or embezzlement by such Optionee or
(iv) a conviction of, or a plea of nolo contendere or a guilty plea or
confession by, such Optionee to an act of fraud, subversion,
misappropriation, or embezzlement or to a felony; provided, however, that
if such Optionee is a party to an Employment Agreement, the definition of
Cause provided for in such Employment Agreement shall apply.
; and further
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4. RESOLVED, that Section 2(f) of the WS Holdings Option Plan be
amended to read in its entirety as follows:
(f)(X) "Change in Control" means prior to a Public Distribution, (i) the
sale or transfer of all or substantially all of the assets of Foodservice,
whether in one transaction or in a series of related transactions, except a
sale or transfer to a successor corporation in which the holders of the
fully-diluted common stock of Foodservice immediately prior the transaction
hold, directly or indirectly, more than 50% of the total voting power of
the successor corporation immediately after the transaction; (ii) any
merger or consolidation between Foodservice and another corporation, except
a merger or consolidation immediately after which the ML Investors hold,
directly and/or indirectly, more than 50% of the total voting power of the
surviving corporation; or (iii) a sale by the ML Investors of their shares
of Stock which results in the ML Investors ceasing to own, in the
aggregate, directly and/or indirectly, more than 50% of the Stock,
calculated on a fully diluted basis, assuming the vesting of unvested
options.
; and further
5. RESOLVED that a new Section 2(f)(Y) be added to the WS Holding
Option Plan as follows:
(f)(Y) "Change in Control Spread" means the difference between the
exercise price of the Option and the fair market value of the per share
consideration received by Foodservice and the relevant stockholders in
connection with the Change in Control.
; and further
6. RESOLVED that Section 2(i) of the WS Holdings Option Plan be
renumbered Section 2(i)(X) and that a new Section 2(i)(Y) be added to the WS
Holdings Option Plan as follows:
(i)(Y) "Conflict" means (i) a payment which would violate or conflict with
any statute, rule, injunction, regulation, order, judgment or decree
applicable to Foodservice or by which it or any of its properties may be
bound or affected; (ii) a payment which would result in any breach of or
constitute a default (or an event which will notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation
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of, or result in the creation of a lien or encumbrance on any of the
property or assets of Foodservice or any Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Foodservice or any
Subsidiary is a party or by which Foodservice or any Subsidiary or any of
their properties is bound or affected; or (iii) a payment which in the
ordinary course would be made out of the proceeds of a loan, dividend or
other payment to Foodservice by one of its Subsidiaries and the making of
such payments or loans or payment of such dividend would result in any
breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in
the creation of lien or encumbrance on any of the property or assets of
Foodservice or a Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which a payment which Foodservice or a
Subsidiary is a party or by which Foodservice or a Subsidiary or any of its
property is bound or affected.
; and further
7. RESOLVED, that Section 2(k) of the WS Holdings Option Plan be
amended and restated to read in its entirety as follows:
(k) "Disability" means the permanent inability of an Optionee to perform
substantially his duties and responsibilities to Foodservice or any
Subsidiary by reason of a physical or mental disability or infirmity (i)
for a continuous period of six months or (ii) at such earlier time as the
Optionee, at his option, submits satisfactory medical evidence that he has
a physical or mental disability or infirmity which will likely prevent him
from returning to the performance of his work duties for six months or
longer. The date of such disability shall be on the last day of such six-
month period or the day on which the Optionee submits such satisfactory
medical evidence, as the case may be.
; and further
8. RESOLVED, that Section 2(l) of the WS Holdings Option Plan be
renumbered Section 2(l)(X), and a new
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Section 2(l)(Y) be added to the WS Holdings Option Plan as follows:
(l)(Y) "EBIT" means the consolidated earnings before interest and income
taxes from continuing operations, excluding any extraordinary gains and
losses and the effects of any adjustments resulting from the application of
Accounting Principles Board Opinion Numbers 16 and 17.
; and further
9. RESOLVED, that a new Section 2(l)(Z) be added to the WS Holdings
Option Plan as follows:
(l)(Z) "EBIT Value" means (i)(a) the product of (x) 8.0 and (y) EBIT for
the four consecutive fiscal quarters ending on the Fiscal Date minus (b)
Indebtedness on the Fiscal Date plus (c) on a consolidated basis,
Foodservice's aggregate cash and cash equivalents on the Fiscal Date
divided by (ii) the total number shares of Stock, calculated on a fully
diluted basis, assuming the vesting of all unvested options, outstanding on
the Fiscal Date.
; and further
10. RESOLVED, that Section 2(n) of the WS Holdings Option Plan be
renumbered Section 2(n)(X) and new Section 2(n)(Y) be added as follows:
(n)(Y) "Fiscal Date" means the last day of the last fiscal quarter
completed prior to the date of termination of the relevant Optionee.
; and further
11. RESOLVED, that Section 2(p) of the WS Holdings Option Plan be
amended in its entirety to read as follows:
(p) "Good Reason" means (i) a reduction, without the consent of the
Optionee in the Optionee's base or aggregate compensation, other than an
across-the-board reduction in the compensation of substantially all
similarly situated employees of Foodservice and its Subsidiaries, (ii) a
material reduction in the Optionee's responsibilities with Foodservice or a
change in the Optionee's title to one of lesser status, or (iii) such other
events of hardship as the Board
15
<PAGE>
shall determine on a case by case basis; provided, however, that if such
Optionee is a party to an Employment Agreement, the definition of Good
Reason provided for in such Employment Agreement shall apply.
; and further
12. RESOLVED, that Section 2(q)(V) of the WS Holdings Option Plan be
amended to read in its entirety as follows:
(q)(V) "Indebtedness" means, as calculated on a consolidated basis, (A)
the sum of (i) all indebtedness for borrowed money, including capitalized
leases, (ii) the liquidation preference value (including for the avoidance
of doubt, accrued dividends) of all the outstanding preferred stock, and
(iii) accrued interest expense, minus (B) the proceeds (whether in cash or
through conversion of indebtedness) that would result from the exercise of
all outstanding warrants, all vested and unvested options to purchase
shares of capital stock (assuming that all options are vested) and all
rights to convert one security into or exchange one security for, shares of
capital stock; such difference being either increased by the amount by
which (excluding the effects of any acquisitions or divestitures during the
most recently completed four fiscal quarters of a business as a going
concern) Average Four Quarter Net Working Capital exceeds the Net Working
Capital for the most recent fiscal quarter, or decreased by the amount by
which (excluding the effects of any acquisitions or divestitures during the
most recently completed four fiscal quarters of a business as a going
concern) the Net Working Capital for the most recent fiscal quarter exceeds
the Average Four Quarter Net Working Capital.
; and further
13. RESOLVED, that a new Section 2(q)(W) be added to the WS Holdings
Option Plan as follows:
(q)(W) "Involuntary Termination" means termination by Foodservice or a
Subsidiary of an Optionee's employment.
; and further
14. RESOLVED, that a new Section 2(q)(Y) be added to the WS Holdings
Option Plan as follows:
16
<PAGE>
(q)(Y) "ML Investors" means Merrill Lynch Capital Appreciation Partnership
No. B-XVIII, L.P. ("MLCAP"), a Delaware limited partnership, ML Offshore
LBO Partnership No. B-XVIII ("Offshore"), a Cayman Island limited
partnership, MLIBK Positions, Inc. ("MLIBK Positions"), a Delaware
corporation, MLCP Associates L.P. No. II ("MLCP Associates"), a Delaware
limited partnership, Merrill Lynch Capital Appreciation Partnership No.
XIII, L.P., ("MLCAP XIII") a Delaware limited partnership, ML Offshore LBO
Partnership No. XIII ("Offshore XIII"), a Cayman Islands partnership, ML
Employees LBO partnership No. I, L.P. ("LBO Employees"), a Delaware limited
partnership, Merrill Lynch Interfunding, Inc. ("Interfunding"), a Delaware
corporation, Merrill Lynch KECALP L.P. 1987 ("KECALP"), a Delaware limited
partnership, and Merchant Banking L.P. No. II ("Merchant L.P."), a Delaware
limited partnership, any Affiliate or limited partner or stockholder of
MLCAP, Offshore, MLIBK Positions, MLCP Associates, MLCAP XIII, Offshore
XIII, LBO Employees, Interfunding, KECALP and Merchant L.P., any Affiliate
of Merrill Lynch & Co., Inc. ("ML&Co."), any employee of any Affiliate of
any MLCAP, Offshore, MLIBK Positions, MLCP Associates, MLCAP XIII, Offshore
XIII, LBO Employees, KECALP or Merchant L.P., an employee of ML&Co., any
employee of Foodservice or any of its subsidiaries or any Affiliate of
ML&Co.
; and further
15. RESOLVED, that a new Section 2(q)(Z) be added to the WS Holdings
Option Plan as follows:
(q)(Z) "Net Working Capital" means (i) (x) current assets minus (y)
current liabilities plus (ii) accrued interest expense.
; and further
16. RESOLVED, that Section 2(r) be renumbered Section 2(r)(X) and a
new Section 2(r)(Y) be added as follows:
(q)(Y) "Option EBT" means (x) EBIT of Foodservice minus (y) the product of
(A) Indebtedness of Foodservice and (B) 0.103.
; and further
17
<PAGE>
17. RESOLVED, that Section 2(t) of the WS Holdings Option Plan be
amended to replace the number 25% with the number "12.5%"; and further
18. RESOLVED, that Section 2(u) of the WS Holdings Option Plan be
amended to read as follows:
(u) "Retirement" means, with respect to any Optionee, the Optionee's
retirement as an employee of Foodservice or a Subsidiary under
Foodservice's or such Subsidiary's retirement plan, as the case may be.
; and further
19. RESOLVED, that a new Section 2(x) be added to the WS Holdings
Option Plan as follows:
(x) "Voluntary Termination" means the voluntary termination by an Optionee
of his employment with Foodservice or a Subsidiary by voluntary resignation
or any other means (i) other than because of such Optionee's Retirement,
Disability or death, or (ii) other than simultaneously with or following
termination for Cause or the occurrence of an event which if known to
Foodservice or such Subsidiary at the time of such voluntary termination by
the Optionee of his employment would constitute Cause.
; and further
20. RESOLVED, that the third line of the second paragraph of Section
9 of the WS Holdings Option Plan be amended to delete the words "in the event"
and replace them with the words "upon the first to occur"; and further
21. RESOLVED, that a third paragraph be added to Section 9 of the WS
Holdings Option Plan as follows:
Notwithstanding anything to the contrary contained herein and unless
otherwise provided by the Committee, Options granted pursuant to the Plan
shall not be exercisable until the first to occur of (v) the ninth
anniversary of its grant, (w) a Change in Control, (x) a Public
Distribution or (y) the date of termination of employment of an Optionee
(except for termination for Cause). Options held by persons whose
employment is
18
<PAGE>
terminated for Cause shall be forfeited and cancelled effective upon such
termination for Cause and no payment shall be made with respect thereto.
; and further
22. RESOLVED, that the first paragraph of Section 10 of the WS
Holdings Option Plan be labelled "(a)" and a second paragraph be added to
Section 10 of the WS Holdings Option Plan as follows:
(b) Capitalized terms used in this paragraph have the meaning specified in
the Stockholders Agreement unless otherwise defined herein. The
Stockholders Agreement shall be subject to amendment from time to time in
accordance with the provisions of the Stockholders Agreement and the
Optionees' approval shall not be required in connection with any amendment
of the Stockholders Agreement. In the event that (i) any Option shall have
become exercisable or shall become exercisable in connection with the
transaction to which the Inclusion Notice Relates, (ii) the provisions of
Section 6.1 of the Stockholder Agreement shall still be in effect and (iii)
there shall have been delivered to Foodservice an Inclusion Notice,
Foodservice shall deliver a copy of such Inclusion Notice to each holder of
such an exercisable Option (a "WS Holdings Eligible Optionee") within 5
calendar days of the date the Inclusion Notice is deemed to be given under
the Stockholders Agreement. Any WS Holdings Eligible Optionee that gives
written notice of (A) exercise of such Option and (B) acceptance of the
Third Party Offer to both Foodservice and the Transferor within 10 days of
the date the Inclusion Notice is deemed to be given under the Stockholders
Agreement shall be deemed to be an Offeree under the Stockholders
Agreement, provided, however, that the WS Holdings Eligible Optionee's
rights under this sentence shall terminate upon payment of the Change in
Control Spread pursuant to Section 12 of the Plan. Payment with respect to
Options exercised pursuant to this Section 10(b) shall be made upon the
date of consummation of the Third Party Offer, but otherwise in accordance
with the provisions of Section 10(a) of the Plan, except that the
Transferor may require Foodservice to issue any certificates issued with
respect to the exercise of the such Option to the Third Party or its
designee.
; and further
19
<PAGE>
23. RESOLVED, that the second line of each of the first and second
paragraph of Section 12 of the WS Holdings Option Plan be amended to replace the
words "the fifth anniversary of the Acquisition" with the words "the third
anniversary of the Merger" and that a new paragraph be added after the second
paragraph as follows:
In the event of a Change in Control, Foodservice shall have the right,
but not the obligation, to pay the Optionee an amount equal to the Change
in Control Spread times the number of shares of Stock allocable to the
vested portion of the Option (to the extent exercisable at the time of the
Change in Control, assuming, for the avoidance of doubt, that such Change
in Control has occurred).
; and further
24. RESOLVED, that clauses (i) and (ii) of the second sentence of the
first paragraph of Section 12 of the WS Holdings Option Plan be amended and
restated in their entirety to read as follows: "the Option Price"; and further
25. RESOLVED, that clauses (i) and (ii) of each of the second
paragraph of Section 12 and the third sentence of the first paragraph of Section
12 of the WS Holdings Option Plan be amended and restated in their entirety to
read as follows: "EBIT Value applicable to Stock on the date of termination";
and further
26. RESOLVED, that the third paragraph of Section 12 of the WS
Holdings Option Plan be amended to delete the third through seventh lines of
such paragraph and replace them with the words "required to avoid the occurrence
of a Conflict), of the" and to delete the 14th through 17th lines of such
paragraph and replace them with the words "payment of such Corporation Note
20
<PAGE>
would not give rise to a Conflict. Each Corporation Note will bear interest at
a rate equal to the"; and further
27. RESOLVED, that the proviso in the third sentence of Section 14 of
the WS Holdings Option Plan be deleted; and further
28. RESOLVED, that Section 16 of the WS Holdings Option Plan be
amended and restated to read in its entirety as follows:
Section 16. Amendment or Discontinuance of the Plan. The Board may,
insofar as permitted by law, amend, suspend, or discontinue this Plan at
any time without restriction; provided, however, that the Board may not
alter or amend or discontinue or revoke or otherwise impair any outstanding
Options which have been granted pursuant to this Plan and which remain
unexercised, except (i) with respect to amendments affecting all Options
(vested and unvested), with the consent of the holders of vested Options
representing the right to purchase a majority of the total number of shares
of Stock subject to Options which are vested; provided, however, that if no
Options are vested then the requisite consent shall be the consent of
holders of unvested Options representing the right to purchase a majority
of the total number of shares of Stock subject to Options which are
unvested, (ii) with respect to amendments affecting only Performance
Options (vested and unvested) or Normal Options (vested or unvested), or
only a single series of Normal Options (vested and unvested) or Performance
Options (vested or unvested) with the consent of the holders of vested
Normal Options or vested Performance Options, as the case may be,
representing the right to purchase a majority of the total number of shares
of Stock subject to Normal Options which are vested, Performance Options
which are vested, Normal Options of such series which are vested, or
Performance Options of such series which are vested, as the case may be;
provided, however, that if none of the Performance Options or none of the
Performance Options of such series, as the case may be, is vested then the
requisite consent with respect to the Performance Options or such series of
Performance Options, as the case may be, shall be the consent of the
holders of unvested Performance Options or unvested Performance Options of
such series, as the case may be, representing the right to purchase a
majority of the total number of shares of stock subject to Performance
21
<PAGE>
Options which are unvested, or Performance Options of such series which are
unvested, as the case may be, (iii) in the event of a merger,
reorganization, or other adjustment referred to in Section 15 above, or
(iv) with the written consent of the holder of the outstanding Option
proposed to be so altered or amended. The Board may not, without the
approval of the stockholders of Foodservice and the Corporation amend,
alter or revise the Plan to change the number of shares of Stock subject to
the Plan, change the description of the class of employees eligible to
receive Options or decrease the price at which Options may be granted
except as provided in Section 15. The Option Period of any outstanding
Option shall not be extended by any amendment or suspension or
discontinuance of the Plan unless the resolutions reflecting such
amendment, suspension or discontinuance expressly provide otherwise. The
Board may agree to amend a previously granted Option (including an Option
with respect to which the exercise period has previously terminated) to
extend the period during which it may be exercised. For purposes of this
Section 16, a Performance Option shall be considered vested if it has
become exercisable under Section 2(b) of the relevant Performance Option
Agreement and a Normal Option granted after the Merger shall be considered
vested if it has become exercisable under Section 2 of the relevant Normal
Option Agreement.
22
<PAGE>
Exhibit 10.8.1
FORM OF NORMAL OPTION AGREEMENT
NORMAL OPTION AGREEMENT dated _________________, 1995 providing for the
granting of an option by US Foodservice Inc., a Delaware corporation (the
"Corporation"), to _______________, an employee of the Corporation or of a
subsidiary of the Corporation (the "Employee");
The Corporation has duly adopted the Management Stock Option Plan of US
Foodservice Inc. (the "Plan"), which is incorporated herein by reference. In
accordance with Paragraph 6 of the Plan, the Committee (as defined in the Plan)
has determined that the Employee is to be granted an option under the Plan to
buy shares of the Corporation's Class A Common Stock, par value $0.01 per share
(the "Shares"), on the terms and conditions hereinafter provided.
1. Number of Shares and Normal Option Price. The Corporation hereby
grants to the Employee an option (the "Normal Option"), which is a non-statutory
stock option, to purchase 213 Shares at a price of $5.43 per Share on the terms
and conditions set forth herein. The Shares purchasable upon exercise of the
Normal Option are hereinafter referred to as the "Normal Option Shares".
2. Period of Normal Option and Conditions of Exercise. The Normal Option
shall be exercisable in accordance with Section 9 of the Plan as amended;
provided, however, that the Normal Option may be exercised only to purchase
whole Shares and in no case may a fraction of a Share be purchased.
No option of the Normal Option shall be exercisable unless (except as
otherwise provided in the Plan in case of Retirement (as such term is defined in
the Plan), termination or death) the Employee at the time of such exercise is,
and at all times from the Date of Grant has been, in the employ of the
Corporation or a subsidiary.
If the employment of the Employee with the Corporation terminates for any
reason, the period during which the Employee shall be permitted to exercise the
Normal Option shall be determined as provided in Section 11 of the Plan and the
Corporation and the Employee shall be governed by the provisions of Section 12
of the Plan relating to puts and calls.
The Normal Option shall terminate in accordance with the provisions of the
Plan.
3. Non-Transferability of Normal Option; Death of Employee. The Normal
Option and this Normal Option Agreement shall not be transferable otherwise than
by will or by the laws of descent and distribution; and the Normal Option may be
1
<PAGE>
exercised, during the lifetime of the Employee, only by him or her, and, in the
event of the death of the Employee, only by his or her estate.
4. Specific Restrictions Upon Normal Option Shares. The Employee hereby
agrees with the Corporation as follows:
(a) The Employee shall acquire the Normal Option Shares for investment
purposes only and not with a view to resale or other distribution thereof
to the public in violation of the Securities Act of 1933, as amended (the
"1933 Act") and shall not dispose of any Normal Option Shares in
transactions which, in the opinion of counsel to the Corporation, violate
the 1933 Act, or the rules and regulations thereunder, or any applicable
state securities or "blue sky" laws; and further
(b) If any Normal Option Shares shall be registered under the 1933
Act, no public offering (otherwise than on a national securities exchange,
as defined in the Securities Exchange Act of 1934, as amended) or any
Normal Option Shares shall be made by the Employee (or any other person)
under such circumstances that he or she (or such other person) may be
deemed an underwriter, as defined in the 1933 Act; and further
(c) Upon exercise, Stock shall not be issued to Optionee unless the
Optionee has become a party to the Stockholders Agreement as a Management
Investor by Executing a Joinder Agreement.
(d) The Employee shall be bound by the terms of the Stockholders'
Agreement whether or not he or she is a party thereto, as fully as if he or
she were a party thereto.
The Employee further agrees that the Corporation shall have the authority to
endorse upon the certificate or certificates representing the Normal Option
Shares such legends referring to the foregoing restrictions, or any other
applicable restrictions, as it may deem appropriate.
5. Notices. Any Notice required or permitted under this Normal Option
Agreement shall be deemed given when delivered personally, or when deposited in
a United States Post Office as registered mail, postage prepaid, addressed, as
appropriate, either to the Employee at his or her address set forth below or
such other address as he or she may designate in writing to the Corporation, or
to the Corporation, Cross Creek Pointe, 1065 Highway 315, Suite 101, Wilkes-
Barre, PA 18702 or such other address as the Corporation may designate in
writing to the Employee.
6. Failure to Enforce Not a Waiver. The failure of the Corporation to
enforce at any time any provision of this Normal
2
<PAGE>
Option Agreement shall in no way be construed to be a waiver of such provision
or of any other provision hereof.
7. GOVERNING LAW. THE NORMAL OPTION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF DELAWARE.
8. Provisions of Plan. The Normal Option provided for herein is granted
pursuant to the Plan, and said Normal Option and this Normal Option Agreement
are in all respects governed by the Plan and subject to all of the terms and
provisions thereof, whether such terms and provisions are incorporated in this
Normal Option Agreement solely by reference or are expressly cited herein.
IN WITNESS WHEREOF, the Corporation has executed this Normal Option
Agreement in duplicate on the day and year first above written.
US FOODSERVICE INC.
By:
--------------------------------
Name: Thomas G. McMullen
Title: President and Chief
Operating Officer
-----------------------------------
Employee
3
<PAGE>
Exhibit 10.8.2
PERFORMANCE OPTION AGREEMENT dated this ___ day of December, 1988 providing
for the granting of an option by WS Holdings Corporation, a Delaware corporation
(the "Corporation") to _________________________, an employee of the Corporation
or of a subsidiary of the Corporation (the "Employee");
The Corporation has duly adopted the Management Stock Option Plan of WS
Holdings Corporation (the "Plan"), which is incorporated herein by reference.
In accordance with paragraph 6 of the Plan, the Committee (as defined in the
Plan) has determined that the Employee is to be granted an option under the Plan
to buy shares of the Corporation's Class A Common Stock, par value $.01 per
share (the "Shares"), on the terms and conditions hereinafter provided.
1. Number of Shares and Performance Option Price. The Corporation hereby
grants to the Employee an option (the "Performance Option"), which is a non-
statutory stock option, to purchase ________ Shares at a price of $10 per Share
on the terms and conditions set forth herein. The Shares purchasable upon
exercise of the Performance Option are hereinafter referred to as the
"Performance Option Shares."
2. Period of Performance Option and Conditions of Exercise. (a) Unless
the Performance Option is previously terminated pursuant to this Performance
Option Agreement, the term of the Performance Option and of this Performance
Option Agreement shall commence on the date hereof (the "Date of Grant") and
terminate upon the expiration of ten years and one day from the Date of Grant.
Upon the termination of the Performance Option, all rights of the Employee
hereunder shall cease.
(b) The Class A Performance Options, subject to the following
provisions of this paragraph, shall become exercisable as follows:
For the fiscal year ending December 31st of each of the years set
forth below, if the Equity Value (as hereinafter defined) as determined as
of the end of such fiscal year equals the amount set forth below for such
year, then a percentage of the Class A Performance Options represented by
this Agreement equal to the percentage set forth below for such year shall
become exercisable. In the event of any change in the Company's fiscal
year, appropriate adjustments to the values set forth below shall be made
in the sole discretion of the Board.
<PAGE>
<TABLE>
<CAPTION>
Cumulative
Year Ended Equity Value Percentage
December 31st (In Millions of Dollars) Exercisable
- ------------- ------------------------ -----------
Equal to or But
greater than less than
------------ ---------
<S> <C> <C> <C>
1989 $10.0 $11.5 4%
11.5 13.0 8%
13.0 14.5 12%
14.5 16.0 16%
16.0 17.5 20%
1990 $66.3 $68.7 24%
68.7 71.1 28%
71.1 73.5 32%
73.5 75.9 36%
75.9 78.3 40%
1991 $113.8 $117.8 44%
117.8 121.8 48%
121.8 125.8 52%
125.9 129.8 56%
129.8 133.8 60%
1992 $143.1 $148.1 64%
148.1 153.1 68%
153.1 158.1 72%
158.1 163.1 76%
163.1 168.1 80%
1993 $172.3 $178.3 84%
178.3 184.3 88%
184.3 190.3 92%
190.3 196.3 96%
196.3 202.3 100%
1994 $208.5 $215.0 84%
215.0 221.5 88%
221.5 228.0 92%
228.0 234.5 96%
234.5 241.0 100%
1995 $257.0 $264.0 84%
264.0 271.0 88%
271.0 278.0 92%
278.0 285.0 96%
285.0 292.0 100%
1996 $307.5 $315.0 84%
315.0 322.5 88%
322.5 330.0 92%
330.0 337.5 96%
337.5 345.0 100%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Cumulative
Year Ended Equity Value Percentage
December 31st (In Millions of Dollars) Exercisable
- ------------- ------------------------ -----------
Equal to or But
greater than less than
------------ ---------
<S> <C> <C> <C>
1997 $365.0 $373.0 84%
373.0 381.0 88%
381.0 389.0 92%
389.0 397.0 96%
397.0 405.0 100%
</TABLE>
In the event of a Public Distribution (as defined in the Plan) or a Change
in Control (as defined in the Plan) at any time prior to the tenth anniversary
of the Date of Grant of any Performance Option as a result of which common
stockholders of the Corporation realize value in excess of targets set forth
below for such transaction in such year, such option will become immediately
exercisable.
<TABLE>
<CAPTION>
Target Value
Year (In Millions of Dollars)
---- ------------------------
<S> <C>
1989 $ 45.0
1990 $ 80.0
1991 $135.0
1992 $170.0
1993 $205.0
1994 $250.0
1995 $300.0
1996 $350.0
1997 $410.0
</TABLE>
"Equity Value" shall mean (i) the product of (a) the Corporation's Adjusted
EBIT (as defined in the Plan) for the fiscal year with respect to which the
determination of Equity Value is being made and (b) 1.3077, less (ii) the
Corporation's Indebtedness (as defined in the Plan) as of the last date of such
fiscal year.
(c) The Performance Option may be exercised only to purchase whole and
fractional Shares. The right of the Employee to purchase Performance Option
Shares subject to any accrued installment may be exercised in whole at any time
or in part from time to time after the accrual of such installment and prior to
the tenth anniversary from the Date of Grant.
3
<PAGE>
(d) No portion of the Performance Option shall be exercisable unless
(except as otherwise provided in the Plan in the case of Retirement (as defined
in the Plan), termination or death) the Employee at the time of such exercise
is, and at all times from the Date of Grant has been, in the employ of the
Corporation or a subsidiary.
(e) If the employment of the Employee with the Corporation or its
subsidiaries terminates for any reason, the period during which the Employee
shall be permitted to exercise the Performance Option shall be determined as
provided in Section 11 of the Plan and the Corporation and the Employee shall be
governed by the provisions of Section 12 of the Plan relating to puts and calls.
3. Non-Transferability of Performance Option; Death of Employee. The
Performance Option and this Performance Option Agreement shall not be
transferable otherwise than by will or by the laws of descent and distribution;
and the Performance Option may be exercised, during the lifetime of the
Employee, only by him or her, and, in the event of the death of the Employee,
only by his or her estate.
4. Exercise of Performance Option. The Performance Option shall be
exercised in the following manner: the Employee or his or her estate shall
deliver to the Corporation written notice, substantially in the form set forth
as Exhibit A hereto, specifying the number of Performance Option Shares which he
elects to purchase and a date, not more than ninety (90) days after the date of
such notice, upon which such Performance Option Shares shall be purchased and
payment therefor shall be made. Upon delivery to the Corporation on such date
of cash or certified or bank cashier's check payable to the order of the
Corporation, in an amount equal to the product of the number of Performance
Option Shares specified in such notice and $__________, together with payment,
by cash or certified or bank cashier's check payable to the order of the
Corporation, of such amount as the Corporation deems necessary to satisfy its
liability to withhold federal, state or local income or other taxes incurred by
reason of the exercise or the transfer of Shares thereupon, the Performance
Option Shares so purchased shall thereupon be promptly delivered to the Employee
or his or her estate. The Employee and his or her estate will not be deemed to
be a holder of any Shares pursuant to exercise of the Performance Option until
the date of the issuance of a stock certificate to him or her for such Shares.
The Employee may specify in any exercise notice that only Shares shall be issued
and that if the Corporation may not then issue Shares the effectiveness of such
exercise shall be delayed until such time as the Corporation may issue Shares.
5. Specific Restrictions Upon Performance Option Shares. The Employee
hereby agrees with the Corporation as follows:
4
<PAGE>
(a) The Employee shall acquire the Performance Option Shares for
investment purposes only and not with a view to resale or other distribution
thereof to the public in violation of the Securities Act of 1933, as amended
(the "1933 Act"), and shall not dispose of any Performance Option Shares in
transactions which, in the opinion of counsel to the Corporation, violate the
1933 Act, or the rules and regulations thereunder, or any applicable state
securities or "blue sky" laws; and further
(b) If any Performance Option Shares shall be registered under the
1933 Act, no public offering (otherwise than on a national securities exchange,
as defined in the Securities Exchange Act of 1934, as amended) of any Option
Shares shall be made by the Employee (or any other person) under such
circumstances that he or she (or such other person) may be deemed an
underwriter, as defined in the 1933 Act; and further
(c) The Employee shall be bound by the terms of the Management Stock
Subscription Agreement dated as of the date hereof, by and among the Corporation
and the persons listed on the Investor Schedule, whether or not he or she is a
party thereto as fully as if he or she were a party thereto.
(d) The Employee shall be bound by the terms of the Stockholders'
Agreement dated as of October 18, 1988 between the Corporation, the persons
listed on the Investor Schedule to the Management Stock Subscription Agreement,
and certain other investors, whether or not he or she is a party thereto or not
as fully as if he or she were a party thereto.
The Employee further agrees that the Corporation shall have the
authority to endorse upon the certificate or certificates representing the
Performance Option Shares such legends referring to the foregoing restrictions,
or any other applicable restrictions, as it may deem appropriate.
6. Notices. Any notice required or permitted under this Performance
Option Agreement shall be deemed given when delivered personally, or when
deposited in a United States Post Office as registered mail, postage prepaid,
addressed, as appropriate, either to the Employee at his or her address set
forth below or such other address as he or she may designate in writing to the
Corporation, or to the Corporation, 2700 Handley Ederville Road, Fort Worth,
Texas 76118 or such other address as the Corporation may designate in writing to
the Employee.
7. Failure to Enforce Not a Waiver. The failure of the Corporation to
enforce at any time any provision of this Performance Option Agreement shall in
no way be construed to be a waiver of such provision or of any other provision
hereof.
8. Governing Law. THE PERFORMANCE OPTION AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF DELAWARE.
5
<PAGE>
9. Provisions of Plan. The Performance Option provided for herein is
granted pursuant to the Plan, and said Performance Option and this Performance
Option Agreement are in all respects governed by the Plan and subject to all of
the terms and provisions thereof, whether such terms and provisions are
incorporated in this Performance Option Agreement solely by reference or are
expressly cited herein.
IN WITNESS WHEREOF, the Corporation has executed this Performance Option
Agreement in duplicate on the day and year first above written.
WS HOLDINGS CORPORATION
By:
----------------------------
Title:
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Performance Option Agreement.
-------------------------------
Signature
-------------------------------
-------------------------------
-------------------------------
Address
6
<PAGE>
EXHIBIT A
Date:
---------------------
WS Holdings Corporation
- -------------------------
- -------------------------
Attention: Secretary
Re: Exercise of
Dear Sirs:
Pursuant to the terms of the Option Agreement between us dated
______________, in which you have granted to me a __________ to purchase a
certain number of the shares of common stock, par value $.01 per share (the
"Shares"), of WS Holdings Corporation ("Holdings"), on certain terms and
conditions, I hereby give notice that I elect to exercise such option to the
extent of Shares at $_____ per Share. In full payment of the option price for
such Shares provided in the Option Agreement, I agree to deliver on (the
"Closing Date") a certified or cashier's check to the order of Holdings or cash,
in each case, in the amount of $_________ for such exercise. I agree to pay an
additional amount equal to any withholding obligation Holdings may have as a
result of this exercise.
I hereby covenant and agree that I am acquiring such Shares for investment
purposes only and not with a view to resale or other distribution thereof to the
public in violation of the Securities Act of 1933, as amended (the "1933 Act").
I further covenant and agree that I shall not dispose of any Shares acquired by
exercise of the * in any transaction or transactions which, in the option of
counsel to Holdings, may violate the 1933 Act, or the rules and regulations
thereunder or any applicable state securities or "blue sky" laws.
I further covenant and agree that, if any of the Shares acquired by
exercise of the option are registered under the 1933 Act, no public offering
(otherwise than on a national securities exchange, as defined in the Securities
Act of 1934, as amended) of any Shares acquired by exercise of the will be made
by me or by any successor under such circumstances that I or such successor may
be deemed an underwriter, as defined in the 1933 Act.
I agree with respect to the Shares I receive as a result of this exercise,
to be bound by the terms of the Management Stock Subscription Agreement dated as
of December __, 1988 by and between the Corporation and the persons listed on
the Investors Schedule, as fully as if I were a party thereto.
7
<PAGE>
I understand that the Company may endorse upon the certificate or
certificates representing the Shares acquired upon exercise of the such legends
referring to the foregoing restrictions, or any other applicable restrictions,
as it may deem appropriate.
Very truly yours,
-----------------------------
(Signature)
-----------------------------
(Print Name)
-----------------------------
(Address)
-----------------------------
-----------------------------
8
<PAGE>
Exhibit 10.8.3
FORM OF WS HOLDINGS OPTION AGREEMENT AMENDMENT AGREEMENT
This WS Holdings Option Agreement Amendment Agreement ("Agreement"), dated
this _____ day of November, 1993, to (a) the Normal Option Agreement (the
"Normal Agreement"), between the undersigned, (the "Employee") and WS Holdings
Corporation, a Delaware corporation ("WS Holdings"), as amended, which provides
for the granting of an option (the "Normal Option") by WS Holdings to the
Employee to purchase shares of Class A Common Stock, par value $.01 per share,
of WS Holdings (the "WS Holdings Class A Stock"), (b) the Performance Option
Agreement (the "Performance A Agreement") between the Employee and WS Holdings,
as amended, which provides for the granting of an option, referred to in Section
2(b) of the Performance A Agreement as a "Class A Performance Option" (the
"Performance A Option") by WS Holdings to the Employee to purchase, upon the
occurrence of certain events, share of WS Holdings Class A Stock and (c) the
Performance Option Agreement (the Performance B Agreement and, together with the
Performance A Agreement, the "Performance Agreements", and together with the
Normal Agreement and the Performance A Agreement, the "Option Agreements"),
between the Employee and WS Holdings, as amended, which provides for the
granting of an option, referred to in Section 2(b) of the Performance B
Agreement as a "Class B Performance Option" (the "Performance B Option" and,
together with the Performance A Options, the "Performance Options" and, together
with the Performance A Options and the Normal Options, the "Employee Options"),
to purchase, upon the occurrence of certain events, shares of WS Holdings Class
A stock;
WHEREAS, based on the results of operations of WS Holdings through January
2, 1993, the last day of the close of the most recently completed fiscal year of
WS Holdings, 60% of the Performance A Options are vested (the "Vested Class A
Performance Options"), 40% of the Performance A Options are not vested (the
"Unvested Class A Performance Options"), 52% of the Performance B Options are
vested (the "Vested Class B Performance Options") and 48% of the Performance B
Options are not vested (the "Unvested Class B Performance Options"),
WHEREAS, WS Holdings entered into an Agreement and Plan of Merger (the
"Merger Agreement") dated as of September 10, 1993 between US Foodservice Inc.,
a Delaware corporation ("Foodservice"), and WS Investments Corporation, a
Delaware corporation ("Acquisition"), pursuant to which Acquisition merged (the
"Merger") with and into WS Holdings and WS Holdings became a wholly-owned
subsidiary of Foodservice;
WHEREAS, pursuant to the Merger Agreement, Foodservice agreed that, in
accordance with The Management Stock Option Plan of WS Holdings Corporation (the
"WS Holdings Options Plan") and
<PAGE>
resolutions adopted by the Board of Directors of each of WS Holdings and
Foodservice, to assume (the "Assumption") the obligation of WS Holdings to issue
shares upon exercise of Options granted pursuant to the WS Holdings Option Plan;
WHEREAS, based on the exchange ratio in the Merger, each option to purchase
one share of WS Holdings Class A Stock became an option to purchase 1.84165
shares of Class A Common Stock, par value $.01 per share, of Foodservice (the
"Foodservice Class A Stock");
WHEREAS, the Board of Directors of WS Holdings adopted certain amendments
(the "WS Holdings Option Plan Conforming Amendments") to the WS Holdings Option
Plan which amendments became applicable to the Employee Options effective upon
the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreement hereinafter set forth, the parties hereto agree,
intending to be legally bound, as follows:
1. The Assumption is approved by the Employee in all respects.
2. The Option Plan Amendments shall be applicable to the Option Agreement
and the Option Agreements shall be subject to the WS Holdings Option Plan, as
amended by the Option Plan Amendments and for purposes of Sections 2(n) and 2(t)
of the WS Holdings Option Plan, as amended by the WS Holdings Option Plan
Conforming Amendments, the term "Stock" shall mean the Class A Common stock, par
value $.01 per share, of Foodservice.
3. The number of Unvested Class A Performance Options shall be reduced to
a number equal to 50% of the number of Unvested Class A Performance Options
immediately prior to the Merger and the balance of such Unvested Class A
Performance Options shall be deemed canceled and extinguished for all purposes.
4. The number of Unvested Class B Performance Options shall be reduced to
a number equal to 50% of the number of Unvested Class B Performance Options
immediately prior to the Merger and the balance of such Unvested Class B
Performance Options shall be deemed canceled and extinguished for all purposes.
5. The second paragraph of the Normal Option Agreement shall be amended to
add an additional sentence at the end of such paragraph as follows:
As a result of the Merger, the option granted pursuant to this Normal
Option Agreement to purchase shares has become an option to purchase shares
of Class A Common Stock, par value $.01 per share (the "Foodservice
Shares"), of Foodservice. All references in this
-2-
<PAGE>
Normal Option Agreement to Shares and Normal Option Shares are references
to Foodservice Shares and any shares which may be substituted for such
shares in the future pursuant to the terms of the Plan.
6. The second paragraph of each Performance Option Agreement shall be
amended to add an additional sentence at the end of such paragraph as follows:
As a result of the Merger, the Option granted pursuant to this Performance
Option Agreement to Purchase Shares has become an option to purchase shares
of Class A Common Stock, par value $.01 per share (the "Foodservice
Shares"), of Foodservice. All references in this Performance Option
Agreement to Shares and Performance Option Shares are references to
Foodservice Shares and any shares which may be substituted for such shares
in the future pursuant to the terms of the Plan.
7. Section 2(b) of the Performance A Agreement shall be amended to read in
its entirety as follows:
If a Public Distribution (as defined in the Plan) or a Change in Control
(as defined in the Plan) has not occurred, the Unvested Class A Performance
Options, subject to the following provisions of this paragraph, shall
become exercisable as follows:
For each of the fiscal years set forth below, if the Option EBT equaled or
exceeded the amount set forth in the second or third column below opposite
such fiscal year then, in such event, the Unvested Class A Performance
Option shall become exercisable to the extent of the percentage of the
Foodservice Shares covered thereby that is set forth in the fourth and
fifth columns below opposite such fiscal year.
<TABLE>
<CAPTION>
Annual Cumulative % Vest % Vest
Year Option EBT Option EBT Annual Cumulative
- ------ ---------- ---------- ------ ----------
<S> <C> <C> <C> <C>
1994 $1.27 $1.27 33-1/3% 33-1/3%
1995 1.64 2.91 33-1/3% 66-2/3%
1996 2.04 4.95 33-1/3% 100%
1997 ---- 7.30 ---- 100%
</TABLE>
The unvested Class A Performance Option shall become fully exercisable upon
the first to occur of a Public Distribution (as defined in the Plan) or a Change
in Control (as defined in the Plan) prior to the tenth anniversary of the
original date of grant of this Performance A Option if the fair market value of
the consideration received by Foodservice and/or the holders of Foodservice
Shares, as the case may be (such fair market value and other matters being as
determined by the Committee, whose good faith determination shall be
conclusive), pursuant to such
-3-
<PAGE>
Public Distribution or Change in Control equals or exceeds that set forth below
for the year in which such Public Distribution or Change in Control occurs.
Year Target Value Per Share
---- ----------------------
1993 $ 8.22
1994 10.22
1995 12.58
1996 14.32
1997 15.74
8. Section 2(b) of the Performance B Agreement shall be amended to read in
its entirety as follows:
If a Public Distribution (as defined in the Plan) or a Change in Control
(as defined in the Plan) has not occurred, the Unvested Class B Performance
Options, subject to the following provisions of this paragraph, shall
become exercisable as follows:
For each of the fiscal years set forth below, if the Option EBT equaled or
exceeded the amount set forth in the second or third column below opposite
such fiscal year then, in such event, the Unvested Class B Performance
Option shall become exercisable to the extent of the percentage of the
Foodservice Shares covered thereby that is set forth in the fourth and
fifth columns below opposite such fiscal year.
<TABLE>
<CAPTION>
Annual Cumulative % Vest % Vest
Year Option EBT Option EBT Annual Cumulative
- ------ ---------- ---------- ------ ----------
<S> <C> <C> <C> <C>
1994 $1.27 $1.27 33-1/3% 33-1/3%
1995 1.64 2.91 33-1/3% 66-2/3%
1996 2.04 4.95 33-1/3% 100%
1997 ---- 7.30 ---- 100%
</TABLE>
The unvested Class B Performance Options shall become fully exercisable
upon the first to occur of a Public Distribution (as defined in the Plan)
or a Change in Control (as defined in the Plan) prior to the tenth
anniversary of the original date of grant of this Performance B Option if
the fair market value of the consideration received by Foodservice and/or
the holders of Foodservice Shares, as the case may be (such fair market
value and other matters being as determined by the Committee, whose good
faith determination shall be conclusive), pursuant to such Public
Distribution or Change in Control equals or exceeds that set forth below
for the year in which such Public Distribution or Change in Control occurs.
-4-
<PAGE>
Year Target Value Per Share
---- ----------------------
1993 $ 8.22
1994 10.22
1995 12.58
1996 14.32
1997 15.74
9. Section 2(c) of the Performance Option Agreements shall be amended to
delete the second sentence of such section in its entirety.
10. Sections 2(d), and 4 and 5(a) of the Performance Option Agreements,
shall be amended to delete the words "the Corporation" and replace them with the
words "Foodservice".
11. Section 2(e) of the Performance Option Agreements shall be amended to
replace the first occurrence of the word "Corporation" with the word
"Foodservice" and, in the fifth line of such section to add between the words
"and" and "the" the word "Foodservice".
12. The fifth line of Section 5(b) of the Performance Option Agreement
shall be amended to add before the word "Option" the word "Performance".
13. The second paragraph of Section 2 of the Normal Option Agreement shall
be amended to delete the words "the Corporation or a subsidiary" and replace
them with the words "Foodservice or a subsidiary".
14. The third paragraph of Section 2 of the Normal Option Agreement shall
be amended to delete the words "the Corporation" and replace them with the words
"Foodservice or a subsidiary" in the second line and in the fifth line to insert
after the words "the Corporation" the word "Foodservice".
15. Sections 4 and 5(a) of the Normal Option Agreement shall be amended to
delete the words "the Corporation" and replace them with the words
"Foodservice".
16. Section 5(c) of each Option Agreement is deleted from each Option
Agreement.
17. Section 5(d) of each Option Agreement is renumbered Section 5(c) and
amended to read in its entirety as follows:
No Foodservice Shares shall be issued to, or registered in the name of, the
optionee, unless the optionee has become a party to the Amended and
Restated Stockholders Agreement, dated as of September 4, 1992, between
Foodservice and its stockholders, as amended and restated from time to
time, as a Management Investor by executing a Joinder Agreement.
-5-
<PAGE>
Section 18. Exhibit A of each Option Agreement is amended and restated to
read in its entirety as set out in Exhibit C to this Agreement.
19. This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
20. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF DELAWARE.
-6-
<PAGE>
Exhibit 10.9
US FOODSERVICE INC.
1992 STOCK OPTION PLAN
(EFFECTIVE SEPTEMBER 4, 1992)
(AS AMENDED SEPTEMBER 23, 1993)
Section 1. Purpose. The purpose of this Plan is to further the best
interests of US Foodservice Inc. and its Subsidiaries by encouraging its key
employees to continue association with the Corporation and by providing
additional incentive for unusual industry and efficiency through offering an
opportunity to acquire a proprietary stake in the Corporation and its future
growth. The Corporation believes that this goal may best be achieved by
granting stock options to eligible key employees of the Corporation and its
Subsidiaries from time to time.
Section 2. Certain Definitions. For purposes of the Plan, the
following terms shall be defined as set forth below:
(a) "Affiliate" means with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
(b) "Average Four Quarter Net Working Capital" means the sum of Net
Working Capital on the last day of the fiscal quarter ending on the Fiscal Date
and the last day of each of the three preceding fiscal quarters divided by four.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Cause" means, with respect to any Optionee, the termination of
employment of such Optionee due to (i) after notice, a material neglect of such
Optionee's duties to the Corporation or any Subsidiary, (ii) willful engagement
by such Optionee in conduct which is materially and demonstrably injurious to
the Corporation or any Subsidiary, (iii) the commission of an act of fraud,
subversion, misappropriate or embezzlement by such Optionee or (iv) a conviction
of, or a plea of nolo contendere or a quality plea or confession by, such
Optionee to an act of fraud, subversion, misappropriation, or embezzlement or to
a felony; provided, however, that if such Optionee is a party to an Employment
Agreement, the definition of Cause provided for in such Employment Agreement
shall apply.
(e) "CEO" means the Chief Executive Officer, if there are two, both
Chief Executive Officers, of the Corporation.
1
<PAGE>
(f) "Change in Control" means prior to a Public Offering, (i) the sale
or transfer of all or substantially all of the assets of the Corporation,
whether in one transaction or in a series of related transactions, except a sale
or transfer to a successor corporation in which the holders of the fully-diluted
common stock of the Corporation immediately prior to the transaction hold,
directly or indirectly, more than 50% of the total voting power of the successor
corporation immediately after the transaction; (ii) any merger or consolidation
between the Corporation and another corporation, except a merger or
consolidation immediately after which the ML Investors hold, directly and/or
indirectly, more than 50% of the total voting power of the surviving
corporation; or (iii) a sale by the ML Investors of their shares of Stock which
results in the ML Investors ceasing to own, in the aggregate, directly and/or
indirectly, more than 50% of the Stock, calculated on a fully diluted basis,
assuming the vesting of unvested options.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(h) "Committee" means the Compensation Committee of the Board, or any
other committee the Board may subsequently appoint to administer the Plan. The
Committee shall be composed entirely of directors who meet the qualifications
referred to in Section 5 of the Plan. If at any time no Committee shall be in
office, then the functions of the Committee specified in the Plan shall be
exercised by the Board.
(i) "Consulting Agreement" means any consulting, personal service,
advisory or other agreement between the Corporation or any of its Subsidiaries
and any Optionee, the terms of which have been approved by the Committee as a
Consulting Agreement for purposes of the Plan. For purposes of the Plan,
termination of a Consulting Agreement pursuant to the terms thereof shall be
deemed a termination of such Optionee's employment.
(j) "Corporation" means US Foodservice Inc. a corporation organized
under the laws of the State of Delaware (or any successor corporation).
(k) "Disability" means the permanent inability of an Optionee to
perform substantially his duties and responsibilities to the Corporation or any
Subsidiary by reason of a physical or mental disability or infirmity (i) for a
continuous period of six months or (ii) at such earlier time as the Optionee, at
his option, submits satisfactory medical evidence that he has a physical or
mental disability or infirmity which will likely prevent him from returning to
the performance of his work duties for six months or longer. The date of such
disability shall be on the last day of such six-month period or the day on which
the Optionee submits such satisfactory medical evidence, as the case may be.
2
<PAGE>
(l) "Disinterested Persons" shall have the meaning set forth in Rule
16B-3(c)(2)(i) as promulgate by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, or any successor definition adopted by the
Commission.
(m) "EBIT" means the consolidated earnings before interest and income
taxes from the continuing operations of the Corporation, excluding any
extraordinary gains and losses and the effects of any adjustments resulting from
the application of Accounting Principles Board Opinion Numbers 16, 17 and 25.
(n) "EBIT Value" means (i)(a) the product of (x) 8.0 and y EBIT for
the four consecutive quarters ending on the Fiscal Date minus (b) Indebtedness
on the Fiscal Date plus (c) on a consolidated basis, the Corporation's aggregate
cash and cash equivalents on the Fiscal Date divided by (ii) the total number
shares of Stock, calculated on a fully diluted basis, assuming the vesting of
all unvested options, outstanding on the Fiscal Date.
(o) "Eligible Director" means any director of the Corporation or any
of its Subsidiaries.
(p) "Employee" means any employee or officer of the Corporation or any
of its Subsidiaries or any person party to a Consulting Agreement, provided that
bona fide services shall be rendered by any consultant or adviser and such
services are not in connection with the offer and sale of securities in a
capital-raising transaction, and provided, further, that the term Employee shall
not include a director of the Corporation or any Subsidiary in his capacity as
such, but shall include a director of the Corporation or a Subsidiary who is
otherwise employed by the Corporation or a Subsidiary.
(q) "Employment Agreement" means any employment agreement entered into
between the Corporation or any of its direct or indirect Subsidiaries which each
of Frank H. Bevevino, Thomas G. McMullen and David F. McAnally, as the same may
be amended from time to time.
(r) "Fair Market Value" means the fair market value of the Stock as
determined by the Committee in good faith; provided, however, that (A) if the
Stock is admitted to trading on a national securities exchange, Fair Market
Value on any date shall be the last sale price reported for the Stock on such
exchange on such date or on the last date preceding such date on which a sale
was reported, (B) if the Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or other
comparable quotation systems and has been designated as a National Market System
("NMS") security, Fair Market Value on any date shall be the last sale price
reported for the Stock on such system on such date or on the last day preceding
such date on which a sale was reported, or (C) if the Stock is admitted to
quotation on NASDAQ and has not been
3
<PAGE>
designated as NMS Security, Fair Market Value on any date shall be the average
of the highest bid and lowest asked prices of the Stock on such system on such
date.
(s) "Fiscal Date" means the last day of the last fiscal quarter
completed prior to the date of termination of the relevant Optionee.
(t) "GAAP" means Generally Accepted Accounting Principles, as in
effect on the date hereof, applied on a consistent basis.
(u) "Good Reason" means (i) a reduction, without the consent of the
Optionee, in the Optionee's base or aggregate compensation, other than an
across-the-board reduction in the compensation of substantially all similarly
situated employees of the Corporation and its Subsidiaries, including any
Company Notes (ii) a material reduction in the Optionee's responsibilities with
the Corporation or a change in the Optionee's title to one of lesser status, or
(iii) such other events of hardship as the Board shall determine on a case by
case basis; provided, however, that if such Optionee is a party to an Employment
Agreement, the definition of Good Reason provided for in such Employment
Agreement shall apply.
(v) "Indebtedness" means, as calculated by the Corporation on a
consolidated basis, (A) the sum of (i) all indebtedness for borrowed money,
including capitalized leases, (ii) the liquidation preference value (including
for the avoidance of doubt, accrued dividends) of all the outstanding preferred
stock of the Corporation and its Subsidiaries, and (iii) accrued interest
expense, minus (B) the proceeds (whether in cash or through conversion of
indebtedness) to the Corporation that would result from the exercise of all
outstanding warrants, all vested and unvested options to purchase shares of
Stock (assuming that all options are vested) and all rights to convert one
security into or exchange one security for shares of Stock; such difference
being either increased by the amount by which (excluding the effects of any
acquisitions or divestitures during the most recently completed four fiscal
quarters by the Corporation or any Subsidiary of a business as a going concern)
Average Four Quarter Net Working Capital exceeds the Net Working Capital for the
Corporation's most recent fiscal quarter, or decreased by the amount by which
(excluding the effects of any acquisitions or divestitures during the most
recently completed four fiscal quarters by the Corporation or any Subsidiary of
a business as a going concern) the Net Working Capital for the Corporation's
most recent fiscal quarter exceeds the Average Four Quarter Net Working Capital.
(w) "Involuntary Termination" means termination by the Corporation or
a Subsidiary of an Optionee's employment.
4
<PAGE>
(x) "ML Investors" means Merrill Lynch Capital Appreciation
Partnership No. B-XVIII, L.P. ("MLCAP"), a Delaware limited partnership, ML
Offshore LBO Partnership No. B-XVIII ("Offshore"), a Cayman Island limited
partnership, MLIBK Positions, Inc. ("MLIBK Positions"), a Delaware corporation,
MLCP Associates L.P. No. II ("MLCP Associates"), a Delaware limited partnership,
Merrill Lynch Capital Appreciation Partnership No. XIII, L.P., ("MLCAP XIII"), a
Delaware limited partnership, ML Offshore LBO Partnership No. XIII ("Offshore
XIII"), a Cayman Islands partnership, ML Employees LBO Partnership No. I, L.P.
("LBO Employees"), a Delaware limited partnership, Merrill Lynch Interfunding,
Inc. ("Interfunding"), a Delaware corporation, Merrill Lynch KECALP, L.P. 1987
("KECALP"), a Delaware limited partnership, and Merchant Banking L.P. No. II
("Merchant L.P."), a Delaware limited partnership, any Affiliate or limited
partner or stockholder of MLCAP, Offshore, MLIBK Positions, MICP Associates,
MLCAP XIII, Offshore XIII, LBO Employees, Interfunding, KECALP and Merchant
L.P., any Affiliate of Merrill Lynch & Co., Inc. ("ML&Co."), any employee of any
Affiliate of any of MLCAP, Offshore, MLIBK Positions, MLCP Associates, MLCAP
XIII, Offshore XIII, LBO Employees, KECALP or Merchant L.P., any employee of
ML&Co., any employee of the Corporation or any of its subsidiaries or any
Affiliate of ML&Co.
(y) "Net Working Capital" means (i) (x) current assets of the
Corporation minus (y) current liabilities of the corporation plus (ii) accrued
interest expense of the Corporation.
(z) "Non-employee Director" means an Eligible Director who is not an
Employee on the date of grant of the relevant Option.
(aa) "Option" means any option to purchase shares of Stock granted
pursuant to Section 7.
(bb) "Option EBT" means the quotient of (i) (x) EBIT minus (y) the
product of (A) Indebtedness and (B) 0.103 and (ii) the total number of shares of
Stock, calculated on a fully diluted basis, assuming the vesting of all unvested
options; provided however, that in calculating Option EBT for purposes of fiscal
year 1993 the acquisition of WS Holdings Corporation, a Delaware corporation, by
the Corporation shall be considered to have occurred on the first day of the
fiscal year 1994 and there shall be excluded any adjustments resulting from the
acquisition of WS Holdings Corporation by the Corporation."
(cc) (y) "Option EBIT" means the quotient of (x) EBIT and (y) the
total number of shares of Stock, calculated on a fully diluted basis, assuming
the vesting of all unvested options; provided however, that in calculating
Option EBIT for purposes of fiscal year 1993 the acquisition of WS Holdings
Corporation, a Delaware corporation by the Corporation shall be considered to
have occurred on the first day of the fiscal year
5
<PAGE>
1994 and there shall be excluded any adjustments resulting from the acquisition
of WS Holdings Corporation by the Corporation.
(dd) "Optionee" means a person to whom an Option has been granted
under the Plan.
(ee) "Person" means any corporation, association, partnership, joint
venture, organization, business, individual, trust or any other entity or
organization, including a government or any subdivision or agency thereof.
(ff) "Plan" means the Corporation's 1992 Stock Option Plan.
(gg) "Public Offering" means an underwritten public offering of the
Stock pursuant to an effective registration statement under the Securities Act
at the conclusion of which the aggregate number of shares of Stock that have
been sold to the public pursuant to one or more effective registration
statements under the Securities Act equals at least 12.5% of the shares of Stock
then outstanding.
(hh) "Retirement" means, with respect to any Optionee, the Optionee's
retirement as an employee of the Corporation or a Subsidiary under the
Corporation's or such Subsidiary's retirement plan, as the case may be.
(ii) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
(jj) "Spread" means the difference between EBIT Value on the relevant
Fiscal Date and the exercise price per share pursuant to an Option except that
(A) in the case of a Normal Option held by a person whose termination of
employment is the result of a Voluntary Termination without Good Reason after
the time such Normal Option becomes exercisable the Spread shall mean an amount
equal to the difference between (x) the lesser of (a) $3.04 and (b) EBIT Value
on the relevant Fiscal Date and (y) $.01 and (B) in the case of a Change in
Control, the Spread shall mean the difference between the fair market value of
the per share consideration received by the Corporation and the relevant holders
of Stock (such fair market value and other matters being as determined by the
Committee in good faith) and the exercise price per share pursuant to the
Option. If EBIT Value is less than the Exercise Price then the spread shall
equal $0.
(kk) "Stock" means the common stock, $0.01 par value, of the
Corporation.
(ll) "Stockholders Agreement" means the Stockholders Agreement, dated
as of the date this plan becomes effective, among the Corporation, Merrill Lynch
Capital Appreciation Partnership No. B-XVIII, L.P., a Delaware limited
partnership, ML Offshore LBO Partnership No. B-XVIII, a Cayman Islands limited
6
<PAGE>
partnership, MLIBK Positions, Inc., a Delaware corporation, MLCP Associates L.P.
No. II, a Delaware limited partnership, Clipper Unifax L.P., a Delaware limited
partnership, the Persons listed on Exhibit A thereto and such other Persons who
become parties to such Agreement pursuant to the terms and provisions contained
therein, as amended and restated from time to time.
(mm) "Subsidiary" means any corporation, partnership, joint venture or
other entity of which the Corporation owns, directly or indirectly, a majority
of the capital stock, is a general partner or which it controls.
(nn) "Unifax" means Unifax, Inc., a Delaware corporation.
(oo) "Voluntary Termination" means the voluntary termination by an
Optionee of his employment with the Corporation or a Subsidiary by voluntary
resignation or any other means (i) other than because of such Optionee's
Retirement, Disability or death, or (ii) other than simultaneously with or
following termination for Cause or the occurrence of an event which if know to
the Corporation or such Subsidiary at the time of such voluntary termination by
the Optionee of his employment would constitute cause.
Section 3. Option Shares. (a) The shares of Stock which may be made
subject to Options granted pursuant to this Plan shall be no more than a total
of 1,541,181 shares of Stock except as such number may be adjusted as provided
in Section 15. Any shares of Stock remaining unissued at the termination of
this Plan shall cease to be reserved for the purpose of the Plan, but until
termination of the Plan, the Corporation shall at all times reserve a sufficient
number of shares of Stock to meet the requirements of the Plan.
(b) Whenever any outstanding Option or portion thereof expires, is
cancelled or is otherwise terminated (other than by exercise of the Option or
such portion thereof or payment of the Spread) (collectively, an "Event"),
Options (the "Regranted Options") relating to the number of shares of Stock
allocable to the unexercised portion of such Option and the portion, if any, of
such Options as to which the Spread was payable shall be granted to the
Management Investors (as defined in the Stockholders Agreement) and such other
members of the Corporation's management as shall be jointly selected by the CEO
and the Committee in such manner as the CEO and the Committee shall jointly
decide (the "New Acquirors") within the twelve month period (or such longer time
as may be agreed to by the CEO) following the date of the Event; provided,
however, that, if the CEO and the Committee cannot agree as to the identity of
the New Acquirors, then the Regranted Options shall be granted pro rata to those
stockholders of the Corporation that are Employees on the date of grant in
relation to their then current holdings of Stock within 30 days following the
end of such twelve month
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period. Notwithstanding the provisions of Section 8 hereof, the exercise price
under each Regranted Option shall, if granted prior to a Public Offering, be the
EBIT Value with respect to the date of the relevant Event and, if granted after
a Public Offering, be Fair Market Value.
Section 4. Effective Date of Plan. The Plan shall take effect upon its
adoption by the Board, provided that it is approved by the stockholders of the
Corporation within twelve (12) months after the date of its adoption by the
Board.
Section 5. Administration of the Plan. The Plan shall be administered
by the Board or by the Committee composed of not less than three Disinterested
Persons, provided that if three Disinterested Persons are not available then the
Plan shall be administered by the Board or such other committee as determined by
the Board. The Board may authorize the Committee to exercise any and all of the
powers and functions of the Board pursuant to the Plan. The interpretation and
construction by the Committee or the Board of any provisions of the Plan or of
any Options granted under it shall be final and conclusive. No member of the
Committee or of the Board shall be personally liable for any action or
determination made in good faith with respect to the Plan or any Options granted
under it.
Section 6. Eligibility. The persons eligible to participate in the
Plan as recipients of Options shall include only Employees and Eligible
Directors.
Section 7. Grant of Options. The Corporation, by action of the
Committee and subject to the provisions of this Plan, may, from time to time,
grant Options to purchase shares of Stock to such Employees and Eligible
Directors as may be selected by the Committee and for such number or numbers of
shares of Stock as may be determined by the Committee. Options to be granted
pursuant to this Plan are intended to not qualify as "incentive stock options"
within the meaning of Section 422 of the Code by are intended to constitute non-
qualified stock options. Each grant of an Option pursuant to this Plan shall be
made in writing and upon such terms and conditions as may be determined by the
Committee at the time of grant, subject to the provisions and limitations set
forth in this Plan. The grant of such Option shall be evidenced by written
notice executed by the proper officer of the Corporation so long as such officer
is not the recipient of the Option.
Section 8. Option Price. The purchase price for each share of Stock
placed under Option pursuant to this Plan (hereinafter called the "Option
Price") shall be determined by the Committee on the date of grant but unless the
Board otherwise determines in its discretion, shall be not less than 100% of the
Fair Market Value of the Stock on such date; provided, however, that (I) the
grant of a Normal Option (as defined below) shall provide that the Option Price
shall be $.01 and (ii) the Option
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Price for Regranted Options shall be set as provided for in Section 3(b).
Section 9. Exercisability of Options. Subject to Section 11 hereof, an
Option granted pursuant to this Plan may be exercised only within the time
limits and subject to the terms prescribed by the Committee in the grant of the
particular Option. Options for 209,507 shares of Stock ("Normal Options") shall
be exercisable only upon the occurrence of certain events. Options of 1,331,674
shares of stock ("Performance Options") will become exercisable upon the
occurrence of certain events to the extent that certain performance targets set
forth therein are attained. The Committee will designate each Option as a
Normal Option or Performance Option at the time of grant.
Section 10. Procedure for Exercise and Payment for Shares. (a)
Exercise of an Option shall be made by the giving of written notice to the
Corporation by the Optionee. Such written notice shall be deemed sufficient for
this purpose only if delivered to the Corporation at its principal office and
only if such written notice states the number of shares of Stock. Payment upon
the exercise of an Option, if payment is due, shall be made in full at the time
the Option is exercised by delivery of such payment to the Corporation at the
principal offices of the Corporation. Upon the exercise of any Option, in
compliance with the provisions of this Section and (except as otherwise provided
in Section 12) upon receipt by the Corporation of the payment of the Stock so
purchased together with the payment of the amount of any taxes required to be
collected or withheld as a result of the exercise of this Option, the
Corporation shall deliver or cause to be delivered to the Optionee so exercising
an Option either a certificate or certificates for the number of shares of Stock
with respect to which the Option is so exercised and payment is so made or the
Spread as provided by Section 12. The shares of Stock shall be registered in
the name of the exercising Employee, provided that, in no event, shall any
shares of Stock be issued pursuant to exercise of an Option until full payment
therefor shall have been made by cash or certified or bank cashier's check.
Until the shares of Stock have been issued, the exercising Optionee shall not
have any of the rights of a shareholder of the Corporation with respect to such
shares of Stock. For purposes of this Section, the date of issuance shall be
the date upon which payment in full has been received by the Corporation as
provided herein.
(b) Capitalized terms used in this Section 10(b) have the meaning
specified in the Stockholders Agreement unless otherwise defined herein. The
Stockholders Agreement shall be subject to amendment from time to time in
accordance with the provisions of the Stockholders Agreement and the Optionees'
approval shall not be required in connection with any amendment of the
Stockholders Agreement. In the event that (i) any Option shall have become
exercisable or shall become exercisable in connection with the transaction to
which the Inclusion Notice
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relates, (ii) the provisions of Section 6.1 of the Stockholders Agreement shall
still be in effect, (iii) there shall have been delivered to the Corporation an
Inclusion Notice, the Corporation shall deliver a copy of such inclusion Notice
to each holder of such an exercisable Option ("Eligible Optionee") within 5
calendar days of the date the Inclusion Notice is deemed to be given under the
Stockholders Agreement. An Eligible Optionee that gives written notice of (A)
exercise of such Option and (B) acceptance of the Third Party Offer to both the
Corporation and the Transferor within 10 days of the date the Inclusion Notice
is deemed to be given under the Stockholders Agreement shall be deemed to be an
Offeree under the Stockholders Agreement, provided, however that the Eligible
Optionee's rights under this sentence shall terminate upon payment of the Spread
pursuant to Section 12. Payment with respect to Options exercised pursuant to
this Section 10(b) shall be made upon the date of consummation of the Third
Party Offer, but otherwise in accordance with the provisions of Section 10(a),
except that the Transferor may require the Corporation to issue any certificates
issued with respect to the exercise of the such Option to the Third Party or its
designee.
Section 11. Duration of Options. The period for which each Option granted
hereunder shall be effective shall commence upon the date of the grant of the
Option and shall continue until such Option shall be terminated according to its
terms or as hereinafter provided, but in no event shall such period exceed ten
(10) years and one (1) day (the "Option Period"). In addition to and in
limitation of the above, the Option Period of any Option granted to an Employee
or Eligible Director pursuant to this Plan shall terminate as follows:
(a) If (x) the Optionee's employment is terminated due to (i) such
Optionee's death, Disability, Retirement, Involuntary Termination without Cause,
or Voluntary Termination with Good Reason or (ii) termination of a Consulting
Agreement other than for cause (as defined in the relevant Consulting Agreement)
or (y) the Optionee is a Non-employee Director and is removed as a director
without cause; and a Public Offering has not occurred prior to such termination,
the Option (to the extent exercisable at the time of the Optionee's termination
of employment) shall be exercisable by the Optionee or the Optionee's personal
representative but only upon (A) the death of the Optionee or (B) the
incompetency of the Optionee for purposes of protection and management of the
Optionee's assets, (a "Personal Representative") for a period of six (6) months
following such termination of employment, and shall thereafter terminate;
(b) If (x) the Optionee's employment is terminated due to (i) such
Optionee's death, Disability, Retirement, Involuntary Termination without Cause
or Voluntary Termination with Good Reason or (ii) termination of a Consulting
Agreement other than for cause (as defined in the relevant Consulting Agreement)
or (y) the Optionee is a Non-employee Director and is removed as a
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director without cause; and a Public Offering has occurred prior to such
termination, the Option (to the extent exercisable at the time of the Optionee's
termination of employment) shall be exercisable by the Optionee or the
Optionee's Personal Representative, for a period of one (1) year following such
termination of employment, and shall thereafter terminate; and
(c) If (x) the Optionee's employment is terminated due to (i) such
Optionee's Voluntary Termination without Good Reason or Involuntary Termination
with Cause or (ii) termination of a Consulting Agreement by the Company for
cause (as defined in the relevant Consulting Agreement) or by the Optionee
voluntarily without cause (as defined in the relevant Consulting Agreement) or
(y) the Optionee is a Non-employee Director and is removed as a director with
cause or voluntarily resigns as a director, the Option shall terminate on the
date of the Optionee's termination of employment or, in the case of such Non-
employee Director, the date he ceases to be a director, except that (A) with
respect to Optionees who are Persons identified on Schedule 2 to the
Stockholders Agreement, the Option (to the extent exercisable at the time of the
Optionee's termination of employment) shall be exercisable by the Optionee or
the Optionee's Personal Representative for a period of six months following such
termination of employment, and shall thereafter terminate, and (B) if, in the
case of Performance Options, following the first to occur of the closing of a
Public Offering, a Change in Control or the fifth anniversary of the grant of
the relevant Option or, in the case of a Normal Option, the date the Option
first becomes exercisable, the Optionee's employment is terminated due to such
Optionee's Voluntary Termination without Good Reasons, then the Option (to the
extent exercisable at the time of the Optionee's termination of employment)
shall be exercisable by the Optionee or the Optionee's Personal Representative
for a period of three (3) months following such termination of employment and
shall thereafter terminate.
(d) In the event of a Change in Control, the Corporation may elect to
pay the Optionee the Spread on such date and, upon payment thereof by the
Corporation, the Option shall terminate.
To the extent any Option is not exercisable at the time of (x) the
Optionee's termination of employment (for whatever reason), or (y) a Non-
employee Director ceasing to be an Eligible Director, such Option shall
terminate on the date of the Optionee's termination of employment.
Notwithstanding the foregoing, the Committee may provide, either at
the time an Option is granted or thereafter, that the Option may be exercised
after the periods provided for in this Section 11, but in no event beyond the
term of the Option.
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Nothing contained herein shall limit whatever right the Corporation or
its Subsidiaries might otherwise have to terminate the employment of any
Employee.
Successive Options may be granted to the same Employee whether or not
the Option or Options first granted to such Employee remain unexercised.
Section 12. Payment of the Spread. In the event that (x) an Optionee
that is an Employee ceases to be employed by the Corporation or any Subsidiary
or (y) a Non-employee Director ceases to be a director of the Corporation or a
Subsidiary:
(a) If an Optionee's termination of employment or ceasing to be a
director, is due to such Optionee's death, Disability or Retirement, the
Corporation (x) shall, if requested by the Optionee or the Optionee's Personal
Representative, or (y) may elect to, pay to the Optionee or the Optionee's
Personal Representative, an amount equal to the Spread times the number of
shares of Stock allocable to the vested portion of the Option (to the extent
exercisable at the time of the Optionee's termination of employment), except
that this subsection (a) shall not apply to Optionees who are Persons identified
on Schedule 2 to the Stockholders Agreement; and
(b) If (x) the employment of an Optionee that is an Employee
terminates due to such Optionee's (A) Involuntary Termination without Cause, (B)
Voluntary Termination without Good Reason, (C) Voluntary Termination with Good
Reason, (D) Consulting Agreement terminating (other than for cause as provided
therein) or (y) an Optionee that is a Non-employee Director ceases to be a
director due to such Optionee's (i) removal as a Director without cause or (ii)
resignation as a director under circumstances that would permit his removal for
cause; the Corporation shall have the right, but not the obligation, to pay to
the Optionee an amount equal to the Spread times the number of shares of Stock
allocable to the vested portion of the Option (to the extent exercisable at the
time of the Optionee's termination of employment or ceasing to be a director),
except that this subscription (b) shall not apply to Optionees who are Persons
identified on Schedule 2 to the Stockholders Agreement.
(c) In the event of a Change in Control, the Corporation shall have
the right, but not the obligation, to pay the Optionee an amount equal to the
Spread times the number of shares of Stock allocable to the vested portion of
the Option (to the extent exercisable at the time of the Change in Control,
assuming, for the avoidance of doubt, that such Change in Control had occurred).
No amount shall be payable to any Optionee pursuant to this Section 12
if (x) the employment of an Optionee that is an Employee terminates due to (i)
his Involuntary Termination with
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Cause or (ii) the termination of his Consulting Agreement for cause (as defined
therein) or (y) a Non-employee Director is removed as a director for cause or
resigns under circumstances that would permit his removal for cause. Any amount
required to be paid pursuant to Section 12(a), 12(b), or 12(c), shall be paid
within sixty (60) days of the Optionee's termination of employment or the date
of the Change in Control, as the case may be. To the extent the Corporation
pays the Optionee the Spread for any Option, such Option shall be cancelled to
the extent of the number of shares of Stock as to which the Spread has been
paid.
Notwithstanding anything to the contrary set forth herein, the
Corporation may defer payment of the Spread if it elects or is required to pay
the Spread pursuant to this Section 12 to the extent: (i) such payment would
violate or conflict with any statute, rule, injunction, regulation, order,
judgment or decree applicable to the Corporation or by which it or any of its
properties may be bound or affected; (ii) such payment would result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of the
Corporation or any Subsidiary pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Corporation or any Subsidiary is a party or by which the
Corporation or any Subsidiary or any of their properties is bound or affected;
or (iii) in the ordinary course such payment would be made out of the proceeds
of a loan, dividend or other payment to the Corporation by one of its
Subsidiaries and the making of such payments or loans or payment of such
dividend would result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of the Corporation or a Subsidiary pursuant to any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Corporation or any
Subsidiary is a party or by which the Corporation or any Subsidiary or any of
their properties is bound or affected; or (iii) in the ordinary course such
payment would be made out of the proceeds of a loan, dividend or other payment
to the Corporation by one of its Subsidiaries and the making of such payments or
loans or payment of such dividend would result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of the Corporation or a Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other
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instrument or obligation to which the Corporation or a Subsidiary is a party or
by which the Corporation or a Subsidiary or any of its properties is bound or
affected (each event, a "Conflict"). In the event of a Conflict, the obligation
of the Corporation to pay the Spread shall be suspended for the duration of such
Conflict and such obligation shall resume upon termination of such Conflict;
provided, however, that (a) the Corporation shall be required to make such
payment upon termination of such Conflict; (b) the Corporation shall use its
reasonable best efforts to obtain the consent, approval, authorization or permit
of the payment of the Spread without the occurrence of such Conflict; and (c)
all rights hereunder enjoyed by the Optionee on and as of the date on which such
payment would have been made but for such conflict shall be preserved and shall
not be altered, reduced or adversely affected by such Conflict, provided
further, however, that the proviso set forth in this subparagraph (c) shall not
be construed to create, add to or supplement any rights not otherwise enjoyed by
the Optionee on an as of such date and no additional Options of such Optionee
shall become vested subsequent to such date.
The Corporation may elect to pay a portion, not to exceed such percentage as
may be required to avoid the occurrence of a Conflict, of the Spread in the form
of an unsecured junior subordinated promissory note made by the Corporation and
payable to the stockholder (a "Company Note") or in other securities of the
Corporation. Each Company Note will mature on the later to occur of the second
anniversary of the date such Company Note was issued and the date payment of
such Company Note will not give rise to a Conflict. Each Company Note will bear
interest at a rate equal to the lower or (i) 7% per annum of (ii) the average
time weighted reference rate of The Chase Manhattan Bank, N.A. Such interest
shall be paid annually; provided, however, that if payment of such interest
would give rise to a Conflict, it shall accrue and shall not be paid until such
time as payment of it would not give rise to a Conflict.
Section 13. Non-Transferability. No Option granted pursuant to this
Plan may be transferred by the Optionee except to the Personal Representative of
a deceased Optionee, and further, during the lifetime of the Optionee, the
Option may be exercised only by such Optionee or such Optionee's Personal
Representative.
Section 14. Requirements of Law and of Certain Agreements. If any law,
regulation or interpretation of any commission or agency having jurisdiction
shall require the Corporation or the exercising Optionee to take any action with
respect to the shares of Stock acquired by the exercise of an Option, then the
date upon which the Corporation shall issue or cause to be issued the
certificate or certificates of the shares of Stock shall be postponed until full
compliance has been made with all such requirements of law, regulation or
interpretation,
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provided, that the Corporation shall use its reasonable best efforts to fully
comply with such requirements of law, regulation or interpretation; provided,
further, that all rights hereunder enjoyed by the Optionee on and as of the date
on which such certificates would have been issued but for the lack of such
compliance shall be preserved and shall not be altered, reduced or adversely
affected by any such lack of compliance; and provided, further, however, that
the immediately preceding proviso shall not be construed to create, add to or
supplement any rights not otherwise enjoyed by the Optionee on and as of such
date and no additional Options of such Optionee shall become vested subsequent
to such date. Further, if requested by the Corporation, at or before the time
of the issuance of the shares of Stock with respect to which exercise of an
Option has been made, the exercising Optionee shall deliver to the Corporation
such Optionee's written statement satisfactory in form and content to the
Corporation, that such Optionee intends to hold the shares of Stock so acquired
by such Optionee on exercise of such Optionee's Option, for investment and not
with a view to resale or other distribution thereof to the public in violation
of the Securities Act. Moreover, in the event that the Corporation shall
determine that, in compliance with the Securities Act or other applicable
statutes or regulations, it is necessary to register any of the shares of Stock
with respect to which an exercise of an Option has been made, or to qualify any
such shares of Stock for exemption from any of the requirements of the
Securities Act or any other applicable statute or regulation, no shares of Stock
shall be issued to the exercising Optionee until the required action has been
completed; provided, that all rights hereunder and under the Plan enjoyed by the
Optionee on and as of the date on which such Options would have been exercised
or shares of Stock issued, as the case may be, but for such required action not
having been taken shall be preserved and shall not be altered, reduced or
adversely affected by the failure to take any such required action; and
provided, further, however, that the preceding proviso shall not be construed to
create, add to or supplement any rights not otherwise enjoyed by the Optionee on
and as of such date and not additional Options of such Optionee shall become
vested subsequent to such date. The terms of the grant of any Option shall
require the Optionee to agree to be bound by the terms and conditions of, and to
execute a joinder agreement to, the Stockholders Agreement, to the extent then
applicable, with respect to the shares of Stock deliverable as a result of such
exercise, whether such Optionee is a party thereto or not, as fully as if such
Optionee were a party thereto.
Section 15. Adjustments. In the event of the declaration of any stock
dividend on the stock or in the event of any reorganization, merger,
consolidation, acquisition, separation, recapitalization, reclassification,
split-up, combination or exchange of the Stock or like adjustment, the number of
shares of Stock and the class of shares of stock available pursuant to this
Plan, the performance targets applicable to Performance Options,
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and the number and class of shares of Stock subject to any Option granted
pursuant to this Plan, and the Option Prices, shall be adjusted by appropriate
change in this Plan and in any Options outstanding pursuant to this Plan. Any
such adjustments to the Plan or to Options or Option Prices shall be made by
action of the Board in good faith, whose good faith determination shall be
conclusive.
Section 16. Amendment or Discontinuance of the Plan. The Board may,
insofar as permitted by law, amend, suspend, or discontinue this Plan at any
time without restriction, provided however, that the Board may not alter or
amend or discontinue or revoke or otherwise impair any outstanding Options which
have been granted pursuant to this Plan and which remain unexercised, except (i)
with respect to amendments affecting all Options (vested and unvested), with the
consent of the holders of vested Options representing the right to purchase a
majority of the total number of shares of Stock subject to Options which are
vested; provided, however, that if no Options are vested then the requisite
consent shall be the consent of holders of unvested Options representing the
right to purchase a majority of the total number of shares of Stock subject to
Options which are unvested, (ii) with respect to amendments affecting only
Performance Options (vested and unvested) or Normal Options (vested and
unvested), with the consent of the holders of vested Normal Options or vested
Performance Options, as the case may be, representing the right to purchase a
majority of the total number of shares of Stock subject to Normal Options which
are vested or Performance Options which are vested, as the case may be;
provided, however, that if none of the Performance Options are vested then the
requisite consent shall be the consent of the holders of unvested Performance
Options, representing the right to purchase a majority of the total number of
shares of Stock subject to Performance Options which are unvested, (iii) in the
event of a merger, reorganization, or other adjustment referred to in Section 15
above, or (iv) with the written consent of the holder of the outstanding Option
proposed to be altered or amended. The Board may not, without the approval of
the stockholders of the Corporation amend, alter or revise the Plan to change
the number of shares of Stock subject to the Plan, change the description of the
class of employees eligible to receive Options or decrease the price at which
Options may be granted except as provided in Section 15. The Option Period of
any outstanding Option shall be extended by any amendment or suspension or
discontinuance of the Plan. For purposes of this Section 16 a Performance
Option (i) shall be considered vested if it has become exercisable under Section
4(b) of the relevant Performance Option Agreement and (ii) shall be considered
vested to the extent it would be exercisable under Section 4(a) of the relevant
Performance Option Agreement upon the occurrence of any of the events set out in
clauses (v) through (z) inclusive of such Section 4(a).
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Section 17. Liquidation of the Corporation. In the event of the
complete liquidation or dissolution of the Corporation other than as an incident
to a merger, reorganization, or other adjustment referred to in Section 15
above, any Options granted pursuant to this Plan and remaining unexercised shall
be deemed cancelled without regard to or limitation by any other provision of
this Plan.
Section 18. Term of Plan. No Option shall be granted pursuant to the
Plan on or after the tenth anniversary of the date of Board approval, but
Options theretofore granted may be extended beyond that date.
Section 19. Information To Be Provided To Optionees. Within 120 days of
the end of any fiscal year of the Corporation, the Committee shall determine the
Option EBT as of the ending date of such fiscal year and shall provide written
notice of such determination to each Optionee. Promptly upon the occurrence of
any Change of Control or Public Offering, the Committee shall determine and
provide written notice to each Optionee of the fair market value of the per
share consideration received by the Corporation and/or the relevant holders of
the Stock, as the case may be. If either any change in the corporation's fiscal
year or the issuance of equity securities by the Corporation requires an
adjustment to be made to the values set forth in Annex A to the agreement
evidencing the grant of any Option, the Committee shall promptly provide written
notice of any such adjustment to each Optionee and, upon the request of the
holder of the proxy granted pursuant to Section 3.5(a) or 3.5(b)(i) of the
Stockholders Agreement, shall instruct the Corporation's auditors to review such
adjustment, which shall be revised in accordance with the auditors'
determination.
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Exhibit 10.9.1
FORM OF NORMAL OPTION AGREEMENT
AGREEMENT made on ______________, by and between Unifax Holdings, Inc., a
Delaware corporation (the "Company") and ______________ (the "Optionee").
WHEREAS, the Company has adopted the Unifax Holdings, Inc. 1992 Stock
Option Plan (the "Plan"), subject to approval by the stockholders of the
Company; and
WHEREAS, the Company desires to grant to the Optionee options under the
Plan to acquire an aggregate of 1,380.00 shares of the Company's common stock,
par value $.01 per share, (the "Stock") on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Plan.
2. Grant of Option. The Optionee is hereby granted a nonqualified Stock
option (the "Option") to purchase an aggregate of 1,380.00 shares of Stock,
pursuant to the terms of this Agreement and the provisions of the Plan. It is
intended that the Option will not qualify as an "incentive stock option" within
the meaning of Section 422 of the Code.
3. Option Price. The exercise price shall be $.01 per share of Stock
issuable hereunder.
4. Conditions to Exercise. (a) The Option shall not be exercisable until
the first to occur of (v) the ninth anniversary of its grant, (w) a Change in
Control, (x) the first anniversary of a Public Offering, (y) the date of
termination of employment of an Optionee that is an Employee (other than due to
an Involuntary Termination with Cause at any time or Voluntary Termination
without Good Reason or, in the case of an Optionee with a Consulting Agreement,
the termination of the Optionee's Consulting Agreement with cause (as provided
therein) or by the Optionee voluntarily without cause (as provided therein) and
(z) the date the Optionee, if such Optionee is a Non-employee Director, ceases
to be a director of the Company or a Subsidiary (other than due to his removal
for cause or resignation as director of the Corporation or a Subsidiary under
circumstances that would permit his removal for cause). At such time this
Option shall become fully exercisable.
(b) If (x) the employment of an Optionee that is an Employee terminates due
to an Involuntary Termination with Cause at any time or Voluntary Termination
without Good Reason at any
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time prior to the Option otherwise becoming exercisable under Section 4(a)
hereof, or, in the case of an Optionee with a Consulting Agreement, termination
of the Optionee's Consulting Agreement with cause (as provided therein) or by
the Optionee voluntarily without cause (as provided therein) or (y) an Optionee,
if such Optionee is an Eligible Director, ceases to be a director of the Company
or a Subsidiary due to his removal for cause or resignation as a director under
circumstances that would permit his removal for cause; then the Option shall
terminate immediately and may not be exercised, for cash or Stock, to any
extent.
5. Period of Option. Except as otherwise provided in this Agreement, the
Option shall expire ten years from the date of grant or, if earlier, pursuant to
the provisions of Section 11 of the Plan.
6. Exercise of Option. (a) Except as otherwise provided in this
Agreement, the Option shall be exercised as provided in the Plan.
(b) The Company may, in its discretion, require that the Optionee pay
to the Company, at the time of exercise of any portion of the Option, any such
additional amount as the Company deems necessary to satisfy its liability to
withhold federal, state or local income tax or any other taxes incurred by
reason of the exercise or the transfer of shares of Stock thereupon.
(c) If the Plan or any law, regulation or interpretation requires the
Company to take any action regarding the Stock, before the Company issues
certificates for the Stock being purchased, the Company may delay delivering the
certificates for the Stock for the period necessary to take such action,
provided, that all rights hereunder and under the Plan enjoyed by the Optionee
on and as of the date on which such certificates would have been issued but for
such delay shall be preserved and shall not be altered, reduced or adversely
affected by any such delay; provided, further, however, that the foregoing
proviso shall not be construed to create, add to or supplement any rights not
otherwise enjoyed by the Optionee on and as of such date. The certificate or
certificates representing the Stock acquired pursuant to the Option may bear a
legend restricting the transfer of such Stock, and the Company may impose stop
transfer instructions to implement such restrictions, if applicable.
(d) The Optionee will not be deemed to be a holder of any shares of
Stock pursuant to exercise of the Option until the date of the issuance of a
stock certificate to him for such shares of Stock and until the shares of Stock
are paid for in full.
(e) Stock shall not be issued to, or registered in the name of, the
exercising Optionee, unless the Optionee has become
2
<PAGE>
a party to the Stockholders Agreement as a Management Investor by executing a
Joinder Agreement.
(f) Upon the circumstances set out in the Plan the Company may elect
to pay the Spread in lieu of issuing shares of Stock.
7. Representations. (a) The Company represents and warrants that (i)
this Agreement has been authorized by all necessary corporate action of the
Company and is a valid and binding agreement of the Company enforceable against
it in accordance with its terms and (ii) upon issuance of certificates for any
shares of Stock against delivery of full payment therefor, all such shares will
be, at the time of such issuance, duly authorized, validly issued and fully paid
and nonassessable shares of the capital stock of the Company, and, upon delivery
of such certificates to the Optionee, the Optionee will acquire good, valid and
marketable title to such shares free and clear of any adverse lien, claim or
other restriction, other than the restrictions set forth in the Stockholders
Agreement or applicable law and any lien or encumbrance created by the Optionee,
to the extent permitted by the Stockholders Agreement.
(b) The Optionee represents and warrants that he or she is not a party
to any agreement or instrument which would prevent him or her from entering into
or performing his duties in any way under this Agreement.
8. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into by them with respect thereto. The Optionee represents
that, in executing this Agreement, he does not rely and has not relied upon any
representation or statement not set forth herein made by the Company with regard
to the subject matter, bases or effect of this Agreement or otherwise.
9. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing and
signed by the Optionee and by a duly authorized officer of the Company. No
waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
10. Notices. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address
3
<PAGE>
as such party may subsequently give notice of hereunder in writing:
To Optionee at:
________________
________________
Telecopy:
To the Company at:
Unifax Holdings, Inc.
Cross Creek Pointe
1065 Highway 315
Suite 203
Wilkes-Barre, Pennsylvania 18702
Attn: Frank H. Bevevino
Telecopy: (717) 822-0909
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: Thomas H. Kennedy
Telecopy: (212) 735-2000
Any notice delivered personally or by courier under this Section 10 shall
be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
11. Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
12. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
13. Governing Law. This agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
conflicts of laws principles.
14. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience,
4
<PAGE>
and no provision of this Agreement is to be construed by reference to the
heading of any section or paragraph.
15. Construction. This Agreement is made under and subject to the
provisions of the Plan, and all of the provisions of the Plan are hereby
incorporated herein as provisions of this Agreement. If there is a conflict
between the provisions of this Agreement and the provisions of the Plan, the
provisions of the Plan will govern. By signing this Agreement, the Optionee
confirms that he has received a copy of the Plan and has had an opportunity to
review the contents thereof.
16. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
UNIFAX HOLDINGS, INC.
By:__________________________________________
Name: Robert J. Mylod, Jr.
Title: Vice President
_____________________________________________
Optionee
5
<PAGE>
Exhibit 10.9.2
FORM OF PERFORMANCE OPTION AGREEMENT
AGREEMENT made on ________________, by and between Unifax Holdings, Inc., a
Delaware corporation (the "Company") and ______________ (the "Optionee").
WHEREAS, the Company has adopted the Unifax Holdings, Inc. 1992 Stock
Option Plan (the "Plan"), subject to approval by the stockholders of the
Company; and
WHEREAS, the Company desires to grant to the Optionee options under the
Plan to acquire an aggregate of 5,700.00 shares of the Company's common stock,
par value $.01 per share, (the "Stock") on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Plan.
2. Grant of Option. The Optionee is hereby granted a nonqualified stock
option (the "Option") to purchase an aggregate of 5,700.00 shares of Stock,
pursuant to the terms of this Agreement and the provisions of the Plan. It is
intended that the Option will not qualify as an "incentive stock option" within
the meaning of Section 422 of the Code.
3. Option Price. The exercise price shall be $3.04 per share of Stock
issuable hereunder.
4. Conditions to Exercisability. (a) The Option shall not be exercisable
until the first to occur of (v) the ninth anniversary of its grant, (w) a Public
Offering, (x) a Change in Control, (y) the date of termination of employment of
an Optionee that is an Employee (other than due to an Involuntary Termination
with Cause, a Voluntary Termination without Good Reason (prior to a Public
Offering, Change in Control or the fifth anniversary of the date of this
Option), or the termination of the Optionee's Consulting Agreement with cause
(as provided therein) and (z) the date an Optionee that is a Non-employee
Director ceases to be a director of the Corporation or a Subsidiary (other than
due to his removal for cause or resignation as director of the Company or a
Subsidiary under circumstances that would permit his removal for cause) and at
such time shall be exercisable only to the extent that at the end of any
completed fiscal year of the Company set forth on Annex A the Option EBT equaled
or exceeded the amount set forth in the second or third column of Annex A hereto
opposite the ending date of such fiscal year and, in such event, the Option
shall become exercisable to the extent of the percentage of the shares of Stock
covered thereby that is equal
<PAGE>
to the percentage set forth in the fourth or fifth column, respectively, of
Annex A hereto opposite the ending date of such fiscal year.
(b) The Option shall become fully exercisable upon the first to occur
of a Public Offering or a Change in Control prior to the sixth anniversary of
the date hereof if the fair market value of the per share consideration received
by the Company and/or the relevant holders of the Stock, as the case may be
(such fair market value and other matters being as determined by the Committee,
whose good faith determination shall be conclusive) pursuant to such Public
Offering or Change in Control equals or exceeds the amount set forth in Annex B
hereto for the year in which such Public Offering or Change in Control occurred.
(c) If (x) the Optionee's employment terminates due to such Optionee's
Involuntary Termination with Cause, Voluntary Termination without Good Reason
(prior to a Public Offering, Change in Control or the fifth anniversary of the
grant of this Option), or termination by the Company of the Optionee's
Consulting Agreement with cause (as provided therein) or by the Optionee
voluntarily without cause (as defined therein) (prior to a Public Offering,
Change in Control or the fifth anniversary of the grant of the Option) or (y) an
Optionee that is an Eligible Director ceases to be a director of the Company or
a Subsidiary due to his removal for cause or resignation as a director under
circumstances that would permit his removal for cause; then the Option shall
terminate immediately and may not be exercised, for cash or Stock, to any
extent.
If the Option becomes fully exercisable in the event of a Change in
Control or a Public Offering under Section 4(b) then Section 4(a) shall not
apply.
5. Period of Option. Except as otherwise provided in this Agreement, the
Option shall expire ten years from the date of grant or, if earlier, pursuant to
the provisions of Section __ of the Plan.
6. Exercise of Option. (a) Except as otherwise provided in this
Agreement, the Option shall be exercised as provided in the Plan.
(b) The Company may, in its discretion, require that the Optionee pay
to the Company, at the time of exercise of any portion of the Option, any such
additional amount as the Company deems necessary to satisfy its liability to
withhold federal, state or local income tax or any other taxes incurred by
reason of the exercise or the transfer of shares of Stock thereupon.
(c) If the Plan or any law, regulation or interpretation requires the
Company to take any action regarding the Stock, before the Company issues
certificates for the Stock being purchased, the Company may delay delivering the
2
<PAGE>
certificates for the Stock for the period necessary to take such action;
provided, that all rights hereunder and under the Plan enjoyed by the Optionee
on and as of the date on which such certificates would have been issued but for
such delay shall be preserved and shall not be altered, reduced or adversely
affected by any such delay; provided, further, however, that the foregoing
proviso shall not be construed to create, add to or supplement any rights not
otherwise enjoyed by the Optionee on and as of such date and no additional
Options of such Optionee shall become vested subsequent to such date. The
certificate or certificates representing the Stock acquired pursuant to the
Option may bear a legend restricting the transfer of such Stock, and the Company
may impose stop transfer instructions to implement such restrictions, if
applicable.
(d) The Optionee will not be deemed to be a holder of any shares of
Stock pursuant to exercise of the Option until the date of the issuance of a
stock certificate to him for such shares of Stock and until the shares of Stock
are paid for in full.
(e) Stock shall not be issued to, or registered in the name of, the
exercising Optionee, unless the Optionee has become a party to the Stockholders
Agreement as a Management Investor by executing a Joinder Agreement.
(f) Upon the circumstances set out in the Plan, the Company may elect
to pay the Spread in lieu of issuing shares of Stock.
7. Representations. (a) The Company represents and warrants that (i)
this Agreement has been authorized by all necessary corporate action of the
Company and is a valid and binding agreement of the Company enforceable against
it in accordance with its terms and (ii) upon issuance of certificates for any
shares of Stock against delivery of full payment therefor, all such shares will
be, at the time of such issuance, duly authorized, validly issued and fully paid
and nonassessable shares of the capital stock of the Company and, upon delivery
of such certificates to the Optionee, the Optionee will acquire good, valid and
marketable title to such shares free and clear of any adverse lien, claim or
other restriction, other than the restrictions set forth in the Stockholders
Agreement or imposed by applicable law and any lien or encumbrance created by
the Optionee to the extent permitted by the Stockholders Agreement.
(b) The Optionee represents and warrants that he or she is not a party
to any agreement or instrument which would prevent him or her from entering into
or performing his duties in any way under this Agreement.
8. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and
3
<PAGE>
agreements, whether oral or in writing, previously entered into by them with
respect thereto. The Optionee represents that, in executing this Agreement, he
does not rely and has not relied upon any representation or statement not set
forth herein made by the Company with regard to the subject matter, bases or
effect of this Agreement or otherwise.
9. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing and
signed by the Optionee and by a duly authorized officer of the Company. No
waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
10. Notices. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To the Optionee at:
---------------------------
---------------------------
Telecopy:
To the Company at:
Unifax Holdings, Inc.
Cross Creek Pointe
1065 Highway 315
Suite 203
Wilkes-Barre, Pennsylvania 18702
Attn: Frank H. Bevevino
Telecopy: (717) 822-0909
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: Thomas H. Kennedy
Telecopy: (212) 735-2000
Any notice delivered personally or by courier under this Section 10 shall
be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
4
<PAGE>
11. Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
12. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
13. Governing Law. This agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
conflicts of laws principles.
14. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
15. Construction. This Agreement is made under and subject to the
provisions of the Plan, and all of the provisions of the Plan are hereby
incorporated herein as provisions of this Agreement. If there is a conflict
between the provisions of this Agreement and the provisions of the Plan, the
provisions of the Plan will govern. By signing this Agreement, the Optionee
confirms that he has received a copy of the Plan and has had an opportunity to
review the contents thereof.
16. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
UNIFAX HOLDINGS, INC.
By:
--------------------------
Name:
Title: Vice President
-----------------------------
Optionee
5
<PAGE>
Annex A
To Performance
Option Agreement
<TABLE>
<CAPTION>
Annual Cumulative % Vest % Vest
Year Option EBT Option EBT Annual Cumulative
- ---- ---------- ---------- ------ ----------
<S> <C> <C> <C> <C>
1992 $10,481 $ 10,481 20% 20%
1993 $15,366 $ 25,847 20% 40%
1994 $19,560 $ 45,407 20% 60%
1995 $22,638 $ 68,045 20% 80%
1996 $25,510 $ 93,555 20% 100%
1997 -- $121,402 -- 100%
</TABLE>
6
<PAGE>
Annex B
To Performance
Option Agreement
<TABLE>
<CAPTION>
Per Share
Year Consideration
---- -------------
<S> <C>
1993 $4.11
1994 $5.36
1995 $6.29
1996 $7.16
1997 $7.87
</TABLE>
7
<PAGE>
Exhibit 10.10
US FOODSERVICE INC.
1993 STOCK OPTION PLAN
Section 1. Purpose. The purpose of this Plan is to further the best
interests of US Foodservice Inc. and its Subsidiaries by encouraging its key
employees to continue association with the Corporation and by providing
additional incentive for unusual industry and efficiency through offering an
opportunity to acquire a proprietary stake in the Corporation and its future
growth. The Corporation believes that this goal may best be achieved by
granting stock options to eligible key employees of the Corporation and its
Subsidiaries from time to time.
Section 2. Certain Definitions. For purposes of the Plan, the
following terms shall be defined as set forth below:
(a) "Affiliate" means with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
(b) "Average Four Quarter Net Working Capital" means the sum of Net
Working Capital on the last day of the fiscal quarter ending on the Fiscal Date
and the last day of each of the three preceding fiscal quarters divided by four.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Cause" means, with respect to any Optionee, the termination of
employment of such Optionee due to (i) after notice, a material neglect of such
Optionee's duties to the Corporation or any Subsidiary, (ii) willful engagement
by such Optionee in conduct which is materially and demonstrably injurious to
the Corporation or any Subsidiary, (iii) the commission of an act of fraud,
subversion, misappropriation or embezzlement by such Optionee or (iv) a
conviction of, or a plea of nolo contendere or a guilty plea or confession by,
such Optionee to an act of fraud, subversion, misappropriation, or embezzlement
or to a felony.
(e) "CEO" means the Chief Executive Officer of the Corporation.
(f) "Change in Control" means prior to a Public Offering, (i) the sale
or transfer of all or substantially all of the assets of the Corporation,
whether in one transaction or in a series of related transactions, except a sale
or transfer to a successor corporation in which the holders of the fully-diluted
common stock of the Corporation immediately prior to the transaction hold,
directly or indirectly, more than 50% of the
<PAGE>
total voting power of the successor corporation immediately after the
transaction; (ii) any merger or consolidation between the Corporation and
another corporation, except a merger or consolidation immediately after which
the ML Investors hold, directly and/or indirectly, more than 50% of the total
voting power of the surviving corporation; or (iii) a sale by the ML Investors
of their shares of Stock which results in the ML Investors ceasing to own, in
the aggregate, directly and/or indirectly, more than 50% of the Stock,
calculated on a fully diluted basis, assuming the vesting of unvested options.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(h) "Committee" means the Compensation Committee of the Board, or any
other committee the Board may subsequently appoint to administer the Plan. The
Committee shall be composed entirely of directors who meet the qualifications
referred to in Section 5 of the Plan. If at any time no Committee shall be in
office, then the functions of the Committee specified in the Plan shall be
exercised by the Board.
(i) "Corporation" means US Foodservice Inc., a corporation organized
under the laws of the State of Delaware (or any successor corporation).
(j) "Disability" means the permanent inability of an Optionee to
perform substantially his duties and responsibilities to the Corporation or any
Subsidiary by reason of a physical or mental disability or infirmity (i) for a
continuous period of six months or (ii) at such earlier time as the Optionee, at
his option, submits satisfactory medical evidence that he has a physical or
mental disability or infirmity which will likely prevent him from returning to
the performance of his work duties for six months or longer. The date of such
disability shall be on the last day of such six-month period or the day on which
the Optionee submits such satisfactory medical evidence, as the case may be.
(k) "Disinterested Persons" shall have the meaning set forth in Rule
16B-3(c)(2)(i) as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, or any successor definition adopted by the
Commission.
(l) "EBIT" means the consolidated earnings before interest and income
taxes from the continuing operations of the Corporation, excluding any
extraordinary gains and losses and the effects of any adjustments resulting from
the application of Accounting Principles Board Opinion Numbers 16, 17 and 25.
(m) "EBIT Value" means (i) (a) the product of (x) 8.0 and (y) EBIT for
the four consecutive fiscal quarters ending on the Fiscal Date minus (b)
Indebtedness on the Fiscal Date plus
2
<PAGE>
(c) on a consolidated basis, the Corporation's aggregate cash and cash
equivalents on the Fiscal Date divided by (ii) the total number shares of Stock,
calculated on a fully diluted basis, assuming the vesting of all unvested
options, outstanding on the Fiscal Date.
(n) "Employee" means any employee or officer of the Corporation or any
of its Subsidiaries provided, that the term Employee shall not include a
director of the Corporation or any Subsidiary in his capacity as such, but shall
include a director of the Corporation or a Subsidiary who is otherwise employed
by the Corporation or a Subsidiary.
(o) "Fair Market Value" means the fair market value of the Stock as
determined by the Committee in good faith; provided, however, that (A) if the
Stock is admitted to trading on a national securities exchange, Fair Market
Value on any date shall be the last sale price reported for the Stock on such
exchange on such date or on the last date preceding such date on which a sale
was reported, (B) if the Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or other
comparable quotation system and has been designated as a National Market System
("NMS") security, Fair Market Value on any date shall be the last sale price
reported for the Stock on such system on such date or on the last day preceding
such date on which a sale was reported, or (C) if the Stock is admitted to
quotation on NASDAQ and has not been designated a NMS Security, Fair Market
Value on any date shall be the average of the highest bid and lowest asked
prices of the Stock on such system on such date.
(p) "Fiscal Date" means the last day of the last fiscal quarter
completed prior to the date of termination of the relevant Optionee.
(q) "GAAP" means Generally Accepted Accounting Principles, as in
effect on the date hereof, applied on a consistent basis.
(r) "Good Reason" means (i) a reduction, without the consent of the
Optionee, in the Optionee's base or aggregate compensation, other than an
across-the-board reduction in the compensation of substantially all similarly
situated employees of the Corporation and its Subsidiaries including any Company
Notes, (ii) a material reduction in the Optionee's responsibilities with the
Corporation or a change in the Optionee's title to one of lesser status, or
(iii) such other events of hardship as the Board shall determine on a case by
case basis.
(s) "Indebtedness" means, as calculated by the Corporation on a
consolidated basis, (A) the sum of (i) all indebtedness for borrowered money,
including capitalized leases, (ii) the liquidation preference value (including
for the avoidance of doubt, accrued dividends) of all the outstanding
3
<PAGE>
preferred stock of the Corporation and its Subsidiaries, (iii) accrued interest
expense, and (iv) the principal amount of all interests held by persons other
than the Company or one of its subsidiaries in any trust into which accounts
receivable of the Company are conveyed minus (B) the proceeds (whether in cash
or through conversion of indebtedness) to the Corporation that would result from
the exercise of all outstanding warrants, all vested and unvested options to
purchase shares of Stock, (assuming that all options are vested) and all rights
to convert one security into or exchange one security for, shares of Stock; such
difference being either increased by the amount by which (excluding the effects
of any acquisitions or divestitures during the most recently completed four
fiscal quarters by the Corporation or any Subsidiary of a business as a going
concern) Average Four Quarter Net Working Capital exceeds the Net Working
Capital for the Corporation's most recent fiscal quarter, or decreased by the
amount by which (excluding the effects of any acquisitions or divestitures
during the most recently completed four fiscal quarters by the Corporation or
any Subsidiary of a business as a going concern) the Net Working Capital for the
Corporation's most recent fiscal quarter exceeds the Average Four Quarter Net
Working Capital.
(t) "Involuntary Termination" means termination by the Corporation or
a Subsidiary of an Optionee's employment.
(u) "ML Investors" means Merrill Lynch Capital Appreciation
Partnership No. B-XVIII, L.P. ("MLCAP"), a Delaware limited partnership, ML
Offshore LBO Partnership No. B-XVIII ("Offshore"), a Cayman Island limited
partnership, MLIBK Positions, Inc. ("MLIBK Positions"), a Delaware corporation,
MLCP Associates L.P. No. II ("MLCP Associates"), a Delaware limited partnership,
Merrill Lynch Capital Appreciation Partnership No. XIII, L.P., ("MLCAP XIII") a
Delaware limited partnership, ML Offshore LBO Partnership No. XIII ("Offshore
XIII"), a Cayman Islands partnership, ML Employees LBO Partnership No. I., L.P.
("LBO Employees"), a Delaware limited partnership, Merrill Lynch Interfunding,
Inc. ("Interfunding"), a Delaware corporation, Merrill Lynch KECALP L.P. 1987
("KECALP"), a Delaware limited partnership, and Merchant Banking L.P. No. II
("Merchant L.P."), a Delaware limited partnership, any Affiliate or limited
partner or stockholder of MLCAP, Offshore, MLIBK Positions, MLCP Associates,
MLCAP XIII, Offshore XIII, LBO Employees, Interfunding, KECALP and Merchant
L.P., any Affiliate of Merrill Lynch & Co., Inc. ("ML&Co."), any employee of
ML&Co., any employee of the Corporation or any of its subsidiaries or any
Affiliate of ML&Co.
(v) "Net Working Capital" means (i) (x) current assets of the
Corporation minus (y) current liabilities of the Corporation plus (ii) accrued
interest expense of the Corporation.
4
<PAGE>
(w) "Option" means any option to purchase shares of Stock granted
pursuant to Section 7.
(x) "Option EBT" means the quotient of (i)(x) EBIT minus (y) the
product of (A) Indebtedness and (B) 0.103 and (ii) the total number of shares of
Stock, calculated on a fully diluted basis, assuming the vesting of all unvested
options; provided however, that in calculating Option EBT for purposes of fiscal
year 1993 the acquisition of WS Holdings Corporation, a Delaware corporation, by
the Corporation shall be considered to have occurred on the first day of the
fiscal year 1994 and there shall be excluded any adjustments resulting from the
acquisition of WS Holdings Corporation by the Corporation.
(y) "Option EBIT" means the quotient of (x) EBIT and (y) the total
number of shares of Stock, calculated on a fully diluted basis, assuming the
vesting of all unvested options; provided however, that in calculating Option
EBIT for purposes of fiscal year 1993 the acquisition of WS Holdings
Corporation, a Delaware corporation, by the Corporation shall be considered to
have occurred on the first day of the fiscal year 1994 and there shall be
excluded any adjustments resulting from the acquisition of WS Holdings
Corporation by the Corporation.
(z) "Optionee" means a person to whom an Option has been granted under
the Plan.
(aa) "Person" means any corporation, association, partnership, joint
venture, organization, business, individual, trust, or any other entity or
organization, including a government or any subdivision or agency thereof.
(bb) "Plan" means the Corporation's 1993 Stock Option Plan.
(cc) "Public Offering" means an underwritten public offering of the
Stock pursuant to an effective registration statement under the Securities Act
at the conclusion of which the aggregate number of shares of Stock that have
been sold to the public pursuant to one or more effective registration
statements under the Securities Act equals at least 12.5% of the shares of Stock
then outstanding.
(dd) "Retirement" means, with respect to any Optionee, the Optionee's
retirement as an employee of the Corporation or a Subsidiary under the
Corporation's or such Subsidiary's retirement plan, as the case may be.
(ee) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
(ff) "Spread" means the difference between EBIT Value on the relevant
Fiscal Date and the exercise price per share pursuant to an Option except that
in the case of a Change
5
<PAGE>
in Control, the Spread shall mean the difference between the fair market value
of the per share consideration received by the Corporation and the relevant
holders of Stock (such fair market value and other matters being as determined
by the Committee in good faith) and the exercise price per share pursuant to the
Option. If EBIT Value or such fair market value is less than the Exercise Price
then the spread shall equal $0.
(gg) "Stock" means the Class A Common Stock, $0.01 par value, of the
Corporation.
(hh) "Stockholders Agreement" means the Restated Stockholders
Agreement, among the Corporation and the holders of its Stock and Class B Common
Stock, par value $.01 per share and such other Persons who become parties to
such Agreement pursuant to the terms and provisions contained therein, as
amended and restated from time to time.
(ii) "Subsidiary" means any corporation, partnership, joint venture or
other entity of which the Corporation owns, directly or indirectly, a majority
of the capital stock, is a general partner or which it controls.
(jj) "Unifax" means Unifax, Inc., a Delaware corporation.
(kk) "Voluntary Termination" means the voluntary termination by an
Optionee of his employment with the Corporation or a Subsidiary by voluntary
resignation or any other means (i) other than because of such Optionee's
Retirement, Disability or death, or (ii) other than simultaneously with or
following termination for Cause or the occurrence of an event which if known to
the Corporation or such Subsidiary at the time of such voluntary termination by
the Optionee of his employment would constitute Cause.
Section 3. Option Shares. (a) The shares of Stock which may be made
subject to Options granted pursuant to this Plan shall be no more than a total
of 850,000 shares of Stock except as such number may be adjusted as provided in
Section 15. Any shares of Stock remaining unissued at the termination of this
Plan shall cease to be reserved for the purpose of the Plan, but until
termination of the Plan, the Corporation shall at all times reserve a sufficient
number of shares of Stock to meet the requirements of the Plan.
(b) Whenever any outstanding Option or portion thereof expires, is
cancelled or is otherwise terminated (other than by exercise of the Option or
such portion thereof) Options (the "Regranted Options") relating to the number
of shares of Stock allocable to the unexercised portion of such Option shall be
available for granting.
6
<PAGE>
Section 4. Effective Date of Plan. The Plan shall take effect upon
its adoption by the Board, provided that it is approved by the stockholders of
the Corporation within twelve (12) months after the date of its adoption by the
Board.
Section 5. Administration of the Plan. The Plan shall be
administered by the Board or by the Committee composed of not less than three
disinterested Persons, provided that if three Disinterested Persons are not
available then the Plan shall be administered by the Board or such other
committee as determined by the Board. The Board may authorize the Committee to
exercise any and all of the powers and functions of the Board pursuant to the
Plan. The interpretation and construction by the Committee or the Board of any
provisions of the Plan or of any Options granted under it shall be final and
conclusive. No member of the Committee or of the Board shall be personally
liable for any action or determination made in good faith with respect to the
Plan or any Options granted under it.
Section 6. Eligibility. The persons eligible to participate in the
Plan as recipients of Options shall include only Employees.
Section 7. Grant of Options. The Corporation, by action of the
Committee and subject to the provisions of this Plan, may, from time to time,
grant Options to purchase shares of Stock to such Employees as may be selected
by the Committee and for such number or numbers of shares of Stock as may be
determined by the Committee. Options to be granted pursuant to this Plan are
intended to not qualify as "incentive stock options" within the meaning of
Section 422 of the Code but are intended to constitute non-qualified stock
options. Each grant of an Option pursuant to this Plan shall be made in writing
and upon such terms and conditions as may be determined by the Committee at the
time of grant, subject to the provisions and limitations set forth in this Plan.
The grant of such Option shall be evidenced by written notice executed by the
proper officer of the Corporation so long as such officer is not the recipient
of the Option.
Section 8. Option Price. The purchase price for each share of Stock
placed under Option pursuant to this Plan (hereinafter called the "Option
Price") shall be determined by the Committee on the date of grant but unless the
Board otherwise determines in its discretion, shall be not less than 100% of the
Fair Market Value of the Stock on such date.
Section 9. Exercisability of Options. Subject to Section 11 hereof,
an Option granted pursuant to this Plan may be exercised only within the time
limits and subject to the terms prescribed by the Committee in the grant of the
particular Option. Options denominated as "Normal Options" shall be exercisable
only upon the occurrence of the events referred to in the terms of the Option.
Options denominated as "Performance
7
<PAGE>
Options" will become exercisable upon the occurrence of certain events referred
to in the terms of the Option to the extent that certain performance targets set
forth therein are attained. The Committee will designate each Option as a Normal
Option or Performance Option at the time of grant.
Section 10. Procedure for Exercise and Payment for Shares. (a)
Exercise of an Option shall be made by the giving of written notice to the
Corporation by the Optionee. Such written notice shall be deemed sufficient for
this purpose only if delivered to the Corporation at its principal office and
only if such written notice states the number of shares of Stock. Payment upon
the exercise of an Option, if payment is due, shall be made in full at the time
the Option is exercised by delivery of such payment to the Corporation at the
principal offices of the Corporation. Upon the exercise of any Option, in
compliance with the provisions of this Section and (except as otherwise provided
in Section 12) upon receipt by the Corporation of the payment for the Stock so
purchased together with the payment of the amount of any taxes required to be
collected or withheld as a result of the exercise of this Option, the
Corporation shall deliver or cause to be delivered to the Optionee so exercising
an option either a certificate or certificates for the number of shares of
Stock with respect to which the Option is so exercised and payment is so made or
the Spread as provided by Section 12. The shares of Stock shall be registered
in the name of the exercising Employee, provided that, in no event, shall any
shares of Stock be issued pursuant to exercise of an Option until full payment
therefor shall have been made by cash or certified or bank cashier's check.
Until the shares of Stock have been issued, the exercising Optionee shall not
have any of the rights of a shareholder of the Corporation with respect to such
shares of Stock. For purposes of this Section, the date of issuance shall be
the date upon which payment in full has been received by the Corporation as
provided herein.
(b) Capitalized terms used in this Section 10(b) have the meaning
specified in the Stockholders Agreement unless otherwise defined herein. The
Stockholders Agreement shall be subject to amendment from time to time in
accordance with the provisions of the Stockholders Agreement and the Optionees'
approval shall not be required in connection with any amendment of the
Stockholders Agreement. In the event that (i) any Option shall have become
exercisable or shall become exercisable in connection with the transaction to
which the Inclusion Notice relates, (ii) the provisions of Section 6.1 of the
Stockholders Agreement shall still be in effect, (iii) there shall have been
delivered to the Corporation an Inclusion Notice, the Corporation shall deliver
a copy of such Inclusion Notice to each holder of such an exercisable Option
("Eligible Optionee") within 5 calendar days of the date the Inclusion Notice is
deemed to be given under the Stockholders Agreement. Any Eligible Optionee that
gives written notice of (A) exercise of such Option and (B) acceptance of the
Third Party Offer to both the Corporation and
8
<PAGE>
the Transferor within 10 days of the date the Inclusion Notice is deemed to be
given under the Stockholders Agreement shall be deemed to be an Offeree under
the Stockholders Agreement, provided, however, that the Eligible Optionee's
rights under this sentence shall terminate upon payment of the Spread pursuant
to Section 12. Payment with respect to Options exercised pursuant to this
Section 10(b) shall be made upon the date of consummation of the Third Party
Offer, but otherwise in accordance with the provisions of Section 10(a), except
that the Transferor may require the Corporation to issue any certificates issued
with respect to the exercise of the such Option to the Third Party or its
designee.
Section 11. Duration of Options. The period for which each Option
granted hereunder shall be effective shall commence upon the date of the grant
of the Option and shall continue until such Option shall be terminated according
to this terms or as hereinafter provided, but in no event shall such period
exceed ten (10) years and one (1) day (the "Option Period"). In addition to and
in limitation of the above, the Option Period of any Option granted pursuant to
this Plan shall terminate as follows:
(a) If the Optionee's employment is terminated due to such Optionee's
death, Disability, Retirement, Involuntary Termination without Cause or
Voluntary Termination with Good Reason and a Public Offering has not occurred
prior to such termination, the Option (to the extent exercisable at the time of
the Optionee's termination of employment) shall be exercisable by the Optionee
or the Optionee's personal representative but only upon (A) the death of the
Optionee or (B) the incompetency of the Optionee for purposes of protection and
management of the Optionee's assets, (a "Personal Representative") for a period
of six (6) months following such termination of employment, and shall thereafter
terminate;
(b) If the Optionee's employment is terminated due to such Optionee's
death, Disability, Retirement, Involuntary Termination without Cause or
Voluntary Termination with Good Reason and a Public Offering has occurred prior
to such termination, the Option (to the extent exercisable at the time of the
Optionee's termination of employment) shall be exercisable by the Optionee or
the Optionee's Personal Representative, for a period of one (1) year following
such termination of employment, and shall thereafter terminate; and
(c) If the Optionee's employment is terminated due to such Optionee's
Voluntary Termination without Good Reason or Involuntary Termination with Cause
the Option shall terminate on the date of the Optionee's termination of
employment.
(d) In the event of a Change in Control, the Corporation may elect to
pay the Optionee the Spread on such date
9
<PAGE>
and, upon payment thereof by the Corporation, the Option shall terminate.
To the extent any Option is not exercisable at the time of the
Optionee's termination of employment (for whatever reason), such Option shall
terminate on the date of the Optionee's termination of employment.
Notwithstanding the foregoing, the Committee may provide, either at
the time an Option is granted or thereafter, that the Option may be exercised
after the periods provided for in this Section 11, but in no event beyond the
term of the Option.
Nothing contained herein shall limit whatever right the Corporation or
its Subsidiaries might otherwise have to terminate the employment of any
Employee.
Successive Options may be granted to the same Employee whether or not
the Option or Options first granted to such Employee remain unexercised.
Section 12. Payment of the Spread. In the event that an Optionee
ceases to be employed by the Corporation or any Subsidiary:
(a) If an Optionee's termination of employment is due to such
Optionee's death, Disability or Retirement, the Corporation (x) shall, if
requested by the Optionee or the Optionee's Personal Representative, or (y) may
elect to, pay to the Optionee or the Optionee's Personal Representative, an
amount equal to the Spread times the number of shares of Stock allocable to the
vested portion of the Option (to the extent exercisable at the time of the
Optionee's termination of employment); and
(b) If the employment of an Optionee terminates due to such Optionee's
(A) Involuntary Termination without Cause or (B) Voluntary Termination with Good
Reason, the Corporation shall have the right, but not the obligation, to pay to
the Optionee an amount to the Spread times the number of shares of Stock
allocable to the vested portion of the Option (to the extent exercisable at the
time of the Optionee's termination of employment or ceasing to be or a
director).
(c) In the event of a Change in Control, the Corporation shall have
the right, but not the obligation, to pay the Optionee an amount equal to the
Spread times the number of shares of Stock allocable to the vested portion of
the Option (to the extent exercisable at the time of the Change in Control,
assuming, for the avoidance of doubt, that such Change in Control had occurred).
No amount shall be payable to any Optionee pursuant to this Section 12
if the employment of an Optionee terminates due
10
<PAGE>
to (A) the Involuntary Termination with Cause of the employee or (B) this
Voluntary Termination without Good Reason of the employee. Any amount required
to be paid pursuant to Section 12(a), 12(b) or 12(c) shall be paid within sixty
(60) days of the Optionee's termination of employment or the date of the Change
in Control, as the case may be. To the extent the Corporation pays the Optionee
the Spread for any Option, such Option shall be cancelled to the extent of the
number of shares of Stock as to which the Spread has been paid.
Notwithstanding anything to the contrary set forth herein, the
Corporation may defer payment of the Spread if it elects or is required to pay
the Spread pursuant to this Section 12 to the extent: (i) such payment would
violate or conflict with any statute, rule, injunction, regulation, order,
judgment or decree applicable to the Corporation or by which it or any of its
properties may be bound or affected; (ii) such payment would result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of the
Corporation or any Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Corporation or any Subsidiary is a party or by which the
Corporation or any Subsidiary or any of their properties is bound or affected;
or (iii) in the ordinary course such payment would be made out of the proceeds
of a loan, dividend or other payment to the Corporation by one of its
Subsidiaries and the making of such payments or loans or payment of such
dividend would result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of the Corporation or a Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Corporation or a
Subsidiary is a party or by which the Corporation or a Subsidiary or any of its
properties is bound or affected (each such event, a "Conflict"). In the event
of a Conflict, the obligation of the Corporation to pay the Spread shall be
suspended for the duration of such Conflict and such obligation shall resume
upon termination of such Conflict; provided, however, that (a) the Corporation
shall be required to make such payment upon termination of such Conflict; (b)
the Corporation shall use its reasonable best efforts to obtain the consent,
approval, authorization or permit of any Person which would permit the payment
of the Spread without the occurrence of such Conflict; and (c) all rights
hereunder enjoyed by the Optionee on and as of the date on which such payment
would have been made but for such Conflict shall be preserved and shall not be
altered, reduced or adversely affected by such Conflict,
11
<PAGE>
provided further, however, that the proviso set forth in this subparagraph (c)
shall not be construed to create, add to or supplement any rights not otherwise
enjoyed by the Optionee on and as of such date and no additional Options of such
Optionee shall become vested subsequent to such date.
The Corporation may elect to pay a portion, not to exceed, such
percentage as may be required to avoid the occurrence of a Conflict, of the
Spread in the form of an unsecured junior subordinated promissory note made by
the Corporation and payable to the stockholder (a "Company Note") or in other
securities of the Corporation. Each Company Note will mature on the later to
occur of the second anniversary of the date such Company Note was issued and the
date payment of such Company Note will not give rise to a Conflict. Each
Company Note will bear interest at a rate equal to the lower of (i) 7% per annum
or (ii) the average time weighted reference rate of The Chase Manhattan Bank,
N.A. Such interest shall be paid annually; provided, however, that if payment
of such interest would give rise to a Conflict it shall accrue and shall not be
paid until such time as payment of it would not give rise to a Conflict.
Section 13. Non-Transferability. No Option granted pursuant to this
Plan may be transferred by the Optionee except to the Personal Representative of
a deceased Optionee, and, further, during the lifetime of the Optionee, the
Option may be exercised only by such Optionee or such Optionee's Personal
Representative.
Section 14. Requirements of Law and of Certain Agreements. If any
law, regulation or interpretation of any commission or agency having
jurisdiction shall require the Corporation or the exercising Optionee to take
any action with respect to the shares of Stock acquired by the exercise of an
Option, then the date upon which the Corporation shall issue or cause to be
issused the certificate or certificates of the shares of Stock shall be
postponed until full compliance has been made with all such requirements of law,
regulation or interpretation, provided, that the Corporation shall use its
reasonable best efforts to fully comply with such requirements of law,
regulation or interpretation; provided, further, that all rights hereunder
enjoyed by the Optionee on and as of the date on which such certificates would
have been issued but for the lack of such compliance shall be preserved and
shall not be altered, reduced or adversely affected by any such lack of
compliance; and provided, further, however immediately preceding proviso shall
not be construed to create, add to or supplement any rights not otherwise
enjoyed by the Optionee on and as of such date and no additional Options of such
Optionee shall become vested subsequent to such date. Further, if requested by
the Corporation, at or before the time of the issuance of the shares of Stock
with respect to which exercise of an Option has been made, the exercising
Optionee shall deliver to the Corporation such Optionee's written statement
satisfactory in form and
12
<PAGE>
content to the Corporation, that such Optionee intends to hold the shares of
Stock so acquired by such Optionee on exercise of such Optionee's Option, for
investment and not with a view of resale or other distribution thereof to the
public in violation of the Securities Act. Moreover, in the event that the
Corporation shall determine that, in compliance with the Securities Act or other
applicable statutes or regulations, it is necessary to register any of the
shares of Stock with respect to which an exercise of an Option has been made, or
to qualify any such shares of Stock for exemption from any of the requirements
of the Securities Act or any other applicable statute or regulation, no shares
of Stock shall be issued to the exercising Optionee until the required action
has been completed; provided, that all rights hereunder and under the Plan
enjoyed by the Optionee on and as of the date on which such Options would have
been exercised or shares of Stock issued, as the case may be, but for such
required action not having been taken shall be preserved and shall not be
altered, reduced or adversely affected by the failure to take any such required
action; and provided, further, however, that the preceding proviso shall not be
construed to create, add to or supplement any rights not otherwise enjoyed by
the Optionee on and as of such date and no additional Options of such Optionee
shall become vested subsequent to such date. The terms of the grant of any
Option shall require the Optionee to agree to be bound by the terms and
conditions of, and to execute a joinder agreement to, the Stockholders
Agreement, to the extent then applicable, with respect to the shares of Stock
deliverable as a result of such exercise, whether such Optionee is a party
thereto or not, as fully as if such Optionee were a party thereto.
Section 15. Adjustments. In the event of the declaration of any
stock dividend on the Stock or in the event of any reorganization, merger,
consolidation, acquisition, separation, recapitalization, reclassification,
split-up, combination or exchange of the Stock or like adjustment, the number of
shares of Stock and the class of shares of stock available pursuant to this
Plan, the performance targets applicable to Performance Options and the number
and class of shares of Stock subject to any Option granted pursuant to this
Plan, and the Option Prices, shall be adjusted by appropriate change in this
Plan and in any Options outstanding pursuant to this Plan. Any such adjustment
to the Plan or to Options or Option Prices shall be made by action of the Board
in good faith, whose good faith determination shall be conclusive.
Section 16. Amendment or Discontinuance of the Plan. The Board may,
insofar as permitted by law, amend, suspend, or discontinue this Plan at any
time without restriction, provided, however, that the Board may not alter or
amend or discontinue or revoke or otherwise impair any outstanding Options which
have been granted pursuant to this Plan and which remain unexercised, except (i)
with respect to amendments affecting all Options (vested and unvested), with the
consent of the holders of vested
13
<PAGE>
Options representing the right to purchase a majority of the total number of
shares of Stock subject to Options which are vested; provided, however, that if
no Options are vested then the requisite consent shall be the consent of holders
of unvested Options representing the right to purchase a majority of the total
number of shares of Stock subject to Options which are unvested, (ii) with
respect to amendments affecting only Performance Options (vested and unvested)
or Normal Options(vested or unvested), with the consent of the holders of vested
Normal Options or vested Performance Options, as the case may be, representing
the right to purchase a majority of the total number of shares of Stock subject
to Normal Options which are vested or Performance Options which are vested, as
the case may be; provided, however, that if none of the Performance Options are
vested then the requisite consent shall be the consent of the holders of
unvested Performance Options, representing the right to purchase a majority of
the total number of shares of Stock subject to Performance Options which are
unvested, (iii) in the event of a merger, reorganization, or other adjustment
referred to in Section 15 above, or (iv) with the written consent of the holder
of the outstanding Option proposed to be so altered or amended. The Board may
not, without the approval of the stockholders of the Corporation amend, alter or
revise the Plan to change the number of shares of Stock subject to the Plan,
change the description of the class of employees eligible to receive Options or
decrease the price at which Options may be granted except as provided in Section
15. The Option Period of any outstanding Option shall not be extended by any
amendment or suspension or discontinuance of the Plan. For purposes of this
Section 16 a Performance Option (i) shall be considered vested if it has become
exercisable under Section 4(b) of the relevant Performance Option Agreement and
(ii) shall be considered vested to the extent it would be exercisable under
Section 4(a) of the relevant Performance Option Agreement upon the occurrence of
any of the events set out in clauses (v) through (z) inclusive of such Section
4(a).
Section 17. Liquidation of the Corporation. In the event of the
complete liquidation or dissolution of the Corporation other than as an incident
to a merger, reorganization, or other adjustment referred to in Section 15
above, any Options granted pursuant to this Plan and remaining unexercised shall
be deemed cancelled without regard to or limitation by any other provision of
this Plan.
Section 18. Term of Plan. No Option shall be granted pursuant to the
Plan on or after the tenth anniversary of the date of Board approval, but
Options theretofore granted may be extended beyond that date.
Section 19. Information To Be Provided To Optionees. Within 120 days
of the end of any fiscal year of the Corporation, the Committee shall determine
the Option EBT as of the ending date of such fiscal year and shall provide
written notice of such
14
<PAGE>
determination to each Optionee. Promptly upon the occurrence of any Change of
control or Public Offering, the Committee shall determine and provide written
notice to each Optionee of the fair market value of the per share consideration
received by the Corporation and/or the relevant holders of the Stock, as the
case may be. If either any change in the Corporation's fiscal year or the
issuance of equity securities by the Corporation requires an adjustment to be
made to the values set forth in Annex A to the agreement evidencing the grant of
any Option, the Committee shall promptly provide written notice of any such
adjustment to each Optionee and, upon the request of the holder of the proxy
granted pursuant to Section 3.5 of the Stockholders Agreement, shall instruct
the Corporation's auditors to review such adjustment, which shall be revised in
accordance with the auditors' determination.
15
<PAGE>
Exhibit 10.10.1
FORM OF NORMAL OPTION AGREEMENT
THIS NORMAL OPTION AGREEMENT (this "Agreement") made on ____________, 1996
by and between Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), and
_____________ (the "Optionee").
WHEREAS, the Company, USF Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of the Company ("Merger Sub"), and US Foodservice
Inc., a Delaware corporation ("US Foodservice"), have entered into an Agreement
and Plan of Merger dated February 2, 1996 (the "Merger Agreement"), pursuant to
which US Foodservice is to be merged with and into Merger Sub [(the "Merger")];
WHEREAS, US Foodservice has adopted the US Foodservice Inc. 1993 Stock
Option Plan, (as amended from time to time, the "Plan");
WHEREAS, Section 4.1(e) of the Merger Agreement provides that at the
Effective Time (as defined in the Merger Agreement) of the Merger certain
outstanding options to purchase shares of US Foodservice Class A Common Stock,
par value $.01 per share (US Foodservice Class A Common Stock"), or shares of US
Foodservice Class B Common Stock, par value $.01 per share (together with US
Foodservice Class of Common Stock "US Foodservice Common Stock") shall be
assumed by the Company and shall constitute an option to acquire a number of
shares of Common Stock, par value $.10 per share ("Company Common Stock")
rounded up or down to the nearest thousandth of a share, or if there shall not
be a nearest thousandth of a share, to the next highest thousandth of a share,
equal to the product of the Exchange Ratio (as determined in accordance with the
Merger Agreement) and the number of shares of US Foodservice Common Stock
subject to such option immediately prior to the Effective Time, at a price per
share equal to the aggregate exercise price for the shares of US Foodservice
Common Stock subject to such option divided by the number of shares of Company
Common Stock deemed to be purchasable pursuant to such option;
WHEREAS, US Foodservice granted the Optionee a nonqualified option on
_________________, 199__ (the "Grant Date"), for the purchase of ______ shares
of US Foodservice Class A Common Stock (immediately prior to the Effective Time)
for an aggregate exercise price of $____________ (the "Option"); and
WHEREAS, the Exchange Ratio is equal to _______________.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
1. Definitions. Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Plan.
2. Assumption of the Option. The Company hereby assumes the Option as an
option to acquire __________ shares of Company Common Stock (the "Assumed
Option") pursuant to the terms of this Agreement and the provisions of the Plan.
It is intended that the Assumed Option will not qualify as an "incentive stock
option" within the meaning of Section 422 of the Code.
3. Option Price. The exercise price of the Assumed Option shall be
$_________ per share of Company Common Stock issuable hereunder.
4. Conditions to Exercise. (a) The Assumed Option shall not be
exercisable until the first to occur of (v) the ninth anniversary of Grant Date,
(w) a CHANGE IN CONTROL or the date of termination of employment of an Optionee
that is an Employee (other than due to an Involuntary Termination with Cause or
Voluntary Termination without Good Reason). At any such time, this Assumed
Option shall become exercisable to the extent provided below.
<TABLE>
<CAPTION>
Initially Exercisable During % Exercisable
- ------------------------------ --------------
<S> <C>
Calendar year 1996 33-1/3%
Calendar year 1997 66-2/3%
Calendar year 1998 or 100%
thereafter
</TABLE>
This Assumed Option shall not become exercisable as to any additional shares
after the date that the employment of the Optionee with the Company or any of
its Subsidiary terminates or is terminated, for whatever reason. If this
Assumed Option initially becomes exercisable prior to January 1, 1997, it shall
become exercisable to the extent of an additional one third of the shares of
Company Common Stock covered by this Assumed Option on each of January 1, 1997
and January 1, 1998. If this Assumed Option initially becomes exercisable after
December 31, 1996 and prior to January 1, 1998 it shall become exercisable to
the extent of an additional one third of the shares of Company Common Stock
covered by this Assumed Option on January 1, 1998.
(b) If the employment of an Optionee terminates due to an involuntary
Termination with Cause at any time or Voluntary Termination without Good Reason,
then the Assumed Option shall terminate immediately and may not be exercised,
for cash or Company Common Stock, to any extent.
2
<PAGE>
5. Period of Assumed Option. Except as otherwise provided in this
Agreement or the Plan, the Assumed Option shall expire ten years from the Grant
Date or, if earlier, pursuant to the provisions of the Plan.
6. Exercise of the Assumed Option. (a) Except as otherwise provided in
this Agreement, the Assumed Option shall be exercised as provided in the Plan.
(b) The Plan permits the Company to elect to pay the Optionee the
Spread instead of issuing shares of Company Common Stock upon exercise of the
Assumed Option and to elect to pay the Optionee the SPREAD and terminate the
Assumed Option in connection with a Change in Control.
(c) The Company may, in its discretion, require that the Optionee pay
to the Company, at the time of exercise of any portion of the Assumed Option,
any such additional amount as the Company deems necessary to satisfy its
liability to withhold federal, state or local income tax or any other taxes
incurred by reason of the exercise or the transfer of shares of Company Common
Stock thereupon.
(d) If the Plan or any law, regulation or interpretation requires the
Company to take any action regarding shares of Company Common Stock, before the
Company issues certificates for shares of Company Common Stock being purchased,
the Company may delay delivering the certificates for the Company Common Stock
for the period necessary to take such action; provided, however, that all rights
hereunder and under the Plan enjoyed by the Optionee on and as of the date on
which such certificates would have been issued but for such delay shall be
preserved and shall not be altered, reduced or adversely affected by any such
delay; provided, further, however, that the foregoing proviso shall not be
construed to create, add to or supplement any rights not otherwise enjoyed by
the Optionee on and as of such date. The certificate or certificates
representing the Company Common Stock acquired pursuant to the Assumed Option
may bear a legend restricting the transfer of such Company Common Stock, and the
Company may impose stop transfer instructions to implement such restrictions, if
applicable.
(e) The Optionee will not be deemed to be a holder of any shares of
Company Common Stock pursuant to exercise of the Assumed Option until the date
of the issuance of a stock certificate to him or her for such shares of Company
Common Stock and until the shares of Company Common Stock are paid for in full.
7. Representations. (a) The Company represents and warrants that (i)
this Agreement has been authorized by all necessary corporate action of the
Company and is a valid and
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binding agreement of the Company enforceable against it in accordance with its
terms and (ii) upon issuance of certificates for any shares of Company Common
Stock against delivery of full payment therefore, all such shares will be, at
the time of such issuance, duly authorized, validly issued and fully paid and
nonassessable shares of the capital stock of the Company, and, upon delivery of
such certificates to the Optionee, the Optionee will acquire good, valid and
marketable title to such shares free and clear of any adverse lien, claim or
other restriction, other than restrictions imposed by applicable law and any
lien or encumbrance which may only be created by the Optionee.
(b) The Optionee represents and warrants that he or she is not a party
to any agreement or instrument which would prevent him or her from entering into
or performing his or her duties in any way under this Agreement.
8. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into by them with respect thereto. The Optionee represents
that, in executing this Agreement, he or she is not relying and has not relied
upon any representation or statement not set forth herein made by the Company
with regard to the subject matter, bases or effect of this Agreement or
otherwise.
9. Amendment or Modification Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing and
signed by the Optionee and by a duly authorized officer of the Company. No
waiver by any party hereto of any breach by another party hereto or any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
10. Notices. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Optionee at:
-------------------------
-------------------------
Telecopy:
----------------
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To the Company at:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532-5201
Attn: Robert J. Harter, Jr.
Senior Vice President,
Human Resources and
General Counsel
Telecopy: (708) 964-0355
With a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker, Suite 3500
Chicago, Illinois 60601-1692
Attn: Elizabeth C. Kitslaar
Telecopy: (312) 782-8585
Any notice delivered personally or by courier under this Section 10 shall
be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
11. Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable shall not be affected thereby, and each provision
hereof shall be valid and shall be enforced to the fullest extent permitted by
law.
12. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
13. Governing Law. This agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
conflicts of laws principles.
14. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
15. US Foodservice Inc. 1993 Stock Option Plan; Construction. This
Agreement is made under and subject to the provisions of the Plan, and all of
the provisions of the Plan are
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hereby incorporated herein as provisions of this Agreement. If there is a
conflict between the provisions of this Agreement and the provisions of the
Plan, the provisions of the Plan will govern. By signing this Agreement, the
Optionee confirms that he or she has received a copy of the Plan and has had an
opportunity to review the contents thereof.
16. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
RYKOFF-SEXTON, INC.
By:
-----------------------------------
Name:
Title:
OPTIONEE
--------------------------------------
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Exhibit 10.11
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
2nd day of February, 1996, by and between RYKOFF-SEXTON, INC., a Delaware
corporation (the "Company"), and MARK VAN STEKELENBURG (the "Executive").
WHEREAS, the Executive has been serving as the President, Chief
Executive Officer and Chairman of the Board of the Company;
WHEREAS, the Executive is a party to an Employment Agreement with the
Company, dated as of July 20, 1994 (the "Prior Agreement");
WHEREAS, pursuant to an Agreement and Plan of Merger dated February 2,
1996 (the "Merger Agreement") by and among the Company, US Foodservice Inc., a
Delaware corporation ("USFS"), and USF Acquisition Corporation ("Acquisition"),
a Delaware corporation and a wholly-owned subsidiary of the Company, as of the
date hereof, USFS will be merged with and into Acquisition, with Acquisition as
the surviving entity (the "Merger");
WHEREAS, in view of the changes in the nature and scope of the duties
and responsibilities of the Executive that will occur as a result of the Merger,
the Company and the Executive desire to amend and restate certain of the terms
and conditions of the Executive's employment with the Company as set forth in
the Prior Agreement;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to remain in the employ of the Company
upon the terms and conditions herein set forth.
2. Term. Employment shall be for a term commencing on the date
hereof and, subject to termination under Section 8, expiring five (5) years from
the date hereof. Notwithstanding the previous sentence, this Agreement and the
employment of the Executive shall be automatically renewed (subject to Section
8) for successive one-year periods upon the terms and conditions set forth
herein, commencing on the fifth anniversary of the date of this Agreement, and
on each anniversary date thereafter, unless either party to this Agreement gives
the other party written notice (in accordance with Section 17) of such party's
intention to terminate this Agreement and the employment of the Executive at
least twelve months prior to the end of such initial or
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extended term. For purposes of this Agreement, any reference to the "term" of
this Agreement shall include the original term and any extension thereof.
3. Duties of the Executive. The Executive shall serve as the Chief
Executive Officer and Chairman of the Board of the Company, subject to the
pleasure of the Company's Board of Directors (the "Board"), and shall otherwise
be assigned only executive policy and management duties. The Executive shall
devote substantially all of his normal working time and his best efforts, full
attention and energies to the business of the Company, the responsibilities
provided for the Chief Executive Officer and Chairman of the Board in the
Company's Bylaws, and such other related duties and responsibilities as may from
time to time be reasonably prescribed by the Board. The Company shall use its
best efforts to cause the Executive to be elected as a member of its Board and
as Chairman of the Board throughout the term of this Agreement and shall include
him in the management slate for election as a director at every stockholders'
meeting at which his term as a director would otherwise expire. Notwithstanding
the foregoing and with the advance approval of the Board, which approval may be
withheld for any reason, the Executive may serve on the boards of directors of
unrelated companies and may devote reasonable time to fulfilling his
responsibilities as a member of such boards.
4. Compensation.
(a) During the term of this Agreement, the Company shall pay to the
Executive a base salary of not less than $450,000 per annum, which base salary
may be increased (but not decreased) from time to time by the Board in its sole
discretion, payable at the times and in the manner consistent with the Company's
general policies regarding compensation of executive employees. Such base
salary shall include any salary reduction contributions to (i) any Company-
sponsored plan that includes a cash-or-deferred arrangement under Section 401(k)
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) any other
plan of deferred compensation sponsored by the Company, or (iii) any Company-
sponsored "cafeteria plan" under Section 125 of the Code. The Board may from
time to time authorize such additional compensation to the Executive, in cash or
in property, as the Board may determine in its sole discretion to be
appropriate.
(b) If the Board authorizes cash incentive compensation under the
Company's Senior Executive Incentive Plan or such other management incentive
program or arrangement approved by the Board, the Executive shall be eligible to
participate in such plan, program or arrangement under the terms and conditions
applicable to executive and management employees; provided, however, that (i)
the cash incentive compensation paid to the Executive for the Company's 1997
fiscal year shall be in an amount not less than 50% of the Executive's annual
base salary earned for the applicable period, and (ii) the cash incentive
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compensation paid to the Executive for the Company's 1998 fiscal year shall be
in an amount not less than 25% of the Executive's annual base salary earned for
the applicable period.
(c) If the Board authorizes grants under the Company's employee stock
option plans in effect from time to time, the Executive shall participate in any
such award in a manner commensurate with the Executive's position and level of
responsibility with the Company as compared to the position and level of
responsibility of other executive and management employees of the Company as
determined by the Board in its sole discretion.
5. Executive Benefits.
(a) In addition to the compensation described in Section 4, the
Company shall make available to the Executive, subject to the terms and
conditions of the applicable plans, including without limitation the eligibility
rules, participation for the Executive and his eligible dependents in the
following Company-sponsored employee benefit plans or any successor plans
adopted by the Company: (i) Basic Life Insurance; (ii) Supplemental Life
Insurance; (iii) Basic Accidental Death and Dismemberment Insurance ("AD&D");
(iv) Supplemental AD&D; (v) Business Travel Accident Insurance; (vi) Short-term
Disability Insurance; (vii) Long-term Disability Insurance; (viii) Medical and
Dental Plan; (ix) the Rykoff-Sexton, Inc. Pension Plan (the "Qualified Pension
Plan"); and (x) the Rykoff-Sexton, Inc. Value Plan; notwithstanding the
foregoing, the Company reserves the right to amend or terminate each of the
foregoing plans at any time. The level of coverage and benefit options
available now and hereafter to the Executive under the foregoing plans shall be
the usual and customary benefits offered by the Company to other executive and
management employees of the Company.
(b) The Company shall make available to the Executive and his eligible
dependents, subject to generally applicable plan eligibility rules, such other
usual and customary benefits now or hereafter offered by the Company to other
employees of the Company, and such other benefits and perquisites as may be made
available by the Board to the Executive or generally to other executive and
management employees of the Company.
(c) The Executive shall be provided with retirement benefits under the
Rykoff-Sexton, Inc. Supplemental Executive Retirement Plan for Mark Van
Stekelenburg, originally effective as of July 20, 1994 and as amended effective
June 19, 1995 (the "Supplemental Retirement Plan"), subject to all of the terms
and conditions thereof.
(d) In addition to any life insurance coverage made available to the
Executive under Section 5(a), the Company shall continue to provide to the
Executive, as the owner of the
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contract (or, alternatively, to his designee, as the owner) a term life
insurance contract on the Executive's life in an amount not less than one
million dollars ($1,000,000) and to reimburse the Executive, on an after-tax
basis, for the cost of such insurance.
6. Expenses. The Company shall also pay or reimburse the Executive
for reasonable and necessary expenses incurred by the Executive in connection
with his duties on behalf of the Company in accordance with the general policies
of the Company.
7. Place of Performance. In connection with his employment by the
Company, unless otherwise agreed by the Executive, the Executive shall be based
at the principal executive offices of the Company, except for travel reasonably
required for Company business.
8. Termination.
(a) Involuntary Termination. The Executive's employment hereunder may
be terminated by the Company for any reason by written notice as provided in
Section 17. The Executive's Disability (as defined herein) during the term of
the Agreement shall constitute an involuntary termination of employment
hereunder, unless the Board expressly extends such employment for a specified
time thereafter. The Executive will be treated for purposes of this Agreement
as having been involuntarily terminated by the Company if the Executive
terminates his employment with the Company under the following circumstances:
(i) the Company has breached any material provision of this Agreement and within
30 days after notice thereof from the Executive, the Company fails to cure such
breach; (ii) at any time after the Company has notified the Executive pursuant
to Section 2 hereof that the Company intends to terminate the Agreement and the
Executive's employment (rather than allow the Agreement to automatically renew);
(iii) a successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company fails to assume liability under the Agreement or the
Supplemental Retirement Plan; (iv) the Executive fails to be elected to the
Board; (v) the Board fails to appoint the Executive as Chief Executive Officer
or to elect the Executive as Chairman of the Board; or (vi) the Board's
consistent failure, after appropriate efforts by the parties, to approve the
Executive's bona fide strategic plan as presented from time to time such that a
reasonable executive would conclude that the parties hold irreconcilable
differences in vision and direction for the Company.
(b) Voluntary Termination. The Executive may voluntarily terminate
the Agreement (including without limitation by retirement under the terms of the
Supplemental Retirement Plan) at any time by notice to the Company as provided
in Section 17. The Executive's death during the term of the Agreement shall
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constitute a voluntary termination of employment for purposes of eligibility for
Termination Payments and Benefits as provided in Section 9.
(c) Subject to Section 9 and any benefit continuation requirements of
applicable laws, in the event the Executive's employment hereunder is
voluntarily or involuntarily terminated for any reason whatsoever, the
compensation and benefits obligations of the Company under Sections 4 and 5
shall cease as of the effective date of such termination, except for any
compensation and benefits earned or accrued but unpaid through such date.
9. Termination Payments and Benefits. If the Executive's employment
hereunder is involuntarily terminated by the Company other than for Cause (as
defined herein) prior to the end of the term of this Agreement, then the Company
shall be obligated to pay to the Executive certain termination payments and make
available certain benefits during the termination payment period, as follows:
(a) Termination Payment Period. Termination payments shall be
made for the greater of the number of years (and fractions thereof)
remaining in the term of the Agreement or two years.
(b) Calculation of Termination Payments. Subject to subsections
(f) and (h), termination payments calculated on an annual basis shall
equal the sum of (i) the Executive's highest annual base salary during
the three-year period prior to the Executive's termination plus (ii)
the Executive's average annual cash incentive compensation award,
including without limitation any award under the Senior Executive
Incentive Program or any successor plan thereto, during the three-year
period prior to the Executive's termination.
(c) Method of Payment. Termination payments shall be paid to
the Executive in accordance with the Company's regular payroll
schedule. If the Executive should die while any amounts are still
payable to him hereunder, all such amounts, unless otherwise provided
herein, shall be paid to the Executive's surviving spouse, or, if she
is not then living, in accordance with the Executive's Beneficiary
Designation under Section 14.01 of the Qualified Pension Plan or, if
the Executive fails to name such a Beneficiary or the named
Beneficiary predeceases him, in accordance with the order of priority
in Section 14.02 of the Qualified Pension Plan.
(d) Benefits. Notwithstanding any provision to the contrary in
any option agreement or other agreement
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or in any plan, (i) all of the Executive's outstanding stock options
shall immediately become exercisable; (ii) all restrictions on any
other equity awards relating to continued performance of services
shall lapse; and (iii) in the case of a termination that occurs prior
to July 20, 1999, the Executive shall be credited with two additional
Years of Service under the Supplemental Retirement Plan.
During the termination payment period as set forth above in
subsection (a), the Company shall use its best efforts to maintain in
full force and effect for the continued benefit of the Executive all
employee welfare benefit plans and perquisite programs in which the
Executive was entitled to participate immediately prior to the
Executive's termination or shall arrange to make available to the
Executive benefits substantially similar to those which the Executive
would otherwise have been entitled to receive if his employment had
not been terminated. Such welfare benefits shall be provided to the
Executive on the same terms and conditions (including employee
contributions toward the premium payments) under which the Executive
was entitled to participate immediately prior to his termination. The
Company does not guarantee a favorable tax consequence to the
Executive for continued coverage and benefits under the Company-
sponsored plans nor will it indemnify the Executive for such results
except with respect to the life insurance plan made available under
Section 5.
Notwithstanding the foregoing, with respect to the
Executive's continued coverage under the Company's Medical and Dental
Plan, or a successor plan, pursuant to this provision, the Executive's
"qualifying event" for purposes of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") shall be his date of termination
from the Company.
Any termination payments hereunder shall not be taken into
account for purposes of any retirement plan or other benefit plan
sponsored by the Company (including the Supplemental Retirement Plan),
except as otherwise expressly required by such plans or applicable
law.
(e) Termination for Cause. For purposes of this Agreement,
"Cause" shall mean
(i) the willful and continued failure by the Executive to
substantially perform his duties hereunder (other than any
such failure resulting from the Executive's incapacity due
to physical
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or mental illness), after demand for substantial performance
is delivered by the Company that specifically identifies the
manner in which the Company believes the Executive has not
substantially performed his duties,
(ii) the willful engaging by the Executive in misconduct
which is materially injurious to the Company, monetarily or
otherwise, or
(iii) the material breach of the Confidentiality and
Nonsolicitation Agreement set forth in Section 10.
No act, or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was in the
best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause
without (x) reasonable notice to the Executive setting forth the
reasons for the Company's intention to terminate for Cause, (y) an
opportunity for the Executive, together with his counsel, to be heard
before the Board, and (z) delivery to the Executive of a written
notice of termination from the Board finding that in the good faith
opinion of the Board, the Executive was guilty of conduct set forth
above in clause (i), (ii) or (iii) hereof, and specifying the
particulars thereof in detail.
(f) Effect of Change in Control Agreement. If the Executive also
becomes entitled to receive severance payments under the terms of the
Second Amended and Restated Change in Control Agreement between the
Company and the Executive, dated as of February 2, 1996, as it may be
amended and restated from time to time (the "Change in Control
Agreement"), then the Executive's termination payments under this
Agreement shall be reduced by the amount of severance payments payable
in any given year under Section 3(B) of the Change in Control
Agreement.
(g) Disability Defined. "Disability" shall mean the Executive's
incapacity due to physical or mental illness to substantially perform
his duties on a full-time basis for six (6) consecutive months and
within thirty (30) days after a notice of termination is thereafter
given by the Company the Executive shall not have returned to the
full-time performance of the Executive's duties; provided, however, if
the Executive shall not agree with a determination to terminate him
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because of Disability, the question of the Executive's disability
shall be subject to the certification of a qualified medical doctor
agreed to by the Company and the Executive or, in the event of the
Executive's incapacity to designate a doctor, the Executive's legal
representative. In the absence of agreement between the Company and
the Executive, each party shall nominate a qualified medical doctor
and the two doctors shall select a third doctor, who shall make the
determination as to Disability.
(h) Effect of Long-Term Disability. If the Executive also
becomes entitled to receive benefits under an insured long-term
disability insurance plan ("LTD Plan") now or hereafter paid for by
the Company, then the Executive's termination benefits under this
Agreement (calculated on a monthly basis) shall be reduced by the
amount of the benefits paid under such LTD Plan. No such reduction
shall be made for benefits paid to the Executive under a personal
disability income plan or such other disability income plan paid for
by the Executive, whether or not the plan was obtained through a
group-sponsored or Company-related program.
(i) No Obligation to Mitigate. The Executive is under no
obligation to mitigate damages or the amount of any payment provided
for hereunder by seeking other employment or otherwise; provided,
however, that the Executive's coverage under the Company's welfare
benefit plans will terminate when the Executive becomes covered under
any employee benefit plan made available by another employer and
covering the same type of benefits. The Executive shall notify the
Company within thirty (30) days after the commencement of any such
benefits.
(j) Forfeiture. Notwithstanding the foregoing, any right of the
Executive to receive termination payments and benefits hereunder shall
be forfeited to the extent of any amounts payable after any breach of
Section 10, 11 or 12 by the Executive.
10. Confidentiality and Nonsolicitation Agreement.
(a) The Executive acknowledges that in the course of his employment by
the Company, he will or may have access to and become informed of confidential
and secret information which is a competitive asset of the Company
("Confidential Information"), including, without limitation, (i) the terms of
any agreement between the Company and any employee, customer or supplier, (ii)
pricing strategy, (iii) merchandising and marketing methods, (iv) product
development ideas and strategies,
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(v) personnel training and development programs, (vi) financial results, (vii)
strategic plans and demographic analyses, (viii) proprietary computer and
systems software, and (ix) any non-public information concerning the Company,
its employees, suppliers or customers. The Executive agrees that he will keep
all Confidential Information in strict confidence during the term of his
employment by the Company and thereafter, and will never directly or indirectly
make known, divulge, reveal, furnish, make available, or use any Confidential
Information (except in the course of his regular authorized duties on behalf of
the Company). The Executive agrees that the obligations of confidentiality
hereunder shall survive termination of his employment at the Company regardless
of any actual or alleged breach by the Company of this Agreement, until and
unless any such Confidential Information shall have become, through no fault of
the Executive, generally known to the public or the Executive is required by law
to make disclosure (after giving the Company notice and an opportunity to
contest such requirement). The Executive's obligations under this Section 10
are in addition to, and not in limitation of or preemption of, all other
obligations of confidentiality which the Executive may have to the Company under
general legal or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of this
Agreement, make or cause to be made, any copies, pictures, duplicates,
facsimiles or other reproductions or recordings or any abstracts or summaries
including or reflecting Confidential Information. All such documents and other
property furnished to the Executive by the Company or otherwise acquired or
developed by the Company shall at all times be the property of the Company.
Upon termination of the Executive's employment with the Company, the Executive
will return to the Company any such documents or other property of the Company
which are in the possession, custody or control of the Executive.
(c) Without the prior written consent of the Company (which may be
withheld for any reason or no reason), except in the ordinary course of the
Company's business, the Executive shall not at any time following the date of
this Agreement use for the benefit or purposes of the Executive or for the
benefit or purposes of any other person, firm, partnership, association, trust,
venture, corporation or business organization, entity or enterprise engaged in
the "Restricted Business" (as herein defined), or disclose in any manner to any
person, firm, partnership, association, trust, venture, corporation or business
organization, entity or enterprise engaged in the Restricted Business, any
Confidential Information. "Restricted Business" means any business or division
of a business which consists of the manufacturing or sale for distribution, or
the distribution, to customers that are primarily restaurants, cafes, bars,
hotels, schools, colleges and other institutions (as the word "institution" is
customarily
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defined in the wholesale grocery business) of (i) processed or bulk food and
other groceries; (ii) restaurant and commercial kitchen supplies (such as paper
products, janitorial supplies, consumable stores and supplies of every kind and
nature); and (iii) restaurant and commercial kitchen equipment (such as
cookware, appliances, glassware, dinnerware, smallwares and similar items), and
likewise includes any business of a kind in whole or in part similar to that
heretofore engaged in by the Company or any of its subsidiaries.
(d) In the event of the Executive's voluntary or involuntary
termination of employment with the Company, the Executive agrees that he will
not in any capacity, on his own behalf or on behalf of any other firm, person or
entity, undertake or assist in the solicitation of any employee of the Company,
including, but not limited to, solicitation of any employee to terminate his or
her employment with the Company.
(e) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 10 (referred to collectively as the
Confidentiality and Nonsolicitation Agreement) that results in material
detriment to the Company would cause irreparable harm to the Company, and that
the Company's remedy at law for any such violation would be inadequate. In
recognition of the foregoing, the Executive agrees that, in addition to any
other relief afforded by law or this Agreement, including damages sustained by a
breach of this Agreement and any forfeitures under Section 9, and without any
necessity or proof of actual damages, the Company shall have the right to
enforce this Agreement by specific remedies, which shall include, among other
things, temporary and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the forfeitures described above and
injunctions shall all be proper modes of relief and are not to be considered as
alternative remedies.
11. Post-termination Assistance. The Executive agrees that after his
employment with the Company has terminated he will provide, upon reasonable
notice, such information and assistance to the Company as may reasonably be
requested by the Company in connection with any litigation in which it or any of
its affiliates is or may become a party; provided, however, that the Company
agrees to reimburse the Executive for any related expenses, including travel
expenses.
12. Covenant Not to Compete. During the termination payment period
as set forth above in Section 9(a), if the Executive has received or is
receiving benefits under Section 9, the Executive will not, without the prior
written consent of the Company (which may be withheld for any reason or no
reason), directly or indirectly or by action in concert with others, own,
manage, operate, join, control, perform consulting services for, be employed by,
participate in or be connected with any business, enterprise or other entity (or
the ownership, management,
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operation, or control of any such business, enterprise or other entity) (a
"Competing Enterprise") engaged anywhere in the United States in the "Restricted
Business" (as herein defined) or any other principal line of business developed
or acquired by the Company or its affiliates during the term of this Agreement
(the "Other Business").
13. Arbitration. Any dispute between the parties under this
Agreement shall be resolved (except as provided below) through informal
arbitration by an arbitrator selected under the rules of the American
Arbitration Association (located in the city in which the Company's principal
executive offices are based) and the arbitration shall be conducted in that
location under the rules of said Association. Each party shall each be entitled
to present evidence and argument to the arbitrator. The arbitrator shall have
the right only to interpret and apply the provisions of this Agreement and may
not change any of its provisions. The arbitrator shall permit reasonable pre-
hearing discovery of facts, to the extent necessary to establish a claim or a
defense to a claim, subject to supervision by the arbitrator. The determination
of the arbitrator shall be conclusive and binding upon the parties and judgment
upon the same may be entered in any court having jurisdiction thereof. The
arbitrator shall give written notice to the parties stating his or their
determination, and shall furnish to each party a signed copy of such
determination. The expenses of arbitration shall be borne equally by the
Executive and the Company or as the arbitrator shall otherwise equitably
determine.
Notwithstanding the foregoing, the Company shall not be required to
seek or participate in arbitration regarding any breach of the Executive's
Confidentiality and Nonsolicitation Agreement contained in Section 10 or the
Covenant Not to Compete contained in Section 12, but may pursue its remedies for
such breach in a court of competent jurisdiction in the city in which the
Company's principal executive offices are based. Any arbitration or action
pursuant to this Section 13 will be governed by and construed in accordance with
the substantive laws of the State of Illinois, without giving effect to the
principles of conflict of laws of such State.
14. Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the subject matter hereof and contains all of the covenants and agreements
between the parties with respect to such subject matter. Each party to this
Agreement acknowledges that no representations, inducements, promises, or other
agreements, orally or otherwise, have been made by any party, or anyone acting
on behalf of any party, pertaining to the subject matter hereof, which are not
embodied herein, and that no other agreement, statement, or promise pertaining
to the subject matter hereof that is not contained in this Agreement shall be
valid or binding on either party.
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15. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
16. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place.
This Agreement will be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 16(a) and 16(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by the Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 16(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
17. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of
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<PAGE>
the Secretary of the Company) at its principal executive offices and to the
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.
18. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Illinois, without giving effect to the
principles of conflict of laws of such State.
19. Validity. If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
20. Survival of Provisions. Notwithstanding any other provision of
this Agreement, the parties' respective rights and obligations under Sections 9,
10, 11, 13 and 21 will survive any termination or expiration of this Agreement
or the termination of the Executive's employment for any reason whatsoever.
21. Legal Fees and Expenses. Without regard to whether the Executive
prevails, in whole or in part, in connection therewith, the Company will pay and
be financially responsible for 100% of any and all reasonable attorneys' and
related fees and expenses incurred by the Executive in connection with any
dispute associated with the interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or otherwise, provided
that, in regard to such dispute, the Executive has not acted in bad faith or
with no colorable claim of success.
22. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. Unless otherwise noted, references to
"Sections" are to sections of this Agreement. The captions used in this
Agreement are designed for convenient reference only and are not to be used for
the purpose of interpreting any provision of this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an
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<PAGE>
original but all of which together will constitute one and the same agreement.
24. Prior Agreement. Notwithstanding any other provisions of this
Agreement, if the Merger has not been completed by July 31, 1996, this Agreement
shall have no further force or effect, and the Prior Agreement shall be
reinstated in its entirety as though this Agreement had not been entered into.
IN WITNESS WHEREOF, the parties hereof have executed this Agreement as
of the day and year first above written.
/s/ Mark Van Stekelenburg
----------------------------------
Mark Van Stekelenburg
ATTEST: RYKOFF-SEXTON, INC.
/s/ Robert J. Harter, Jr. By: /s/
- --------------------------- -------------------------------
Robert J. Harter, Jr.
Secretary
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<PAGE>
Exhibit 10.13
RYKOFF-SEXTON
July 18, 1994
HAND DELIVERED
Harold E. Feather
Dear Harold:
The purpose of this letter is to clarify the letter agreement, dated
June 20, 1994 (the "Letter Agreement"), between you and Rykoff-Sexton, Inc. (the
"Company").
Any payments made to you pursuant to the Change of Control Agreement,
dated December 11, 1989, between you and the Company, shall reduce, dollar for
dollar, the amount of any termination payments to be made to you pursuant to the
Letter Agreement.
To confirm our understanding, please sign and return a copy of this
letter to the Company.
Very truly yours,
/s/ Mark Van Stekelenburg
Mark Van Stekelenburg
President and Chief Executive Officer
Agreed and Accepted:
/s/ Harold E. Feather
- --------------------------
Harold E. Feather
<PAGE>
Exhibit 10.14
RYKOFF-SEXTON
December 10, 1993
Mr. Donald E. Willis, Jr.
1613 Riverview Circle
Huntington Beach, CA 92648
Dear Don:
I am delighted to confirm that the Company is prepared to make an
employment offer to you, as Senior Vice President and Chief Information Officer,
on the following principal terms and conditions:
<TABLE>
<CAPTION>
<S> <C>
. Annual Salary: $210,000
. Annual Car Allowance: $7,200
. Executive Bonus Plan: 20% at target
40% maximum
Fiscal year 1994 minimum guaranteed
bonus of $20,000
. Non-Qualified Stock Options: Up to 8,000 shares annually
(At Stock Option Committee's discretion)
. Converging Stock Options: Award of 20,000 shares upon signing
(plan description enclosed)
. Restricted Stock: Award of 4,000 shares upon signing
. Start Date: On or before January 17, 1994
. Health and Welfare Benefits: As outlined in the enclosed Open
Enrollment Brochure
</TABLE>
<PAGE>
Mr. Donald E. Willis, Jr.
December 10, 1993
Page 2
. Your employment with the Company will be "at will" which means that
either you or the Company may terminate the relationship at any time with
or without cause. However, should your job terminate during the first
year of employment for any reason, other than willful neglect or the
like, your salary will continue until the earlier of (i) one year from
the date of termination of your employment with Rykoff-Sexton, Inc., or
(ii) the date you obtain other employment.
. Change of Control Agreement (Enclosed).
This offer is subject to your satisfactory completion of the Company's standard
drug test and the approval of the Company's Compensation Committee. We look
forward to you joining the Company and remain available to answer any further
questions you may have.
Very truly yours,
/s/ Mark Van Stekelenburg
Mark Van Stekelenburg
President and Chief Executive Officer
I Accept This Offer /s/ Donald E. Willis, Jr.
----------------------------
Donald E. Willis, Jr.
Enclosures
<PAGE>
Exhibit 10.15
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
____ day of ___________, 1996, by and between RYKOFF-SEXTON, INC., a Delaware
corporation (the "Company"), and FRANK H. BEVEVINO (the "Executive").
WHEREAS, immediately prior to the date hereof, the Executive was Chief
Executive Officer and Chairman of the Board of Directors of US Foodservice Inc.,
a Delaware corporation ("USFS");
WHEREAS, pursuant to an Agreement and Plan of Merger dated
_________________, 1996 (the "Merger Agreement") by and among the Company, USFS
and USF Acquisition Corporation ("Acquisition"), a Delaware corporation and a
wholly-owned subsidiary of the Company, as of the date hereof, USFS will be
merged with and into Acquisition, with Acquisition as the surviving entity (the
"Merger");
WHEREAS, this Agreement was subject to and contingent upon prior
approval by the stockholders of USFS in accordance with the provisions of
Section 280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"), and was so approved;
WHEREAS, it is a condition precedent to effectuating the Merger that
the Executive enter into an employment agreement with the Company in the form
hereof, which agreement supersedes any previous employment agreement the
Executive may have had with USFS;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. Employment. The Company hereby agrees to employ the Executive and
the Executive hereby agrees to be employed by the Company upon the terms and
conditions herein set forth.
2. Term. Employment shall be for a term commencing on the date
hereof and, subject to termination under Section 8, expiring five (5) years from
the date hereof. Notwithstanding the previous sentence, this Agreement and the
employment of the Executive shall be automatically renewed (subject to Section
8) for successive one-year periods upon the terms and conditions set forth
herein, commencing on the fifth anniversary of the date of this Agreement, and
on each anniversary date thereafter, unless either party to this Agreement gives
the other party written notice (in accordance with Section 17) of such party's
intention to terminate this Agreement and the employment of the Executive
<PAGE>
at least twelve months prior to the end of such initial or extended term. For
purposes of this Agreement, any reference to the "term" of this Agreement shall
include the original term and any extension thereof.
3. Duties of the Executive. The Executive shall serve as the
President of the Company, and as such shall have primary responsibility for
oversight, management and general operation of all of the food service
distribution and manufacturing operations of the Company and its direct or
indirect subsidiaries and shall otherwise be assigned only executive policy and
management duties. The Executive shall have the additional title of Chief
Executive Officer of the food service distribution division and shall be the
Chief Executive Officer of Acquisition. The Executive shall report solely to
the Company's Chief Executive Officer and the Company's Board of Directors (the
"Board") and shall be assigned only those duties that are consistent with the
Executive's position as President of the Company. The Executive shall devote
substantially all of his normal working time and his best efforts, full
attention and energies to the food service distribution and manufacturing
business of the Company and its direct or indirect subsidiaries. The Company
shall use its best efforts to cause the Executive to be elected as a member of
its Board throughout the term of this Agreement and shall include him in the
management slate for election as a director at every stockholders' meeting at
which his term as a director would otherwise expire. The Executive may not
serve as an officer of, director of, make investments in, or otherwise
participate in, any other entity without the prior written consent of the
Company's Chief Executive Officer or the Board; provided, that the foregoing
shall not be deemed to prohibit the Executive from acquiring, directly or
indirectly, solely as an investment, not more than two percent (2%) of any class
of securities of any entity that are registered under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934, as amended, including the regulations
issued thereunder; and provided further, that as long as it does not interfere
with the Executive's employment, the Executive may (a) with the prior written
consent of the Company's Chief Executive Officer or the Board, serve as a
director in a noncompeting company, (b) serve as an officer, director or
otherwise participate in purely educational, welfare, social, religious and
civic organizations, and (c) manage personal and family investments.
4. Compensation.
(a) During the term of this Agreement, the Company shall pay to the
Executive a base salary of not less than $400,000 per annum, which base salary
may be increased (but not decreased) from time to time by the Board in its sole
discretion, payable at the times and in the manner consistent with the Company's
general policies regarding compensation of executive employees. Such base
salary shall include any salary reduction contributions to (i) any Company-
sponsored plan that includes a
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<PAGE>
cash-or-deferred arrangement under Section 401(k) of the Code, (ii) any other
plan of deferred compensation sponsored by the Company, or (iii) any Company-
sponsored "cafeteria plan" under Section 125 of the Code. The Board may from
time to time authorize such additional compensation to the Executive, in cash or
in property, as the Board may determine in its sole discretion to be
appropriate.
(b) If the Board authorizes cash incentive compensation under the
Company's Senior Executive Incentive Plan or such other management incentive
program or arrangement approved by the Board, the Executive shall be eligible to
participate in such plan, program or arrangement under the terms and conditions
applicable to executive and management employees; provided, however, that (i)
the cash incentive compensation paid to the Executive for the Company's 1997
fiscal year shall be in an amount not less than 50% of the Executive's annual
base salary earned for the applicable period, and (ii) the cash incentive
compensation paid to the Executive for the Company's 1998 fiscal year shall be
in an amount not less than 25% of the Executive's annual base salary earned for
the applicable period.
(c) If the Board authorizes grants under the Company's employee stock
option plans in effect from time to time, the Executive shall participate in any
such award in a manner commensurate with the Executive's position and level of
responsibility with the Company as compared to the position and level of
responsibility of other executive and management employees of the Company as
determined by the Board in its sole discretion; provided that the Executive
shall vest in any such award on the same basis as other executive and management
employees. Notwithstanding the foregoing, no later than the date that is three
months from the date hereof, the Executive shall be granted an option under the
Company's [1996 Key Employees Stock Option Plan] to purchase not less than
25,000 shares of the Company's common stock.
5. Executive Benefits.
(a) In addition to the compensation described in Section 4, the
Company shall make available to the Executive, subject to the terms and
conditions of the applicable plans, including without limitation the eligibility
rules, participation for the Executive and his eligible dependents in the
Company-sponsored employee benefit plans or arrangements and such other usual
and customary benefits now or hereafter generally available to employees of the
Company.
(b) The Company shall make available to the Executive such benefits
and perquisites as may be made available to senior executives of the Company,
including, without limitation, equity and cash incentive programs and
supplemental retirement, deferred compensation and welfare plans.
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<PAGE>
(c) In addition to any life insurance coverage made available to the
Executive under Section 5(a), the Company shall provide to the Executive, as the
owner of the contract (or, alternatively, to his designee, as the owner) a term
life insurance contract on the Executive's life in an amount not less than one
million dollars ($1,000,000) and to reimburse the Executive, on an after-tax
basis, for the cost of such insurance.
6. Expenses. The Company shall also pay or reimburse the Executive
for reasonable and necessary expenses incurred by the Executive in connection
with his duties on behalf of the Company in accordance with the general policies
of the Company.
7. Place of Performance. In connection with his employment by the
Company, unless otherwise agreed by the Executive, the Executive shall be based
at offices located in Wilkes-Barre, Pennsylvania, except for travel reasonably
required for Company business.
8. Termination.
(a) Involuntary Termination. The Executive's employment hereunder may
be terminated by the Company for any reason by written notice as provided in
Section 17. The Executive's Disability (as defined herein) during the term of
the Agreement shall constitute an involuntary termination of employment
hereunder, unless the Board expressly extends such employment for a specified
time thereafter. The Executive will be treated for purposes of this Agreement
as having been involuntarily terminated by the Company if the Executive
terminates his employment with the Company under the following circumstances:
(i) the Company has breached any material provision of this Agreement and within
30 days after notice thereof from the Executive, the Company fails to cure such
breach; (ii) a material reduction in the Executive's authority, functions,
duties or responsibilities as provided in Section 3; (iii) at any time after the
Company has notified the Executive pursuant to Section 2 hereof that the Company
intends to terminate the Agreement and the Executive's employment (rather than
allow the Agreement to automatically renew); (iv) a successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company fails to assume
liability under the Agreement; (v) the Executive fails to be elected to the
Board or is removed from the Board; (vi) unless otherwise agreed by the
Executive, the relocation of the Executive, his offices or the principal place
where he is required to perform his duties hereunder from Wilkes-Barre,
Pennsylvania; or (vii) the consistent failure by the Executive, after
appropriate efforts by the parties, to endorse the Company's bona fide strategic
plan as presented from time to time by the Company's Chief Executive Officer and
adopted by the Board, such that a reasonable executive would conclude that the
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<PAGE>
parties hold irreconcilable differences in vision and direction for the Company.
(b) Voluntary Termination. The Executive may voluntarily terminate
the Agreement at any time by notice to the Company as provided in Section 17.
The Executive's death during the term of the Agreement shall constitute a
voluntary termination of employment for purposes of eligibility for Termination
Payments and Benefits as provided in Section 9.
(c) Subject to Section 9 and any benefit continuation requirements of
applicable laws, in the event the Executive's employment hereunder is
voluntarily or involuntarily terminated for any reason whatsoever, the
compensation and benefits obligations of the Company under Sections 4 and 5
shall cease as of the effective date of such termination, except for any
compensation and benefits earned or accrued but unpaid through such date.
9. Termination Payments and Benefits. If the Executive's employment
hereunder is involuntarily terminated by the Company other than for Cause (as
defined herein) prior to the end of the term of this Agreement, then the Company
shall be obligated to pay to the Executive certain termination payments and make
available certain benefits during the termination payment period, as follows:
(a) Termination Payment Period. Termination payments shall be made
for the greater of the number of years (and fractions thereof) remaining in the
term of the Agreement or two years.
(b) Calculation of Termination Payments. Termination payments
calculated on an annual basis shall equal the sum of (i) the Executive's highest
annual base salary during the three-year period prior to the Executive's
termination plus (ii) the Executive's average annual cash incentive compensation
award, including without limitation any award under the Senior Executive
Incentive Program or any successor plan thereto, during the three-year period
prior to the Executive's termination; provided, however, that the sum of all
termination payments during the termination payment period as set forth above in
subsection (a) shall equal at least $1,000,000; and provided further that any
termination payments hereunder are subject to the provisions of subsection (g).
(c) Method of Payment. Termination payments shall be paid to the
Executive in accordance with the Company's regular payroll schedule. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid to the Executive's
designated beneficiary, or, if none, then to the Executive's estate.
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<PAGE>
(d) Benefits. Notwithstanding any provision to the contrary in any
option agreement or other agreement or in any plan, all of the Executive's
outstanding stock options shall immediately become exercisable, and all
restrictions on any other equity awards relating to continued performance of
services shall lapse.
During the termination payment period as set forth above in subsection
(a), the Company shall use its best efforts to maintain in full force and effect
for the continued benefit of the Executive all employee welfare benefit plans
and perquisite programs in which the Executive was entitled to participate
immediately prior to the Executive's termination or shall arrange to make
available to the Executive benefits substantially similar to those which the
Executive would otherwise have been entitled to receive if his employment had
not been terminated. Such welfare benefits shall be provided to the Executive
on the same terms and conditions (including employee contributions toward the
premium payments) under which the Executive was entitled to participate
immediately prior to his termination. The Company does not guarantee a
favorable tax consequence to the Executive for continued coverage and benefits
under the Company-sponsored plans nor will it indemnify the Executive for such
results except with respect to the life insurance plan made available under
Section 5(c).
Notwithstanding the foregoing, with respect to the Executive's
continued coverage under the Company's Medical and Dental Plan, or a successor
plan, pursuant to this provision, the Executive's "qualifying event" for
purposes of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
shall be his date of termination from the Company.
Any termination payments hereunder shall not be taken into account for
purposes of any retirement plan or other benefit plan sponsored by the Company,
except as otherwise expressly required by such plans or applicable law.
(e) Termination for Cause. For purposes of this Agreement, "Cause"
shall mean
(i) the willful and continued failure by the Executive to
substantially perform his duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical
or mental illness), after demand for substantial performance is
delivered by the Company that specifically identifies the manner
in which the Company believes the Executive has not substantially
performed his duties,
(ii) the willful engaging by the Executive in misconduct which is
materially injurious to the Company, monetarily or otherwise, or
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<PAGE>
(iii) the material breach of the Confidentiality and
Nonsolicitation Agreement set forth in Section 10.
No act, or failure to act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause without (x) reasonable notice to the Executive
setting forth the reasons for the Company's intention to terminate for Cause,
(y) an opportunity for the Executive, together with his counsel, to be heard
before the Board, and (z) delivery to the Executive of a written notice of
termination from the Board finding that in the good faith opinion of the Board,
the Executive was guilty of conduct set forth above in clause (i), (ii) or (iii)
hereof, and specifying the particulars thereof in detail.
(f) Disability Defined. "Disability" shall mean the Executive's
incapacity due to physical or mental illness to substantially perform his duties
on a full-time basis for six (6) consecutive months and within thirty (30) days
after a notice of termination is thereafter given by the Company the Executive
shall not have returned to the full-time performance of the Executive's duties;
provided, however, if the Executive shall not agree with a determination to
terminate him because of Disability, the question of the Executive's disability
shall be subject to the certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal representative. In the absence of
agreement between the Company and the Executive, each party shall nominate a
qualified medical doctor and the two doctors shall select a third doctor, who
shall make the determination as to Disability.
(g) Effect of Long-Term Disability. If the Executive also becomes
entitled to receive benefits under an insured long-term disability insurance
plan ("LTD Plan") now or hereafter paid for by the Company, then the Executive's
termination benefits under this Agreement (calculated on a monthly basis) shall
be reduced by the amount of the benefits paid under such LTD Plan. No such
reduction shall be made for benefits paid to the Executive under a personal
disability income plan or such other disability income plan paid for by the
Executive, whether or not the plan was obtained through a group-sponsored or
Company-related program.
(h) No Obligation to Mitigate. The Executive is under no obligation
to mitigate damages or the amount of any payment provided for hereunder by
seeking other employment or otherwise; provided, however, that the Executive's
coverage under the Company's welfare benefit plans will terminate when the
Executive becomes covered under any employee benefit plan made available by
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<PAGE>
another employer and covering the same type of benefits. The Executive shall
notify the Company within thirty (30) days after the commencement of any such
benefits.
(i) Forfeiture. Notwithstanding the foregoing, any right of the
Executive to receive termination payments and benefits hereunder shall be
forfeited to the extent of any amounts payable after any breach of Section 10,
11 or 12 by the Executive.
10. Confidentiality and Nonsolicitation Agreement.
(a) The Executive acknowledges that in the course of his employment by
the Company, he will or may have access to and become informed of confidential
and secret information which is a competitive asset of the Company
("Confidential Information"), including, without limitation, (i) the terms of
any agreement between the Company and any employee, customer or supplier, (ii)
pricing strategy, (iii) merchandising and marketing methods, (iv) product
development ideas and strategies, (v) personnel training and development
programs, (vi) financial results, (vii) strategic plans and demographic
analyses, (viii) proprietary computer and systems software, and (ix) any non-
public information concerning the Company, its employees, suppliers or
customers. The Executive agrees that he will keep all Confidential Information
in strict confidence during the term of his employment by the Company and
thereafter, and will never directly or indirectly make known, divulge, reveal,
furnish, make available, or use any Confidential Information (except in the
course of his regular authorized duties on behalf of the Company). The
Executive agrees that the obligations of confidentiality hereunder shall survive
termination of his employment at the Company regardless of any actual or alleged
breach by the Company of this Agreement, until and unless any such Confidential
Information shall have become, through no fault of the Executive, generally
known to the public or the Executive is required by law to make disclosure
(after giving the Company notice and an opportunity to contest such
requirement). The Executive's obligations under this Section 10 are in addition
to, and not in limitation of or preemption of, all other obligations of
confidentiality which the Executive may have to the Company under general legal
or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of this
Agreement, make or cause to be made, any copies, pictures, duplicates,
facsimiles or other reproductions or recordings or any abstracts or summaries
including or reflecting Confidential Information. All such documents and other
property furnished to the Executive by the Company or otherwise acquired or
developed by the Company shall at all times be the property of the Company.
Upon termination of the Executive's employment with the Company, the Executive
will return to the Company any such documents or other property of the
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<PAGE>
Company which are in the possession, custody or control of the Executive.
(c) Without the prior written consent of the Company (which may be
withheld for any reason or no reason), except in the ordinary course of the
Company's business, the Executive shall not at any time following the date of
this Agreement use for the benefit or purposes of the Executive or for the
benefit or purposes of any other person, firm, partnership, association, trust,
venture, corporation or business organization, entity or enterprise engaged in
the "Restricted Business" (as herein defined), or disclose in any manner to any
person, firm, partnership, association, trust, venture, corporation or business
organization, entity or enterprise engaged in the Restricted Business, any
Confidential Information. "Restricted Business" means any business or division
of a business which consists of the manufacturing or sale for distribution, or
the distribution, to customers that are primarily restaurants, cafes, bars,
hotels, schools, colleges and other institutions (as the word "institution" is
customarily defined in the wholesale grocery business) of (i) processed or bulk
food and other groceries; (ii) restaurant and commercial kitchen supplies (such
as paper products, janitorial supplies, consumable stores and supplies of every
kind and nature); and (iii) restaurant and commercial kitchen equipment (such as
cookware, appliances, glassware, dinnerware, smallwares and similar items), and
likewise includes any business of a kind in whole or in part similar to that
heretofore engaged in by the Company or any of its subsidiaries.
(d) In the event of the Executive's voluntary or involuntary
termination of employment with the Company, the Executive agrees that he will
not in any capacity, on his own behalf or on behalf of any other firm, person or
entity, undertake or assist in the solicitation of any employee of the Company,
including, but not limited to, solicitation of any employee to terminate his or
her employment with the Company.
(e) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 10 (referred to collectively as the
Confidentiality and Nonsolicitation Agreement) that results in material
detriment to the Company would cause irreparable harm to the Company, and that
the Company's remedy at law for any such violation would be inadequate. In
recognition of the foregoing, the Executive agrees that, in addition to any
other relief afforded by law or this Agreement, including damages sustained by a
breach of this Agreement and any forfeitures under Section 9, and without any
necessity or proof of actual damages, the Company shall have the right to
enforce this Agreement by specific remedies, which shall include, among other
things, temporary and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the forfeitures described above and
injunctions shall all be proper modes of relief and are not to be considered as
alternative remedies.
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11. Post-termination Assistance. The Executive agrees that after his
employment with the Company has terminated he will provide, upon reasonable
notice, such information and assistance to the Company as may reasonably be
requested by the Company in connection with any litigation in which it or any of
its affiliates is or may become a party; provided, however, that the Company
agrees to reimburse the Executive for any related expenses, including travel
expenses.
12. Covenant Not to Compete. During the termination payment period
as set forth above in Section 9(a), if the Executive has received or is
receiving benefits under Section 9, the Executive will not, without the prior
written consent of the Company (which may be withheld for any reason or no
reason), directly or indirectly or by action in concert with others, own,
manage, operate, join, control, perform consulting services for, be employed by,
participate in or be connected with any business, enterprise or other entity (or
the ownership, management, operation, or control of any such business,
enterprise or other entity) (a "Competing Enterprise") engaged anywhere in the
United States in the "Restricted Business" (as herein defined) or any other
principal line of business developed or acquired by the Company or its
affiliates during the term of this Agreement (the "Other Business").
13. Arbitration. Any dispute between the parties under this
Agreement shall be resolved (except as provided below) through informal
arbitration by an arbitrator selected under the rules of the American
Arbitration Association (located in Wilkes-Barre, Pennsylvania) and the
arbitration shall be conducted in that location under the rules of said
Association. Each party shall each be entitled to present evidence and argument
to the arbitrator. The arbitrator shall have the right only to interpret and
apply the provisions of this Agreement and may not change any of its provisions.
The arbitrator shall permit reasonable pre-hearing discovery of facts, to the
extent necessary to establish a claim or a defense to a claim, subject to
supervision by the arbitrator. The determination of the arbitrator shall be
conclusive and binding upon the parties and judgment upon the same may be
entered in any court having jurisdiction thereof. The arbitrator shall give
written notice to the parties stating his or their determination, and shall
furnish to each party a signed copy of such determination. The expenses of
arbitration shall be borne equally by the Executive and the Company or as the
arbitrator shall otherwise equitably determine.
Notwithstanding the foregoing, the Company shall not be required to
seek or participate in arbitration regarding any breach of the Executive's
Confidentiality and Nonsolicitation Agreement contained in Section 10 or the
Covenant Not to Compete contained in Section 12, but may pursue its remedies for
such breach in a court of competent jurisdiction in Wilkes-Barre, Pennsylvania.
Any arbitration or action pursuant to this Section
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13 will be governed by and construed in accordance with the substantive laws of
the State of Pennsylvania, without giving effect to the principles of conflict
of laws of such State.
14. Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto, or between
either or both of the parties hereto and USFS, with respect to the subject
matter hereof and contains all of the covenants and agreements between the
parties with respect to such subject matter. Each party to this Agreement
acknowledges that no representations, inducements, promises, or other
agreements, orally or otherwise, have been made by any party, or anyone acting
on behalf of any party, pertaining to the subject matter hereof, which are not
embodied herein, and that no other agreement, statement or promise pertaining to
the subject matter hereof that is not contained in this Agreement shall be valid
or binding on either party.
15. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
16. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place.
This Agreement will be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 16(a) and 16(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable,
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whether by pledge, creation of a security interest, or otherwise, other than by
a transfer by the Executive's will or by the laws of descent and distribution
and, in the event of any attempted assignment or transfer contrary to this
Section 16(c), the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
17. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive offices and to the Executive at his
principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes
of address shall be effective only upon receipt.
18. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Pennsylvania, without giving effect to
the principles of conflict of laws of such State.
19. Validity. If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
20. Survival of Provisions. Notwithstanding any other provision of
this Agreement, the parties' respective rights and obligations under Sections 9,
10, 11, 13 and 21 will survive any termination or expiration of this Agreement
or the termination of the Executive's employment for any reason whatsoever.
21. Legal Fees and Expenses. Without regard to whether the Executive
prevails, in whole or in part, in connection therewith, the Company will pay and
be financially responsible for 100% of any and all reasonable attorneys' and
related fees and expenses incurred by the Executive in connection with any
dispute associated with the interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or otherwise, provided
that, in regard to such
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dispute, the Executive has not acted in bad faith or with no colorable claim of
success.
22. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. Unless otherwise noted, references to
"Sections" are to sections of this Agreement. The captions used in this
Agreement are designed for convenient reference only and are not to be used for
the purpose of interpreting any provision of this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereof have executed this Agreement as
of the day and year first written.
----------------------------------
Frank H. Bevevino
RYKOFF-SEXTON, INC.
By:
-------------------------------
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Exhibit 10.16
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
____ day of __________, 1996, by and between RYKOFF-SEXTON, INC., a Delaware
corporation (the "Company"), and THOMAS G. McMULLEN (the "Executive").
WHEREAS, immediately prior to the date hereof, the Executive was
President and Chief Operating Officer of US Foodservice Inc., a Delaware
corporation ("USFS");
WHEREAS, pursuant to an Agreement and Plan of Merger dated
_________________, 1996 (the "Merger Agreement") by and among the Company, USFS
and USF Acquisition Corporation ("Acquisition"), a Delaware corporation and a
wholly-owned subsidiary of the Company, as of the date hereof, USFS will be
merged with and into Acquisition, with Acquisition as the surviving entity (the
"Merger");
WHEREAS, this Agreement was subject to and contingent upon prior
approval by the stockholders of USFS in accordance with the provisions of
Section 280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"), and was so approved;
WHEREAS, it is a condition precedent to effectuating the Merger that
the Executive enter into an employment agreement with the Company in the form
hereof, which agreement supersedes any previous employment agreement the
Executive may have had with USFS;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. Employment. The Company hereby agrees to employ the Executive and
the Executive hereby agrees to be employed by the Company upon the terms and
conditions herein set forth.
2. Term. Employment shall be for a term commencing on the date
hereof and, subject to termination under Section 8, expiring three (3) years
from the date hereof. Notwithstanding the previous sentence, this Agreement and
the employment of the Executive shall be automatically renewed (subject to
Section 8) for successive one-year periods upon the terms and conditions set
forth herein, commencing on the third anniversary of the date of this Agreement,
and on each anniversary date thereafter, unless either party to this Agreement
gives the other party written notice (in accordance with Section 17) of such
party's intention to terminate this Agreement and the employment of the
Executive at least 90 days prior to the end of such initial or extended term.
For purposes of this Agreement, any reference to the "term" of this Agreement
shall include the original term and any extension thereof.
<PAGE>
3. Duties of the Executive. The Executive shall serve as President
of the food service distribution division of the Company. The Executive shall
report directly to the President of the Company. The Executive shall devote his
full time and best efforts to the food service distribution business of the
Company and any other related duties and responsibilities that may from time to
time be prescribed by the President of the Company. Notwithstanding the
foregoing, as long as it does not interfere with the Executive's employment
hereunder, the Executive may serve as an officer, director or otherwise
participate in educational, welfare, social, religious and civic organizations.
4. Compensation.
(a) During the term of this Agreement, the Company shall pay to the
Executive a base salary of $230,000 per annum, which base salary may be adjusted
from time to time by the Company, payable at the times and in the manner
consistent with the Company's general policies regarding compensation of
executive employees. Such base salary shall include any salary reduction
contributions to (i) any Company- sponsored plan that includes a cash-or-
deferred arrangement under Section 401(k) of the Code, (ii) any other plan of
deferred compensation sponsored by the Company, or (iii) any Company-sponsored
"cafeteria plan" under Section 125 of the Code.
(b) If the Company's Board of Directors (the "Board") authorizes cash
incentive compensation under the Company's Senior Executive Incentive Plan or
such other management incentive program or arrangement approved by the Board,
the Executive shall be eligible to participate in such plan, program or
arrangement under the terms and conditions applicable to executive and
management employees; provided, however, that (i) the cash incentive
compensation paid to the Executive for the Company's 1997 fiscal year shall be
in an amount not less than 50% of the Executive's annual base salary earned for
the applicable period, and (ii) the cash incentive compensation paid to the
Executive for the Company's 1998 fiscal year shall be in an amount not less than
25% of the Executive's annual base salary earned for the applicable period.
(c) If the Board authorizes grants under the Company's employee stock
option plans in effect from time to time, the Executive shall participate in any
such award in a manner commensurate with the Executive's position and level of
responsibility with the Company as compared to the position and level of
responsibility of other executive and management employees of the Company as
determined by the Board in its sole discretion; provided that the Executive
shall vest in any such award on the same basis as other executive and management
employees. Notwithstanding the foregoing, no later than the date that is three
months from the date hereof, the Executive shall be granted an option under the
Company's [1996 Key Employees Stock
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Option Plan] to purchase not less than 10,000 shares of the Company's common
stock.
5. Executive Benefits.
(a) In addition to the compensation described in Section 4, the
Company shall make available to the Executive, subject to the terms and
conditions of the applicable plans, including without limitation the eligibility
rules, participation for the Executive and his eligible dependents in the
Company-sponsored employee benefit plans or arrangements and such other usual
and customary benefits now or hereafter generally available to employees of the
Company.
(b) The Company shall make available to the Executive such benefits
and perquisites as may be made available to senior executives of the Company,
including, without limitation, equity and cash incentive programs and
supplemental retirement, deferred compensation and welfare plans.
6. Expenses. The Company shall also pay or reimburse the Executive
for reasonable and necessary expenses incurred by the Executive in connection
with his duties on behalf of the Company in accordance with the general policies
of the Company.
7. Place of Performance. In connection with his employment by the
Company, unless otherwise agreed by the Executive, the Executive shall be based
at offices located in Wilkes-Barre, Pennsylvania, except for travel reasonably
required for Company business.
8. Termination.
(a) Involuntary Termination. The Executive's employment hereunder may
be terminated by the Company for any reason by written notice as provided in
Section 17. The Executive's Disability (as defined herein) during the term of
the Agreement shall constitute an involuntary termination of employment
hereunder, unless the Board expressly extends such employment for a specified
time thereafter. The Executive will be treated for purposes of this Agreement
as having been involuntarily terminated by the Company if the Executive
terminates his employment with the Company under the following circumstances:
(i) at any time after the Company has notified the Executive pursuant to Section
2 hereof that the Company intends to terminate the Agreement and the Executive's
employment (rather than allow the Agreement to automatically renew); (ii) within
90 days of a reduction in the Executive's base salary as set forth in Section
4(a), unless such reduction in base salary is part of a reduction applicable
generally to senior executives of the Company; or (iii) unless otherwise agreed
by the Executive, the relocation of the Executive or his offices or the
principal place where he is required to perform his duties hereunder from
Wilkes-Barre, Pennsylvania.
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(b) Voluntary Termination. The Executive may voluntarily terminate
the Agreement at any time by notice to the Company as provided in Section 17.
The Executive's death during the term of the Agreement shall constitute a
voluntary termination of employment for purposes of eligibility for Termination
Payments and Benefits as provided in Section 9.
(c) Subject to Section 9 and any benefit continuation requirements of
applicable laws, in the event the Executive's employment hereunder is
voluntarily or involuntarily terminated for any reason whatsoever, the
compensation and benefits obligations of the Company under Sections 4 and 5
shall cease as of the effective date of such termination, except for any
compensation and benefits earned or accrued but unpaid through such date.
9. Termination Payments and Benefits. If the Executive's employment
hereunder is involuntarily terminated by the Company other than for Cause (as
defined herein) prior to the end of the term of this Agreement, subject to the
condition precedent that the Executive enter into a release and settlement
agreement with the Company, then the Company shall be obligated to pay to the
Executive certain termination payments and make available certain benefits
during the termination payment period, as follows:
(a) Termination Payment Period. Termination payments shall be made
for the greater of the number of years (and fractions thereof) remaining in the
term of the Agreement or two years.
(b) Calculation of Termination Payments. Subject to subsection (g),
termination payments calculated on an annual basis shall equal the sum of (i)
the Executive's highest annual base salary during the three-year period prior to
the Executive's termination plus (ii) the Executive's average annual cash
incentive compensation award, including without limitation any award under the
Senior Executive Incentive Program or any successor plan thereto, during the
three-year period prior to the Executive's termination.
(c) Method of Payment. Termination payments shall be paid to the
Executive in accordance with the Company's regular payroll schedule. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid to the Executive's
designated beneficiary, or, if none, then to the Executive's estate.
(d) Benefits. Notwithstanding any provision to the contrary in any
option agreement or other agreement or in any plan, all of the Executive's
outstanding stock options shall immediately become exercisable, and all
restrictions on any other equity awards relating to continued performance of
services shall lapse.
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During the termination payment period as set forth above in subsection
(a), the Company shall use its best efforts to maintain in full force and effect
for the continued benefit of the Executive all employee welfare benefit plans
and perquisite programs in which the Executive was entitled to participate
immediately prior to the Executive's termination or shall arrange to make
available to the Executive benefits substantially similar to those which the
Executive would otherwise have been entitled to receive if his employment had
not been terminated. Such welfare benefits shall be provided to the Executive
on the same terms and conditions (including employee contributions toward the
premium payments) under which the Executive was entitled to participate
immediately prior to his termination. The Company does not guarantee a
favorable tax consequence to the Executive for continued coverage and benefits
under the Company-sponsored plans nor will it indemnify the Executive for such
results.
Notwithstanding the foregoing, with respect to the Executive's
continued coverage under the Company's Medical and Dental Plan, or a successor
plan, pursuant to this provision, the Executive's "qualifying event" for
purposes of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
shall be his date of termination from the Company.
Any termination payments hereunder shall not be taken into account for
purposes of any retirement plan or other benefit plan sponsored by the Company,
except as otherwise expressly required by such plans or applicable law.
(e) Termination for Cause. For purposes of this Agreement, "Cause"
shall mean
(i) the willful and continued failure by the Executive to
substantially perform his duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical
or mental illness), after demand for substantial performance is
delivered by the Company that specifically identifies the manner
in which the Company believes the Executive has not substantially
performed his duties,
(ii) the willful engaging by the Executive in misconduct which is
materially injurious to the Company, monetarily or otherwise, or
(iii) the material breach of the Confidentiality and
Nonsolicitation Agreement set forth in Section 10.
No act, or failure to act, on the Executive's part shall be deemed "willful"
unless done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.
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Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause without (x) reasonable notice to the Executive setting
forth the reasons for the Company's intention to terminate for Cause, (y) an
opportunity for the Executive, together with his counsel, to be heard before the
Board, and (z) delivery to the Executive of a written notice of termination from
the Board finding that in the good faith opinion of the Board, the Executive was
guilty of conduct set forth above in clause (i), (ii) or (iii) hereof, and
specifying the particulars thereof in detail.
(f) Disability Defined. "Disability" shall mean the Executive's
incapacity due to physical or mental illness to substantially perform his duties
on a full-time basis for six (6) consecutive months and within thirty (30) days
after a notice of termination is thereafter given by the Company the Executive
shall not have returned to the full-time performance of the Executive's duties;
provided, however, if the Executive shall not agree with a determination to
terminate him because of Disability, the question of the Executive's disability
shall be subject to the certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal representative. In the absence of
agreement between the Company and the Executive, each party shall nominate a
qualified medical doctor and the two doctors shall select a third doctor, who
shall make the determination as to Disability.
(g) Effect of Long-Term Disability. If the Executive also becomes
entitled to receive benefits under an insured long-term disability insurance
plan ("LTD Plan") now or hereafter paid for by the Company, then the Executive's
termination benefits under this Agreement (calculated on a monthly basis) shall
be reduced by the amount of the benefits paid under such LTD Plan. No such
reduction shall be made for benefits paid to the Executive under a personal
disability income plan or such other disability income plan paid for by the
Executive, whether or not the plan was obtained through a group-sponsored or
Company-related program.
(h) No Obligation to Mitigate. The Executive is under no obligation
to mitigate damages or the amount of any payment provided for hereunder by
seeking other employment or otherwise; provided, however, that the Executive's
coverage under the Company's welfare benefit plans will terminate when the
Executive becomes covered under any employee benefit plan made available by
another employer and covering the same type of benefits. The Executive shall
notify the Company within thirty (30) days after the commencement of any such
benefits.
(i) Forfeiture. Notwithstanding the foregoing, any right of the
Executive to receive termination payments and benefits hereunder shall be
forfeited to the extent of any amounts payable after any breach of Section 10,
11 or 12 by the Executive.
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10. Confidentiality and Nonsolicitation Agreement.
(a) The Executive acknowledges that in the course of his employment by
the Company, he will or may have access to and become informed of confidential
and secret information which is a competitive asset of the Company
("Confidential Information"), including, without limitation, (i) the terms of
any agreement between the Company and any employee, customer or supplier, (ii)
pricing strategy, (iii) merchandising and marketing methods, (iv) product
development ideas and strategies, (v) personnel training and development
programs, (vi) financial results, (vii) strategic plans and demographic
analyses, (viii) proprietary computer and systems software, and (ix) any non-
public information concerning the Company, its employees, suppliers or
customers. The Executive agrees that he will keep all Confidential Information
in strict confidence during the term of his employment by the Company and
thereafter, and will never directly or indirectly make known, divulge, reveal,
furnish, make available, or use any Confidential Information (except in the
course of his regular authorized duties on behalf of the Company). The
Executive agrees that the obligations of confidentiality hereunder shall survive
termination of his employment at the Company regardless of any actual or alleged
breach by the Company of this Agreement, until and unless any such Confidential
Information shall have become, through no fault of the Executive, generally
known to the public or the Executive is required by law to make disclosure
(after giving the Company notice and an opportunity to contest such
requirement). The Executive's obligations under this Section 10 are in addition
to, and not in limitation of or preemption of, all other obligations of
confidentiality which the Executive may have to the Company under general legal
or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of this
Agreement, make or cause to be made, any copies, pictures, duplicates,
facsimiles or other reproductions or recordings or any abstracts or summaries
including or reflecting Confidential Information. All such documents and other
property furnished to the Executive by the Company or otherwise acquired or
developed by the Company shall at all times be the property of the Company.
Upon termination of the Executive's employment with the Company, the Executive
will return to the Company any such documents or other property of the Company
which are in the possession, custody or control of the Executive.
(c) Without the prior written consent of the Company (which may be
withheld for any reason or no reason), except in the ordinary course of the
Company's business, the Executive shall not at any time following the date of
this Agreement use for the benefit or purposes of the Executive or for the
benefit or purposes of any other person, firm, partnership, association, trust,
venture, corporation or business organization, entity or enterprise engaged in
the "Restricted
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Business" (as herein defined), or disclose in any manner to any person, firm,
partnership, association, trust, venture, corporation or business organization,
entity or enterprise engaged in the Restricted Business, any Confidential
Information. "Restricted Business" means any business or division of a business
which consists of the manufacturing or sale for distribution, or the
distribution, to customers that are primarily restaurants, cafes, bars, hotels,
schools, colleges and other institutions (as the word "institution" is
customarily defined in the wholesale grocery business) of (i) processed or bulk
food and other groceries; (ii) restaurant and commercial kitchen supplies (such
as paper products, janitorial supplies, consumable stores and supplies of every
kind and nature); and (iii) restaurant and commercial kitchen equipment (such as
cookware, appliances, glassware, dinnerware, smallwares and similar items), and
likewise includes any business of a kind in whole or in part similar to that
heretofore engaged in by the Company or any of its subsidiaries.
(d) In the event of the Executive's voluntary or involuntary
termination of employment with the Company, the Executive agrees that he will
not in any capacity, on his own behalf or on behalf of any other firm, person or
entity, undertake or assist in the solicitation of any employee of the Company,
including, but not limited to, solicitation of any employee to terminate his or
her employment with the Company.
(e) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 10 (referred to collectively as the
Confidentiality and Nonsolicitation Agreement) that results in material
detriment to the Company would cause irreparable harm to the Company, and that
the Company's remedy at law for any such violation would be inadequate. In
recognition of the foregoing, the Executive agrees that, in addition to any
other relief afforded by law or this Agreement, including damages sustained by a
breach of this Agreement and any forfeitures under Section 9, and without any
necessity or proof of actual damages, the Company shall have the right to
enforce this Agreement by specific remedies, which shall include, among other
things, temporary and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the forfeitures described above and
injunctions shall all be proper modes of relief and are not to be considered as
alternative remedies.
11. Covenant Not to Compete. During the termination payment period
as set forth above in Section 9(a), if the Executive has received or is
receiving benefits under Section 9, the Executive shall not, without the prior
written consent of the Company (which consent may be withheld for any reason or
no reason), directly or indirectly or by action in concert with others, own,
manage, operate, join, control, perform consulting services for, be employed by,
participate in or be connected with any business, enterprise or other entity (or
the ownership, management, operation, or control of any such business,
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<PAGE>
enterprise or other entity) (a "Competing Enterprise") engaged anywhere in the
United States in the "Restricted Business" (as herein defined) or any other
principal line of business developed or acquired by the Company or its
affiliates during the term of this Agreement (the "Other Business"); provided,
however, that nothing in the foregoing shall prohibit the Executive from the
mere ownership of securities in any such Competing Enterprise, and provided
further that the foregoing prohibitions shall apply only if the annual revenues
of such Competing Enterprise (including any affiliate thereof) derived from the
Restricted Business and the Other Business for the most recently completed
fiscal year exceed $500 million.
12. Post-termination Assistance. The Executive agrees that after his
employment with the Company has terminated he will provide, upon reasonable
notice, such information and assistance to the Company as may reasonably be
requested by the Company in connection with any litigation in which it or any of
its affiliates is or may become a party; provided, however, that the Company
agrees to reimburse the Executive for any related expenses, including travel
expenses.
13. Arbitration. Any dispute between the parties under this
Agreement shall be resolved (except as provided below) through informal
arbitration by an arbitrator selected under the rules of the American
Arbitration Association (located in Wilkes-Barre, Pennsylvania) and the
arbitration shall be conducted in that location under the rules of said
Association. Each party shall be entitled to present evidence and argument to
the arbitrator. The arbitrator shall have the right only to interpret and apply
the provisions of this Agreement and may not change any of its provisions. The
arbitrator shall permit reasonable pre-hearing discovery of facts, to the extent
necessary to establish a claim or a defense to a claim, subject to supervision
by the arbitrator. The determination of the arbitrator shall be conclusive and
binding upon the parties and judgment upon the same may be entered in any court
having jurisdiction thereof. The arbitrator shall give written notice to the
parties stating his or their determination, and shall furnish to each party a
signed copy of such determination. The expenses of arbitration shall be borne
equally by the Executive and the Company or as the arbitrator shall otherwise
equitably determine.
Notwithstanding the foregoing, the Company shall not be required to
seek or participate in arbitration regarding any breach of the Executive's
Confidentiality and Nonsolicitation Agreement contained in Section 10 or the
Covenant Not to Compete contained in Section 11, but may pursue its remedies for
such breach in a court of competent jurisdiction in Wilkes-Barre, Pennsylvania.
Any arbitration or action pursuant to this Section 13 will be governed by and
construed in accordance with the substantive laws of the State of Pennsylvania,
without giving effect to the principles of conflict of laws of such State.
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14. Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto, or between
either or both of the parties hereto and USFS, with respect to the subject
matter hereof and contains all of the covenants and agreements between the
parties with respect to such subject matter. Each party to this Agreement
acknowledges that no representations, inducements, promises, or other
agreements, orally or otherwise, have been made by any party, or anyone acting
on behalf of any party, pertaining to the subject matter hereof, which are not
embodied herein, and that no other agreement, statement or promise pertaining to
the subject matter hereof that is not contained in this Agreement shall be valid
or binding on either party.
15. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
16. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place.
This Agreement will be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 16(a) and 16(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by the Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 16(c), the
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Company shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
17. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive offices and to the Executive at his
principal residence, or to such other address as either party may have furnished
to the other in writing and in accordance herewith, except that notices of
changes of address shall be effective only upon receipt.
18. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Pennsylvania, without giving effect to
the principles of conflict of laws of such State.
19. Validity. If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
20. Survival of Provisions. Notwithstanding any other provision of
this Agreement, the parties' respective rights and obligations under Sections 9,
10, 12, 13 and 21 will survive any termination or expiration of this Agreement
or the termination of the Executive's employment for any reason whatsoever.
21. Legal Fees and Expenses. Without regard to whether the Executive
prevails, in whole or in part, in connection therewith, the Company will pay and
be financially responsible for 100% of any and all reasonable attorneys' and
related fees and expenses incurred by the Executive in connection with any
dispute associated with the interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or otherwise, provided
that, in regard to such dispute, the Executive has not acted in bad faith or
with no colorable claim of success.
22. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the
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Executive and the Company. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Unless otherwise noted, references to "Sections" are to
sections of this Agreement. The captions used in this Agreement are designed
for convenient reference only and are not to be used for the purpose of
interpreting any provision of this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereof have executed this Agreement as
of the day and year first written.
________________________________________
Thomas G. McMullen
RYKOFF-SEXTON, INC.
By:_____________________________________
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Exhibit 10.17
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
____ day of __________, 1996, by and between RYKOFF-SEXTON, INC., a Delaware
corporation (the "Company"), and DAVID F. McANALLY (the "Executive").
WHEREAS, immediately prior to the date hereof, the Executive was Vice
President, Secretary and Chief Financial Officer of US Foodservice Inc., a
Delaware corporation ("USFS");
WHEREAS, pursuant to an Agreement and Plan of Merger dated
_________________, 1996 (the "Merger Agreement") by and among the Company, USFS
and USF Acquisition Corporation ("Acquisition"), a Delaware corporation and a
wholly-owned subsidiary of the Company, as of the date hereof, USFS will be
merged with and into Acquisition, with Acquisition as the surviving entity (the
"Merger");
WHEREAS, this Agreement was subject to and contingent upon prior
approval by the stockholders of USFS in accordance with the provisions of
Section 280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"), and was so approved;
WHEREAS, it is a condition precedent to effectuating the Merger that
the Executive enter into an employment agreement with the Company in the form
hereof, which agreement supersedes any previous employment agreement the
Executive may have had with USFS;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. Employment. The Company hereby agrees to employ the Executive and
the Executive hereby agrees to be employed by the Company upon the terms and
conditions herein set forth.
2. Term. Employment shall be for a term commencing on the date
hereof and, subject to termination under Section 7, expiring two (2) years from
the date hereof. Notwithstanding the previous sentence, this Agreement and the
employment of the Executive shall be automatically renewed (subject to Section
7) for successive one-year periods upon the terms and conditions set forth
herein, commencing on the second anniversary of the date of this Agreement, and
on each anniversary date thereafter, unless either party to this Agreement gives
the other party written notice (in accordance with Section 17) of such party's
intention to terminate this Agreement and the employment of the Executive at
least 90 days prior to the end of such initial or extended term. For purposes
of this Agreement, any reference to the "term" of this Agreement shall include
the original term and any extension thereof.
<PAGE>
3. Duties of the Executive. The Executive shall serve as Chief
Financial Officer of the food service distribution division of the Company. The
Executive shall report directly to the President of the Company. The Executive
shall devote his full time and best efforts to the food service distribution
business of the Company and any other related duties and responsibilities that
may from time to time be prescribed by the President of the Company.
Notwithstanding the foregoing, as long as it does not interfere with the
Executive's employment hereunder, the Executive may serve as an officer,
director or otherwise participate in educational, welfare, social, religious and
civic organizations.
4. Compensation.
(a) During the term of this Agreement, the Company shall pay to the
Executive a base salary of $185,000 per annum, which base salary may be
adjusted from time to time by the Company, payable at the times and in the
manner consistent with the Company's general policies regarding compensation of
executive employees. Such base salary shall include any salary reduction
contributions to (i) any Company-sponsored plan that includes a cash-or-deferred
arrangement under Section 401(k) of the Code, (ii) any other plan of deferred
compensation sponsored by the Company, or (iii) any Company-sponsored "cafeteria
plan" under Section 125 of the Code.
(b) If the Company's Board of Directors (the "Board") authorizes cash
incentive compensation under the Company's Senior Executive Incentive Plan or
such other management incentive program or arrangement approved by the Board,
the Executive shall be eligible to participate in such plan, program or
arrangement under the terms and conditions applicable to executive and
management employees; provided, however, that (i) the cash incentive
compensation paid to the Executive for the Company's 1997 fiscal year shall be
in an amount not less than 50% of the Executive's annual base salary earned for
the applicable period, and (ii) the cash incentive compensation paid to the
Executive for the Company's 1998 fiscal year shall be in an amount not less than
25% of the Executive's annual base salary earned for the applicable period.
(c) If the Board authorizes grants under the Company's employee stock
option plans in effect from time to time, the Executive shall participate in any
such award in a manner commensurate with the Executive's position and level of
responsibility with the Company as compared to the position and level of
responsibility of other executive and management employees of the Company as
determined by the Board in its sole discretion; provided that the Executive
shall vest in any such award on the same basis as other executive and management
employees. Notwithstanding the foregoing, no later than the date that is three
months from the date hereof, the Executive shall be granted an option under the
Company's [1996 Key Employees Stock
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Option Plan] to purchase not less than 10,000 shares of the Company's common
stock.
5. Executive Benefits.
(a) In addition to the compensation described in Section 4, the
Company shall make available to the Executive, subject to the terms and
conditions of the applicable plans, including without limitation the eligibility
rules, participation for the Executive and his eligible dependents in the
Company-sponsored employee benefit plans or arrangements and such other usual
and customary benefits now or hereafter generally available to employees of the
Company.
(b) The Company shall make available to the Executive such benefits
and perquisites as may be made available to senior executives in the Company's
food service distribution division, including, without limitation, equity and
cash incentive programs and deferred compensation and welfare plans.
6. Expenses. The Company shall also pay or reimburse the Executive
for reasonable and necessary expenses incurred by the Executive in connection
with his duties on behalf of the Company in accordance with the general policies
of the Company.
7. Place of Performance. In connection with his employment by the
Company, unless otherwise agreed by the Executive, the Executive shall be based
at offices located in Wilkes-Barre, Pennsylvania, except for travel reasonably
required for Company business.
8. Termination.
(a) Involuntary Termination. The Executive's employment hereunder may
be terminated by the Company for any reason by written notice as provided in
Section 17. The Executive's Disability (as defined herein) during the term of
the Agreement shall constitute an involuntary termination of employment
hereunder, unless the Board expressly extends such employment for a specified
time thereafter. The Executive will be treated for purposes of this Agreement
as having been involuntarily terminated by the Company if the Executive
terminates his employment with the Company under the following circumstances:
(i) at any time after the Company has notified the Executive pursuant to Section
2 hereof that the Company intends to terminate the Agreement and the Executive's
employment (rather than allow the Agreement to automatically renew); (ii) within
90 days of a reduction in the Executive's base salary as set forth in Section
4(a), unless such reduction in base salary is part of a reduction applicable
generally to senior executives in the Company's food service distribution
division; or (iii) unless otherwise agreed by the Executive, the relocation of
the Executive or his offices or the principal place where he is required to
perform his duties hereunder from Wilkes-Barre, Pennsylvania.
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(b) Voluntary Termination. The Executive may voluntarily terminate
the Agreement at any time by notice to the Company as provided in Section 17.
The Executive's death during the term of the Agreement shall constitute a
voluntary termination of employment for purposes of eligibility for Termination
Payments and Benefits as provided in Section 9.
(c) Subject to Section 9 and any benefit continuation requirements of
applicable laws, in the event the Executive's employment hereunder is
voluntarily or involuntarily terminated for any reason whatsoever, the
compensation and benefits obligations of the Company under Sections 4 and 5
shall cease as of the effective date of such termination, except for any
compensation and benefits earned or accrued but unpaid through such date.
9. Termination Payments and Benefits. If the Executive's employment
hereunder is involuntarily terminated by the Company other than for Cause (as
defined herein) prior to the end of the term of this Agreement, subject to the
condition precedent that the Executive enter into a release and settlement
agreement with the Company, then the Company shall be obligated to pay to the
Executive certain termination payments and make available certain benefits
during the termination payment period, as follows:
(a) Termination Payment Period. Termination payments shall be made
for the greater of the number of years (and fractions thereof) remaining in the
term of the Agreement or one year.
(b) Calculation of Termination Payments. Subject to subsection (g),
termination payments calculated on an annual basis shall equal the sum of (i)
the Executive's highest annual base salary during the three-year period prior to
the Executive's termination plus (ii) the Executive's average annual cash
incentive compensation award, including without limitation any award under the
Senior Executive Incentive Program or any successor plan thereto, during the
three-year period prior to the Executive's termination.
(c) Method of Payment. Termination payments shall be paid to the
Executive in accordance with the Company's regular payroll schedule. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid to the Executive's
designated beneficiary, or, if none, then to the Executive's estate.
(d) Benefits. Notwithstanding any provision to the contrary in any
option agreement or other agreement or in any plan, all of the Executive's
outstanding stock options shall immediately become exercisable, and all
restrictions on any other equity awards relating to continued performance of
services shall lapse.
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During the termination payment period as set forth above in subsection
(a), the Company shall use its best efforts to maintain in full force and effect
for the continued benefit of the Executive all employee welfare benefit plans
and perquisite programs in which the Executive was entitled to participate
immediately prior to the Executive's termination or shall arrange to make
available to the Executive benefits substantially similar to those which the
Executive would otherwise have been entitled to receive if his employment had
not been terminated. Such welfare benefits shall be provided to the Executive
on the same terms and conditions (including employee contributions toward the
premium payments) under which the Executive was entitled to participate
immediately prior to his termination. The Company does not guarantee a
favorable tax consequence to the Executive for continued coverage and benefits
under the Company-sponsored plans nor will it indemnify the Executive for such
results.
Notwithstanding the foregoing, with respect to the Executive's
continued coverage under the Company's Medical and Dental Plan, or a successor
plan, pursuant to this provision, the Executive's "qualifying event" for
purposes of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
shall be his date of termination from the Company.
Any termination payments hereunder shall not be taken into account for
purposes of any retirement plan or other benefit plan sponsored by the Company,
except as otherwise expressly required by such plans or applicable law.
(e) Termination for Cause. For purposes of this Agreement, "Cause"
shall mean either:
(i) that the Executive shall have failed consistently to meet the
objectives set forth in the Company's performance appraisal
standards as applied to the Executive; or
(ii) that the Executive shall have committed:
(A) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his
employment with the Company;
(B) intentional wrongful damage to property of the Company;
(C) intentional misconduct that is materially injurious to
the Company, monetarily or otherwise; or
(D) an intentional breach of the Confidentiality and
Nonsolicitation Agreement set forth in Section 10.
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For purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed "intentional" if it was due primarily to an error in
judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by the Executive not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company.
(f) Disability Defined. "Disability" shall mean the Executive's
incapacity due to physical or mental illness to substantially perform his duties
on a full-time basis for six (6) consecutive months and within thirty (30) days
after a notice of termination is thereafter given by the Company the Executive
shall not have returned to the full-time performance of the Executive's duties;
provided, however, if the Executive shall not agree with a determination to
terminate him because of Disability, the question of the Executive's disability
shall be subject to the certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal representative. In the absence of
agreement between the Company and the Executive, each party shall nominate a
qualified medical doctor and the two doctors shall select a third doctor, who
shall make the determination as to Disability.
(g) Effect of Long-Term Disability. If the Executive also becomes
entitled to receive benefits under an insured long-term disability insurance
plan ("LTD Plan") now or hereafter paid for by the Company, then the Executive's
termination benefits under this Agreement (calculated on a monthly basis) shall
be reduced by the amount of the benefits paid under such LTD Plan. No such
reduction shall be made for benefits paid to the Executive under a personal
disability income plan or such other disability income plan paid for by the
Executive, whether or not the plan was obtained through a group-sponsored or
Company-related program.
(h) No Obligation to Mitigate. The Executive is under no obligation
to mitigate damages or the amount of any payment provided for hereunder by
seeking other employment or otherwise; provided, however, that the Executive's
coverage under the Company's welfare benefit plans will terminate when the
Executive becomes covered under any employee benefit plan made available by
another employer and covering the same type of benefits. The Executive shall
notify the Company within thirty (30) days after the commencement of any such
benefits.
(i) Forfeiture. Notwithstanding the foregoing, any right of the
Executive to receive termination payments and benefits hereunder shall be
forfeited to the extent of any amounts payable after any breach of Section 10,
11 or 12 by the Executive.
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10. Confidentiality and Nonsolicitation Agreement.
(a) The Executive acknowledges that in the course of his employment by
the Company, he will or may have access to and become informed of confidential
and secret information which is a competitive asset of the Company
("Confidential Information"), including, without limitation, (i) the terms of
any agreement between the Company and any employee, customer or supplier, (ii)
pricing strategy, (iii) merchandising and marketing methods, (iv) product
development ideas and strategies, (v) personnel training and development
programs, (vi) financial results, (vii) strategic plans and demographic
analyses, (viii) proprietary computer and systems software, and (ix) any non-
public information concerning the Company, its employees, suppliers or
customers. The Executive agrees that he will keep all Confidential Information
in strict confidence during the term of his employment by the Company and
thereafter, and will never directly or indirectly make known, divulge, reveal,
furnish, make available, or use any Confidential Information (except in the
course of his regular authorized duties on behalf of the Company). The
Executive agrees that the obligations of confidentiality hereunder shall survive
termination of his employment at the Company regardless of any actual or alleged
breach by the Company of this Agreement, until and unless any such Confidential
Information shall have become, through no fault of the Executive, generally
known to the public or the Executive is required by law to make disclosure
(after giving the Company notice and an opportunity to contest such
requirement). The Executive's obligations under this Section 10 are in addition
to, and not in limitation of or preemption of, all other obligations of
confidentiality which the Executive may have to the Company under general legal
or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of this
Agreement, make or cause to be made, any copies, pictures, duplicates,
facsimiles or other reproductions or recordings or any abstracts or summaries
including or reflecting Confidential Information. All such documents and other
property furnished to the Executive by the Company or otherwise acquired or
developed by the Company shall at all times be the property of the Company.
Upon termination of the Executive's employment with the Company, the Executive
will return to the Company any such documents or other property of the Company
which are in the possession, custody or control of the Executive.
(c) Without the prior written consent of the Company (which may be
withheld for any reason or no reason), except in the ordinary course of the
Company's business, the Executive shall not at any time following the date of
this Agreement use for the benefit or purposes of the Executive or for the
benefit or purposes of any other person, firm, partnership, association, trust,
venture, corporation or business organization, entity or enterprise engaged in
the "Restricted
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Business" (as herein defined), or disclose in any manner to any person, firm,
partnership, association, trust, venture, corporation or business organization,
entity or enterprise engaged in the Restricted Business, any Confidential
Information. "Restricted Business" means any business or division of a business
which consists of the manufacturing or sale for distribution, or the
distribution, to customers that are primarily restaurants, cafes, bars, hotels,
schools, colleges and other institutions (as the word "institution" is
customarily defined in the wholesale grocery business) of (i) processed or bulk
food and other groceries; (ii) restaurant and commercial kitchen supplies (such
as paper products, janitorial supplies, consumable stores and supplies of every
kind and nature); and (iii) restaurant and commercial kitchen equipment (such as
cookware, appliances, glassware, dinnerware, smallwares and similar items), and
likewise includes any business of a kind in whole or in part similar to that
heretofore engaged in by the Company or any of its subsidiaries.
(d) In the event of the Executive's voluntary or involuntary
termination of employment with the Company, the Executive agrees that he will
not in any capacity, on his own behalf or on behalf of any other firm, person or
entity, undertake or assist in the solicitation of any employee of the Company,
including, but not limited to, solicitation of any employee to terminate his or
her employment with the Company.
(e) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 10 (referred to collectively as the
Confidentiality and Nonsolicitation Agreement) that results in material
detriment to the Company would cause irreparable harm to the Company, and that
the Company's remedy at law for any such violation would be inadequate. In
recognition of the foregoing, the Executive agrees that, in addition to any
other relief afforded by law or this Agreement, including damages sustained by a
breach of this Agreement and any forfeitures under Section 9, and without any
necessity or proof of actual damages, the Company shall have the right to
enforce this Agreement by specific remedies, which shall include, among other
things, temporary and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the forfeitures described above and
injunctions shall all be proper modes of relief and are not to be considered as
alternative remedies.
11. Covenant Not to Compete. During the termination payment period
as set forth above in Section 9(a), if the Executive has received or is
receiving benefits under Section 9, the Executive will not, without the prior
written consent of the Company (which consent may be withheld for any reason or
no reason), directly or indirectly or by action in concert with others, own,
manage, operate, join, control, perform consulting services for, be employed by,
participate in or be connected with any business, enterprise or other entity (or
the ownership,
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management, operation, or control of any such business, enterprise or other
entity) (a "Competing Enterprise") engaged anywhere in the United States in the
"Restricted Business" (as herein defined) or any other principal line of
business developed or acquired by the Company or its affiliates during the term
of this Agreement (the "Other Business"); provided, however, that nothing in the
foregoing shall prohibit the Executive from the mere ownership of securities in
any such Competing Enterprise, and provided further that the foregoing
prohibitions shall apply only if the annual revenues of such Competing
Enterprise (including any affiliate thereof) derived from the Restricted
Business and the Other Business for the most recently completed fiscal year
exceed $500 million.
12. Post-termination Assistance. The Executive agrees that after his
employment with the Company has terminated he will provide, upon reasonable
notice, such information and assistance to the Company as may reasonably be
requested by the Company in connection with any litigation in which it or any of
its affiliates is or may become a party; provided, however, that the Company
agrees to reimburse the Executive for any related expenses, including travel
expenses.
13. Arbitration. Any dispute between the parties under this
Agreement shall be resolved (except as provided below) through informal
arbitration by an arbitrator selected under the rules of the American
Arbitration Association (located in Wilkes-Barre, Pennsylvania) and the
arbitration shall be conducted in that location under the rules of said
Association. Each party shall be entitled to present evidence and argument to
the arbitrator. The arbitrator shall have the right only to interpret and apply
the provisions of this Agreement and may not change any of its provisions. The
arbitrator shall permit reasonable pre-hearing discovery of facts, to the extent
necessary to establish a claim or a defense to a claim, subject to supervision
by the arbitrator. The determination of the arbitrator shall be conclusive and
binding upon the parties and judgment upon the same may be entered in any court
having jurisdiction thereof. The arbitrator shall give written notice to the
parties stating his or their determination, and shall furnish to each party a
signed copy of such determination. The expenses of arbitration shall be borne
equally by the Executive and the Company or as the arbitrator shall otherwise
equitably determine.
Notwithstanding the foregoing, the Company shall not be required to
seek or participate in arbitration regarding any breach of the Executive's
Confidentiality and Nonsolicitation Agreement contained in Section 10 or the
Covenant Not to Compete contained in Section 11, but may pursue its remedies for
such breach in a court of competent jurisdiction in Wilkes-Barre, Pennsylvania.
Any arbitration or action pursuant to this Section 13 will be governed by and
construed in accordance with the substantive laws of the State of Pennsylvania,
without giving effect to the principles of conflict of laws of such State.
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14. Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto, or between
either or both of the parties hereto and USFS, with respect to the subject
matter hereof and contains all of the covenants and agreements between the
parties with respect to such subject matter. Each party to this Agreement
acknowledges that no representations, inducements, promises, or other
agreements, orally or otherwise, have been made by any party, or anyone acting
on behalf of any party, pertaining to the subject matter hereof, which are not
embodied herein, and that no other agreement, statement or promise pertaining to
the subject matter hereof that is not contained in this Agreement shall be valid
or binding on either party.
15. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
16. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place.
This Agreement will be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 16(a) and 16(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by the Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 16(c), the
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Company shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
17. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive offices and to the Executive at his
principal residence, or to such other address as either party may have furnished
to the other in writing and in accordance herewith, except that notices of
changes of address shall be effective only upon receipt.
18. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Pennsylvania, without giving effect to
the principles of conflict of laws of such State.
19. Validity. If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
20. Survival of Provisions. Notwithstanding any other provision of
this Agreement, the parties' respective rights and obligations under Sections 9,
10, 12, 13 and 21 will survive any termination or expiration of this Agreement
or the termination of the Executive's employment for any reason whatsoever.
21. Legal Fees and Expenses. Without regard to whether the Executive
prevails, in whole or in part, in connection therewith, the Company will pay and
be financially responsible for 100% of any and all reasonable attorneys' and
related fees and expenses incurred by the Executive in connection with any
dispute associated with the interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or otherwise, provided
that, in regard to such dispute, the Executive has not acted in bad faith or
with no colorable claim of success.
22. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the
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Executive and the Company. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Unless otherwise noted, references to "Sections" are to
sections of this Agreement. The captions used in this Agreement are designed
for convenient reference only and are not to be used for the purpose of
interpreting any provision of this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereof have executed this Agreement as
of the day and year first written.
________________________________________
David F. McAnally
RYKOFF-SEXTON, INC.
By: ____________________________________
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Exhibit 10.18
SECOND AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
SECOND AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT, dated as of
the ____ day of __________, 1996 (this "Agreement"), between Rykoff-Sexton,
Inc., a Delaware corporation (the "Company"), and Mark Van Stekelenburg (the
"Executive").
WITNESSETH:
----------
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the Executive's contribution to the growth and success of the
Company and its subsidiaries has been substantial;
WHEREAS, the Board has determined that it is appropriate and in the
best interests of the Company and its stockholders to reinforce and encourage
the continued attention and dedication of members of the Company's management,
including the Executive, to their assigned duties;
WHEREAS, the Company and the Executive have entered into the Amended
and Restated Change in Control Agreement, dated as of October 12, 1993 (the
"Prior Change in Control Agreement");
WHEREAS, the Prior Change in Control Agreement includes provisions
defining the term "Change in Control";
WHEREAS, pursuant to an Agreement and Plan of Merger dated __________,
1996 (the "Merger Agreement") by and among the Company, US Foodservice Inc., a
Delaware corporation ("USFS"), and USF Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Company ("Acquisition"), as of
the
<PAGE>
date hereof, USFS will be merged with and into Acquisition, with Acquisition as
the surviving entity (the "Merger");
WHEREAS, consummation of the Merger by and among the Company, USFS and
Acquisition as described in the Merger Agreement would result in the occurrence
of a "Change in Control", as defined in the Prior Change in Control Agreement;
WHEREAS, the Company and the Executive desire that neither the
transactions effected pursuant to the Merger Agreement nor certain other
transactions in the future result in a Change in Control, as so defined; and
WHEREAS, the Company and the Executive desire to make certain
administrative changes to the Prior Change in Control Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and in further consideration of services performed
and to be performed by the Executive for the Company, the Company and the
Executive do hereby amend and restate the Amended and Restated Change in Control
Agreement in its entirety as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) CHANGE IN CONTROL. A "Change in Control" of the Company shall
occur if:
(i) any person (as defined in Sections 3(a)(9) and 13(d)(3) of
the '34 Act) ("Person") (other than an Excluded Person (as hereinafter
defined)) becomes the "beneficial owner" (as defined in Rule 13d-3
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promulgated pursuant to the '34 Act), directly or indirectly, of 25%
or more of combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors of
the Company ("Voting Securities") other than pursuant to an Excepted
Transaction (as hereinafter defined); or
(ii) the occurrence within any twelve-month period during the
term of the Agreement of a change in the Board with the result that
the Incumbent Members do not constitute a majority of the Board.
"Excluded Person" shall mean (x) Merrill Lynch Capital Partners,
Inc., Merrill Lynch Capital Appreciation Partnership No. B-XVIII,
L.P., Merrill Lynch Kecalp L.P. 1994, ML Offshore LBO Partnership No.
B-XVIII, ML IBK Positions, Inc., MLCP Associates L.P. No. II, MLCP
Associates L.P. No. IV, Merrill Lynch Kecalp L.P. 1991, Merrill Lynch
Capital Appreciation Partnership No. XIII, L.P., ML Offshore LBO
Partnership No. XIII, ML Employees LBO Partnership No. I, L.P.,
Merrill Lynch Kecalp L.P. 1987, and Merchant Banking L.P. No. II
(each, an "ML Entity" and collectively the "ML Entities"), if the ML
Entities shall have executed a written agreement with the Company (and
approved by the Company's Board of Directors) on or prior to the date
on which the ML Entities (together with its Affiliates) became the
beneficial owner of 25% or more of the shares of Voting Securities
then outstanding
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(the "Standstill Agreement"), which Standstill Agreement imposes one
or more limitations on the amount of the ML Entities' beneficial
ownership of shares of Common Stock, and if, and so long as, such
Standstill Agreement (or any amendment thereto approved by the
Company's Board of Directors by the vote of a majority of the Present
Directors) continues to be in effect and binding on the ML Entities
and the ML Entities are in compliance (as determined by the Company's
Board of Directors in its discretion by the vote of a majority of the
Present Directors) with the terms of such Standstill Agreement
(including any such amendment); or (y) any other Person acquiring
Voting Securities from an ML Entity if (i) such Voting Securities were
acquired by an ML Entity pursuant to the transactions contemplated by
the Letter of Intent dated December 5, 1995 ("Letter of Intent") from
the Company to US Foodservice Inc. ("Excluded Shares") and (ii) if,
prior to such acquisition by such other Person, a majority of the
Present Directors has expressly determined in good faith that such
acquisition is not a "Change in Control" for purposes of this
Agreement ("ML Successor"); provided, however, that an Excluded Person
shall cease to be such and a Change in Control shall occur if either
(A) the Chief Executive Officer of the Company immediately prior to
the execution of the Letter of Intent ceases to constitute the Chief
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Executive Officer of the Company (or any successor to the Company)
immediately following the consummation of the merger contemplated
thereby and throughout the twelve-month period thereafter (unless such
Chief Executive Officer ceases to constitute the Chief Executive
Officer of the Company by reason of death, Disability (as defined in
such Chief Executive Officer's Employment Agreement with the Company,
as it may be amended and restated from time to time (the "Employment
Agreement")), termination for Cause (as defined in the Employment
Agreement) or voluntary termination by such Chief Executive Officer
under circumstances that are not treated as an involuntary termination
under the Employment Agreement), or (B) the directors of the Company
in office immediately prior to the execution of the Letter of Intent,
together with any successors of such directors (provided that any such
successors qualify as Present Directors), cease to constitute at least
a majority of the Board immediately after the consummation of the
merger contemplated thereby and throughout the twelve-month period
thereafter.
"Excepted Transaction" shall mean any transaction (other than the
acquisition of the Excluded Shares by the ML Entities) initiated by
the Company in which (A) the Chief Executive Officer of the Company
immediately prior to such transaction constitutes the
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<PAGE>
Chief Executive Officer of the Company, or the surviving, ultimate
parent or other controlling corporation or other entity, if any,
resulting from any merger, consolidation, reorganization or sale or
transfer of assets of the Company effected pursuant to such
transaction ("Resulting Corporation") immediately following the
transaction and throughout the twelve-month period thereafter, and (B)
the directors of the Company in office immediately prior to the
transaction (the "Directors") constitute at least a majority of the
Board or the Board of Directors of the Resulting Corporation
immediately after such transaction and throughout the twelve-month
period thereafter.
"Present Director" shall mean a member of the Board who (1) is
not designated as a member of the Board by any ML Entity or ML
Successor, (2) does not otherwise have any agreement, arrangement or
understanding with any ML Entity or ML Successor for the purpose of
serving as a member of the Board, and (3) is not an Affiliate or an
Associate (as hereinafter defined) of any ML Entity or ML Successor.
"Affiliate" and "Associate" shall have the meanings set forth in
Rule 12b-2 of the '34 Act.
The Board shall have the power to determine, for purposes of this
Agreement, on the basis of information known to the Board (a) by a
vote taken in good faith by
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<PAGE>
a majority of Present Directors, (1) whether any Person is an Excluded
Person, (2) the percentage of the Company's Voting Securities
beneficially owned by an Excluded Person, and (3) any determination to
be made pursuant to clause (x) of the definition of Excluded Person,
and (b) by a vote taken in good faith by a majority of all Directors,
whether a transaction is an Excepted Transaction. Any such
determination shall be conclusive and binding for all purposes of this
Agreement.
(b) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) DATE OF TERMINATION. "Date of Termination" shall mean the date on
which the Executive's employment is terminated by the Company or the
Executive.
(d) INCUMBENT MEMBERS. "Incumbent Members" in respect of any twelve-
month period shall mean the members of the Board on the date immediately
preceding the commencement of such twelve-month period, provided that any
person becoming a Director during such twelve-month period whose election
or nomination for election was supported by a majority of the Directors
who, on the date of such election or nomination for election, comprised the
Incumbent Members shall be considered one of the Incumbent Members in
respect of such twelve-month period.
(e) '34 ACT. "'34 Act" shall mean the Securities Exchange Act of
1934, as amended.
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<PAGE>
2. TERM. This Agreement shall commence on the date first above written
and shall continue in effect until September 12, 1998; provided, however, that
on September 12, 1996 and on each September 12 (the "anniversary date")
thereafter, the term of this Agreement shall automatically be extended for one
additional year unless, not later than 90 days prior to such anniversary date,
the Company shall have given the Executive written notice that the Company does
not wish to extend the term of this Agreement (by way of illustration, on
September 12, 1996, assuming no notice to the contrary has been given, the term
will automatically be extended to September 12, 1999); and provided further that
this Agreement shall continue in effect beyond the term provided herein if such
continuation is provided for in a contract of employment between the Company and
the Executive, or if a Change of Control shall have occurred during such term or
if any obligation of the Company hereunder remains unpaid as of such time.
3. SEVERANCE COMPENSATION UPON A CHANGE IN CONTROL AND TERMINATION OF
EMPLOYMENT. If (a) a Change in Control of the Company shall have occurred while
the Executive is an employee of the Company, and (b) within two (2) years from
the date of such Change in Control (i) the Company shall terminate the
Executive's employment for any or no reason (except for the death of the
Executive) or (ii) the Executive shall elect to terminate his employment for any
or no reason, then
(A) the Company shall pay the Executive any earned and accrued but
unpaid installment of base salary through
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the Date of Termination at the rate in effect on the Date of Termination
and all other unpaid amounts to which the Executive is entitled as of the
Date of Termination under any compensation plan or program of the Company,
including, without limitation, all accrued vacation time; all such payments
shall be made in a lump sum on or before the fifth day following the Date
of Termination;
(B) in addition to any amounts payable to the Executive for
periods subsequent to the Date of Termination pursuant to any written
employment agreement between the Company and the Executive, the Company
shall pay to the Executive an amount equal to the product of (i) the sum of
(a) the Executive's annual base salary in effect as of the Date of
Termination and (b) the amount that otherwise would be earned under the
Senior Management Incentive Plan and any other executive compensation plan
in which the Executive is then participating for the year in which such
Date of Termination occurs (assuming all such funds under such plan had
been earned) and (ii) the number 2.99; such payment shall be made in a lump
sum on or before the fifth calendar day following the Date of Termination;
(C) for a period of not less than twenty-four (24) months
following the Executive's Date of Termination, the Company will reimburse
the Executive for all reasonable expenses incurred by him (but not
including any arrangement by which the Executive prepays expenses for a
period of greater than thirty (30) days) in seeking employment with
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another employer including the fees of a reputable outplacement
organization;
(D) if the payment provided under paragraph (B) above (the
"Contract Payment") or any other portion of the Total Payments (as defined
below) will be subject to the tax (the "Excise Tax") imposed by Section
4999 of the Code, the Company shall pay the Executive on or before the
fifth calendar day following the Date of Termination, an additional amount
(the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Control Payment and
such other Total Payments and any federal and state and local income tax
and Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Control Payment and such other Total Payments. For purposes
of determining whether any of the payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) any other payments or benefits
received or to be received by the Executive in connection with a Change in
Control of the Company or the Executive's termination of employment,
whether payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, its successors, any person whose
actions result in a Change in Control of the Company or any corporation
affiliated (or which, as a result of the completion of a transaction
causing a Change in Control, will become affiliated) with the Company
within the meaning of Section 1504 of the Code (together with the Control
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Payment, the "Total Payments") shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Company's independent auditors and acceptable to the
Executive the Total Payments (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code either in their entirety or in
excess of the base amount within the meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax, (ii) the amount of
the Total Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (a) the total amount of the Total Payments or (b)
the amount of excess parachute payments within the meaning of Section
280G(b)(1) (after applying clause (i), above), and (iii) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay
federal income taxes at the highest marginal rate of taxation in the
calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the
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<PAGE>
highest marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum
reduction in federal income taxes which could be obtained from deduction of
such state and local taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal and state and local
income tax imposed on the Gross-Up Payment being repaid by the Executive of
such repayment results in a reduction in Excise Tax and/or a federal and
state and local income tax deduction) plus interest on the amount of such
repayment at the rate provided in Section 1274(d) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall made an additional gross-up payment in respect of such excess
at the time that the amount of such excess is finally determined; and
(E) the Company shall maintain in full force and effect for two (2)
years following the Executive's Date of
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<PAGE>
Termination, for the continued benefit of the Executive, all employee
welfare benefit plans and prerequisite programs in which the Executive was
entitled to participate immediately prior to the Date of Termination,
provided that the Executive's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that
the Executive's participation in any such plan or program is barred, the
Company shall, at its sole cost and expense, arrange to provide the
Executive with benefits substantially similar to those which the Executive
would otherwise have been entitled to receive under such plans and programs
from which his continued participation is barred.
4. NO OBLIGATIONS TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS. (a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, incentive plan or
securities plan, employment agreement or other contract, plan or arrangement.
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<PAGE>
5. SUCCESSOR TO THE COMPANY. (a) The Company will require any successor
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to 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 or assignment had taken place. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor or assign to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 5 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. If at any time during the term of the Agreement the Executive
is employed by any corporation, a majority of the voting securities of which is
then owned by the Company, "Company" as used in this Agreement shall in addition
include such employer. In such event, the Company agrees that it shall pay or
shall cause such employer to pay any amounts owed to the Executive pursuant to
Section 3 hereof.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are still payable to him hereunder, all such amounts
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's
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devisee, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
6. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532
Attn: General Counsel
If to the Executive:
Mr. Mark Van Stekelenburg
34 Deverell Drive
North Barrington, Illinois 60010
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of any similar or dissimilar provision or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
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have been made by either party which are not set forth expressly in this
Agreement. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
8. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. FEES AND EXPENSES. The Company shall pay all reasonable fees and
expenses (including attorneys' fees) that the Executive may incur as a result of
the Company's contesting the validity, enforceability or the Executive's
interpretation of, or determinations under, this Agreement.
11. CONFIDENTIALITY. The Executive shall retain in confidence any and all
confidential information known to the Executive concerning the Company and its
business so long as such information is not otherwise publicly disclosed.
12. COMPANY'S RIGHT TO TERMINATE. Notwithstanding anything contained in
this Agreement to the contrary, except to the extent that the Executive has a
written employment agreement with the Company, the Company may terminate the
Executive's employment at any time, for any reason or no reason, and no
provision contained herein shall affect the Company's ability to terminate the
Executive's employment at any time, with or without cause.
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Nothing in this Agreement shall in any way require the Company to provide any of
the benefits specified in this Agreement prior to a Change in Control, nor shall
this Agreement be construed in any way to establish any policies or other
benefits for the Executive or any other employee of the Company whose employment
with the Company is terminated prior to a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
Attest: RYKOFF-SEXTON, INC.
/S/ ROBERT J. HARTER, JR. /S/ RICHARD J. MARTIN
By: ______________________________ By: _________________________________
Robert J. Harter, Jr. Richard J. Martin
Senior Vice President - Human Senior Vice President and Chief
Resources and General Counsel Financial Officer
/s/ MARK VAN STEKELENBURG
_____________________________________
Mark Van Stekelenburg
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Exhibit 10.19
FORM OF AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT dated as of the _____
day of ____________, 1996, (this "Agreement") between Rykoff-Sexton, Inc., a
Delaware corporation (the "Company"), and ___________________ (the "Executive").
WITNESSETH:
----------
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is appropriate and in the best interests of the Company and
its stockholders to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties;
WHEREAS, the Executive is a party to a Change in Control Agreement
with the Company, dated as of __________________ (the "Prior Change in Control
Agreement");
WHEREAS, the Prior Change in Control Agreement includes a provision
defining the term "Change in Control;"
WHEREAS, pursuant to an Agreement and Plan of Merger dated
________________, 1996 (the "Merger Agreement") by and among the Company, US
Foodservice Inc., a Delaware corporation ("USFS") and USF Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company
("Acquisition"), as of the date hereof, USFS will be merged with and into
<PAGE>
Acquisition, with Acquisition as the surviving entity (the "Merger");
WHEREAS, consummation of the Merger by and among the Company, USFS and
Acquisition as described in the Merger Agreement would result in the occurrence
of a "Change in Control," as defined in the Prior Change in Control Agreement;
WHEREAS, the Company and the Executive desire that neither the
transactions effected pursuant to the Merger Agreement nor certain other
transactions in the future result in a Change in Control, as so defined; and
WHEREAS, the Company and the Executive desire to make certain
administrative changes to the Prior Change in Control Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and in further consideration of services performed
and to be performed by the Executive for the Company, the Company and the
Executive do hereby amend and restate the Prior Change in Control Agreement in
its entirety as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) CAUSE. Termination for "Cause" shall mean:
(i) the willful and continued failure by the Executive to
substantially perform his duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure after
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the issuance of a Notice of Termination by the Executive for Good
Reason), after demand for substantial performance is delivered by the
Company that specifically identifies the manner in which the Company
believes the Executive has not substantially performed his duties, or
(ii) the willful engaging by the Executive in misconduct which is
materially injurious to the Company, monetarily or otherwise.
No act, or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith and
without reasonable belief that his action or omission was in the best
interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause without (x) reasonable notice to the Executive
setting forth the reasons for the Company's intention to terminate for
Cause, (y) an opportunity for the Executive, together with his counsel, to
be heard before the Board, and (z) delivery to the Executive of a Notice of
Termination from the Board finding that in the good faith opinion of the
Board the Executive was guilty of conduct set forth above in clause (i) or
(ii) hereof, and specifying the particulars thereof in detail.
(b) CHANGE IN CONTROL. A "Change in Control" of the Company shall
occur if:
(i) any person (as defined in Sections 3(a)(9) and 13(d)(3) of
the '34 Act) ("Person") (other than an
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Excluded Person (as hereinafter defined)) becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated pursuant to the '34 Act),
directly or indirectly, of 25% or more of combined voting power of the
Company's then outstanding securities entitled to vote generally in
the election of directors of the Company ("Voting Securities") other
than pursuant to an Excepted Transaction (as hereinafter defined); or
(ii) the occurrence within any twelve-month period during the
term of the Agreement of a change in the Board with the result that
the Incumbent Members do not constitute a majority of the Board.
"Excluded Person" shall mean (x) Merrill Lynch Capital Partners, Inc.,
Merrill Lynch Capital Appreciation Partnership No. B-XVIII, L.P., Merrill
Lynch Kecalp L.P. 1994, ML Offshore LBO Partnership No. B-XVIII, ML IBK
Positions, Inc., MLCP Associates L.P. No. II, MLCP Associates L.P. No. IV,
Merrill Lynch Kecalp L.P. 1991, Merrill Lynch Capital Appreciation
Partnership No. XIII, L.P., ML Offshore LBO Partnership No. XIII, ML
Employees LBO Partnership No. I, L.P., Merrill Lynch Kecalp L.P. 1987, and
Merchant Banking L.P. No. II (each, an "ML Entity" and collectively the "ML
Entities"), if the ML Entities shall have executed a written agreement with
the Company (and approved by the Company's Board of Directors) on or prior
to the date on which the ML Entities (together with its Affiliates) became
the beneficial owner of 25% or more of
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the shares of Voting Securities then outstanding (the "Standstill
Agreement"), which Standstill Agreement imposes one or more limitations on
the amount of the ML Entities' beneficial ownership of shares of Common
Stock, and if, and so long as, such Standstill Agreement (or any amendment
thereto approved by the Company's Board of Directors by the vote of a
majority of the Present Directors) continues to be in effect and binding on
the ML Entities and the ML Entities are in compliance (as determined by the
Company's Board of Directors in its discretion by the vote of a majority of
the Present Directors) with the terms of such Standstill Agreement
(including any such amendment); or (y) any other Person acquiring Voting
Securities from an ML Entity if (i) such Voting Securities were acquired by
an ML Entity pursuant to the transactions contemplated by the Letter of
Intent dated December 5, 1995 ("Letter of Intent") from the Company to US
Foodservice Inc. ("Excluded Shares") and (ii) if, prior to such acquisition
by such other Person, a majority of the Present Directors has expressly
determined in good faith that such acquisition is not a "Change in Control"
for purposes of this Agreement ("ML Successor"); provided, however, that an
Excluded Person shall cease to be such and a Change in Control shall occur
if either (A) the Chief Executive Officer of the Company immediately prior
to the execution of the Letter of Intent ceases to constitute the Chief
Executive Officer of the Company (or any successor to the Company)
immediately following the consummation of
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the merger contemplated thereby and throughout the twelve-month period
thereafter (unless such Chief Executive Officer ceases to constitute the
Chief Executive Officer of the Company by reason of death, Disability (as
defined in such Chief Executive Officer's Employment Agreement with the
Company, as it may be amended and restated from time to time (the
"Employment Agreement")), termination for Cause (as defined in the
Employment Agreement) or voluntary termination by such Chief Executive
Officer under circumstances that are not treated as an involuntary
termination under the Employment Agreement), or (B) the directors of the
Company in office immediately prior to the execution of the Letter of
Intent, together with any successors of such directors (provided that any
such successors qualify as Present Directors), cease to constitute at least
a majority of the Board immediately after the consummation of the merger
contemplated thereby and throughout the twelve-month period thereafter.
"Excepted Transaction" shall mean any transaction (other than the
acquisition of the Excluded Shares by the ML Entities) initiated by the
Company in which (A) the Chief Executive Officer of the Company immediately
prior to such transaction constitutes the Chief Executive Officer of the
Company, or the surviving, ultimate parent or other controlling corporation
or other entity, if any, resulting from any merger, consolidation,
reorganization or sale or transfer of assets of the Company effected
pursuant to such
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transaction ("Resulting Corporation") immediately following the transaction
and throughout the twelve-month period thereafter, and (B) the directors of
the Company in office immediately prior to the transaction (the
"Directors") constitute at least a majority of the Board or the Board of
Directors of the Resulting Corporation immediately after such transaction
and throughout the twelve-month period thereafter.
"Present Director" shall mean a member of the Board who (1) is not
designated as a member of the Board by any ML Entity or ML Successor, (2)
does not otherwise have any agreement, arrangement or understanding with
any ML Entity or ML Successor for the purpose of serving as a member of the
Board, and (3) is not an Affiliate or an Associate (as hereinafter defined)
of any ML Entity or ML Successor.
"Affiliate" and "Associate" shall have the meanings set forth in Rule
12b-2 of the '34 Act.
The Board shall have the power to determine, for purposes of this
Agreement, on the basis of information known to the Board (a) by a vote
taken in good faith by a majority of Present Directors, (1) whether any
Person is an Excluded Person, (2) the percentage of the Company's Voting
Securities beneficially owned by an Excluded Person, and (3) any
determination to be made pursuant to clause (x) of the definition of
Excluded Person, and (b) by a vote taken in good faith by a majority of all
Directors, whether a transaction is an Excepted Transaction. Any such
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determination shall be conclusive and binding for all purposes of this
Agreement.
(c) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) DATE OF TERMINATION. "Date of Termination" shall mean:
(i) if this Agreement is terminated by the Company for
Disability, 30 days after Notice of Termination is given to the
Executive (provided that the Executive shall not have returned to the
performance of the Executive's duties on a full-time basis during such
30-day period); or
(ii) if the Executive's employment is terminated by the
Company for any other reason, the date on which a Notice of
Termination is delivered to the Executive; provided that if within 30
days after any Notice of Termination is delivered to the Executive by
the Company the Executive notifies the Company that a dispute exists
concerning the termination, the Date of Termination shall be the date
the dispute is finally determined, whether by mutual agreement by the
parties, by one or more qualified medical doctors in the case of
Disability, or upon final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
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(e) DISABILITY. "Disability" shall mean the Executive's incapacity
due to physical or mental illness to substantially perform his duties on a
full-time basis for six consecutive months and within 30 days after Notice
of Termination is thereafter given by the Company the Executive shall not
have returned to the full-time performance of the Executive's duties.
Provided, however, that if Executive shall not agree with a determination
to terminate him because of Disability, the question of Executive's ability
shall be subject to the certification of a qualified medical doctor agreed
to by the Company and the Executive or, in the event of the Executive's
incapacity to designate a doctor, the Executive's legal representative. In
the absence of agreement between the Company and the Executive, each party
shall nominate a qualified medical doctor and the two doctors shall select
a third doctor, who shall make the determination as to Disability.
(f) GOOD REASON. Termination for "Good Reason" shall mean:
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities
and status with the Company immediately prior to a Change in Control
of the Company, or a change in the Executive's titles or offices as in
effect immediately prior to a Change in Control of the Company, or any
removal of the Executive
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from or any failure to reelect the Executive to any of such positions;
or
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from
time to time during the term of this Agreement or the Company's
failure to increase (within 12 months of the Executive's last increase
in base salary) the Executive's base salary after a Change in Control
of the Company in the amount which at least equals, on a percentage
basis, the average percentage increase in base salary for all officers
of the Company effected in the preceding 12 months; or
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement (including, without limitation, the
Company's Profit Sharing Plan, group life insurance plan, and medical,
dental, accident and disability plans) in which the Executive is
participating at the time of a Change in Control of the Company (or
any other plans providing the Executive with substantially similar
benefits) (hereinafter referred to as "Benefit Plans"), or the taking
of any action by the Company which would adversely affect the
Executive's participation in or materially reduce the Executive's
benefits under any such Benefit Plan or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time of a
Change in Control of the Company; or
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(iv) any failure by the Company to continue in effect any
incentive plan or arrangement (including, without limitation, the
Company's Senior Management Incentive Plan, bonus and contingent bonus
arrangements and credits and the right to receive performance awards
and similar incentive compensation benefits) in which the Executive is
participating at the time of a Change in Control of the Company (or
any other plans or arrangements providing him with substantially
similar benefits) (hereinafter referred to as "Incentive Plans") or
the taking of any action by the Company which would adversely affect
the Executive's participation in any such Incentive Plan or reduce the
Executive's benefits under any such Incentive Plan; or
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company (including,
without limitation, the Company's 1980 Stock Option Plan, 1988 Stock
Option and Compensation Plan and any other plan or arrangement to
receive and exercise stock options, stock appreciation rights,
restricted stock or grants thereof) in which the Executive is
participating at the time of a Change in Control of the Company (or
plans or arrangements providing him with substantially similar
benefits) (hereinafter referred to as "Securities Plans") or the
taking of any action by the Company which would adversely affect the
Executive's participation in or
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materially reduce the Executive's benefits under any such Securities
Plan; or
(vi) a relocation subsequent to a Change in Control of the
Company's principal executive offices to a location more than 40 miles
from the location of such principal executive offices immediately
prior to the Change in Control, provided that such relocation shall
have no effect under this Agreement unless prior to the Change in
Control the Executive performed the Executive's duties at such
principal executive offices; or the Executive's relocation to any
place other than the location at which the Executive performed the
Executive's duties prior to a Change in Control, except for required
travel by the Executive on the Company's business to an extent
substantially consistent with the Executive's business travel
obligations at the time of a Change in Control; or
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at
the time of a Change in Control of the Company; or
(viii) any material breach by the Company of any provision of
this Agreement; or
(xi) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company; or
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(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination and for
purposes of this Agreement, no such purported termination shall be
effective.
(g) INCUMBENT MEMBERS. "Incumbent Members" in respect of any twelve-
month period, shall mean the members of the Board on the date immediately
preceding the commencement of such twelve-month period, provided that any
person becoming a Director during such twelve-month period whose election
or nomination for election was supported by a majority of the Directors
who, on the date of such election or nomination for election, comprised the
Incumbent Members shall be considered one of the Incumbent Members in
respect of such twelve-month period.
(h) NOTICE OF TERMINATION. A "Notice of Termination" shall mean a
written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Any termination
by the Company shall be communicated by a Notice of Termination.
(i) '34 ACT. "'34 Act" shall mean the Securities Exchange Act of
1934, as amended.
2. TERM. This Agreement shall commence on the date first above written
and shall continue in effect until December 11, 1998; provided, however, that on
December 11, 1996 and on each
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December 11 (the "anniversary date") thereafter, the term of this Agreement
shall automatically be extended for one additional year unless, not later than
90 days prior to such anniversary date, the Company shall have given the
Executive written notice that the Company does not wish to extend the term of
this Agreement (by way of illustration, on December 11, 1996, assuming no notice
to the contrary has been given, the term will automatically be extended to
December 11, 1999); and provided further that this Agreement shall continue in
effect beyond the term provided herein if such continuation is provided for in a
contract of employment between the Company and the Executive, or if a Change of
Control shall have occurred during such term or if any obligation of the Company
hereunder remains unpaid as of such time.
3. SEVERANCE COMPENSATION UPON A CHANGE IN CONTROL AND TERMINATION OF
EMPLOYMENT. If (a) a Change in Control of the Company shall have occurred while
the Executive is an employee of the Company, and (b) within two (2) years from
the date of such Change in Control (i) the Company shall terminate the
Executive's employment other than for death, Disability, or Cause (it being
understood that a purported termination for Disability or for Cause which is
finally determined not to have been proper shall not be a termination for
Disability or for Cause), or (ii) the Executive shall terminate his employment
for Good Reason, then
(A) the Company shall pay the Executive any earned and accrued but
unpaid installment of base salary through the Date of Termination at the
rate in effect at the time Notice
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<PAGE>
of Termination is given and all other unpaid amounts to which the Executive
is entitled as of the Date of Termination under any compensation plan or
program of the Company, including, without limitation, all accrued vacation
time; such payments to be made in a lump sum on or before the fifth day
following the Date of Termination;
(B) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay to the
Executive an amount equal to the product of (i) the sum of (a) the
Executive's annual base salary in effect as of the Date of Termination and
(b) the amount that otherwise would be earned under the Senior Management
Incentive Plan or in any other executive compensation plan that the
Executive is then participating for the year in which occurs such Date of
Termination assuming all such funds under such Plan had been earned and
(ii) the number 2.99; such payment to be made in a lump sum on or before
the fifth calendar day following the Date of Termination;
(C) for a period of not less than twenty-four (24) months following
the Executive's Date of Termination, the Company will reimburse the
Executive for all reasonable expenses incurred by him (but not including
any arrangement by which the Executive prepays expenses for a period of
greater than thirty (30) days) in seeking employment with another employer
including the fees of a reputable outplacement organization; and
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(D) /1/[if the payment provided under paragraph (B) above (the
"Contract Payment") or any other portion of the Total Payments (as defined
below) will be subject to the tax (the "Excise Tax") imposed by Section
4999 of the Code, the Company shall pay the Executive on or before the
fifth calendar day following the Date of Termination, an additional amount
(the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Contract Payment and
such other Total Payments and any federal and state and local income tax
and Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Contract Payment and such other Total Payments. For purposes
of determining whether any of the payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) any other payments or benefits
received or to be received by the Executive in connection with a Change in
Control of the Company or the Executive's termination of employment,
whether payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, its successors, any person whose
actions result in a Change in Control of the Company or any corporation
affiliated (or which, as a result of the completion of a transaction
causing a Change in Control, will become affiliated) with the Company
within the meaning of Section 1504 of the Code (together with the Contract
- ----------------------
/1/ Language in brackets provides gross-up payment. This applies only to form
for Harold Feather.
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<PAGE>
Payment, the "Total Payments") shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Company's independent auditors and acceptable to the
Executive the Total Payments (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code either in their entirety or in
excess of the base amount within the meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax, (ii) the amount of
the Total Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (a) the total amount of the Total Payments or (b)
the amount of excess parachute payments within the meaning of Section
280G(b)(1) (after applying clause (i), above), and (iii) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay
federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made
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and state and local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on the Date of
Termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company at the
time that the amount of such reduction in Excise Tax is finally determined
the portion of the Gross-Up Payment attributable to such reduction (plus
the portion of the Gross-Up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the Gross-Up Payment
being repaid by the Executive if such repayment results in a reduction in
Excise Tax and/or a federal and state and local income tax deduction) plus
interest on the amount of such repayment at the rate provided in Section
1274(d) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional gross-up
payment in respect of such excess at the time that the amount of such
excess is finally determined; and
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(E)] the Company shall maintain in full force and effect for two (2)
years following the Executive's Date of Termination, for the continued
benefit of the Executive, all employee welfare benefit plans and perquisite
programs in which the Executive was entitled to participate immediately
prior to the Date of Termination provided that the Executive's continued
participation is possible under the general terms and provisions of such
plans and programs. In the event that the Executive's participation in any
such plan or program is barred, the Company shall, at its sole cost and
expense, arrange to provide the Executive with benefits substantially
similar to those which the Executive would otherwise have been entitled to
receive under such plans and programs from which his continued
participation is barred.
4. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS. (a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of
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time, under any Benefit Plan, Incentive Plan or Securities Plan, employment
agreement or other contract, plan or arrangement.
5. SUCCESSOR TO THE COMPANY. (a) The Company will require any successor
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to 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 or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement
and shall entitle the Executive to terminate the Executive's employment for Good
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 5 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law. If at any time during the term of this
Agreement the Executive is employed by any corporation a majority of the voting
securities of which is then owned by the Company, "Company" as used in this
Agreement shall in addition include such employer. In such event, the Company
agrees that it shall pay or shall cause such employer to pay any amounts owed to
the Executive pursuant to Section 3 hereof.
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(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are still payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, or other designee or, if
there be no such designee, to the Executive's estate.
6. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532
Attn: Chairman of the Board and Chief Executive Officer
With copy to:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532
Attn: General Counsel
If to the Executive:
[Executive]
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
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7. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed to be a waiver of similar or dissimilar provision or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. This Agreement shall be
interpreted and applied as though entered into immediately prior to the date of
the Merger.
8. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. FEES AND EXPENSES. The Company shall pay all reasonable fees and
expenses (including attorneys' fees) that the Executive may incur as a result of
the Company's contesting the
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validity, enforceability or the Executive's interpretation of, or determinations
under, this Agreement.
11. CONFIDENTIALITY. The Executive shall retain in confidence any and all
confidential information known to the Executive concerning the Company and its
business so long as such information is not otherwise publicly disclosed.
12. COMPANY'S RIGHT TO TERMINATE. Notwithstanding anything contained in
this Agreement to the contrary, except to the extent that the Executive has a
written employment agreement with the Company, the Company may terminate the
Executive's employment at any time, for any reason or no reason, and no
provision contained herein shall affect the Company's ability to terminate the
Executive's employment at any time, with or without Cause. Nothing in this
Agreement shall in any way require the Company to provide any of the benefits
specified in this Agreement prior to a Change in Control, nor shall this
Agreement be construed in any way to establish any policies or other benefits
for the Executive or any other employee of the Company whose employment with the
Company is terminated prior to a Change in Control.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
RYKOFF-SEXTON, INC.
By: ____________________________________________
Mark Van Stekelenburg
Chief Executive Officer and Chairman of the
Board
_________________________________________________
[Executive]
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EXHIBIT 10.22
CHANGE IN CONTROL AGREEMENT
AGREEMENT dated as of the 22nd day of June 1992, between Rykoff-Sexton,
Inc., a Delaware corporation (the "Company"), and Andre Mills (the "Executive").
WITNESSETH:
----------
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company and
its subsidiaries has been substantial.
WHEREAS, the Board has determined that it is appropriate and in the best
interests of the Company and its stockholders to reinforce and encourage the
continued attention and dedication of members of the Company's management,
including the Executive, to their assigned duties.
WHEREAS, this Agreement sets forth the severance compensation which the
Company agrees it will pay to the Executive if the Executive's employment with
the Company terminates under one of the circumstances described herein following
a Change in Control (as defined herein).
NOW THEREFORE, in consideration of the mutual covenants and conditions
herein contained and in further consideration of services performed and to be
performed by the Executive for the Company, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) CAUSE. Termination for "Cause" shall mean:
<PAGE>
(i) the willful and continued failure by the Executive to
substantially perform his duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination by the Executive for Good Reason),
after demand for substantial performance is delivered by the Company
that specifically identifies the manner in which the Company believes
the Executive has not substantially performed his duties, or
(ii) the willful engaging by the Executive in misconduct which is
materially injurious to the Company, monetarily or otherwise. No act,
or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was in the
best interest of the Company.
Notwithstanding the foregoing, the Executive shall-not be deemed to have been
terminated for Cause without (x) reasonable notice to the Executive setting
forth the reasons for the Company's intention to terminate for Cause, (y) an
opportunity for the Executive, together with his counsel, to be heard before the
Board, and (z) delivery to the Executive of a Notice of Termination from the
Board finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth above in clause (i) or (ii) hereof, and specifying
the particulars thereof in detail.
(B) CHANGE IN CONTROL. A "Change in Control" of the Company shall
occur if:
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(i) any person (as defined in Sections 3(a) (9) and 13(d) (3) of
the '34 Act) becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated pursuant to the '34 Act), directly or indirectly, of 25%
or more of combined voting power of the Company's then outstanding
securities; or
(ii) the occurrence within any twelve-month period during the
term of the Agreement of a change in the Board with the result that
the Incumbent Members do not constitute a majority of the Board.
(C) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(D) DATE OF TERMINATION. "Date of Termination" shall mean:
(i) if this Agreement is terminated by the Company for
Disability, 30 days after Notice of Termination is given to the
Executive (provided that the Executive shall not have returned to the
performance of the Executive's duties on a full-time basis during such
30-day period); or
(ii) if the Executive's employment is terminated by the Company
for any other reason, the date on which a Notice of Termination is
delivered to the Executive; provided that if within 30 days after any
Notice of Termination is delivered to the Executive by the Company the
Executive notifies the Company that a dispute exists concerning the
termination, the Date of Termination shall be the date the dispute is
finally determined, whether by mutual agreement by the parties, by one
or more qualified medical doctors in the case of Disability, or upon
final judgment, order or
3
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decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
(E) DISABILITY. "Disability" shall mean the Executive's incapacity
due to physical or mental illness to substantially perform his duties on a
full-time basis for six consecutive months and within 30 days after Notice
of Termination is thereafter given by the Company the Executive shall not
have returned to the full-time performance of the Executive's duties.
Provided, however, that if Executive shall not agree with a determination
to terminate him because of Disability, the question of Executive's ability
shall be subject to the certification of a qualified medical doctor agreed
to by the Company and the Executive or, in the event of the Executive's
incapacity to designate a doctor, the Executive's legal representative. In
the absence of agreement between the Company and the Executive, each party
shall nominate a qualified medical doctor and the two doctors shall select
a third doctor, who shall make the determination as to Disability.
(F) GOOD REASON. Termination for "Good Reason" shall mean:
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities
and status with the Company immediately prior to a Change in Control
of the Company, or a change in the Executive's titles or offices as in
effect immediately prior to a Change in Control of the Company, or any
removal of the Executive from or any failure to reelect the Executive
to any of such positions; or
(ii) a reduction by the Company in the Executive's base salary as
in effect on the date hereof or as the same may be increased from time
to
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time during the term of this Agreement or the Company's failure to
increase (within 12 months of the Executive's last increase in base
salary) the Executive's base salary after a Change in Control of the
Company in the amount which at least equals, on a percentage basis,
the average percentage increase in base salary for all officers of the
Company effected in the preceding 12 months; or
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement (including, without limitation, the
Company's Profit Sharing Plan, group life insurance plan, and medical,
dental, accident and disability plans) in which the Executive is
participating at the time of a Change in Control of the Company (or
any other plans providing the Executive with substantially similar
benefits) (hereinafter referred to as "Benefit Plans"), or the taking
of any action by the Company which would adversely affect the
Executive's participation in or materially reduce the Executive's
benefits under any such Benefit Plan or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time of a
Change in Control of the Company; or
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement (including, without limitation, the
Company's Senior Management Incentive Plan, bonus and contingent bonus
arrangements and credits and the right to receive performance awards
and similar incentive compensation benefits) in which the Executive is
participating at the time of a Change in Control of the Company (or
any other plans or arrangements
5
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providing him with substantially similar benefits) (hereinafter
referred to as "Incentive Plans") or the taking of any action by the
Company which would adversely affect the Executive's participation in
any such Incentive Plan or reduce the Executive's benefits under any
such Incentive Plan; or
(v) any failure by the Company to continue in effect any plan or
arrangement to receive securities of the Company (including, without
limitation, the Company's 1980 Stock Option Plan, 1988 Stock Option
and Compensation Plan and any other plan or arrangement to receive and
exercise stock options, stock appreciation rights, restricted stock or
grants thereof) in which the Executive is participating at the time of
a Change in Control of the Company (or plans or arrangements providing
him with substantially similar benefits) (hereinafter referred to as
"Securities Plans") or the taking of any action by the Company which
would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Securities Plan; or
(vi) a relocation of the Company's principal executive offices to
a location outside of Los Angeles, California, or the Executive's
relocation to any place other than the location at which the Executive
performed the Executive's duties prior to a Chance in Control of the
Company, except for required travel by the Executive on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations at the time of a Change in Control of the
Company; or
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(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at
the time of a Change in Control of the Company; or
(viii) any material breach by the Company of any provision of
this Agreement; or
(ix) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment which
is not effected pursuant to a Notice of Termination and for purposes
of this Agreement, no such purported termination shall be effective.
(G) INCUMBENT MEMBERS. "Incumbent Members" in respect of any twelve-
month period, shall mean the members of the Board on the date immediately
preceding the commencement of such twelve-month period, provided that any
person becoming a Director during such twelve-month period whose election
or nomination for election was supported by a majority of the Directors
who, on the date of such election or nomination for election, comprised the
Incumbent Members shall be considered one of the Incumbent Members in
respect of such twelve-month period.
(H) NOTICE OF TERMINATION. A "Notice of Termination" shall mean a
written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Any termination
by the Company shall be communicated by a Notice of Termination.
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(I) '34 ACT. "'34 Act" shall mean the Securities Exchange Act of
1934, as amended.
2. TERM. This Agreement shall commence on the date first above written
and shall continue in effect until June 22, 1994. Commencing on June 22, 1994,
and each June 22 thereafter, the term of this Agreement shall automatically be
extended for one additional year to June 22, 1995 and each June 22 thereafter,
unless at least not later than the March 22 immediately preceding such June 22,
the Company shall have given the Executive written notice that the Company does
not wish to extend this Agreement; provided that this Agreement shall continue
in effect beyond the term provided herein if a Change of Control shall have
occurred during such term or if any obligation of the Company hereunder remains
unpaid as of such time.
3. SEVERANCE COMPENSATION UPON A CHANGE OF CONTROL AND TERMINATION OF
EMPLOYMENT. If (a) a Change in Control of the Company shall have occurred while
the Executive is an employee of the Company, and (b) within two (2) years from
the date of such Change in Control (i) the Company shall terminate the
Executive's employment other than for death, Disability, or Cause (it being
understood that a purported termination for Disability or for Cause which is
finally determined not to have been proper shall not be a termination for
Disability or for Cause), or (ii) the Executive shall terminate his employment
for Good Reason, then
(A) the Company shall pay the Executive any earned and accrued but
unpaid installment of base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given and all other
unpaid amounts to which the Executive is entitled as of the Date of
Termination under any
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compensation plan or program of the Company, including, without limitation,
all accrued vacation time; such payments to be made in a lump sum on or
before the fifth day following the Date of Termination;
(B) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay to the
Executive an amount equal to the product of (i) the sum of (a) the
Executive's annual base salary in effect as of the Date of Termination and
(b) the amount that otherwise would be earned under the Senior Management
Incentive Plan or in any other executive compensation plan that the
Executive is then participating for the year in which occurs such Date of
Termination assuming all such funds under such Plan had been earned and
(ii) the number 2.99; such payment to be made in a lump sum on or before
the fifth calendar day following the Date of Termination;
(C) for a period of not less than twenty-four (24) months following
the Executive's Date of Termination, the Company will reimburse the
Executive for all reasonable expenses incurred by him (but not including
any arrangement by which the Executive prepays expenses for a period of
greater than thirty (30) days) in seeking employment with another employer
including the fees of a reputable outplacement organization; and
(D) the Company shall maintain in full force and effect for two (2)
years following the Executive's Date of Termination, for the continued
benefit of the Executive, all employee welfare benefit plans and perquisite
programs in which the Executive was entitled to participate immediately
prior to the Date of Termination provided that the Executive's continued
participation is possible under the general
9
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terms and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred, the
Company shall, at its sole cost and expense, arrange to provide the
Executive with benefits substantially similar to those which the Executive
would otherwise have been entitled to receive under such plans and programs
from which his continued participation is barred.
4. NO OBLIGATION TO MITIGATE DAMAGES: NO EFFECT ON OTHER CONTRACTUAL
RIGHTS. (a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.
5. SUCCESSOR TO THE COMPANY. (a) The Company will require any successor
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to 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 or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the effectiveness of
10
<PAGE>
any such succession or assignment shall be a material breach of this Agreement
and shall entitle the Executive to terminate the Executive's employment for Good
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 5 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law. If at any time during the term of this
Agreement the Executive is employed by any corporation a majority of the voting
securities of which is then owned by the Company, "Company" as used in this
Agreement shall in addition include such employer. In such event, the Company
agrees that it shall pay or shall cause such employer to pay any amounts owed to
the Executive pursuant to Section 3 hereof.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are still payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, or other designee or, if
there be no such designee, to the Executive's estate.
6. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Rykoff-Sexton, Inc.
761 Terminal Street
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P.O. Box 21917
Los Angeles, California 90021-0917
Attn: Mr. Roger W. Coleman
If to the Executive:
Mr. Andre Mills
913 West Van Buren
Chicago, Illinois 60607
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
7. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware.
8. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
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9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. FEES AND EXPENSES. The Company shall pay all fees and expenses
(including attorney's fees) that the Executive may incur as a result of the
Company's contesting the validity, enforceability or the Executive's
interpretation of, or determinations under, this Agreement.
11. CONFIDENTIALITY. The Executive shall retain in confidence any and all
confidential information known to the Executive concerning the Company and its
business so long as such information is not otherwise publicly disclosed.
12. COMPANY'S RIGHT TO TERMINATE. Notwithstanding anything contained in
this Agreement to the contrary, except to the extent that the Executive has a
written employment agreement with the Company, the Company may terminate the
Executive's employment at any time, for any reason or no reason, and no
provision contained herein shall affect the Company's ability to terminate the
Executive's employment at any time, with or without Cause. Nothing in this
Agreement shall in any way require the Company to provide any of the benefits
specified in this Agreement prior to a Change in Control, nor shall this
Agreement be construed in any way to establish any policies or other benefits
for the Executive or any other employee of the Company whose employment with the
Company is terminated prior to a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
By /s/ Robert J. Harter, Jr. By /s/ Roger W. Coleman
------------------------- --------------------
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Robert J. Harter, Jr. Roger W. Coleman, President
Assistant Secretary and Chief Executive Officer
ATTEST:
/s/ Laura Cunningham /s/ Andre Mills
___________________________ ____________________________
Witness Andre Mills
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EXHIBIT 10.24
RYKOFF-SEXTON, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR MARK VAN STEKELENBURG
(EFFECTIVE AS OF JULY 20, 1994)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
ARTICLE 1. THE PLAN................................................... 1
1.1 Establishment................................................ 1
1.2 Purpose...................................................... 1
ARTICLE 2. DEFINITIONS................................................ 1
2.1 Definitions.................................................. 1
2.1.1 "Actuarial Equivalent"................................ 1
2.1.2 "Affiliate"........................................... 1
2.1.3 "Annuity Starting Date"............................... 1
2.1.4 "Base Compensation"................................... 1
2.1.5 "Benefit Percentage".................................. 2
2.1.6 "Code"................................................ 2
2.1.7 "Committee"........................................... 2
2.1.8 "Disability".......................................... 2
2.1.9 "Early Retirement Date"............................... 2
2.1.10 "Effective Date"...................................... 2
2.1.11 "Employer"............................................ 2
2.1.12 "Employment Agreement................................. 2
2.1.13 "ERISA"............................................... 2
2.1.14 "Final Average Earnings".............................. 2
2.1.15 "Normal Retirement Age"............................... 3
2.1.16 "Participant"......................................... 3
2.1.17 "Plan"................................................ 3
2.1.18 "Qualified Pension Plan".............................. 3
2.1.19 "Surviving Spouse..................................... 3
2.1.20 "Termination of Employment"........................... 3
2.1.21 "Year of Service"..................................... 3
2.2 Gender and Number............................................ 3
ARTICLE 3. PARTICIPATION.............................................. 3
3.1 Eligibility.................................................. 3
3.2 Termination of Participation................................. 3
ARTICLE 4. RETIREMENT BENEFITS 4
4.1 Normal Retirement Benefits................................... 4
4.2 Benefits Upon Early Retirement............................... 4
4.3 Disability Benefits.......................................... 4
4.4 Deferred Vested Benefits..................................... 5
</TABLE>
i
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<TABLE>
<CAPTION>
<C> <S> <C>
4.5 Social Security Reduction.................................... 5
4.6 Benefits upon Reemployment................................... 5
ARTICLE 5. SURVIVOR BENEFITS.......................................... 6
5.1 Death Prior to Retirement.................................... 6
5.2 Death After Commencement of Benefits......................... 6
ARTICLE 6. CLAIMS AND REVIEW PROCEDURE................................ 6
6.1 Claims Procedure............................................. 6
6.2 Review Procedure............................................. 7
ARTICLE 7. ADMINISTRATION............................................. 7
7.1 Administration............................................... 7
7.2 Powers of the Committee...................................... 7
7.3 Actions of the Committee..................................... 8
7.4 Delegation................................................... 8
7.5 Reports and Records.......................................... 8
ARTICLE 8. AMENDMENT AND TERMINATION.................................. 8
8.1 Procedures for Amending Plan................................. 8
8.2 Termination of Plan.......................................... 8
ARTICLE 9. MISCELLANEOUS.............................................. 9
9.1 No Guaranty of Employment.................................... 9
9.2 Financing of Benefits........................................ 9
9.3 Non-Alienation............................................... 9
9.4 Taxes........................................................ 10
9.5 Applicable Laws.............................................. 10
9.6 Form of Communication........................................ 10
9.7 Captions..................................................... 10
9.8 Severability................................................. 10
9.9 Binding Agreement............................................ 10
9.10 Successors.................................................. 10
9.11 Facility of Payment......................................... 10
</TABLE>
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ARTICLE 1. THE PLAN
1.1 Establishment. RYKOFF-SEXTON, INC. (the "Employer"), hereby
establishes, effective as of July 20, 1994, a supplemental deferred compensation
plan for the benefit of Mark Van Stekelenburg (the "Participant"), who is
currently the President and Chief Executive Officer of the Employer. This Plan
shall be known as the RYKOFF-SEXTON, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR MARK VAN STEKELENBURG (the "Plan").
1.2 Purpose. The purpose of the Plan is to encourage the Participant's
continued interest in the Employer's success and to enhance his security by
providing him with additional retirement and survivor benefits that will
supplement his benefits under the Employer's Qualified Pension Plan.
The Plan is intended to provide benefits for a "management or highly
compensated" employee within the meaning of Sections 201, 301 and 401 of ERISA,
and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of
ERISA. Accordingly, in the event that it is determined by a court of competent
jurisdiction that the Plan constitutes an employee pension benefit plan within
the meaning of Section 3(2) of ERISA, which is not so exempt, the Plan shall
thereafter be modified and operated and administered in such a manner as to
comply with the provisions of Parts 2, 3 and 4 of Title I of ERISA, or if the
Plan cannot be so modified or operated, the Plan shall terminate in accordance
with Article 8 and no further benefits shall accrue hereunder.
ARTICLE 2. DEFINITIONS
2.1 Definitions. Whenever used in the Plan, the following words and
phrases shall have the respective meanings set forth below unless the context
plainly requires a different meaning. When the defined meaning is intended, the
term is capitalized.
2.1.1 "Actuarial Equivalent" means a benefit of equal value computed by
using the applicable actuarial assumptions and factors stated for the applicable
purpose in the Qualified Pension Plan, as in effect on the effective date of a
determination.
2.1.2 "Affiliate" means John Sexton & Co., Tone Brothers, Inc. or any
other business entity that is owned by the Employer or a member of a "related
group" (as that term is defined in the Qualified Pension Plan) with the
Employer.
2.1.3 "Annuity Starting Date" means that term as defined in Article X of
the Qualified Pension Plan, except that Annuity Starting Date shall relate to
the commencement of benefits under this Plan.
2.1.4 "Base Compensation" means the total annual base salary paid by the
Employer to or on behalf of the Participant, including any salary reduction
contributions to (a) any Employer-sponsored plan that includes a cash-or-
deferred arrangement under Code
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Section 401(k), (b) any other plan of deferred compensation sponsored by the
Employer, or (c) any Employer-sponsored "cafeteria plan" under Code Section 125.
Base Compensation shall not take into account any reimbursed expenses,
benefits paid under any Employer-sponsored welfare benefit plan, credits or
benefits under any plan of deferred compensation (including this Plan)
attributable to Employer contributions, any additional cash incentive
compensation under the Senior Executive Incentive Plan or such other management
incentive program or arrangement approved by the Board, compensation payable in
a form other than cash or any termination payments under the Employment
Agreement.
2.1.5 "Benefit Percentage" means sixty percent (60%), reduced by three
percent (3%) for each Year of Service of the Participant less than twenty (20),
determined as of the date of the Participant's Termination of Employment.
2.1.6 "Code" means the Internal Revenue Code of 1986, as it has been and
may be amended from time to time.
2.1.7 "Committee" means the Advisory Committee from time to time appointed
by the Board of Directors of the Employer pursuant to its Qualified Pension
Plan. The Committee shall be this Plan's named fiduciary.
2.1.8 "Disability" shall have the meaning set forth in the Employment
Agreement.
2.1.9 "Early Retirement Date" means the date on which the Participant has
both attained age fifty-five (55) and completed five (5) Years of Service with
the Employer; provided, however, that he has not attained Normal Retirement Age.
2.1.10 "Effective Date" means July 20, 1994, with respect to this Plan.
2.1.11 "Employer" means Rykoff-Sexton, Inc., a Delaware corporation.
2.1.12 "Employment Agreement" means the written employment agreement
between the Employer and the Participant dated as of July 20, 1994, and any
written modifications to such agreement agreed to by the parties from time to
time.
2.1.13 "ERISA" means the Employee Retirement Income Security Act of 1974,
as it has been and may be amended from time to time.
2.1.14 "Final Average Earnings" means the Participant's aggregate Base
Compensation plus any cash incentive compensation paid by the Employer during
the thirty-six (36) consecutive complete months ending on or immediately before
the date of the Participant's Termination of Employment, divided by the number
three (3).
2.1.15 "Normal Retirement Age" means age sixty (60).
2
<PAGE>
2.1.16 "Participant" means Mark Van Stekelenburg, an executive employee of
the Employer.
2.1.17 "Plan" means the "Rykoff-Sexton, Inc. Supplemental Executive
Retirement Plan for Mark Van Stekelenburg", as set forth herein and as amended
or restated from time to time.
2.1.18 "Qualified Pension Plan" means the Rykoff-Sexton, Inc. Pension
Plan, as amended or restated from time to time, which is a defined benefit
pension plan sponsored by the Employer and is intended to be qualified under
Code Section 401(a).
2.1.19 "Surviving Spouse" means the Participant's surviving spouse to whom
he has been continuously married for at least one (1) year prior to the date of
his death.
2.1.20 "Termination of Employment" means the Participant's ceasing to be
employed by the Employer or any Affiliate for any reason whatsoever, voluntary
or involuntary, other than by reason of his death or an approved leave of
absence.
2.1.21 "Year of Service" means a "Year of Vesting Service," as defined in
the Qualified Pension Plan including a Year of Service with any Affiliate and
all Years of Service earned by the Participant as an employee of the Employer or
an Affiliate before and after the Effective Date.
2.2 Gender and Number. Except as otherwise clearly indicated by context,
masculine terminology used herein also includes the feminine and neuter, and
terms used in the singular may also include the plural.
ARTICLE 3. PARTICIPATION
3.1 Eligibility. The Participant shall automatically commence
participation in the Plan as of the Effective Date; provided, however, that
unless the Participant is credited with five (5) Years of Service, no benefit
shall be payable to him; and provided further, however, regardless of the
Participant's Years of Service, in the event of his death a benefit shall be
payable to his Surviving Spouse under the Plan.
3.2 Termination of Participation. Participation in the Plan shall continue
as long as the Participant is eligible to receive benefits under the Plan.
ARTICLE 4. RETIREMENT BENEFITS
4.1 Normal Retirement Benefits.
(a) If the Participant's Termination of Employment occurs on or after the
date on which he has attained Normal Retirement Age and has completed five (5)
Years of Service, the Employer shall pay to the Participant, in monthly
payments, an annual benefit equal to: (i) the product of (I) the Participant's
Final Average Earnings multiplied by (II) his
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<PAGE>
Benefit Percentage; reduced by (ii) the accrued benefit the Participant would be
entitled to receive on an annual basis under the Qualified Pension Plan,
assuming the Participant elected to commence receiving a straight life annuity
form of benefit under the Qualified Pension Plan, as of the Annuity Starting
Date for commencement of his benefits under this Plan.
(b) Payments under this Section 4.1 shall commence on the first day of the
month coincident with or next following the Participant's Termination of
Employment and shall continue on the first day of each month thereafter during
the Participant's lifetime, unless the Participant is reemployed by the Employer
or an Affiliate.
4.2 Benefits Upon Early Retirement.
(a) If the Participant's Termination of Employment occurs before he
attains Normal Retirement Age, but on or after the date on which he has reached
his Early Retirement Date, the Employer shall pay to the Participant a benefit
equal to the retirement benefit payable at Normal Retirement Age under Section
4.1, determined as of the date of his Termination of Employment, and reduced by
one-half of one percent (0.5%) for each month that the date of commencement of
benefits under this paragraph 4.2 precedes the Participant's attainment of his
Normal Retirement Age.
(b) Payments under this Section 4.2 shall commence on the first day of the
month coincident with or next following the Participant's Termination of
Employment and shall continue on the first day of each month thereafter during
the Participant's lifetime, unless the Participant is reemployed by the Employer
or an Affiliate.
4.3 Disability Benefits.
(a) If the Participant's Termination of Employment is caused by his
Disability and occurs after his completion of one (1) but less than ten (10)
Years of Service, the Employer shall pay to the Participant a benefit equal to
the retirement benefit described in Section 4.1, determined (i) as of the date
of his Termination of Employment, (ii) by using a Benefit Percentage equal to
thirty percent (30%), and (iii) without any reduction for early commencement of
benefits.
(b) If the Participant's Termination of Employment is caused by his
Disability and occurs on or after the Participant has been credited with ten
(10) or more Years of Service, the Employer shall pay to the Participant a
benefit equal to the retirement benefit described in Section 4.1, determined (i)
as of the date of his Termination of Employment, and (ii) without any reduction
for early commencement of benefits.
(c) Payments under this Section 4.3 shall commence on the first day of the
month coincident with or next following the end of the salary continuation
period for the Participant under any noninsured salary continuation plan or
arrangement payable upon the Participant's Disability either provided by the
Employer or included in the Employment Agreement, and shall continue on the
first day of each month thereafter for the Participant's lifetime, unless the
Participant is reemployed by the Employer or an Affiliate.
4
<PAGE>
4.4 Deferred Vested Benefits.
(a) If the Participant's Termination of Employment occurs prior to his
Early Retirement Date, but after he has completed five (5) Years of Service, he
shall receive a deferred retirement benefit commencing immediately after his
Early Retirement Date, equal to the Actuarial Equivalent of his retirement
benefit payable at Normal Retirement Age under Section 4.1, determined as of the
date of his Termination of Employment.
(b) Payments under this Section 4.4 shall commence on the first day of the
month coincident with or next following the Participant's Early Retirement Date
and shall continue on the first day of each month thereafter during the
Participant's lifetime, unless the Participant is reemployed by the Employer or
an Affiliate.
4.5 Social Security Reduction. Benefits payable to the Participant under
Sections 4.1, 4.2, 4.3 and 4.4 shall be reduced by the amount of unreduced
primary (not family) annual retirement benefits under the United States Social
Security Act that the Participant is paid ("Social Security benefits").
4.6 Benefits upon Reemployment. If the Participant is reemployed by the
Employer or an Affiliate, any benefits in pay status shall be discontinued until
the Participant again terminates employment. If a Participant receives a
benefit under the Plan and again becomes a Participant, his retirement benefit
on his subsequent Termination of Employment shall be reduced by the Actuarial
Equivalent of the payments previously made to him.
5
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ARTICLE 5. SURVIVOR BENEFITS
5.1 Death Prior to Retirement. If the Participant dies prior to his
Annuity Starting Date, his Surviving Spouse (if any) shall be eligible for
survivor benefits from the Employer. Such benefits shall be payable monthly by
the Employer until the Surviving Spouses's death. The Surviving Spouse benefit
under this provision shall equal sixty percent (60%) of the Participant's
retirement benefit payable at Normal Retirement Age under Section 4.1 determined
(a) as if the Participant had a Termination of Employment upon his death, and
(b) without a reduction for the Participant's accrued benefit under the
Qualified Pension Plan. Pre-retirement survivor payments under this Plan will
be reduced by the monthly survivor benefit actually paid to the Surviving Spouse
under the Qualified Pension Plan.
5.2 Death After Commencement of Benefits. If the Participant dies after
his Annuity Starting Date, the Employer shall pay to the Participant's Surviving
Spouse (if any) post-retirement survivor benefits. Such benefits shall be
payable monthly by the Employer until the Surviving Spouse's death. The
Surviving Spouse benefit shall equal sixty percent (60%) of the retirement
benefit received by the Participant pursuant to the applicable provision of this
Plan; provided, however, that, for purposes of this provision, the Participant's
retirement benefit shall not be reduced by his accrued benefit under the
Qualified Pension Plan. Post-retirement survivor benefit payments under this
Plan will be reduced by the monthly guaranteed payments or survivor benefits
actually paid to the Surviving Spouse under the Qualified Pension Plan.
ARTICLE 6. CLAIMS AND REVIEW PROCEDURE
6.1 Claims Procedure. If the Participant or, in the event of his death,
his Surviving Spouse (either hereinafter referred to as the "Claimant") is not
for any reason paid all or a portion of an expected benefit under this Plan he
or she may file a claim with the Committee. The Committee shall notify the
Claimant, within ninety (90) days of receipt of the claim, of the Committee's
allowance or denial of the claim. The notice of the Committee's decision shall
be in writing, signed by the Claimant, sent by mail to the Claimant's last known
address and, if a denial of all or a portion of the claim, shall set forth:
(a) the specific reasons for the denial;
(b) specific reference to the provisions of the Plan on which the
denial is based;
(c) if applicable, a description of any additional information or
material necessary to perfect the claim, and an explanation of why it is
needed; and
(d) an explanation of the Plan's claims review procedure, including
the names of members of the Committee and the name and address of the
Committee member to whom any petition for review should be directed.
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If the Committee determines that special circumstances require
additional time to make a decision, the Committee shall notify the Claimant
(within the 90-day period for the Committee's response) of the circumstances and
the date by which a decision is expected, and may extend the response period for
up to an added 90-day period.
6.2 Review Procedure. If a Claimant is determined by the Committee to be
ineligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different benefits, the Claimant shall have the opportunity to
appeal the Committee's determination by filing a petition for review with the
Committee within sixty (60) days after receipt of the notice of decision issued
by the Committee. The petition shall be in writing signed by the Claimant and
shall state the specific reasons why the Claimant believes he or she is entitled
to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Committee of the petition,
the Committee shall afford the Claimant (and an authorized representative, if
any) an opportunity to present his or her position to the Committee orally or in
writing, and the Claimant (or an authorized representative) shall have the right
to review the pertinent documents. The Committee shall notify the Claimant of
its decision in writing within the 60-day period, stating specifically the basis
of its decision (written in a manner calculated to be understood by the
Claimant) and the specific provisions of the Plan on which the decision is
based. If, because of the need for a hearing, the 60-day period is not
sufficient, the decision may be deferred for up to another 60-day period at the
election of the Committee, but notice of this deferral shall be given to the
Claimant.
ARTICLE 7. ADMINISTRATION
7.1 Administration. Except as otherwise provided herein, the Plan shall be
administered by the Committee. The Employer shall bear all costs of the Plan.
7.2 Powers of the Committee. The Committee shall have sole authority over
administration of the Plan and all powers necessary to administer the Plan,
including, without limitation, authority and powers:
(a) to construe and interpret the provisions of the Plan;
(b) to establish rules for the administration of the Plan and to
prescribe any forms required to administer the Plan; and
(c) to determine the Participant's eligibility for benefits under the
Plan and the amount of benefits payable to the Participant or, in the event
of his death, his Surviving Spouse (if any).
7.3 Actions of the Committee. All determinations, interpretations, rules,
and decisions of the Committee shall be conclusive and binding upon all persons
having or claiming to have any interest or right under the Plan.
7
<PAGE>
7.4 Delegation. The Committee shall have the power to delegate specific
duties and responsibilities to officers or other employees of the Employer or
other individuals or entities. Any delegation by the Committee may allow
further delegations by the individual or entity to whom the delegation is made.
Any delegation by the Committee may be rescinded at any time. Each person or
entity to whom a duty or responsibility has been delegated shall be responsible
for the exercise of such duty or responsibility and shall not be responsible for
any act or failure to act of any other person or entity.
7.5 Reports and Records. The Committee and those to whom they have
delegated duties under the Plan shall keep records of all their proceedings and
actions and shall maintain books of account, records and other data as shall be
necessary for the proper administration of the Plan and for compliance with
applicable law.
ARTICLE 8. AMENDMENT AND TERMINATION
8.1 Procedures for Amending Plan.
(a) The Employer may not amend, suspend or terminate the Plan, in full
or in part, at any time without the written consent of the Participant. Any
action to amend, suspend or terminate the Plan may only be taken by resolution
of the Board of Directors of the Employer.
(b) No amendment, suspension or Plan termination after the death of
the Participant, shall adversely affect the rights of the Surviving Spouse who
is then entitled to receive payments under the Plan as a result of the previous
occurrence of the Participant's death.
(c) Any amendment, suspension or termination documents shall be filed
with the Plan documents, and written notice thereof given the Participant or, in
the event of his death, his Surviving Spouse.
8.2 Termination of Plan. In the event of Plan termination, the Employer
may elect to accelerate payments of the Actuarial Equivalent value of all plan
benefits previously accrued (whether or not commenced) either in a cash lump sum
payable within sixty (60) days from the Plan termination date or, in the sole
discretion of the Employer, in sixty (60) equal monthly installments commencing
within that 60-day period, with interest at the Actuarial Equivalent rate
applicable to Qualified Pension Plan termination payments, compounded annually.
ARTICLE 9. MISCELLANEOUS
9.1 No Guaranty of Employment. The adoption and maintenance of the Plan
shall not be deemed to be a contract of employment between the Employer and the
Participant. Nothing contained herein shall give the Participant the right to
be retained in the employ of the Employer or to interfere with the right of the
Employer to discharge the Participant at any
8
<PAGE>
time, nor shall it give the Employer the right to require the Participant to
remain in its employ or to interfere with the Participant's right to terminate
employment at any time.
9.2 Financing of Benefits. Benefits payable under the Plan to the
Participant or, in the event of his death, to his Surviving Spouse shall be paid
by the Employer from its general assets. The rights of the Participant, or his
Surviving Spouse, to benefits under the Plan shall be solely those of an
unsecured creditor of the Employer.
(a) The Employer in its discretion may apply for and procure as owner
and for its own benefit, insurance on the life of the Participant, in such
amounts and in such forms as the Employer may choose. The Participant shall
have no interest whatsoever in any such policy or policies, but at the request
of the Employer shall submit to medical examinations and supply such information
and execute such documents as may be required by the insurance company or
companies to whom the Employer has applied for insurance. Any insurance policy
on the life of the Participant or other assets acquired by or held by the
Employer (whether or not held in trust) shall not be deemed to be held as
security for the performance of the Plan obligations of the Employer but shall
be, and remain, a general, unpledged, and unrestricted asset of the Employer.
(b) The Employer may establish a trust to facilitate management of any
life insurance or other assets which may be used to pay Plan benefits, but the
assets of any such trust shall remain subject to the claims of the Employer's
general creditors, and neither the Participant, nor his Surviving Spouse or
estate, shall have the right to any of such assets, except in their capacity as
unsecured general creditors of the Employer. To the extent that any of the
benefits accrued for the Participant under this Plan are paid to the Participant
or his Surviving Spouse by the trustee of such a trust, the Employer's
obligation to pay that portion of the Participant's benefits under this Plan
shall be discharged to the extent of the trustee's payment.
9.3 Non-Alienation. No benefit payable at any time under this Plan shall
be subject in any manner to alienation, sale, transfer, assignment, pledge,
attachment or encumbrance of any kind.
9.4 Taxes. The Employer shall deduct, from all payments to be made
hereunder, all applicable federal and state taxes required by law to be withheld
from the payments.
9.5 Applicable Laws. The Plan and all rights hereunder shall be governed
by and construed according to the laws of the State of California, except to the
extent such laws are preempted by the laws of the United States of America.
9.6 Form of Communication. Any election, application, claim, notice or
other communication required or permitted to be made by the Participant or, in
the event of his death, his Surviving Spouse to the Committee shall be made in
writing and in such form as the Committee shall prescribe. Such communication
shall be effective upon mailing, if sent by first class mall, postage pre-paid,
and addressed to the Employer's principal offices at Los
9
<PAGE>
Angeles, California, to the attention of the "Pension Advisory Committee" or one
of its members.
9.7 Captions. The captions at the head of the Articles and Sections of
this Plan are designed for convenient reference only and are not to be used for
the purpose of interpreting any provision of this Plan.
9.8 Severability. The invalidity of any portion of this Plan shall not
invalidate the remainder thereof, and in any such case the remainder shall
continue in full force and effect, to the extent that any purposes of the Plan
may still be carried out.
9.9 Binding Agreement. The provisions of this Plan shall be binding upon
the Participant, his Surviving Spouse and his, her and their heirs and personal
representatives.
9.10 Successors. The Employer shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of the Employer expressly
to assume and to agree to perform this Plan in the same manner and to the same
extent the Employer would be required to perform if no such succession had taken
place. This Plan shall be binding upon and inure to the benefit of the Employer
and any successor of or to the Employer, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business and/or assets of the Employer whether by sale, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be deemed the
"Employer" for the purposes of this Plan), and the heirs, beneficiaries,
executors and administrators of the Participant.
9.11 Facility of Payment. Whenever and as often as Participant or, in the
event of his death, his Surviving Spouse entitled to payments hereunder shall be
under a legal disability or, in the sole judgment of the Committee, shall
otherwise be unable to apply such payments to his own best interests and
advantage, the Committee in the exercise of its discretion may direct all or any
portion of such payments to be made in any one or more of the following ways:
(a) directly to him; (b) to his legal guardian or conservator; or (c) to his
spouse or to any other person, to be expended for his benefit; and the decision
of the Committee, shall in each case be final and binding upon all persons in
interest.
IN WITNESS WHEREOF, and pursuant to a duly adopted resolution of the
Employer's Board of Directors, the Employer has caused this instrument to be
executed by its duly authorized officers as of the Effective Date.
Attest: RYKOFF-SEXTON, INC.
/s/ Neil I. Sell By:/s/ Richard J. Martin
- ----------------------- -------------------------
Neil I. Sell, Secretary Richard J. Martin
Its: Senior Vice President - Chief
Financial Officer
10
<PAGE>
AMENDMENT
TO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR MARK VAN STEKELENBURG
(EFFECTIVE AS OF JUNE 19, 1995)
<PAGE>
The Rykoff-Sexton Supplemental Executive Retirement Plan for Mark Van
Stekelenburg is hereby amended as follows:
. Article 2.1.14, entitled, "Final Average Earnings" is amended to read in
full as follows:
""Final Average Earnings" means the Participant's aggregate Base
Compensation plus any cash incentive compensation paid by the
Employer during the thirty-six (36) consecutive complete months
ending on or iminediately before the date of the Participant's
Termination of Employment, divided by the number three (3). For
this purpose cash compensation includes the amount of any cash
compensation converted to Converted Shares under the Rykoff-
Sexton Convertible Award Plan (Officer and Key Employee
Edition)."
. Article 2.1.22 is added to read as follows:
""Trust" shall mean the trust established pursuant to that
certain Master Trust Plan Agreement for Rykoff-Sexton, Inc.
Executive Deferrals Plan, dated as of October 1, 1995, between
the Company and the trustee named therein, as it may be amended
from time to time."
. Article 9.2, entitled "Financing of Benefits" shall be deleted and the
following shall be inserted in its place:
"9.2(a) Establishment of the Trust. The Employer shall establish
the Trust and shall at least annually transfer over to the Trust
such assets as the Employer determines, in its sole discretion,
are necessary to provide, on a present value basis, for their
respective future liabilities created with respect to the
aggregate benefit accruals of the Participant.
9.2(b) Interrelationship of the Plan and the Trust. The
provisions of the Plan and the Plan Agreement shall govern the
rights of the Participant to receive distributions pursuant to
the Plan. The provisions of the Trust shall govern the rights of
the Employer, Participant and the creditors of the Employer to
the assets transferred to the Trust. The Employer shall at all
times remain liable to carry out its obligations under the Plan.
9.2(c) Distributions From the Trust. The Employer's obligations
under the Plan may be satisfied with Trust assets distributed
<PAGE>
pursuant to the terms of the Trust, and any such distribution
shall reduce the Employer's obligations under this Agreement.
9.2(d) Unsecured General Creditor. The Participant and his
Surviving Spouse, beneficiaries, heirs, successors and assigns
shall have no legal or equitable rights, interests or claiins in
any property or assets of the Employer. For purposes of the
payment of benefits under this Plan, any and all of the
Employer's assets shall be, and remain, the general, unpledged
unrestricted assets of the Employer. The Employer's obligation
under the Plan shall be merely that of an unfunded and unsecured
promise to pay money in the future.
9.2(e) Employer's Liability. The Employer's liability for the
payment of benefits shall be defined only by the Plan and the
Plan Agreement, as entered into between the Employer and the
Participant. The Employer shall have no obligation to the
Participant under the Plan except as expressly provided in the
Plan and his Plan Agreement.
9.2(f) Insurance on Participant's Life. The Trust in its
discretion may apply for and procure as owner for its own
benefit, insurance on the life of the Participant, in such
amounts and in such forms as the Trust may choose. The
Participant shall have no interest whatsoever in any such policy
or policies, but at the request of the Employer shall submit to
medical examinations and supply such information and execute such
documents as may be required by the insurance company or
companies to whom the Trust has applied for insurance."
IN WITNESS WHEREOF, and pursuant to a duly adopted resolution of the
Employer's Board of Directors, the Employer has caused this Amendment to be
executed by its duly authorized officers as of June 19, 1995.
Attest: RYKOFF-SEXTON, INC.
/s/ Neil I. Sell By: /s/ Richard J. Martin
- ----------------------- -----------------------------
Neil I. Sell, Secretary Richard J. Martin
Its: Senior Vice President - Chief
Financial Officer
<PAGE>
Exhibit 10.25
RYKOFF-SEXTON, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR ________________________
EFFECTIVE OCTOBER 1, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
Article I Purpose.................................... 1
1.1 Purpose.................................... 1
Article II Definitions................................ 1
Article III Participation; Vesting..................... 6
3.1 Enrollment Requirements.................... 6
3.2 Commencement of Participation.............. 6
3.3 Termination of Participation............... 6
3.4 Vesting.................................... 6
3.5 FICA and Other Taxes....................... 7
Article IV Retirement Benefits........................ 7
4.1 Normal Retirement.......................... 7
4.2 Early Retirement Benefit................... 8
4.3 Disability Benefit......................... 8
4.4 Deferred Vested Benefits................... 9
4.5 Benefits Upon Reemployment................. 9
Article V Survivor Benefits.......................... 9
5.1 Death Prior to Retirement.................. 9
5.2 Death After Commencement of Benefits....... 9
Article VI Termination, Amendment or Modification..... 10
6.1 Termination................................ 10
6.2 Amendment.................................. 10
6.3 Effect of Payment.......................... 10
Article VII Administration............................. 10
7.1 Committee Duties........................... 10
7.2 Agents..................................... 10
7.3 Binding Effect of Decisions................ 11
7.4 Indemnity of Committee..................... 11
7.5 Employer Information....................... 11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Article VIII Other Benefits and Agreements.............. 11
8.1 Coordination with Other Benefits........... 11
Article IX Claims Procedures.......................... 11
9.1 Presentation of Claim...................... 11
9.2 Notification of Decision................... 11
9.3 Review of a Denied Claim................... 12
9.4 Decision on Review......................... 12
9.5 Legal Action............................... 12
Article X Trust...................................... 13
10.1 Establishment of the Trust................. 13
10.2 Interrelationship of the Plan and the
Trust..................................... 13
10.3 Distributions From the Trust............... 13
10.4 Issuance of Life Insurance................. 13
Article XI Miscellaneous.............................. 13
11.1 Unsecured General Creditor................. 13
11.2 Employer's Liability....................... 13
11.3 Nonassignability........................... 14
11.4 Not a Contract of Employment............... 14
11.5 Furnishing Information..................... 14
11.6 Terms...................................... 14
11.7 Captions................................... 14
11.8 Governing Law.............................. 14
11.9 Notice..................................... 14
11.10 Successors................................. 15
11.11 Spouse's Interest.......................... 15
11.12 Validity................................... 15
11.13 Incompetent................................ 15
11.14 Court Order................................ 16
11.15 Distribution in the Event of Taxation...... 16
</TABLE>
-ii-
<PAGE>
RYKOFF-SEXTON, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR _____________________________
EFFECTIVE OCTOBER 1, 1995
Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), hereby
establishes, effective as of October 1, 1995, a supplemental executive
retirement plan for the benefit of _______________________ (the "Employee").
This Plan shall be known as the "RYKOFF-SEXTON, INC. SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN FOR ___________________________" (the "Plan").
ARTICLE I
PURPOSE
-------
1.1 PURPOSE. The purpose of the Plan is to encourage the Employee's continued
interest in the Employer's success and to enhance his retirement benefits.
The Plan is designed to be a "Top-Hat" plan that provides a benefit for a
"management or highly compensated employee" within the meaning of Sections
201(2), 301(a)(3) and 401(a)(1) of ERISA, and, therefore, it is designed to
be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Further, the Plan shall be unfunded for tax purposes and for purposes of
Title I of ERISA. However, if a court of competent jurisdiction determines
that the Plan constitutes an employee pension benefit plan, within the
meaning of Section 3(2) of ERISA, which is not so exempt, the Plan shall
thereafter be modified and operated and administered in such a manner as to
comply with the provisions of Parts 2, 3 and 4 of Title I of ERISA, or, if
the Plan cannot reasonably be so modified or operated, the Plan shall
terminate in accordance with Article VI and no further benefits shall
accrue under the Plan.
ARTICLE II
DEFINITIONS
-----------
Whenever used in the Plan, the following words and phrases shall have
the respective meanings set forth below unless the context plainly requires a
different meaning. When the defined meaning is intended, the terms is
capitalized.
2.1 "Actuarial Equivalent" means a benefit of equal value computed by using the
applicable actuarial assumptions and factors (including any reduction for
the early payment of benefits) stated for the applicable purpose in the
Qualified Pension Plan that are in effect on the effective date of a
determination of the payment of a benefit under this Plan.
2.2 "Base Compensation" means the annual compensation, excluding bonuses,
commissions, overtime, relocation expenses, incentive payments, non-
monetary awards, directors fees, other fees, compensation voluntarily
deferred from a
<PAGE>
previous Plan Year to the current Plan Year, and automobile allowances,
paid to the Employee for employment services rendered to Employer, before
reduction for compensation deferred pursuant to all qualified, non-
qualified and Code Section 125 plans of Employer.
2.3 "Benefit Percentage" means a percentage that is equal to two and one-half
percent (2-1/2%) multiplied by the total number of the Employee's Years of
Service, not to exceed twenty (20) years, determined at the time of the
Employee's Termination of Employment or death, as the case may be.
However, if the Employee reaches his Normal Retirement Age prior to a
Termination of Employment, has fifteen (15) or more Years of Service and is
not Disabled, that Employee's Benefit Percentage shall be 50%, regardless
of his Years of Service.
2.4 "Bonus" means any cash compensation, in addition to Base Compensation, paid
to the Employee as an employee under any of Employer's bonus and incentive
plans and including the amount of any cash compensation converted to
Converted Shares under the Rykoff-Sexton Convertible Award Plan (Officer
and Key Employee Edition), before reduction for compensation deferred
pursuant to all qualified, non-qualified and Code Section 125 plans of
Employer and excluding compensation voluntarily deferred from a Previous
Plan Year to the current Plan Year.
2.5 "Board" means the board of directors of Rykoff-Sexton, Inc.
2.6 A "Change in Control" of the Company means the first to occur of any of the
following events:
(a) any person (as defined in Sections 3(a)(9) and 13(d)(3) of the
Securities Act of 1934 (the "'34 Act")) ("Person") (other than an
Excluded Person (as hereinafter defined)) becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated pursuant to the '34 Act),
directly or indirectly, of 25% or more of combined voting power of the
Company's then outstanding securities entitled to vote generally in
the election of directors of the Company ("Voting Securities") other
than pursuant to an Excepted Transaction (as hereinafter defined); or
(b) the occurrence within any twelve-month period during the term of the
Plan Agreement of a change in the Board with the result that the
incumbent members do not constitute a majority of the Board.
"Excluded Person" shall mean (x) Merrill Lynch Capital Partners, Inc.,
Merrill Lynch Capital Appreciation Partnership No. B-XVIII, L.P., Merrill
Lynch Kecalp L.P. 1994, ML Offshore LBO Partnership No. B-XVIII, ML IBK
Positions, Inc., MLCP Associates L.P. No. II, MLCP Associates L.P. No. IV,
Merrill Lynch Kecalp L.P. 1991, Merrill Lynch Capital Appreciation
Partnership No. XIII, L.P., ML Offshore LBO Partnership No. XIII, ML
Employees LBO Partnership No. I, L.P., Merrill Lynch Kecalp L.P. 1987, and
Merchant Banking L.P. No. II (each,
-2-
<PAGE>
an "ML Entity" and collectively the "ML Entities"), if the ML Entities
shall have executed a written agreement with the Company (and approved by
the Company's Board of Directors) on or prior to the date on which the ML
Entities (together with its Affiliates) became the beneficial owner of 25%
or more of the shares of Voting Securities then outstanding (the
"Standstill Agreement"), which Standstill Agreement imposes one or more
limitations on the amount of the ML Entities' beneficial ownership of
shares of Common Stock, and if, and so long as, such Standstill Agreement
(or any amendment thereto approved by the Company's Board of Directors by
the vote of a majority of the Present Directors) continues to be in effect
and binding on the ML Entities and the ML Entities are in compliance (as
determined by the Company's Board of Directors in its discretion by the
vote of a majority of the Present Directors) with the terms of such
Standstill Agreement (including any such amendment); or (y) any other
Person acquiring Voting Securities from an ML Entity if (i) such Voting
Securities were acquired by an ML Entity pursuant to the transactions
contemplated by the Letter of Intent dated December 5, 1995 ("Letter of
Intent") from the Company to US Foodservice Inc. ("Excluded Shares") and
(ii) if, prior to such acquisition by such other Person, a majority of the
Present Directors has expressly determined in good faith that such
acquisition is not a "Change in Control" for purposes of this Agreement
("ML Successor"); provided, however, that an Excluded Person shall cease to
be such and a Change in Control shall occur if either (A) the Chief
Executive Officer of the Company immediately prior to the execution of the
Letter of Intent ceases to constitute the Chief Executive Officer of the
Company (or any successor to the Company) immediately following the
consummation of the merger contemplated thereby and throughout the twelve-
month period thereafter (unless such Chief Executive Officer ceases to
constitute the Chief Executive Officer of the Company by reason of death,
Disability (as defined in such Chief Executive Officer's Employment
Agreement with the Company, as it may be amended and restated from time to
time (the "Employment Agreement")), termination for Cause (as defined in
the Employment Agreement) or voluntary termination by such Chief Executive
Officer under circumstances that are not treated as an involuntary
termination under the Employment Agreement), or (B) the directors of the
Company in office immediately prior to the execution of the Letter of
Intent, together with any successors of such directors (provided that any
such successors qualify as Present Directors), cease to constitute at least
a majority of the Board immediately after the consummation of the merger
contemplated thereby and throughout the twelve-month period thereafter.
"Excepted Transaction" shall mean any transaction (other than the
acquisition of the Excluded Shares by the ML Entities) initiated by the
Company in which (A) the Chief Executive Officer of the Company immediately
prior to such transaction constitutes the Chief Executive Officer of the
Company, or the surviving, ultimate parent or other controlling corporation
or other entity, if any, resulting from any merger, consolidation,
reorganization or sale or transfer of assets of the Company effected
pursuant to such transaction ("Resulting Corporation") immediately
following the transaction and throughout the twelve-month period
thereafter, and (B) the directors of the Company in office
-3-
<PAGE>
immediately prior to the transaction (the "Directors") constitute at least
a majority of the Board or the Board of Directors of the Resulting
Corporation immediately after such transaction and throughout the twelve-
month period thereafter.
"Present Director" shall mean a member of the Board who (1) is not
designated as a member of the Board by any ML Entity or ML Successor, (2)
does not otherwise have any agreement, arrangement or understanding with
any ML Entity or ML Successor for the purpose of serving as a member of the
Board, and (3) is not an Affiliate or an Associate (as hereinafter defined)
of any ML Entity or ML Successor.
"Affiliate" and "Associate" shall have the meanings set forth in Rule 12b-2
of the '34 Act.
The Board shall have the power to determine, for purposes of this
Agreement, on the basis of information known to the Board (a) by a vote
taken in good faith by a majority of Present Directors, (1) whether any
Person is an Excluded Person, (2) the percentage of the Company's Voting
Securities beneficially owned by an Excluded Person, and (3) any
determination to be made pursuant to clause (x) of the definition of
Excluded Person, and (b) by a vote taken in good faith by a majority of all
Directors, whether a transaction is an Excepted Transaction. Any such
determination shall be conclusive and binding for all purposes of this
Agreement.
2.7 "Code" means the Internal Revenue Code of 1986, as it has been and may be
amended from time to time.
2.8 "Committee" means the Committee appointed from time to time by the Board of
Directors of the Employer. The Committee shall be this Plan's named
fiduciary.
2.9 "Disability" shall mean the Employee's incapacity due to physical or mental
illness to substantially perform his duties on a full time basis for six
(6) consecutive months if within thirty (30) days after a notice of
termination is thereafter given by the Company the Employee shall not have
returned to the full time performance of the Employee's duties; provided,
however, if the Employee shall not agree with a determination to terminate
him because of Disability, the question of the Employee's disability shall
be subject to the certification of a qualified medical doctor agreed to by
the Company and the Employee or, in the event of the Employee's incapacity
to designate a doctor, the Employee's legal representative. In the absence
of agreement between the Company and the Employee, each party shall
nominate a qualified medical doctor and the two doctors shall select a
third doctor, who shall make a determination as to Disability.
2.10 "Early Retirement Date" means the date on which the Employee has both
attained age fifty-five (55) and completed ten (10) Years of Service with
an Employer; provided, however, that he has not attained Normal Retirement
Age.
-4-
<PAGE>
2.11 "Employee" means _____________________________.
2.12 "Employer" means Rykoff-Sexton, Inc., a Delaware corporation, and/or any of
its subsidiaries.
2.13 "ERISA" means the Employee Retirement Income Security Act of 1974, as it
has been and may be amended from time to time.
2.14 "Final Average Earnings" means the Employee's highest average annual Base
Compensation plus Bonus paid by all Employers to the Employee during any
consecutive three (3) year period within the five (5) year period ending on
or immediately before the date of the Employee's Termination of Employment.
2.15 "Normal Retirement Age" means age sixty-two (62).
2.16 "Plan" means the "Rykoff-Sexton, Inc. Supplemental Executive Retirement
Plan For ___________________________," as set forth herein and as it may be
amended or restated from time to time.
2.17 "Plan Agreement" means this written agreement, as it may be amended from
time to time.
2.18 "Plan Year" shall, for the first Plan Year, begin on October 1, 1995, and
end on April 30, 1996. For each Plan Year thereafter, the Plan Year shall
begin on May 1 of each calendar year and continue through April 30 of the
following calendar year.
2.19 "Qualified Pension Plan" means the Rykoff-Sexton, Inc. Pension Plan, as it
may be amended or restated from time to time, which is a defined benefit
pension plan sponsored by the Employer and is intended to be qualified
under Code Section 401(a).
2.20 "Restoration Plan" means the Rykoff-Sexton, Inc. Supplemental Excess
Retirement Plan, as it may be amended or restated from time to time,
effective October 1, 1995, which is a nonqualified retirement plan
sponsored by the Employer.
2.21 "Social Security Benefit" means the projected unreduced primary (not
family) benefit that will be payable to the Employee, for his life, under
the United States Social Security Act, as determined at the time of his
Termination of Employment, using the assumptions set forth in Section
4.1(a)(ii).
2.22 "Surviving Spouse" means the Employee's surviving spouse to whom he has
been continuously married for at least one (1) year prior to the date of
his death.
2.23 "Termination of Employment" means the Employee's ceasing to be employed by
the Employer for any reason whatsoever, voluntary or involuntary, other
than by reason of his death or an approved leave of absence.
-5-
<PAGE>
2.24 "Trust" shall mean the trust established pursuant to that certain Master
Trust Agreement for Rykoff-Sexton, Inc. Executive Deferral Plans, dated as
of October 1, 1995, between the Employer and the trustee named therein, as
it may be amended from time to time.
2.25 "Vested" means that the Employee has become vested in his benefit under
this Plan in accordance with Section 3.4 below.
2.26 "Years of Plan Participation" shall mean the total number of full Plan
Years the Employee has been in the Plan prior to his Termination of
Employment. For purposes of the Employee's first Plan Year of
participation only, any partial Plan Year of participation shall be treated
as a full Plan Year.
2.27 "Year of Service" means a "Year of Vesting Service," as defined in the
Qualified Pension Plan, and it includes any Year of Service with any
Employer, including any and all Years of Service earned by the Employee as
an employee of any Employer before and after October 1, 1995.
ARTICLE III
PARTICIPATION; VESTING
----------------------
3.1 ENROLLMENT REQUIREMENTS. As a condition to participation, the Employee
shall complete, execute and return to the Committee this Plan Agreement.
3.2 COMMENCEMENT OF PARTICIPATION. The Employee shall commence participation
in the Plan on the date hereof.
3.3 TERMINATION OF PARTICIPATION. If a court of competent jurisdiction
determines that the Employee no longer qualifies as a member of a select
group of "management or highly compensated employees", as membership in
such group is determined in accordance with Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA, the Committee shall have the right, in its sole
discretion, to (i) terminate any future benefit accruals under this Plan
with respect to the Employee and/or (ii) immediately distribute the
Actuarial Equivalent of the Employee's then Vested accrued benefit in a
lump sum and terminate the Employee's participation in the Plan. If the
Committee chooses not to terminate the Employee's participation in the
Plan, the Committee may, in its sole discretion, reinstate the Employee to
full Plan participation at such time in the future as the Employee again
becomes a member of the select group described above.
3.4 VESTING. The Employee shall have a nonforfeitable right and vested
interest in his accrued benefit under this Plan if, before his Termination
of Employment, he (i) has at least five (5) Years of Plan Participation and
(ii) reaches age fifty-five (55). If both of those requirements are not
met at the time of his Termination of Employment, he shall forfeit his
entire right and interest in and to a benefit under this Plan. Despite the
foregoing, if, prior to his Termination of Employment, the Employee dies
with a Surviving Spouse or experiences a Disability, or a Change of
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Control occurs, the Employee shall immediately become one hundred percent
(100%) vested in his accrued benefit under this Plan. However, if the
Employee dies without a Surviving Spouse, his unpaid accrued benefit shall
be completely forfeited.
3.5 FICA AND OTHER TAXES. For each Plan Year during which an Employee vests in
a new portion of his benefit under the Plan, the Employee's Employer shall
ratably withhold from the Employee's other compensation the Employee's
share of FICA and other employment and income taxes, if any, that are
attributable to such vesting, as such share is determined in accordance
with applicable law. In addition, the Employer, or the trustee of the
Trust, may withhold from any distribution under the Plan any and all
employment and income taxes that are required to be withheld under
applicable law.
ARTICLE IV
RETIREMENT BENEFITS
-------------------
4.1 NORMAL RETIREMENT.
(a) NORMAL RETIREMENT BENEFIT. If the Employee is Vested under the Plan
and his Termination of Employment occurs on or after he has attained
his Normal Retirement Age, his Employer shall pay to the Employee, in
the form of a single life annuity that is payable monthly for the
Employee's life, a monthly amount that is equal to the difference
between (i) and (ii):
(i) The product of the Employee's Final Average Earnings multiplied
by his Benefit Percentage multiplied by 1/12; and
(ii) The sum of the accrued benefits, if any, that the Employee is
entitled to receive under (1) the Qualified Pension Plan, (2) the
Restoration Plan, (3) all other nonqualified retirement plans of
the Employers (other than the Rykoff-Sexton, Inc. Deferred
Compensation Plan), (4) all retirement benefits under any
qualified and nonqualified plan of any prior employer of the
Employee and (4) Social Security Benefits, assuming, in each
instance, that the Employee is to receive his benefits under each
of those plans and/or governmental entitlement, on an Actuarial
Equivalent basis, as of his Normal Retirement Age, in the form of
a monthly single life annuity for his life, commencing as of the
date specified in Section 4.1(b) below.
(b) PAYMENTS. Payments under this Section 4.1 shall commence on the first
day of the month coincident with or next following the Employee's
Termination of Employment and shall continue on the first day of each
month thereafter during the Employee's lifetime, unless the Employee
is reemployed by any Employer, in which case Section 4.5 below shall
apply.
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4.2 EARLY RETIREMENT BENEFIT.
(a) EARLY RETIREMENT BENEFIT. If the Employee is Vested under the Plan
and his Termination of Employment occurs before he attains Normal
Retirement Age, but on or after the date on which he reached his Early
Retirement Date, his Employer shall pay to the Employee a monthly
benefit equal to the product of (i) the retirement benefit payable at
Normal Retirement Age under Section 4.1 above, determined as of the
date of his Termination of Employment, multiplied by (ii) the
difference between (1) one hundred percent (100%) and (2) one-half of
one percent (0.5%) multiplied by the number of months that the date of
the commencement of benefit payments under Section 4.2(b) precedes the
Employee's attainment of his Normal Retirement Age.
(b) PAYMENTS. Payments under this Section 4.2 shall commence on the first
day of the month coincident with or next following the Employee's
Termination of Employment and shall continue on the first day of each
month thereafter during the Employee's lifetime, unless the Employee
is reemployed by any Employer, in which case Section 4.5 below shall
apply.
4.3 DISABILITY BENEFIT.
(a) LESS THAN TEN YEARS OF SERVICE. If the Employee's Termination of
Employment is caused by his Disability and occurs after his completion
of one (1) but less than ten (10) Years of Service, the Employer, in
lieu of any other benefit under this Plan, shall pay to the Employee a
benefit equal to the retirement benefit described in Section 4.1
above, determined (i) as of the date of his Termination of Employment,
(ii) by using a Benefit Percentage equal to twenty-five percent (25%),
and (iii) without any reduction for the early commencement of
benefits.
(b) TEN OR MORE YEARS OF SERVICE. If the Employee's Termination of
Employment is caused by his Disability and occurs on or after the
Employee has been credited with ten (10) or more Years of Service, the
Employer, in lieu of any other benefit under this Plan, shall pay to
the Employee a benefit equal to the retirement benefit described in
Section 4.1 above, determined (i) as of the date of his Termination of
Employment, and (ii) without any reduction for early commencement of
benefits.
(c) PAYMENTS. Payments under this Section 4.3 shall commence on the first
day of the month coincident with or next following the end of the
salary continuation period for the Employee under any non-insured
salary continuation plan or arrangement payable upon the Employee's
Disability provided by the Employer, and shall continue on the first
day of each month thereafter for the Employee's lifetime, unless the
Employee is reemployed by Employer, in which case Section 4.5 below
shall apply.
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<PAGE>
4.4 DEFERRED VESTED BENEFITS.
(a) DEFERRAL OF BENEFIT. If a Change in Control occurs and Employee's
Termination of Employment occurs prior to his Early Retirement Date,
the Employer shall pay to the Employee a benefit equal to the
retirement benefit payable at his Normal Retirement Age under Section
4.1, as reduced for any early commencement of benefits in accordance
with Section 4.2 above.
(b) PAYMENTS. Payments under this Section 4.4 shall commence on the first
day of the month coincident with or next following the Employee's
Early Retirement Date and shall continue on the first day of each
month thereafter during the Employee's lifetime, unless the Employee
is reemployed by any Employer, in which case Section 4.5 below shall
apply.
4.5 BENEFITS UPON REEMPLOYMENT. If the Employee is reemployed by the Employer,
any benefits under this Plan that are in pay status shall be discontinued
until the Employee again terminates employment. Any subsequent benefits
paid under this Plan as a result of a re-Termination of Employment shall
take into account, on an Actuarial Equivalent basis, prior payments made
and any additional benefits that have accrued under the Plan.
ARTICLE V
SURVIVOR BENEFITS
-----------------
5.1 DEATH PRIOR TO RETIREMENT. If the Employee dies prior to his Termination
of Employment, his Surviving Spouse, if any, shall be eligible for a
monthly survivor benefit under this Plan. This benefit shall be payable
monthly until the Surviving Spouse's death and shall be equal in amount on
a monthly basis to the excess of (a) fifty percent (50%) of the Employee's
monthly retirement benefit determined as if the Employee experienced a
Termination of Employment upon his death (taking into consideration the
vesting of benefits under Section 3.4), over (b) the amount of any monthly
survivor benefit actually paid, or to be paid, to the Surviving Spouse
under the Qualified Pension Plan (determined on an Actuarial Equivalent
adjusted basis).
5.2 DEATH AFTER COMMENCEMENT OF BENEFITS. If the Employee dies after the
commencement of the payment of his benefit under the Plan, his Surviving
Spouse, if any shall be eligible for a survivor benefit under the Plan.
This benefit shall be payable monthly until the Surviving Spouse's death
and shall be equal in amount to fifty percent (50%) of the monthly
retirement benefit actually received by the Employee pursuant to the
applicable provisions of this Plan prior to the Employee's death, as
adjusted to (i) add back the Employee's monthly accrued benefit under the
Qualified Pension Plan (determined on an Actuarial Equivalent adjusted
basis) and (ii) reduce the benefit by any monthly survivor benefit actually
paid, or to be paid, (determined on an Actuarial Equivalent adjusted basis)
to the Surviving Spouse under the Qualified Pension Plan.
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<PAGE>
ARTICLE VI
TERMINATION, AMENDMENT OR MODIFICATION
--------------------------------------
6.1 TERMINATION. Although the Employer anticipates that the Plan will continue
for an indefinite period of time, there is no guarantee that the Employer
will continue the Plan or will not terminate the Plan at any time in the
future. Accordingly, the Employer reserves the right to discontinue its
sponsorship of the Plan and/or to terminate the Plan, at any time, by
action of the Board. Upon any termination of the Plan, the Employee shall
have his unpaid Vested accrued benefits paid to him, in the sole discretion
of the Employer, either in a lump sum or in sixty (60) equal monthly
installments, either form being the Actuarial Equivalent of the Employee's
unpaid Vested accrued benefit, with the lump sum payment or the first
installment payment commencing within sixty (60) days after such
termination. Upon the completion of the specified payment(s), the
Employee's Plan Agreement shall terminate.
6.2 AMENDMENT. The Employer may, at any time, amend or modify the Plan in
whole or in part by action of the Board. Despite the foregoing, no
amendment or modification shall be effective to decrease or restrict the
Employee's then Vested accrued benefit, determined on an Actuarial
Equivalent basis. The amendment or modification of the Plan shall not
affect the Employee or his Beneficiary who has become entitled to the
payment of benefits under the Plan as of the date of the amendment or
modification; provided, however, that the Employer shall have the right to
accelerate payments by paying the Actuarial Equivalent value of such
payments either in a lump sum or in some other accelerated form of payment.
6.3 EFFECT OF PAYMENT. The full payment of the applicable benefit under this
Plan shall completely discharge all obligations to the Employee and his
Surviving Spouse under this Plan and the Employee's Plan Agreement shall
terminate.
ARTICLE VII
ADMINISTRATION
--------------
7.1 COMMITTEE DUTIES. This Plan shall be administered by the Committee, which
shall consist of such individuals as the Board shall appoint. The Employee
may serve as a member of the Committee. The Committee shall also have the
discretion and authority to (i) make, amend, interpret, and enforce all
appropriate rules and regulations for the administration of this Plan and
(ii) decide or resolve any and all questions including interpretations of
this Plan, as may arise in connection with the Plan.
7.2 AGENTS. In the administration of this Plan, the Committee may, from time
to time, employ agents and delegate to them such administrative duties as
it sees fit (including acting through a duly appointed representative) and
may from time to time consult with counsel who may be counsel to any
Employer.
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<PAGE>
7.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan.
7.4 INDEMNITY OF COMMITTEE. The Employer shall indemnify and hold harmless the
members of the Committee against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with
respect to this Plan, except in the case of willful misconduct by the
Committee or any of its members.
7.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions,
the Employer shall supply full and timely information to the Committee on
all matters relating to the compensation of the Employee, the date and
circumstances of the retirement, Disability, death or Termination of
Employment of the Employee, and such other pertinent information as the
Committee may reasonably require.
ARTICLE VIII
OTHER BENEFITS AND AGREEMENTS
-----------------------------
8.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for the Employee
and the Employee's Surviving Spouse under the Plan are in addition to any
other benefits available to such Employee under any other plan or program
for employees of the Employee's Employer. The Plan shall supplement and
shall not supersede, modify or amend any other such plan or program except
as may otherwise be expressly provided.
ARTICLE IX
CLAIMS PROCEDURES
-----------------
9.1 PRESENTATION OF CLAIM. The Employee or Surviving Spouse of the deceased
Employee (such Employee or spouse being referred to below as a "Claimant")
may deliver to the Committee a written claim for a determination with
respect to the amounts distributable to such Claimant from the Plan. If
such a claim relates to the contents of a notice received by the Claimant,
the claim must be made within 60 days after such notice was received by the
Claimant. The claim must state with particularity the determination desired
by the Claimant. All other claims must be made within 180 days of the date
on which the event that caused the claim to arise occurred. The claim must
state with particularity the determination desired by the Claimant.
9.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim
within a reasonable time, and shall notify the Claimant in writing:
(a) that the Claimant's requested determination has been made, and that
the claim has been allowed in full; or
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<PAGE>
(b) that the Committee has reached a conclusion contrary, in whole or in
part, to the Claimant's requested determination, and such notice must
set forth in a manner calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim, or any part
of it;
(ii) specific reference(s) to pertinent provisions of the Plan upon
which such denial was based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is necessary;
and
(iv) an explanation of the claim review procedure set forth in
Section 9.3 below.
9.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the
Committee that a claim has been denied, in whole or in part, a Claimant (or
the Claimant's duly authorized representative) may file with the Committee
a written request for a review of the denial of the claim. Thereafter, but
not later than 30 days after the review procedure began, the Claimant (or
the Claimant's duly authorized representative) may:
(a) review pertinent documents;
(b) submit written comments or other documents; and/or
(c) request a hearing, which the Committee, in its sole discretion, may
grant.
9.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written request
for review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the Committee's
decision must be rendered within 120 days after such date. Such decision
must be written in a manner calculated to be understood by the Claimant,
and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which the
decision was based; and
(c) such other matters as the Committee deems relevant.
9.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
this Article 9 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under this
Plan.
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ARTICLE X
TRUST
-----
10.1 ESTABLISHMENT OF THE TRUST. The Employer shall establish the Trust and
shall at least annually transfer over to the Trust such assets as the
Employer determines, in its sole discretion, are necessary to provide, on a
present value basis, for its future liabilities created with respect to the
aggregate benefit accruals of the Employee.
10.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan
and the Plan Agreement shall govern the rights of Employee to receive
distributions pursuant to the Plan. The provisions of the Trust shall
govern the rights of the Employer, Employee and the creditors of the
Employer to the assets transferred to the Trust. The Employer shall at all
times remain liable to carry out its obligations under the Plan.
10.3 DISTRIBUTIONS FROM THE TRUST. The Employer's obligations under the Plan
may be satisfied with Trust assets distributed pursuant to the terms of the
Trust, and any such distribution shall reduce the Employer's obligations
under this Agreement.
10.4 ISSUANCE OF LIFE INSURANCE. The Trust in its discretion may apply for and
procure as owner and for its own benefit, insurance on the life of the
Employee, in such amounts and in such forms as the Trust may choose. The
Employee shall have no interest whatsoever in any such policy or policies,
but at the request of the Employer shall submit to medical examinations and
supply such information and execute such documents as may be required by
the insurance company or companies to whom the Trust has applied for
insurance.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 UNSECURED GENERAL CREDITOR. The Employee and his Surviving Spouse,
beneficiaries, heirs, successors and assigns shall have no legal or
equitable rights, interests or claims in any property or assets of the
Employer. For purposes of the payment of benefits under this Plan, any and
all of the Employer's assets shall be, and remain, the general, unpledged
unrestricted assets of the Employer. The Employer's obligation under the
Plan shall be merely that of an unfunded and unsecured promise to pay money
in the future. The obligations created under this Agreement shall be
senior indebtedness as that term is defined in the "Senior Subordinated
Debt Agreement".
11.2 EMPLOYER'S LIABILITY. The Employer's liability for the payment of benefits
shall be defined only by the Plan and this Plan Agreement, as entered into
between the Employer and the Employee. The Employer shall have no
obligation to the Employee under the Plan except as expressly provided in
the Plan and this Plan Agreement.
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<PAGE>
11.3 NONASSIGNABILITY. Neither an Employee nor any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate, alienate or convey in advance of
actual receipt, the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are expressly declared to be,
unassignable and non-transferable. No part of the amounts payable shall,
prior to actual payment, be subject to seizure, attachment, garnishment or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by Employee or any other person, nor be transferable by
operation of law in the event of Employee's or any other person's
bankruptcy or insolvency.
11.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall
not be deemed to constitute a contract of employment between the Employer
and the Employee. Such employment is hereby acknowledged to be an "at
will" employment relationship that can be terminated at any time for any
reason, or no reason, with or without cause, and with or without notice,
except as otherwise expressly provided in a written employment agreement.
Nothing in this Plan shall be deemed to give the Employee the right to be
retained in the service of the Employer as an employee, or to interfere
with the right of the Employer to discipline or discharge the Employee at
any time.
11.5 FURNISHING INFORMATION. The Employee or his Surviving Spouse will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be requested
in order to facilitate the administration of the Plan and the payments of
benefits hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary.
11.6 TERMS. Whenever any words are used herein in the masculine, they shall be
construed as though they were in the feminine in all cases where they would
so apply; and whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural or
the singular, as the case may be, in all cases where they would so apply.
11.7 CAPTIONS. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
11.8 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the internal laws of the State of
Illinois without regard to its conflicts of laws principles.
11.9 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and hand-
delivered, or sent by registered or certified mail, to the address below:
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<PAGE>
Committee
Rykoff-Sexton, Inc. Supplemental Executive Retirement Plan
For __________________________
c/o Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532
Attn: Mr. Robert J. Harter, Jr.
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to the Employee
under this Plan shall be sufficient if in writing and hand-delivered, or
sent by mail, to the last known address of the Employee.
11.10 SUCCESSORS. The Employer shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business and/or assets of
the Employer expressly to assume and to agree to perform this Plan in the
same manner and to the same extent the Employer would be required to
perform if no such succession had taken place. This Plan shall be binding
upon and inure to the benefit of the Employer and any successor of or to
the Employer, including without limitation any persons acquiring directly
or indirectly all or substantially all of the business and/or assets of
the Employer whether by sale, merger, consolidation, reorganization or
otherwise (and such successor shall thereafter be deemed the "Employer"
for the purposes of this Plan), and the heirs, beneficiaries, executors
and administrators of the Employee.
11.11 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of
the Employee who has predeceased the Employee shall automatically pass to
the Employee and shall not be transferable by such spouse in any manner,
including but not limited to such spouse's will, nor shall such interest
pass under the laws of intestate succession.
11.12 VALIDITY. In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal or invalid provision had never been inserted herein.
11.13 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a person declared incompetent or
to a person incapable of handling the disposition of that person's
property, the Committee may direct payment of such benefit to the
guardian, legal representative or person having the care and custody of
such minor, incompetent or incapable person. The Committee may require
proof of minority, incompetency, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit. Any
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<PAGE>
payment of a benefit shall be a payment for the account of the Employee
and the Employee's Surviving Spouse, as the case may be, and shall be a
complete discharge of any liability under the Plan for such payment
amount.
11.14 COURT ORDER. The Committee is authorized to make any payments directed
by court order in any action in which the Plan or the Committee has been
named as a party. In addition, if a court determines that a spouse or
former spouse of the Employee has an interest in the Plan as the result
of a property settlement or otherwise, the Committee, in its sole
discretion, shall have the right, notwithstanding any election made by
the Employee, to immediately distribute the spouse's or former spouse's
interest in the Plan to that spouse or former spouse.
11.15 DISTRIBUTION IN THE EVENT OF TAXATION.
(a) GENERAL. If, for any reason, all or any portion of the Employee's
benefit under this Plan becomes taxable to the Employee prior to
receipt, the Employee may petition the Committee for a distribution
of that portion of his benefit that has become taxable. Upon the
grant of such a petition, which grant shall not be unreasonably
withheld, the Employer shall distribute to the Employee immediately
available funds in an amount equal to the taxable portion of his
benefit (which amount shall not exceed the Employee's unpaid Vested
accrued benefit under the Plan). If the petition is granted, the tax
liability distribution shall be made within 90 days of the date when
the Employee's petition is granted. Such a distribution shall affect
and reduce the benefits to be paid under this Plan.
(b) TRUST. If the Trust terminates in accordance with Section 3.6(e) of
the Trust and benefits are distributed from the Trust to the
Employee in accordance with that Section, the Employee's benefits
under this Plan shall be reduced to the extent of such
distributions.
IN WITNESS WHEREOF, this document is executed as of the 2nd day of
February, 1996.
RYKOFF-SEXTON, INC.
By:
------------------------------------
Mark Van Stekelenburg
Title: Chief Executive Officer and
Chairman of the Board
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<PAGE>
Exhibit 10.26
FORM OF SEVERANCE AGREEMENT
---------------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of
_________________, 1996, is made and entered into by and between Rykoff-Sexton,
Inc., a Delaware corporation (the "Company"), and ______________________ (the
"Executive").
WITNESSETH:
----------
WHEREAS, the Executive is a party to a Change in Control Agreement
with the Company, dated as of _____________ (the "Change in Control Agreement"),
which includes a provision defining the term "Change in Control";
WHEREAS, consummation of a proposed transaction between the Company
and US Foodservice Inc., a Delaware corporation ("USF"), as described in a
letter of intent dated December 5, 1995, with USF would result in the occurrence
of a "Change in Control," as defined in the Change in Control Agreement;
WHEREAS, the Executive has executed an Amended and Restated Change in
Control Agreement, dated as of February ___, 1996 (the "Restated Change in
Control Agreement"), which Restated Change in Control Agreement provides that
the transaction between the Company and USF will not result in a Change in
Control, as so defined, and makes certain other changes;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish certain severance
benefits for certain of its senior executives, including the Executive, to ease
the financial burden on such Executive should his employment with the Company
terminate under certain circumstances;
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary, excluding any
bonuses or other incentive pay, determined as of the date the Executive
terminates employment or, if such termination is due to a reduction in salary
and pursuant to
<PAGE>
Section 3(b), determined as of the date immediately prior to such reduction's
taking effect.
(b) "Cause" means either:
(i) that the Executive will have failed consistently to meet the
objectives set forth in the Company's performance appraisal standards as
applied to the Executive; or
(ii) that the Executive will have committed:
(A) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Company;
(B) intentional wrongful damage to property of the Company;
(C) intentional misconduct that is materially injurious to
the Company, monetarily or otherwise; or
(D) an intentional breach of the Confidentiality and
Nonsolicitation Agreement set forth in Section 8.
For purposes of this Agreement, no act or failure to act on the part of the
Executive will be deemed "intentional" if it was due primarily to an error
in judgment or negligence, but will be deemed "intentional" only if done or
omitted to be done by the Executive not in good faith and without
reasonable belief that his action or omission was in the best interest of
the Company.
(c) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs or arrangements in which Executive is
entitled to participate, including without limitation any stock option, stock
purchase, stock appreciation, savings, pension, supplemental executive
retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health,
medical/hospital or other insurance (whether funded by actual insurance or self-
insured by the Company), disability, salary continuation, expense reimbursement
and other employee benefit policies, plans, programs or arrangements that may
now exist or any equivalent successor policies, plans, programs or arrangements
that may be adopted hereafter by the Company.
2. Term. This Agreement will be effective and binding for a term
(the "Term") commencing immediately upon its execution (the "Effective Date")
and continuing until the
<PAGE>
earliest to occur of (i) the third anniversary of the Effective Date, (ii) the
Executive's death, (iii) the Executive's becoming permanently disabled within
the meaning of, and beginning actually to receive disability benefits pursuant
to, the Company's long-term disability plan as in effect for, or applicable to,
the Executive immediately prior to such Executive's becoming disabled, or (iv)
the Executive's voluntary termination of employment for any reason, including
retirement, but excluding voluntary termination pursuant to Section 3(b);
provided, however, that on each anniversary of the Effective Date, the Term will
automatically be extended for an additional year unless, not later than 90 days
prior to such anniversary date, either the Company or the Executive gives
written notice to the other that the Term is not to be so extended (by way of
illustration, on the first anniversary of the Effective Date, assuming no notice
to the contrary has been given, the Term will automatically be extended to the
fourth anniversary of the Effective Date); and provided, further, that if
severance benefits are being provided under Section 4, the Term will include the
Continuation Period.
3. Eligibility for Benefits.
(a) If the Company terminates the Executive during the Term other than
for Cause, the Executive will be entitled to the severance benefits provided by
Section 4.
(b) If the Executive terminates employment during the Term (i) within
90 days of a reduction in such Executive's Base Pay, unless such reduction in
Base Pay is part of a reduction applicable generally to senior executives of the
Company, or (ii) at any time after the Company has notified the Executive
pursuant to Section 2 hereof that the Company intends to terminate the Agreement
(rather than allow the Agreement to automatically renew), the Executive will be
entitled to the severance benefits provided by Section 4 (regardless of whether
any other reason for such termination exists or has occurred, including without
limitation other employment).
(c) Except as otherwise expressly provided herein, a termination by
the Company pursuant to Section 3(a) or by the Executive pursuant to Section
3(b) will not affect any rights that the Executive may have pursuant to any
other agreement, policy, plan, program or arrangement of the Company providing
Employee Benefits, which rights will be governed by the terms thereof.
4. Severance Benefits.
(a) If the Company terminates the Executive's employment during the
Term pursuant to Section 3(a), or if the Executive terminates his employment
during the Term pursuant to Section 3(b), subject to the condition precedent
that the Executive enter into a release and settlement agreement with the
<PAGE>
Company, the Company will provide to the Executive the following benefits:
(i) The Executive's Base Pay, payable in accordance with the
Company's regular payroll schedule, for a period (the "Continuation
Period") beginning on the date of termination of the Executive's employment
with the Company (the "Termination Date") and ending on the second
anniversary of the Termination Date.
(ii) A payment under any long-term performance compensation plan,
policy, program or arrangement maintained by the Company and applicable to
the Executive immediately prior to the Termination Date, such payment to be
calculated based on actual performance results during the applicable
performance period, determined as though the Executive has remained
employed throughout such period, and to be pro-rated to take into account
the period of the Executive's employment. Such amount will be payable at
the time and in the manner provided in the applicable plan, policy, program
or arrangement.
(iii) During the Continuation Period, the Company will arrange to
provide the Executive with Employee Benefits that are welfare benefits (but
not stock option, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those that the Executive
was receiving or entitled to receive immediately prior to the Termination
Date, except that the level of any such Employee Benefits to be provided to
the Executive may be reduced in the event of a corresponding reduction
generally applicable to all recipients of or participants in such Employee
Benefits. If and to the extent that any benefit described in this Section
4(a)(iii) is not or cannot be paid or provided under any policy, plan,
program or arrangement of the Company, as the case may be, then the Company
will itself pay or provide for the payment of such Employee Benefits to the
Executive, his dependents and beneficiaries, as applicable. Without
otherwise limiting the purposes or effect of Section 5, Employee Benefits
otherwise receivable by the Executive pursuant to this Section 4(a)(iii)
will be reduced to the extent comparable welfare benefits are actually
received by the Executive from another employer during the Continuation
Period, and any such benefits actually received by the Executive will be
reported by the Executive to the Company within 30 days of the Executive's
receipt thereof.
(iv) As of the Termination Date, the Company will vest the
Executive fully in any supplemental executive retirement plan, any stock
options and any awards under any convertible award plan maintained by the
Company and applicable to the Executive immediately prior to the
Termination Date, and the Company will credit any benefits
<PAGE>
payable to the Executive under the Company's Deferred Compensation Plan at
the "Preferred Rate" (as such term is defined in the Deferred Compensation
Plan).
(v) Notwithstanding anything to the contrary in the foregoing,
any benefits payable to the Executive pursuant to Sections 4(a)(i),
4(a)(ii) and 4(a)(iii) will be reduced by the amount of any benefits paid
or provided to the Executive during the Continuation Period pursuant to the
Executive's Restated Change in Control Agreement, as it may be amended and
restated from time to time, and any employment agreement with the Company.
(b) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment or provide any benefit required to be
made or provided hereunder on a timely basis, the Company will pay interest on
the amount or value thereof at an annualized rate of interest equal to the so-
called composite "prime rate" as quoted from time to time during the relevant
period in the Northeast Edition of The Wall Street Journal. Such interest will
be payable on demand as it accrues. Any change in such prime rate will be
effective on and as of the date of such change.
(c) Notwithstanding any provision of this Agreement to the contrary,
the parties' respective rights and obligations under this Section 4 and under
Sections 6 and 8 will survive any termination or expiration of this Agreement or
the termination of the Executive's employment for any reason whatsoever.
5. No Mitigation Obligation. The Executive is under no obligation
to mitigate damages or the amount of any payment provided for hereunder by
seeking other employment or otherwise.
6. Legal Fees and Expenses. The Company will pay and be solely
financially responsible for any reasonable legal fees and related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise.
7. Competitive Activity. During the Continuation Period, if the
Executive has received or is receiving benefits under Section 4, the Executive
will not, without the prior written consent of the Company (which may be
withheld for any reason or no reason), directly or indirectly or by action in
concert with others, own, manage, operate, join, control, perform consulting
services for, be employed by, participate in or be connected with any business,
enterprise or other entity (or the ownership, management, operation, or control
of any such business, enterprise or other entity) (a "Competing Enterprise")
engaged anywhere in the United States in the "Restricted Business" (as herein
defined) or any other principal line of business developed or acquired by the
Company or its affiliates during the Term (the "Other Business"); provided,
however, that
<PAGE>
nothing in the foregoing will prohibit the Executive from the mere ownership of
securities in any such Competing Enterprise, and provided further that the
foregoing prohibitions will apply only if the annual revenues of such Competing
Enterprise (including any affiliate thereof) derived from the Restricted
Business and the Other Business for the most recently completed fiscal year
exceed $500 million.
8. Confidentiality and Nonsolicitation Agreement.
(a) The Executive acknowledges that in the course of his employment by
the Company, he will or may have access to and become informed of confidential
and secret information which is a competitive asset of the Company
("Confidential Information"), including, without limitation, (i) the terms of
any agreement between the Company and any employee, customer or supplier, (ii)
pricing strategy, (iii) merchandising and marketing methods, (iv) product
development ideas and strategies, (v) personnel training and development
programs, (vi) financial results, (vii) strategic plans and demographic
analyses, (viii) proprietary computer and systems software, and (ix) any non-
public information concerning the Company, its employees, suppliers or
customers. The Executive agrees that he will keep all Confidential Information
in strict confidence during the term of his employment by the Company and
thereafter and will never directly or indirectly make known, divulge, reveal,
furnish, make available, or use any Confidential Information (except in the
course of his regular authorized duties on behalf of the Company). The
Executive agrees that the obligations of confidentiality hereunder will survive
termination of his employment at the Company regardless of any actual or alleged
breach by the Company of this Agreement, until and unless any such Confidential
Information will have become, through no fault of the Executive, generally known
to the public or the Executive is required by law to make disclosure (after
giving the Company notice and an opportunity to contest such requirement). The
Executive's obligations under this Section 8 are in addition to, and not in
limitation of or preemption of, all other obligations of confidentiality which
the Executive may have to the Company under general legal or equitable
principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor will at any time following the date of this
Agreement, make or cause to be made, any copies, pictures, duplicates,
facsimiles or other reproductions or recordings or any abstracts or summaries
including or reflecting Confidential Information. All such documents and other
property furnished to the Executive by the Company or otherwise acquired or
developed by the Company will at all times be the property of the Company. Upon
termination of the Executive's employment by the Company, the Executive will
return to the Company any such documents or other property of the Company which
are in the possession, custody or control of the Executive.
<PAGE>
(c) Without the prior written consent of the Company (which may be
withheld for any reason or no reason), except in the ordinary course of the
Company's business, the Executive will not at any time following the date of
this Agreement use for the benefit or purposes of the Executive or for the
benefit or purposes of any other person, firm, partnership, association, trust,
venture, corporation or business organization, entity or enterprise engaged in
the "Restricted Business" (as herein defined), or disclose in any manner to any
person, firm, partnership, association, trust, venture, corporation or business
organization, entity or enterprise engaged in the Restricted Business, any
Confidential Information. "Restricted Business" means any business or division
of a business which consists of the manufacturing or sale, for distribution, or
the distribution, to customers that are primarily restaurants, cafes, bars,
hotels, schools, colleges and other institutions (as the word "institution" is
customarily defined in the wholesale grocery business) of (i) processed or bulk
food and other groceries; (ii) restaurant and commercial kitchen supplies (such
as paper products, janitorial supplies, consumable stores and supplies of every
kind and nature); and (iii) restaurant and commercial kitchen equipment (such as
cookware, appliances, glassware, dinnerware, smallwares and similar items), and
likewise includes any business of a kind in whole or in part similar to that
heretofore engaged in by the Company or any of its subsidiaries.
(d) In the event of the Executive's voluntary or involuntary
termination of employment at the Company, the Executive agrees that he will not
in any capacity, on his own behalf or on behalf of any other firm, person or
entity, undertake or assist in the solicitation of any employee of the Company,
including, but not limited to, solicitation of any employee to terminate his or
her employment with the Company.
(e) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 8 (referred to collectively as the
Confidentiality and Nonsolicitation Agreement) that results in material
detriment to the Company would cause irreparable harm to the Company, and that
the Company's remedy at law for any such violation would be inadequate. In
recognition of the foregoing, the Executive agrees that, in addition to any
other relief afforded by law or this Agreement, including damages sustained by a
breach of this Agreement, and without any necessity or proof of actual damages,
the Company will have the right to enforce this Agreement by specific remedies,
which will include, among other things, temporary and permanent injunctions, it
being the understanding of the undersigned parties hereto that damages, the
forfeitures described above and injunctions will all be proper modes of relief
and are not to be considered as alternative remedies.
9. Employment Rights. Nothing expressed or implied in this
Agreement will create any right or duty on the part of
<PAGE>
the Company or the Executive to have the Executive remain in the employment of
the Company.
10. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
11. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place.
This Agreement will be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor will thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto will, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 11(a) and 11(b). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or by the
laws of descent and distribution and, in the event of any attempted assignment
or transfer contrary to this Section 11(c), the Company will have no liability
to pay any amount so attempted to be assigned, transferred or delegated.
12. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage
<PAGE>
prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as Federal Express, UPS, or Purolator,
addressed to the Company (to the attention of the Secretary of the Company) at
its principal executive office and to the Executive at his principal residence,
or to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of changes of address will be
effective only upon receipt.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
14. Validity. If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
15. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
RYKOFF-SEXTON, INC.
By: _________________________________________
Mark Van Stekelenburg
President and Chief Executive Officer
_________________________________________
[Executive]
<PAGE>
Exhibit 10.27
Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
EFFECTIVE OCTOBER 1, 1995
<PAGE>
Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Purpose..................................................................... 1
ARTICLE 1 Definitions.................................................... 1
ARTICLE 2 Selection, Enrollment, Eligibility............................. 6
2.1 Selection by Committee......................................... 6
2.2 Enrollment Requirements........................................ 7
2.3 Eligibility: Commencement of Participation..................... 7
2.4 Termination of Participation and/or Deferrals.................. 7
ARTICLE 3 Deferral Commitments/Interest Crediting........................ 8
3.1 Minimum Deferral............................................... 8
3.2 Maximum Deferral............................................... 8
3.3 Election to Defer: Effect of Election Form..................... 8
3.4 Withholding of Deferral Amounts................................ 9
3.5 Interest Crediting Prior to Distribution....................... 9
3.6 Interest Crediting for Installment Distributions............... 9
3.7 FICA and Other Taxes........................................... 10
ARTICLE 4 Short-Term Payout: Unforeseeable Financial Emergencies:
Withdrawal Election............................................ 10
4.1 Short-Term Payout.............................................. 10
4.2 Withdrawal Payout/Suspensions for Unforeseeable Financial
Emergencies.................................................... 10
4.3 Withdrawal Election............................................ 11
ARTICLE 5 Retirement Benefit............................................. 11
5.1 Retirement Benefit............................................. 11
5.2 Payment of Retirement Benefit.................................. 11
5.3 Death Prior to Completion of Retirement Benefits............... 12
ARTICLE 6 Pre-Retirement Survivor Benefit................................ 12
</TABLE>
i
<PAGE>
Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<CAPTION>
<C> <S> <C>
6.1 Pre-Retirement Survivor Benefit................................ 12
6.2 Payment of Pre-Retirement Survivor Benefits.................... 12
ARTICLE 7 Termination Benefit............................................ 13
7.1 Termination Benefits........................................... 13
7.2 Payment of Termination Benefit................................. 13
ARTICLE 8 Disability Waiver and Benefit.................................. 13
8.1 Disability Waiver.............................................. 13
8.2 Continued Eligibility: Disability Benefit...................... 14
ARTICLE 9 Beneficiary Designation........................................ 14
9.1 Beneficiary.................................................... 14
9.2 Beneficiary Designation; Change; Spousal Consent............... 14
9.3 Acknowledgement................................................ 15
9.4 No Beneficiary Designation..................................... 15
9.5 Doubt as to Beneficiary........................................ 15
9.6 Discharge of Obligations....................................... 15
ARTICLE 10 Leave of Absence............................................... 15
10.1 Paid Leave of Absence.......................................... 15
10.2 Unpaid Leave of Absence........................................ 16
ARTICLE 11 Terminations Amendment or Modification......................... 16
11.1 Termination.................................................... 16
11.2 Amendment...................................................... 16
11.3 Plan Agreement................................................. 17
11.4 Interest Rate in the Event of a Change in Control.............. 17
11.5 Effect of Payment.............................................. 17
ARTICLE 12 Administration................................................. 18
12.1 Committee Duties............................................... 18
12.2 Agents......................................................... 18
12.3 Binding Effect of Decisions.................................... 18
</TABLE>
ii
<PAGE>
Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<CAPTION>
<C> <S> <C>
12.4 Indemnity of Committee......................................... 18
12.5 Employer Information........................................... 18
ARTICLE 13 Other Benefits and Agreements.................................. 18
13.1 Coordination with Other Benefits............................... 18
ARTICLE 14 Claims Procedures.............................................. 19
14.1 Presentation of Claim.......................................... 19
14.2 Notification of Decision....................................... 19
14.3 Review of a Denied Claim....................................... 20
14.4 Decision on Review............................................. 20
14.5 Legal Action................................................... 20
ARTICLE 15 Trust.......................................................... 20
15.1 Establishment of the Trust..................................... 20
15.2 Interrelationship of the Plan and the Trust.................... 21
15.3 Distributions From the Trust................................... 21
ARTICLE 16 Miscellaneous.................................................. 21
16.1 Unsecured General Creditor..................................... 21
16.2 Employer's Liability........................................... 21
16.3 Nonassignability............................................... 21
16.4 Not a Contract of Employment................................... 22
16.5 Furnishing Information......................................... 22
16.6 Terms.......................................................... 22
16.7 Captions....................................................... 22
16.8 Governing Law.................................................. 22
16.9 Notice......................................................... 22
16.10 Successors..................................................... 23
16.11 Spouse's Interest.............................................. 23
16.12 Validity....................................................... 23
16.13 Incompetent.................................................... 23
16.14 Court Order.................................................... 23
16.15 Distribution in the Event of Taxation.......................... 24
16.16 Insurance 24
</TABLE>
iii
<PAGE>
Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
PURPOSE
-------
The purpose of this Plan is to provide specified benefits to Directors
and a select group of management and highly compensated Employees who contribute
materially to the continued growth, development and future business success of
Rykoff-Sexton, Inc, a Delaware corporation, and its subsidiaries, if any, that
sponsor this Plan. This Plan shall be unfunded for tax purposes and for
purposes of Title I of ERISA.
ARTICLE 1
DEFINITIONS
-----------
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Account Balance" shall mean the sum of (i) the Deferral Amount, plus (ii)
interest credited in accordance with all the applicable interest crediting
provisions of this Plan, less (iii) all distributions. This account shall
be a bookkeeping entry only and shall be utilized solely as a device for
the measurement and determination of the amounts to be paid to a
Participant pursuant to this Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary, paid annually to a Participant as an Employee under any Employer's
annual bonus and incentive plans.
1.3 "Annual Deferral Amount" shall mean that portion of a Participant's Base
Annual Salary, Annual Bonus and/or Directors Fees that a Participant elects
to have, and is deferred, in accordance with Article 3, for any one Plan
Year. In the event of a Participant's Retirement, Disability (if deferrals
cease in accordance with Section 8.1), death or a Termination of Employment
prior to the end of a Plan Year, such year's Annual Deferral Amount shall
be the actual amount withheld prior to such event.
1.4 "Base Annual Salary" shall mean the annual compensation, excluding bonuses,
commissions, overtime, relocation expenses, incentive payments, non-
monetary awards, directors fees, other fees, and automobile allowances,
paid to a Participant for employment services rendered to any Employer,
before reduction for compensation voluntarily deferred pursuant to all
qualified, non-qualified and Code Section 125 plans of any Employer.
<PAGE>
Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled to
receive benefits under this Plan upon the death of a Participant.
1.6 "Beneficiary Designation Form" shall mean the form established from time to
time by the Committee that a Participant completes, signs and returns to
the Committee to designate one or more Beneficiaries.
1.7 "Board" shall mean the board of directors of the Company.
1.8 "Bonus Rate" shall mean, for a Plan Year, an interest rate, if any,
determined by the Committee, in its sole discretion, which rate shall be
determined and announced before the commencement of the Plan Year for which
the rate applies. This rate may be zero for any Plan Year.
1.9 "Change in Control" shall mean the first to occur of the following events:
(a) Any person (as defined in Section 3(a)(9) and 13(d)(3) of the
Securities Act of 1934, as amended (the "'34 Act")) becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated pursuant to
the '34 Act), directly or indirectly, of 25% or more of combined
voting power of the Company's then outstanding securities; or
(b) The occurrence, within any twelve-month period that commences on or
after October 1, 1995, of a change in the Board with the result that
the incumbent members do not constitute a majority of the Board.
1.10 "Claimant" shall have the meaning set forth in Section 14.1.
1.11 "Code" shall mean the Internal Revenue Code of 1986, as may be amended from
time to time.
1.12 "Committee" shall mean the committee described in Article 12.
1.13 "Company" shall mean Rykoff-Sexton, Inc., a Delaware corporation.
1.14 "Crediting Rate" shall mean, for each Plan Year, an interest rate, stated
as an annual rate, determined and announced by the Committee before the
Plan Year for which it is to be used that is equal to the applicable
Moody's Rate. The Moody's Rate for a Plan Year shall be an interest rate,
stated as an annual rate, that (i) is published in
2
<PAGE>
Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
Moody's Bond Record under the heading of "Moody's Corporate Bond Yield
Averages -- Av. Corp," and (ii) is equal to the average corporate bond
yield calculated for, in the case of the first Plan Year, the month of July
1995, and in the case of any subsequent Plan Year, the month of October
that precedes the Plan Year for which the rate is to be used.
1.15 "Deferral Amount" shall mean the sum of all of a Participant's Annual
Deferral Amounts.
1.16 "Deduction Limitation" shall mean the following described limitation on the
annual benefit that may be distributed pursuant to the provisions of this
Plan. Except as otherwise provided, this limitation shall be applied to
all distributions under this Plan. If an Employer determines in good faith
prior to a Change in Control that there is a reasonable likelihood that any
compensation paid to a Participant for a taxable year of the Employer would
not be deductible by the Employer solely by reason of the limitation under
Code Section 162(m), then to the extent deemed necessary by the Employer to
ensure that the entire amount of any distribution to the Participant
pursuant to this Plan prior to the Change in Control is deductible, the
Employer may defer all or any portion of a distribution under this Plan.
Any amounts deferred pursuant to this limitation shall continue to be
credited with interest in accordance with Section 3.5 below. The amounts
so deferred and interest thereon shall be distributed to the Participant or
his or her Beneficiary (in the event of the Participant's death) at the
earliest possible date, as determined by the Employer in good faith, on
which the deductibility of compensation paid or payable to the Participant
for the taxable year of the Employer during which the distribution is made
will not be limited by Section 162(m), or if earlier, the effective date of
a Change in Control. The Deduction Limitation shall not apply to any
distributions made after the effective date of a Change in Control.
1.17 "Director" shall mean any member of the board of directors of the Company.
1.18 "Directors Fees" shall mean the annual fees paid by the Company, including
retainer fees and meetings fees, as compensation for serving on the board
of directors.
1.19 "Disability" means the Participant, because of a physical or mental
disability, will be unable to perform the duties of his or her customary
position of employment (or is unable to engage in any substantial gainful
activity) for an indefinite period which the Committee considers will be of
long continued duration. A Participant also is disabled if he or she
incurs the permanent loss or loss of use of a member or function of the
body, or is permanently disfigured, and incurs a Termination of
3
<PAGE>
Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
Employment. The Plan considers a Participant disabled on the date the
Committee determines the Participant satisfies the definition of
"Disability." The Committee may require a Participant to submit to a
physical examination in order to confirm disability. The Committee will
apply the provisions of this Section 1.19 in a nondiscriminatory,
consistent and uniform manner.
1.20 "Disability Benefit" shall mean the benefit set forth in Article 8.
1.21 "Election Form" shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the Committee
to make an election under the Plan.
1.22 "Employee" shall mean a person who is an employee of any Employer.
1.23 "Employer(s)" shall mean the Company and/or any of its subsidiaries (now in
existence or hereafter formed or acquired) that have been selected by the
Board to participate in the Plan and have adopted the Plan as a sponsor.
1.24 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
1.25 "Participant" shall mean any Employee or Director (i) who is selected to
participate in the Plan, (ii) who elects to participate in the Plan, (iii)
who signs a Plan Agreement, an Election Form and a Beneficiary Designation
Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary
Designation Form are accepted by the Committee, (v) who commences
participation in the Plan, and (vi) whose Plan Agreement has not
terminated. Despite the foregoing, a spouse or former spouse of a
Participant shall not be treated as a Participant in the Plan, even if he
or she has an interest in the Participant's benefits under this Plan as a
result of state property or family law, or property settlements resulting
from a legal separation or divorce.
1.26 "Plan" shall mean the Company's Deferred Compensation Plan, which shall be
evidenced by this instrument and by each Plan Agreement, as it may be
amended from time to time.
1.27 "Plan Agreement" shall mean a written agreement, as it may be amended from
time to time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant shall provide
for the entire benefit to which such Participant is entitled under the
Plan, and the Plan Agreement bearing
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the latest date of acceptance by the Committee shall govern such
entitlement. The terms of any Plan Agreement may be different for any
Participant, and any Plan Agreement may provide additional benefits not set
forth in the Plan or limit the benefits otherwise provided under the Plan;
provided, however, that any such additional benefit or limitation on
benefits must be agreed to by both the Employer and the Participant.
1.28 "Plan Year" shall, for the first Plan Year, begin on October 1, 1995, and
end on December 31, 1995. For each Plan Year thereafter, the Plan Year
shall begin on January 1 of each calendar year and continue through
December 31 of that year.
1.29 "Preferred Rate" shall mean, for each Plan Year, an interest rate that is
the sum of the Crediting Rate and the Bonus Rate for that Plan Year.
1.30 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.
1.31 "Retirement", "Retires" or "Retired" shall mean, with respect to an
Employee, severance from employment from all Employers for any reason other
than a leave of absence, death or Disability on or after the earlier of the
attainment of (a) age sixty-two (62) or (b) age fifty-five with five (5)
Years of Service; and shall mean, with respect to a Director who is not an
Employee, severance of his or her directorships with all Employers on or
after the later of (y) the attainment of age sixty-two (62), or (z) in the
sole discretion of the Committee, an age later than age sixty-two (62). If
a Participant is both an Employee and a Director, Retirement shall not
occur until he or she Retires as both an Employee and a Director, which
Retirement shall be deemed to be a Retirement as a Director; provided,
however, that such a Participant may elect, prior to Retirement, and in
accordance with the policies and procedures established by the Committee,
to Retire for purposes of this Plan at the time he or she Retires as an
Employee, which Retirement shall be deemed to be a Retirement as an
Employee.
1.32 "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.33 "Short-Term Payout" shall mean the payout set forth in Section 4.1.
1.34 "Termination Benefit" shall mean the benefit set forth in Article 7.
1.35 "Termination of Employment" shall mean the severing of employment with all
Employers, or service as a Director of all Employers, voluntarily or
involuntarily, for any reason other than Retirement, Disability, death or
an authorized leave of
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absence. If a Participant is both an Employee and a Director, a
Termination of Employment shall occur only upon the termination of the last
position held; provided, however, that such a Participant may elect, in
accordance with the policies and procedures established by the Committee,
to be treated for purposes of this Plan as having experienced a Termination
of Employment at the time he or she ceases employment with an Employer as
an Employee.
1.36 "Trust" shall mean the trust established pursuant to that certain Master
Trust Agreement for Rykoff-Sexton, Inc. Executive Deferral Plans, dated as
of October 1, 1995, between the Company and the trustee named therein, as
it may be amended from time to time.
1.37 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency
that is caused by an event beyond the control of the Participant that would
result in severe financial hardship to the Participant resulting from (i) a
sudden and unexpected illness or accident of the Participant or a dependent
of the Participant, (ii) a loss of the Participant's property due to
casualty, or (iii) such other extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant, all as
determined in the sole discretion of the Committee.
1.38 "Years of Plan Participation" shall mean the total number of full Plan
Years a Participant has been a Participant in the Plan prior to his or her
Termination of Employment (determined without regard to whether deferral
elections are made under this Plan). For purposes of a Participant's first
Plan Year of participation only, any partial Plan Year of participation
shall be treated as a full Plan Year.
1.39 "Years of Service" shall mean the total number of full years in which a
Participant has been employed by one or more Employers. For purposes of
this definition, a year of employment shall be a 365 day period (or 366 day
period in the case of a leap year) that, for the first year of employment,
commences on the Employee's date of hiring and that, for any subsequent
year, commences on an anniversary of that hiring date. Any partial year of
employment shall not be counted.
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY
----------------------------------
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to
Directors and a select group of management and highly compensated Employees
of the Employers, as determined by the Committee, in its sole discretion.
From that group, the
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Committee shall select, in its sole discretion, Directors and Employees to
participate in the Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected
Director or Employee shall complete, execute and return to the Committee,
by September 27, 1995, or, if later, within 30 days of selection, a Plan
Agreement, an Election Form and a Beneficiary Designation Form. In
addition, the Committee shall establish from time to time such other
enrollment requirements as it determines, in its sole discretion, are
necessary.
2.3 ELIGIBILITY: COMMENCEMENT OF PARTICIPATION. Provided a Director or an
Employee selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Committee,
including returning all required documents to the Committee by September
27, 1995, or, if later, within 30 days of selection, that Employee or
Director shall commence participation in the Plan on the first day of the
month following the month in which the employee or Director completes all
enrollment requirements. If an Employee or a Director fails to meet all
such requirements within the required 30 day period, that Employee or the
Director shall not be eligible to participate in the Plan until the first
day of the Plan Year following the delivery to and acceptance by the
Committee of the required documents.
2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee determines
in good faith that a Participant no longer qualifies as a member of a
select group of management or highly compensated employees, as membership
in such group is determined in accordance with Sections 201(2), 301(a)(3)
and 401(a)(1) of ERISA, the Committee shall have the right, in its sole
discretion, to (i) terminate any deferral election the Participant has made
for the Plan Year in which the Participant's membership status changes,
(ii) prevent the Participant from making future deferral elections and/or
(iii) immediately distribute the Participant's then Account Balance as a
termination benefit in accordance with Sections 7.1 and 7.2 below and to
cause the Participant's participation in the Plan to terminate. If the
Committee chooses not to terminate the Participant's participation in the
Plan, the Committee may, in its sole discretion, reinstate the Participant
to full Plan participation at such time in the future as the Participant
again becomes a member of the select group described above.
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ARTICLE 3
DEFERRAL COMMITMENTS/INTEREST CREDITING
---------------------------------------
3.1 MINIMUM DEFERRAL.
(a) MINIMUM. For each Plan Year, a Participant may elect to defer one or
more of the following forms of compensation in the following
respective minimum amounts:
MINIMUM
DEFERRAL AMOUNT
-------- -------
Base Annual Salary $2,000
Annual Bonus $2,000
Directors Fees $2,000
If no election is made, the amount deferred shall be zero.
(b) SHORT PLAN YEAR. If a Participant first becomes a Participant after
the first day of a Plan Year, or in the case of the first Plan Year of
the Plan itself, the minimum Base Annual Salary deferral shall be an
amount equal to the minimum set forth above, multiplied by a fraction,
the numerator of which is the number of complete months remaining in
the Plan Year and the denominator of which is 12.
3.2 MAXIMUM DEFERRAL. For each Plan Year, a Participant may elect to defer
Base Annual Salary, Annual Bonus and/or Directors Fees up to the following
maximum percentages for each deferral elected:
MINIMUM
DEFERRAL AMOUNT
-------- -------
Base Annual Salary 50%
Annual Bonus 100%
Directors Fees 100%
3.3 ELECTION TO DEFER: EFFECT OF ELECTION FORM.
(a) FIRST PLAN YEAR. In connection with a Participant's commencement of
participation in the Plan, the Participant shall make an irrevocable
deferral election for the Plan Year in which the Participant commences
participation
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in the Plan. At that time, the Participant shall also make such other
elections as the Committee deems necessary under the Plan. For these
elections to be valid, the Election Form must be completed and signed,
timely delivered to the Committee (in accordance with Section 2.3
above) and accepted by the Committee.
(b) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an irrevocable
deferral election for that Plan Year shall be made by timely
delivering to the Committee, in accordance with its rules and
procedures and before the end of the Plan Year preceding the Plan Year
for which the election is made, a new Election Form. Such additional
elections, as the Committee deems necessary under the Plan, shall also
be included on such form. If no Election Form is timely delivered for
a Plan Year, no Annual Deferral Amount shall be withheld for that Plan
Year.
3.4 WITHHOLDING OF DEFERRAL AMOUNTS. For each Plan Year, the Base Annual
Salary portion of the Annual Deferral Amount shall be withheld each payroll
period in equal amounts from the Participant's Base Annual Salary. The
Annual Bonus and/or Directors Fees portion of the Annual Deferral Amount
shall be withheld at the time the Annual Bonus or Directors Fees are or
otherwise would be paid to the Participant.
3.5 INTEREST CREDITING PRIOR TO DISTRIBUTION. Prior to any distribution of
benefits under Articles 4, 5, 6, 7 or 8, interest shall be credited and
compounded annually on a Participant's Account Balance as though the Annual
Deferral Amount for that Plan Year was withheld at the beginning of the
Plan Year or, in the case of the first year of Plan participation, was
withheld on the date that the Participant commenced participation in the
Plan. The rate of interest for crediting shall be the Preferred Rate,
except as otherwise provided in this Plan, which rate shall be treated as
the effective rate for crediting interest. In the event of Retirement,
Disability, death or Termination of Employment prior to the end of a Plan
Year, the basis for that year's interest crediting will be a fraction of
the full year's interest, based on the number of full months that the
Participant was employed with the Employer during the Plan Year prior to
the occurrence of such event. If a distribution is made under this Plan,
for purposes of crediting interest up to the time of the distribution, the
Participant's Account Balance shall be reduced as of the first day of the
month in which the distribution is made.
3.6 INTEREST CREDITING FOR INSTALLMENT DISTRIBUTIONS. If a Participant's
benefits under this Plan are to be paid in equal monthly installments, such
payments shall be
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determined by amortizing the Participant's specified benefit over the
number of months elected, using the interest rate specified below and
treating the first installment payment as all principal and each subsequent
installment payment, first as interest accrued for the applicable
installment period on the unpaid Account Balance and second as a reduction
in the Account Balance. The interest rate to be used to calculate
installment payment amounts shall be a fixed interest rate that is
determined by averaging the Preferred Rates for the Plan Year in which
installment payments commence and the four (4) preceding Plan Years. This
rate shall be treated as the nominal rate for making such calculations. If
a Participant has completed fewer than five (5) Plan Years, this average
shall be determined using the Crediting Rates for the Plan Years during
which the Participant participated in the Plan.
3.7 FICA AND OTHER TAXES. For each Plan Year in which an Annual Deferral -
Amount is being withheld, the Participant's Employer(s) shall withhold from
that portion of the Participant's Base Annual Salary and Annual Bonus that
is not being deferred, the Participant's share of FICA and other employment
taxes. If necessary, the Committee shall reduce the Annual Deferral Amount
in order to comply with this Section 3.7. In addition, the Participant's
Employer(s), or the trustee of the Trust, may withhold from any
distribution under the Plan any and all employment and income taxes that
are required to be withheld under applicable law.
ARTICLE 4
SHORT-TERM PAYOUT: UNFORESEEABLE FINANCIAL EMERGENCIES: WITHDRAWAL ELECTION
---------------------------------------------------------------------------
4.1 SHORT-TERM PAYOUT. In connection with each election to defer an Annual
Deferral Amount, a Participant may elect to receive a future "Short-Term
Payout" from the Plan with respect to that Annual Deferral Amount. Subject
to the Deduction Limitation, the Short-Term Payout shall be a lump sum
payment in an amount that is equal to the Annual Deferral Amount plus
interest credited in the manner provided in Section 3.5 above on that
amount, but using the applicable interest rate set forth in Section 7. 1
below, determined at the time of the distribution. Subject to the other
terms and conditions of this Plan, each Short-Term Payout elected shall be
paid, subject to the Deduction Limitation, within 60 days of the first day
of any Plan Year that is (i) at least 5 years after the first day of the
Plan Year in which the Annual Deferral Amount is actually deferred and (ii)
selected by the Participant in connection with his or her election of a
Short-Term Payout.
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4.2 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If
the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to (i) suspend any deferrals
required to be made by a Participant and/or (ii) receive a partial or full
payout from the Plan. The payout shall not exceed the lesser of the
Participant's Account Balance, calculated as if such Participant were
receiving a Termination Benefit, or the amount reasonably needed to satisfy
the Unforeseeable Financial Emergency. If, subject to the sole discretion
of the Committee, the petition for a suspension and/or payout is approved,
suspension shall take effect upon the date of approval and any payout shall
be made within 60 days of the date of approval. The payment of any amount
under this Section 4.2 shall not be subject to the Deduction Limitation.
4.3 WITHDRAWAL ELECTION. A Participant may elect, at any time, to withdraw all
of his or her Account Balance, calculated as if there had occurred a
Termination of Employment as of the day of the election, less a 10%
withdrawal penalty (the net amount shall be referred to as the "Withdrawal
Amount"). No partial withdrawals of that balance shall be allowed. The
Participant shall make this election by giving the Committee advance
written notice of the election in a form determined from time to time by
the Committee. The penalty shall be equal to 10% of the Participant's
Account Balance determined immediately prior to the withdrawal. The
Participant shall be paid the Withdrawal Amount within 60 days of his or
her election. Once the Withdrawal Amount is paid, the Participant's
participation in the Plan shall terminate and the Participant shall not be
eligible to participate in the Plan in the future. The payment of this
Withdrawal Amount shall be subject to the Deduction Limitation.
ARTICLE 5
RETIREMENT BENEFIT
------------------
5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a Participant who
Retires shall receive, as a Retirement Benefit, his or her Account Balance.
5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with his or
her commencement of participation in the Plan, shall elect on an Election
Form to receive the Retirement Benefit in a lump-sum or in equal monthly
payments (the latter determined in accordance with Section 3.6 above) over
a period of 60, 120 or 180 months. The Participant annually may change his
or her election to an allowable alternative payout period by submitting a
new Election Form to the Committee, provided that any such Election Form is
submitted at least 3 years prior
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to the Participant's Retirement and is accepted by the Committee in its
sole discretion. The Election Form most recently accepted by the Committee
shall govern the payout of the Retirement Benefit. If a Participant does
not make any election with respect to the payment of this benefit, then
such benefit shall be paid in a lump sum. The lump sum payment shall be
made, or installment payments shall commence, on the first day of the month
that coincides with or next follows the Participant's Retirement. Any
payment made shall be subject to the Deduction Limitation.
5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFITS. If a Participant dies
after Retirement but before the Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and shall
be paid to the Participant's Beneficiary (a) over the remaining number of
months and in the same amounts as that benefit would have been paid to the
Participant had the Participant survived, or (b) in a lump sum, if
requested by the Beneficiary and allowed in the sole discretion of the
Committee, that is equal to the Participant's unpaid remaining Account
Balance.
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT
-------------------------------
6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation, the
Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit
equal to the Participant's Account Balance, if the Participant dies before
he or she (i) Retires, (ii) experiences a Termination of Employment or
(iii) suffers a Disability.
6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFITS. A Participant, in connection
with his or her commencement of participation in the Plan, shall elect on
an Election Form whether the Pre-Retirement Survivor Benefit shall be
received by his or her Beneficiary in a lump sum or in equal monthly
payments (the latter determined in accordance with Section 3.6 above) over
a period of 60, 120 or 180 months. The Participant annually may change
this election to an allowable alternative payout period by submitting a new
Election Form to the Committee, which form must be accepted by the
Committee in its sole discretion. The Election Form most recently accepted
by the Committee prior to the Participant's death shall govern the payout
of the Participant's Pre-Retirement Survivor Benefit. If a Participant
does not make any election with respect to the payment of this benefit,
then such benefit shall be paid in a lump sum. Despite the foregoing, if
the Participant's Account Balance at the time of his or her death is less
than $25,000, payment of the Pre-Retirement
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Survivor Benefit may be made, in the sole discretion of the Committee, in a
lump sum or in monthly installment payments that do not exceed five years
in duration. The lump sum payment shall be made, or installment payments
shall commence, on the first day of the month that coincides with or next
follows the Participant's death, provided that the Committee timely
receives proof, which is satisfactory to the Committee, of the
Participant's death. Otherwise, payment shall commence on the first day of
the month that coincides with or next follows the delivery of such proof to
the Committee. Any payment made shall be subject to the Deduction
Limitation.
ARTICLE 7
TERMINATION BENEFIT
-------------------
7.1 TERMINATION BENEFITS. Subject to the Deduction Limitation, the Participant
shall receive a Termination Benefit, which shall be equal to the
Participant's Account Balance, including interest credited in the manner
provided in Section 3.5 above, but using the applicable interest rate set
forth in the following schedule, if a Participant experiences a Termination
of Employment prior to his or her Retirement, death or Disability:
COMPLETION OF YEARS OF PLAN PARTICIPATION APPLICABLE RATE
Less than five years Crediting Rate
Five or more years Preferred Rate
7.2 PAYMENT OF TERMINATION BENEFIT. If the Participant's Account Balance at
the time of his or her Termination of Employment is less than $25,000,
payment of his or her Termination Benefit shall be paid in a lump sum. If
his or her Account Balance at such time is equal to or greater than that
amount, the Committee, in its sole discretion, may cause the Termination
Benefit to be paid in a lump sum or in monthly installment payments over a
period of time that does not exceed five years in duration. The lump sum
payment shall be made, or installment payments shall commence, on the first
day of the month that coincides with or next follows the Participant's
Termination of Employment. Any payment made shall be subject to the
Deduction Limitation.
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ARTICLE 8
DISABILITY WAIVER AND BENEFIT
-----------------------------
8.1 DISABILITY WAIVER.
(a) WAIVER OF DEFERRAL. A Participant who is determined by the Committee
to be suffering from a Disability shall be excused from fulfilling
that portion of the Annual Deferral Amount commitment that would
otherwise have been withheld from a Participant's Base Annual Salary,
Annual Bonus and/or Directors Fees for the Plan Year during which the
Participant first suffers a Disability. During the period of
Disability, the Participant shall not be allowed to make any
additional deferral elections.
(b) RETURN TO WORK. If a Participant returns to employment, or service as
a Director, with an Employer after a Disability ceases, the
Participant may elect to defer an Annual Deferral Amount for the Plan
Year following his or her return to employment or service and for
every Plan Year thereafter while a Participant in the Plan; provided
such deferral elections are otherwise allowed and an Election Form is
delivered to and accepted by the Committee for each such election in
accordance with Section 3.3 above.
8.2 CONTINUED ELIGIBILITY: DISABILITY BENEFIT. A Participant suffering a
Disability shall, for benefit purposes under this Plan, continue to be
considered to be employed, or in the service of an Employer as a Director,
and shall be eligible for the benefits provided for in Articles 4, 5, 6 or
7 in accordance with the provisions of those Articles. Notwithstanding the
above, the Committee shall have the right, in its sole and absolute
discretion and for purposes of this Plan only, to deem that the
Participant's employment, or service as a Director, be terminated after
such Participant is determined to be suffering from a Disability. Should
the Committee exercise such right under this Section, the Participant shall
receive a Disability Benefit, which shall be equal to his or her Account
Balance at the time of such exercise. The Disability Benefit shall be paid
in a lump sum within 30 days of the Committee's exercise of such right.
However, any payment made shall be subject to the Deduction Limitation.
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ARTICLE 9
BENEFICIARY DESIGNATION
-----------------------
9.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (both primary as well as contingent)
to receive any benefits payable under the Plan to a beneficiary upon the
death of a Participant. The Beneficiary designated under this Plan may be
the same as or different from the Beneficiary designation under any other
plan of an Employer in which the Participant participates.
9.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall
designate his or her Beneficiary by completing and signing the Beneficiary
Designation Form, and returnIng it to the Committee or its designated
agent. A Participant shall have the right to change a Beneficiary by
completing, signing and otherwise complying with the terms of the
Beneficiary Designation Form and the Committee's rules and procedures, as
in effect from time to time. If the Participant names someone other than
his or her spouse as a Beneficiary, a spousal consent, in the form
designated by the Committee, must be signed by that Participant's spouse
and returned to the Committee. Upon the acceptance by the Committee of a
new Beneficiary Designation Form, all Beneficiary designations previously
filed shall be cancelled. The Committee shall be entitled to rely on the
last Beneficiary Designation Form filed by the Participant and accepted by
the Committee prior to his or her death.
9.3 ACKNOWLEDGEMENT. No designation or change in designation of a Beneficiary
shall be effective until received, accepted and acknowledged in writing by
the Committee or its designated agent.
9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 9. 1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the Participant's
designated Beneficiary shall be deemed to be his or her surviving spouse.
If the Participant has no surviving spouse, the benefits remaining under
the Plan to be paid to a Beneficiary shall be payable to the executor or
personal representative of the Participant's estate.
9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall
have the right, exercisable in its discretion, to cause the Participant's
Employer to withhold such payments until this matter is resolved to the
Committee's satisfaction.
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9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to the
Participant, and that Participant's Plan Agreement shall terminate upon
such full payment of benefits.
ARTICLE 10
LEAVE OF ABSENCE
----------------
10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's
Employer for any reason to take a paid leave of absence from the employment
of the Employer, the Participant shall continue to be considered employed
by the Employer and the Annual Deferral Amount shall continue to be
withheld during such paid leave of absence in accordance with Section 3.3.
10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of absence
from the employment of the Employer, the Participant shall continue to be
considered employed by the Employer and the Participant shall be excused
from makIng deferrals until the earlier of the date the leave of absence
expires or the Participant returns to a paid employment status. Upon such
expiration or return, deferrals shall resume for the remaining portion of
the Plan Year in which the expiration or return occurs, based on the
deferral election, if any, made for that Plan Year. If no election was
made for that Plan Year, no deferral shall be withheld.
ARTICLE 11
TERMINATIONS AMENDMENT OR MODIFICATION
--------------------------------------
11.1 TERMINATION. Although the Employers anticipate that they will continue the
Plan for an indefinite period of time, there is no guarantee that any
Employer will continue the Plan or will not terminate the Plan at any time
in the future. Accordingly, each Employer reserves the right to
discontinue its sponsorship of the Plan and/or to terminate the Plan, at
any time, with respect to its participating Employees and Directors by the
actions of its board of directors. Upon the termination of the Plan with
respect to any Employer, the Plan Agreements of the Participants who are
employed by that Employer shall terminate and their Account Balances,
determined as if they had experienced a Termination of Employment on the
date of Plan termination or, if Plan termination occurs after the date upon
which any such Participant was eligible to Retire, then with respect to
that Participant as if
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he or she had Retired on the date of Plan termination, shall be paid to the
Participants as follows. Prior to a Change in Control, an Employer shall
have the right, in its sole discretion, and notwithstanding any elections
made by the Participant, to pay such benefits in a lump sum or in monthly
installments for up to 15 years, with interest credited during the
installment period as provided in Section 3.6. After a Change in Control,
the Employer shall be required to pay such benefits in a lump sum. The
termination of the Plan shall not adversely affect any Participant or
Beneficiary who has become entitled to the payment of any benefits under
the Plan as of the date of termination; provided, however, that the
Employer shall have the right to accelerate installment payments by paying
the present value equivalent of such payments, using the Crediting Rate for
the Plan Year in which the termination occurs as the discount rate, in a
lump sum or pursuant to a different payment schedule.
11.2 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in
whole or in part with respect to that Employer by the actions of its board
of directors; provided, however, that no amendment or modification shall be
effective to decrease or restrict the value of a Participant's Account
Balance in existence at the time the amendment or modification is made,
calculated as if the Participant had experienced a Termination of
Employment as of the effective date of the amendment or modification, or,
if the amendment or modification occurs after the date upon which the
Participant was eligible to Retire, the Participant had Retired as of the
effective date of the amendment or modification. The amendment or
modification of the Plan shall not affect any Participant or Beneficiary
who has become entitled to the payment of benefits under the Plan as of the
date of the amendment or modification; provided, however, that prior to a
Change in Control the Employer shall have the right to accelerate
installment payments by paying the present value equivalent of such
payments, using the Crediting Rate for the Plan Year in which the amendment
or modification as the discount rate, in a lump sum or pursuant to a
different payment schedule. After a Change in Control, the Employer shall
have the right to accelerate installment payments by paying the present
value equivalent of such payments, using the interest rate described in
Section 3.6, but calculated by substituting the "Crediting Rate" for the
"Preferred Rate" in such Section, in a lump sum or pursuant to a different
payment schedule (provided that such schedule is as favorable, in terms of
the amount of total payments made at any particular date, as the
installment payment schedule elected by the Participant).
11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2 above, if
a Participant's Plan Agreement contains benefits or limitations that are
not in the Plan document, but are included in the Plan as benefits or
limitations in the Plan
17
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Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
Agreement, the Employer may only amend or terminate such provisions with
the consent of the Participant.
11.4 INTEREST RATE IN THE EVENT OF A CHANGE IN CONTROL. If a Change in Control
occurs, the applicable interest rate to be used in determining a
Participant's benefit in connection with a Termination of Employment after
the Change in Control, or a Plan termination, amendment or modification
under Sections 11. 1 and 11.2, shall be the Preferred Rate. However, the
Crediting Rate for the applicable Plan Year, and not the Preferred Rate,
shall be used as the discount rate for determining present value.
11.5 EFFECT OF PAYMENT. The full payment of the applicable benefit under
Articles 5, 6, 7 or 8 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries under
this Plan and the Participant's Plan Agreement shall terminate.
ARTICLE 12
ADMINISTRATION
--------------
12.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which
shall consist of such individuals as the Board shall appoint. Members of
the Committee may be Participants under this Plan. The Committee shall
also have the discretion and authority to (i) make, amend, interpret, and
enforce all appropriate rules and regulations for the administration of
this Plan and (ii) decide or resolve any and all questions including
interpretations of this Plan, as may arise in connection with the Plan.
12.2 AGENTS. In the administration of this Plan, the Committee may, from time
to time, employ agents and delegate to them such administrative duties as
it sees fit (including acting through a duly appointed representative) and
may from time to time consult with counsel who may be counsel to any
Employer.
12.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan.
18
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Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
12.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless
the members of the Committee against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with
respect to this Plan, except in the case of willful misconduct by the
Committee or any of its members.
12.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions,
each Employer shall supply full and timely information to the Committee on
all matters relating to the compensation of its Participants, the date and
circumstances of the Retirement, Disability, death or Termination of
Employment of its Participants, and such other pertinent information as the
Committee may reasonably require.
ARTICLE 13
OTHER BENEFITS AND AGREEMENTS
-----------------------------
13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant
and Participant's Beneficiary under the Plan are in addition to any other
benefits available to such Participant under any other plan or program for
employees of the Participant's Employer. The Plan shall supplement and
shall not supersede, modify or amend any other such plan or program except
as may otherwise be expressly provided.
ARTICLE 14
CLAIMS PROCEDURES
-----------------
14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as a
"Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant
from the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within 60 days after such
notice was received by the Claimant. The claim must state with
particularity the determination desired by the Claimant. All other claims
must be made within 180 days of the date on which the event that caused the
claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.
14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim
within a reasonable time, and shall notify the Claimant in writing:
19
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Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
(a) that the Claimant's requested determination has been made, and that
the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in
part, to the Claimant's requested determination, and such notice must
set forth in a manner calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim, or any part
of it;
(ii) specific reference(s) to pertinent provisions of the Plan upon
which such denial was based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is necessary;
and
(iv) an explanation of the claim review procedure set forth in
Section 14.3 below.
14.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the
Committee that a claim has been denied, in whole or in part, a Claimant (or
the Claimant's duly authorized representative) may file with the Committee
a written request for a review of the denial of the claim. Thereafter, but
not later than 30 days after the review procedure began, the Claimant (or
the Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole discretion,
may grant.
14.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written request
for review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the Committee's
decision must be rendered within 120 days after such date. Such decision
must be written in a manner calculated to be understood by the Claimant,
and it must contain:
20
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Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which the
decision was based; and
(c) such other matters as the Committee deems relevant.
14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
this Article 14 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under this
Plan.
ARTICLE 15
TRUST
-----
15.1 ESTABLISHMENT OF THE TRUST. The Company shall establish the Trust, and the
Employers shall at least annually transfer over to the Trust such assets as
the Employers determine, in their sole discretion, are necessary to
provide, on a present value basis, for their respective future liabilities
created with respect to the Annual Deferral Amounts and interest credits
for that year.
15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan
and the Plan Agreement shall govern the rights of a Participant to receive
distributions pursuant to the Plan. The provisions of the Trust shall
govern the rights of the Employers, Participants and the creditors of the
Employers to the assets transferred to the Trust. Each Employer shall at
all times remain liable to carry out its obligations under the Plan.
15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the Plan
may be satisfied with Trust assets distributed pursuant to the terms of the
Trust, and any such distribution shall reduce the Employer's obligations
under this Agreement.
ARTICLE 16
MISCELLANEOUS
-------------
16.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests
or claims in any property or assets of an Employer. For purposes of the
payment of benefits under this Plan, any and all of an Employer's assets
shall be, and remain, the
21
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Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
general, unpledged unrestricted assets of the Employer. An Employer's
obligation under the Plan shall be merely that of an unfunded and unsecured
promise to pay money in the future.
16.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits
shall be defined only by the Plan and the Plan Agreement, as entered into
between the Employer and a Participant. An Employer shall have no
obligation to a Participant under the Plan except as expressly provided in
the Plan and his or her Plan Agreement.
16.3 NONASSIGNABILITY. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate, alienate or convey in advance
of actual receipt, the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are expressly declared to be,
unassignable and non-transferable. No part of the amounts payable shall,
prior to actual payment, be subject to seizure, attachment, garnishment or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable
by operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
16.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall
not be deemed to constitute a contract of employment between any Employer
and the Participant. Such employment is hereby acknowledged to be an "at
will" employment relationship that can be terminated at any time for any
reason, or no reason, with or without cause, and with or without notice,
except as otherwise expressly provided in a written employment agreement.
Nothing in this Plan shall be deemed to give a Participant the right to be
retained in the service of any Employer, either as an Employee or a
Director, or to interfere with the right of any Employer to discipline or
discharge the Participant at any time.
16.5 FURNISHING INFORMATION. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be requested
in order to facilitate the administration of the Plan and the payments of
benefits hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary.
16.6 TERMS. Whenever any words are used herein in the masculine, they shall be
construed as though they were in the feminine in all cases where they would
so apply; and whenever any words are used herein in the singular or in the
plural, they
22
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Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
shall be construed as though they were used in the plural or the singular,
as the case may be, in all cases where they would so apply.
16.7 CAPTIONS. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
16.8 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the internal laws of the State of
Illinois without regard to its conflicts of laws principles.
16.9 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and hand-
delivered, or sent by registered or certified mail, to the address below:
Deferred Compensation Plan Committee
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532-5201
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant
under this Plan shall be sufficient if in writing and hand-delivered, or
sent by mail, to the last known address of the Participant.
16.10 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns and
the Participant and the Participant's designated Beneficiaries.
Participant and shall not be transferable by such spouse in any manner,
including but not limited to such spouse's will, nor shall such interest
pass under the laws of intestate succession.
16.12 VALIDITY. In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidly shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal or invalid provision had never been inserted herein.
23
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Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
16.13 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of that
person's property, the Committee may direct payment of such benefit to the
guardian, legal representative or person having the care and custody of
such minor, incompetent or incapable person. The Committee may require
proof of minority, incompetency, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit. Any payment of a
benefit shall be a payment for the account of the Participant and the
Participant's Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.
16.14 COURT ORDER. The Committee is authorized to make any payments directed
by court order in any action in which the Plan or the Committee has been
named as a party. In addition, if a court determines that a spouse or
former spouse of a Participant has an interest in the Plan as the result
of a property settlement or otherwise, the Committee, in its sole
discretion, shall have the right, notwithstanding any election made by a
Participant, to immediately distribute the spouse's or former spouse's
interest in the Plan to that spouse or former spouse.
16.15 DISTRIBUTION IN THE EVENT OF TAXATION.
(a) GENERAL. If, for any reason, all or any portion of a Participant's
benefit under this Plan becomes taxable to the Participant prior to
receipt, a Participant may petition the Committee before a Change in
Control, or the trustee of the Trust after a Change in Control, for a
distribution of that portion of his or her benefit that has become
taxable. Upon the grant of such a petition, which grant shall not be
unreasonably withheld, a Participant's Employer shall distribute to
the Participant immediately available funds in an amount equal to the
taxable portion of his or her benefit (which amount shall not exceed a
Participant's unpaid Account Balance under the Plan). If the petition
is granted, the tax liability distribution shall be made within 90
days of the date when the Participant's petition is granted. Such a
distribution shall affect and reduce the benefits to be paid under
this Plan.
(b) TRUST. If the Trust terminates in accordance with Section 3.6(e) of
the Trust and benefits are distributed from the Trust to a Participant
in accordance with that Section, the Participant's benefits under this
Plan shall be reduced to the extent of such distributions.
24
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Rykoff-Sexton, Inc.
Deferred Compensation Plan
Master Plan Document
================================================================================
16.16 INSURANCE. The Trust in its discretion may apply for and procure as
owner and for its own benefit, insurance on the life of the Participant,
in such amounts and in such forms as the Trust may choose. The Participant
shall have no interest whatsoever in any such policy or policies, but at
the request of the Employer shall submit to medical examinations and
supply such information and execute such documents as may be required by
the insurance company or companies to whom the Trust has applied for
insurance.
IN WITNESS WHEREOF, the Company has signed this Plan document as of
October 1, 1995.
"Company"
RYKOFF-SEXTON, INC.,
a Delaware corporation
By: /s/
-----------------------------------
Title:
---------------------------------
25
<PAGE>
Exhibit 10.28
AMENDMENT TO RYKOFF-SEXTON, INC.
DEFERRED COMPENSATION PLAN
This AMENDMENT dated as of February 28, 1996, to the Rykoff-Sexton,
Inc. Deferred Compensation Plan (the "Plan"),
WITNESSETH:
----------
WHEREAS, pursuant to an Agreement and Plan of Merger dated February 2,
1996 (the "Merger Agreement"), by and among Rykoff-Sexton, Inc., a Delaware
corporation (the "Company"), US Foodservice Inc., a Delaware corporation
("USF"), and USF Acquisition Corporation, a Delaware corporation and a wholly-
owned subsidiary of the Company ("Acquisition"), USF will be merged with and
into Acquisition, with Acquisition as the surviving entity (the "Merger");
WHEREAS, the Plan includes a provision defining the term "Change in
Control;"
WHEREAS, consummation of the Merger by and among the Company, USF and
Acquisition as described in the Merger Agreement would result in the occurrence
of a "Change in Control," as defined in the Plan; and
WHEREAS, the Company desires that neither the transactions effected
pursuant to the Merger Agreement nor certain other transactions in the future
result in a Change in Control, as so defined.
NOW, THEREFORE, pursuant to Section 11.2 of the Plan and as authorized
by action of the Company's board of directors, the Company hereby amends the
Plan as follows:
<PAGE>
1. Section 1.9 of the Plan, defining the term "Change in Control",
shall be amended and restated to read as follows:
1.9 "Change in Control" shall mean the first to occur of the
following events:
(a) any person (as defined in Sections 3(a)(9) and 13(d)(3) of
the Securities Act of 1934 (the "'34 Act")) ("Person")
(other than an Excluded Person (as hereinafter defined))
becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated pursuant to the '34 Act), directly or
indirectly, of 25% or more of combined voting power of the
Company's then outstanding securities entitled to vote
generally in the election of Directors ("Voting Securities")
other than pursuant to an Excepted Transaction (as
hereinafter defined); or
(b) the occurrence within any twelve-month period that commences
on or after October 1, 1995, of a change in the Board with
the result that the incumbent members do not constitute a
majority of the Board.
"Excluded Person" shall mean (x) Merrill Lynch Capital Partners,
Inc., Merrill Lynch Capital Appreciation Partnership No. B-XVIII,
L.P., Merrill Lynch Kecalp L.P. 1994, ML Offshore LBO Partnership
No. B-XVIII, ML IBK Positions, Inc., MLCP Associates L.P. No. II,
MLCP Associates L.P. No. IV, Merrill Lynch Kecalp L.P. 1991,
Merrill Lynch Capital Appreciation Partnership No. XIII, L.P., ML
Offshore LBO Partnership No. XIII, ML Employees LBO Partnership
No. I, L.P., Merrill Lynch Kecalp L.P. 1987, and Merchant
Banking L.P. No. II (each, an "ML Entity" and collectively the
"ML Entities"), if the ML Entities shall have executed a written
agreement with the Company (and approved by the Company's Board
of Directors) on or prior to the date on which the ML Entities
(together with its Affiliates) became the beneficial owner of 25%
or more of the shares of Voting Securities then outstanding (the
"Standstill Agreement"), which Standstill Agreement imposes one
or more limitations on the amount of the ML Entities' beneficial
ownership of shares of Common Stock, and if, and so long as, such
Standstill Agreement (or any amendment thereto approved by the
Company's Board of Directors by the vote of a majority of the
Present Directors) continues to be in effect and binding
-2-
<PAGE>
on the ML Entities and the ML Entities are in compliance (as
determined by the Company's Board of Directors in its discretion
by the vote of a majority of the Present Directors) with the
terms of such Standstill Agreement (including any such
amendment); or (y) any other Person acquiring Voting Securities
from an ML Entity if (i) such Voting Securities were acquired by
an ML Entity pursuant to the transactions contemplated by the
Letter of Intent dated December 5, 1995 ("Letter of Intent") from
the Company to US Foodservice Inc. ("Excluded Shares") and (ii)
if, prior to such acquisition by such other Person, a majority of
the Present Directors has expressly determined in good faith that
such acquisition is not a "Change in Control" for purposes of
this Agreement ("ML Successor"); provided, however, that an
Excluded Person shall cease to be such and a Change in Control
shall occur if either (A) the Chief Executive Officer of the
Company immediately prior to the execution of the Letter of
Intent ceases to constitute the Chief Executive Officer of the
Company (or any successor to the Company) immediately following
the consummation of the merger contemplated thereby and
throughout the twelve-month period thereafter (unless such Chief
Executive Officer ceases to constitute the Chief Executive
Officer of the Company by reason of death, Disability (as defined
in such Chief Executive Officer's Employment Agreement with the
Company, as it may be amended and restated from time to time (the
"Employment Agreement")), termination for Cause (as defined in
the Employment Agreement) or voluntary termination by such Chief
Executive Officer under circumstances that are not treated as an
involuntary termination under the Employment Agreement), or (B)
the Directors in office immediately prior to the execution of the
Letter of Intent, together with any successors of such Directors
(provided that any such successors qualify as Present Directors),
cease to constitute at least a majority of the Board immediately
after the consummation of the merger contemplated thereby and
throughout the twelve-month period thereafter.
"Excepted Transaction" shall mean any transaction (other than the
acquisition of the Excluded Shares by the ML Entities) initiated
by the Company in which (A) the Chief Executive Officer of the
Company immediately prior to such transaction constitutes the
Chief Executive Officer of the Company, or the surviving,
ultimate parent or other controlling corporation or other entity,
if
-3-
<PAGE>
any, resulting from any merger, consolidation, reorganization or
sale or transfer of assets of the Company effected pursuant to
such transaction ("Resulting Corporation") immediately following
the transaction and throughout the twelve-month period
thereafter, and (B) the Directors in office immediately prior to
the transaction constitute at least a majority of the Board or
the Board of Directors of the Resulting Corporation immediately
after such transaction and throughout the twelve-month period
thereafter.
"Present Director" shall mean a member of the Board who (1) is
not designated as a member of the Board by any ML Entity or ML
Successor, (2) does not otherwise have any agreement, arrangement
or understanding with any ML Entity or ML Successor for the
purpose of serving as a member of the Board, and (3) is not an
Affiliate or an Associate (as hereinafter defined) of any ML
Entity or ML Successor.
"Affiliate" and "Associate" shall have the meanings set forth in
Rule 12b-2 of the '34 Act.
The Board shall have the power to determine, for purposes of this
Agreement, on the basis of information known to the Board (a) by
a vote taken in good faith by a majority of Present Directors,
(1) whether any Person is an Excluded Person, (2) the percentage
of the Company's Voting Securities beneficially owned by an
Excluded Person, and (3) any determination to be made pursuant to
clause (x) of the definition of Excluded Person, and (b) by a
vote taken in good faith by a majority of all Directors in office
immediately prior to a transaction, whether such transaction is
an Excepted Transaction. Any such determination shall be
conclusive and binding for all purposes of this Agreement.
2. The validity, interpretation, construction and performance of
this Amendment shall be governed by and construed in accordance with the
substantive laws of the State of Illinois, without giving effect to the
principles of conflict of laws of such State.
3. This Amendment shall become effective immediately upon the
execution of this Amendment by the parties.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Amendment as of the
date and year first above written.
RYKOFF-SEXTON, INC.
By: /s/ Mark Van Stekelenburg
------------------------------
Mark Van Stekelenburg
President and Chief Executive
Officer
-5-
<PAGE>
Exhibit 10.29
RYKOFF-SEXTON, INC.
MASTER TRUST DOCUMENT FOR
Executive Deferral Plans
===============================================================================
Effective October 1, 1995
<PAGE>
RYKOFF-SEXTON, INC.
MASTER TRUST DOCUMENT FOR
Executive Deferral Plans
===============================================================================
MASTER TRUST AGREEMENT
----------------------
Table of Contents
-----------------
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
ARTICLE 1 Name, Intentions, Irrevocability, Deposit and Definitions........ 1
1.1 Name............................................................. 1
1.2 Intentions....................................................... 1
1.3 Irrevocability; Creditor Claims.................................. 1
1.4 Initial Deposit.................................................. 2
1.5 Additional Definitions........................................... 2
1.6 Grantor Trust.................................................... 3
ARTICLE 2 General Administration........................................... 4
2.1 Committee Directions and Administration Before Change in
Control.......................................................... 4
2.2 Administration Upon Change in Control............................ 5
2.3 Contributions.................................................... 5
2.4 Trust Fund....................................................... 5
2.5 Distribution of Excess Trust Fund to Employers................... 5
ARTICLE 3 Powers and Duties of Trustee..................................... 5
3.1 Investment Directions............................................ 5
3.2 Investment Upon Change in Control................................ 6
3.3 Management of Investments........................................ 6
3.4 Securities....................................................... 9
3.5 Substitution..................................................... 9
3.6 Distributions.................................................... 9
3.7 Trustee Responsibility Regarding Payments on Insolvency.......... 12
3.8 Costs of Administration.......................................... 14
3.9 Trustee Compensation and Expenses................................ 14
3.10 Professional Advice.............................................. 14
3.11 Payment on Court Order........................................... 15
3.12 Protective Provisions............................................ 15
</TABLE>
i
<PAGE>
RYKOFF-SEXTON, INC.
MASTER TRUST DOCUMENT FOR
Executive Deferral Plans
================================================================================
<TABLE>
<CAPTION>
<S> <C>
3.13 Indemnifications................................................. 15
ARTICLE 4 Insurance Contracts.............................................. 16
4.1 Types of Contracts............................................... 16
4.2 Ownership........................................................ 16
4.3 Restrictions on Trustee's Rights................................. 16
ARTICLE 5 Trustee's Accounts............................................... 16
5.1 Records.......................................................... 16
5.2 Annual Accounting; Final Accounting.............................. 17
5.3 Valuation........................................................ 17
5.4 Delegation of Duties............................................. 18
ARTICLE 6 Resignation or Removal of Trustee................................ 18
6.1 Resignation; Removal............................................. 18
6.2 Successor Trustee................................................ 18
6.3 Settlement of Accounts........................................... 19
ARTICLE 7 Controversies, Legal Actions and Counsel......................... 19
7.1 Controversy...................................................... 19
7.2 Joinder of Parties............................................... 19
7.3 Employment of Counsel............................................ 19
ARTICLE 8 Insurers......................................................... 20
8.1 Insurer Not a Party.............................................. 20
8.2 Authority of Trustee............................................. 20
8.3 Contract Ownership............................................... 20
8.4 Limitation of Liability.......................................... 20
8.5 Change of Trustee................................................ 20
ARTICLE 9 Amendment and Termination........................................ 20
9.1 Amendment........................................................ 20
9.2 Final Termination................................................ 23
</TABLE>
ii
<PAGE>
RYKOFF-SEXTON, INC.
MASTER TRUST DOCUMENT FOR
Executive Deferral Plans
===============================================================================
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 10 Miscellaneous.................................................... 23
10.1 Directions Following Change in Control........................... 23
10.2 Taxes............................................................ 24
10.3 Third Persons.................................................... 24
10.4 Nonassignability; Nonalienation.................................. 24
10.5 The Plans........................................................ 24
10.6 Applicable Law................................................... 24
10.7 Notices and Directions........................................... 25
10.8 Successors and Assigns........................................... 25
10.9 Gender and Number................................................ 25
10.10 Headings......................................................... 25
10.12 Beneficial Interest.............................................. 25
10.13 The Trust and Plans.............................................. 25
10.14 Effective Date................................................... 25
</TABLE>
iii
<PAGE>
RYKOFF-SEXTON, INC.
MASTER TRUST DOCUMENT FOR
Executive Deferral Plans
===============================================================================
THIS MASTER TRUST AGREEMENT ("Master Trust Agreement") is made and
entered into as of October 1, 1995, between Rykoff-Sexton, Inc., a Delaware
corporation (the "Company"), and Norwest Bank Minnesota, N.A. (the "Trustee), to
evidence the master trust (the "Trust") to be established, pursuant to those
executive deferral plans of the Company now or hereafter existing that require
the establishment of a trust, for the benefit of a select group of management,
highly compensated employees and/or Directors who contribute materially to the
continued growth, development and business success of the Company and those
subsidiaries of the Company, if any, that participate in the Plans
(collectively, "Subsidiaries," or singularly, "Subsidiary").
ARTICLE 1
Name, Intentions, Irrevocability,
Deposit and Definitions
1.1 Name. The name of the Trust created by this Agreement (the
"Trust") shall be:
MASTER TRUST AGREEMENT FOR
RYKOFF-SEXTON, INC. EXECUTIVE DEFERRAL PLANS
1.2 Intentions. The Company wishes to establish the Trust and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's and the Subsidiaries' creditors in the event of their
Insolvency (as defined below) until paid to Participants and their Beneficiaries
in such manner and at such times as specified in the Plans. It is the intention
of the parties that this Trust shall constitute an unfunded arrangement and
shall not affect the status of the Plans as unfunded plans maintained for the
purpose of providing supplemental compensation for a select group of management,
highly compensated employees and/or Directors for purposes of Title I of ERISA
(as defined below). In addition, it is the intention of the Company and the
Subsidiaries to make contributions to the Trust to provide themselves with a
source of funds to assist them in the meeting of their liabilities under the
Plans.
1.3 Irrevocability; Creditor Claims. The Trust hereby established
shall be irrevocable. Except as otherwise provided in Sections 2.5 and 9.2, the
principal of the Trust, and any earnings thereon, shall be held separate and
apart from other funds of the Company and the Subsidiaries and shall be used
exclusively for the uses and purposes of
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the Participants, their beneficiaries, the general creditors of the Company and
the Subsidiaries as herein set forth. The Participants and their Beneficiaries
shall have no preferred claim on, or any beneficial ownership interest in, any
assets of the Trust. Any rights created under the Plans and this Master Trust
Agreement shall be mere unsecured contractual rights of the Participants and
their Beneficiaries against the Company and the Subsidiaries. Any assets held
by the Trust will be subject to the claims of the Company's and the
Subsidiaries' general creditors under federal and state law in the event of
Insolvency.
1.4 Initial Deposit. The Company hereby deposits with the Trustee in
trust $100, which shall become the principal of the Trust to be held,
administered and disposed of by the Trustee as provided in this Master Trust
Agreement.
1.5 Additional Definitions. In addition to the definitions set forth
above, for purposes hereof, unless otherwise clearly apparent from the context,
the following terms have the following indicated meanings:
(a) "Beneficiary" shall mean one of more persons, trusts, estates
or other entities, designated in accordance with a Plan, that are entitled
to receive benefits under a Plan upon the death of a Participant.
(b) "Board" shall mean the board of directors of the Company.
(c) "Change in Control" shall mean the first to occur of the
following events:
(i) Any person (as defined in Section 3(a)(9) and 13(d)(3)
of the Securities Act of 1934, as amended (the "'34
Act")) becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated pursuant to the '34 Act),
directly or indirectly, of 25% or more of combined
voting power of the Company's then outstanding
securities; or
(ii) The occurrence, within any twelve-month period that
commences on or after October 1, 1995, of a change in
the Board with the result that the incumbent members do
not constitute a majority of the Board.
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(d) "Committee" shall mean the administrative committee appointed
by the Board to administer this Trust.
(e) "Director" shall mean any member of the board of directors of
the Company or any Subsidiary.
(f) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as it may be amended from time to time.
(g) "Insolvent" shall have the meaning set forth in Section
3.7(a) below.
(h) "Insolvent Entity" shall have the meaning set forth in
Section 3.7(a) below.
(i) "IRS" shall mean the Internal Revenue Service.
(j) "Participant" shall mean a person who is a participant in one
or more of the Plans in accordance with their terms and conditions.
(k) "Payment Schedule" shall have the meaning set forth in
Section 3.6(b) below.
(l) "Plan(s)" shall mean one or more of the executive deferral
plans established now or in the future by the Company that require the
establishment of a trust.
(m) "Plan Year" shall, for the first Plan Year, begin on October
1, 1995, and end on April 30, 1996. For each Plan Year thereafter, the
Plan Year shall begin on May 1 of each calendar year and continue through
April 30 of the following calendar year.
(n) "Trust Fund" shall mean the assets held by the Trustee
pursuant to the terms of this Master Trust Agreement and for the purposes
of the Plans.
1.6 Grantor Trust. The Trust is intended to be a "grantor trust," of
which the Company and the Subsidiaries are the grantors, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, and the Trust shall be construed accordingly.
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ARTICLE 2
General Administration
2.1 Committee Directions and Administration Before Change in Control.
Until a Change in Control has occurred, this Section 2.1 shall be effective and
the Committee shall direct the Trustee as to the administration of the Trust in
accordance with the following provisions:
(a) The Committee shall be identified to the Trustee by a copy of
the resolution of the Board appointing the Committee. In the absence
thereof, the Board shall be the Committee. Persons authorized to give
directions to the Trustee on behalf of the Committee shall be identified to
the Trustee by written notice from the Committee, and such notice shall
contain specimens of the authorized signatures. The Trustee shall be
entitled to rely on such written notice as evidence of the identity and
authority of the persons appointed until a written cancellation of the
appointment, or the written appointment of a successor, is received by the
Trustee.
(b) Directions by the Committee, or its delegate, to the Trustee
shall be in writing and signed by the Committee or persons authorized by
the Committee, or may be made by such other method as is acceptable to the
Trustee.
(c) The Trustee may conclusively rely upon directions from the
Committee in taking any action with respect to this Master Trust Agreement,
including the making of payments from the Trust Fund and the investment of
the Trust Fund pursuant to this Master Trust Agreement. The Trustee shall
have no liability for actions taken, or for failure to act, on the
direction of the Committee. The Trustee shall have no liability for
failure to act in the absence of proper written directions.
(d) The Trustee may request instructions from the Committee and
shall have no duty to act or liability for failure to act if such
instructions are not forthcoming from the Committee. If requested
instructions are not received within a reasonable time, the Trustee may,
but is under no duty to, act on its own discretion to carry out the
provisions of this Master Trust Agreement in accordance with this Master
Trust Agreement and the Plans.
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2.2 Administration Upon Change in Control. In the event of a Change
in Control, the authority of the Committee to administer the Trust and direct
the Trustee, as set forth in Section 2.1 above, shall cease, and the Trustee
shall have complete authority to administer the Trust.
2.3 Contributions. Except as provided in any Plan, the Company and
the Subsidiaries, in their sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with the
Trustee to augment the principal to be held, administered and disposed of by the
Trustee as provided in this Master Trust Agreement. Neither the Trustee nor any
Participant or Beneficiary shall have any right to compel such additional
deposits. The Trustee shall have no duty to collect or enforce payment to it of
any contributions or to require that any contributions be made, and shall have
no duty to compute any amount to be paid to it nor to determine whether amounts
paid comply with the terms of the Plans.
2.4 Trust Fund. The contributions received by the Trustee from the
Company and the Subsidiaries shall be held and administered pursuant to the
terms of this Master Trust Agreement as a single fund without distinction
between income and principal and without liability for the payment of interest
thereon except as expressly provided in this Master Trust Agreement. During the
term of this Trust, all income received by the Trust, net of expenses and taxes,
shall be accumulated and reinvested.
2.5 Distribution of Excess Trust Fund to Employers. In the event
that the Committee, prior to a Change in Control, or the Trustee in its sole and
absolute discretion, after a Change in Control, determines that the Trust Fund
exceeds 125 percent of the anticipated benefit obligations and administrative
expenses that are to be paid under the Plans, the Trustee, at the direction of
the Committee prior to a Change in Control, or in its sole and absolute
discretion after a Change in Control, shall distribute to the Company and the
Subsidiaries such excess portion of the Trust Fund.
ARTICLE 3
Powers and Duties of Trustee
3.1 Investment Directions. Except as provided in this Section and
Section 3.2 below, the Committee shall provide the Trustee with all investment
instructions. The Trustee shall neither affect nor change investments of the
Trust Fund, except as directed in writing by the Committee, and shall have no
right, duty or responsibility to recommend investments or investment changes;
provided, that the
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Trustee may (i) deposit cash on hand from time to time in any bank savings
account, certificate of deposit, or other instrument creating a deposit
liability for a bank, including the Trustee's own banking department, if the
Trustee is a bank, without such prior direction, or (ii) invest in government
securities, bonds with specific ratings, or stock of "Fortune 500" companies,
all within broad investment guidelines established by the Committee from time to
time.
3.2 Investment Upon Change in Control. In the event of a Change in
Control, the authority of the Committee to direct investments of the Trust Fund
shall cease and the Trustee shall have complete authority to direct investments
of the Trust Fund. The president of the Company shall notify the Trustee in
writing when a Change in Control has occurred. The Trustee has no duty to
inquire whether a Change in Control has occurred and may rely on notification by
the president of the Company of a Change in Control; provided, however, that if
any officer, former officer, director or former director of the Company or any
Subsidiary (other than the president of the Company), or any Participant
notifies the Trustee that there has been or there may be a Change in Control,
the Trustee shall have the duty to satisfy itself as to whether a Change in
Control has in fact occurred. The Company and the Subsidiaries shall indemnify
and hold harmless the Trustee for any damages or costs (including attorneys'
fees) that may be incurred because of reliance on the president's notice or lack
thereof.
3.3 Management of Investments. Subject to Section 3.1 above, the
Trustee shall have, without exclusion, all powers conferred on the Trustee by
applicable law, unless expressly provided otherwise herein, and all rights
associated with assets of the Trust shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercisable by or
rest with Participants or their Beneficiaries. The Trustee shall have full
power and authority to invest and reinvest the Trust Fund in any investment
permitted by law, exercising the judgment and care that persons of prudence,
discretion and intelligence would exercise under the circumstances then
prevailing, considering the probable income and safety of their capital,
including, without limiting the generality of the foregoing, the power:
(a) To invest and reinvest the Trust Fund, together with the
income therefrom, in common stock, preferred stock, convertible preferred
stock, mutual funds, bonds, debentures, convertible debentures and bonds,
mortgages, notes, time certificates of deposit, commercial paper and other
evidences of indebtedness (including those issued by the Trustee or any of
its affiliates), other securities, policies of life insurance, annuity
contracts, options to buy or sell securities or other assets, and other
property of any kind (personal, real, or mixed, and tangible or
intangible); provided, however, that in no event may the Trustee
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invest in securities (including stock or rights to acquire stock) or
obligations issued by the Company or the Subsidiaries, other than a de
minimis amount held in common investment vehicles in which the Trustee
invests;
(b) To deposit or invest all of any part of the assets of the
Trust Fund in savings accounts or certificates of deposit or other deposits
which bear a reasonable interest rate in a bank, including the commercial
department of the Trustee, if such bank is supervised by the United States
or any State;
(c) To hold, manage, improve, repair and control all property,
real or personal, forming part of the Trust Fund and to sell, convey,
transfer, exchange, partition, lease for any term, even extending beyond
the duration of this Trust, and otherwise dispose of the same from time to
time in such manner, for such consideration, and upon such terms and
conditions as the Trustee shall determine;
(d) To have, respecting securities, all the rights, powers and
privileges of an owner, including the power to give proxies, pay
assessments and other sums deemed by the Trustee to be necessary for the
protection of the Trust Fund, to vote any corporate stock either in person
or by proxy, with or without power of substitution, for any purpose; to
participate in voting trusts, pooling agreements, foreclosures,
reorganizations, consolidations, mergers and liquidations, and in
connection therewith to deposit securities with and transfer title to any
protective or other committee under such terms as the Trustee may deem
advisable; to exercise or sell stock subscriptions or conversion rights;
and, regardless of any limitation elsewhere in this instrument relative to
investment by the Trustee, to accept and retain as an investment any
securities or other property received through the exercise of any of the
foregoing powers;
(e) To hold in cash, without liability for interest, such portion
of the Trust Fund which, in its discretion, shall be reasonable under the
circumstances, pending investments, or payment of expenses, or the
distribution of benefits;
(f) To take such actions as may be necessary or desirable to
protect the Trust Fund from loss due to the default on mortgages held in
the Trust including the appointment of agents or trustees in such other
jurisdictions as may seem desirable, to transfer property to such agents or
trustees, to grant such powers as are necessary or desirable to protect the
Trust or its assets, to direct
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such agents or trustees, or to delegate such power to direct, and to remove
such agents or trustees;
(g) To employ such agents including custodians and counsel as may
be reasonably necessary and to pay them reasonable compensation; to settle,
compromise or abandon all claims and demands in favor of or against the
Trust assets;
(h) To cause title to property of the Trust to be issued, held or
registered in the individual name of the Trustee, or in the name of its
nominee(s) or agents, or in such form that title will pass by delivery;
(i) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under the
laws of the State whose laws are applicable to this Master Trust Agreement,
as provided in Section 10.6 below, so that the powers conferred upon the
Trustee herein shall not be in limitation of any authority conferred by
law, but shall be in addition thereto;
(j) To borrow money from any source (including the Trustee) and
to execute promissory notes, mortgages or other obligations and to pledge
or mortgage any Trust assets as security;
(k) To lend certificates representing stocks, bonds, or other
securities to any brokerage or other firm selected by the Trustee;
(l) To institute, compromise and defend actions and proceedings;
to pay or contest any claim; to settle a claim by or against the Trustee by
compromise, arbitration, or otherwise; to release, in whole or in part, any
claim belonging to the Trust to the extent that the claim is uncollectible;
(m) To use securities depositories or custodians and to allow
such securities as may be held by a depository or custodian to be
registered in the name of such depository or its nominee or in the name of
such custodian or its nominee;
(n) To invest the Trust Fund from time to time in one or more
investment funds, which funds shall be registered under the Investment
Company Act of 1940; and
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(o) To do all other acts necessary or desirable for the proper
administration of the Trust Fund, as if the Trustee were the absolute owner
thereof.
However, nothing in this section shall be construed to mean the Trustee assumes
any responsibility for the performance of any investment made by the Trustee in
its capacity as trustee under the operations of this Master Trust Agreement.
Notwithstanding any powers granted to the Trustee pursuant to this Master Trust
Agreement or to applicable law, the Trustee shall not have any power that could
give this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code of
1986, as amended.
3.4 Securities. Voting or other rights in securities shall be
exercised by the person or entity responsible for directing such investments,
and the Trustee shall have no duty to exercise voting or proxy or other rights
relating to any investment managed or directed by the Committee. If any foreign
securities are purchased pursuant to the direction of the Committee, it shall be
the responsibility of the person or entity responsible for directing such
investments to advise the Trustee in writing of any laws or regulations, either
foreign or domestic, that apply to such foreign securities or to the receipt of
dividends or interest on such securities.
3.5 Substitution. Notwithstanding any provision of any Plan or the
Trust to the contrary, the Company and/or any Subsidiary shall at all times have
the power to reacquire the Trust Fund by substituting readily marketable
securities (other than stock, a debt obligation or other security issued by the
Company or any Subsidiary) and/or cash of an equivalent value and such other
property shall, following such substitution, constitute the Trust Fund.
3.6 Distributions.
(a) The establishment of the Trust and the payment or delivery to
the Trustee of money or other property shall not vest in any Participant or
Beneficiary any right, title, or interest in and to any assets of the
Trust. To the extent that any Participant or Beneficiary acquires the
right to receive payments under any of the Plans, such right shall be no
greater than the right of an unsecured general creditor of the Company and
the Subsidiaries and such Participant or Beneficiary shall have only the
unsecured promise of the Company and the Subsidiaries that such payments
shall be made.
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(b) Concurrent with the establishment of this Trust, the Company
shall deliver to the Trustee a schedule (the "Payment Schedule") that
indicates the amounts payable in respect of each Participant (and his or
her Beneficiaries) on a Plan by Plan basis, provides a formula or formulas
or other instructions acceptable to the Trustee for determining the amounts
so payable, specifies the form in which such amount is to be paid (as
provided for or available under the applicable Plans), and the time of
commencement for payment of such amounts. The Payment Schedule shall be
updated from time to time as is necessary. Except as otherwise provided
herein, prior to a Change in Control, the Trustee shall make payments to
the Participants and their Beneficiaries in accordance with such Payment
Schedule. Despite the foregoing, after a Change in Control, the Trustee
shall make payments in accordance with the terms and provisions of each of
the Plans and related plan agreements. The trustee, at the direction of
the Committee or, after a Change in Control, on its own volition, may make
any distribution required to be made by it hereunder by delivering:
(i) Its check payable to the person to whom such
distribution is to be made, to the person, or, if prior to a Change in
Control, to the Company for redelivery to such person; provided that
before a Change in Control, the Committee may direct the Trustee to
deliver one or more lump sum checks payable to the Company, and the
Company shall prepare and deliver individual checks for each
Participant or Beneficiary; or
(ii) Its check payable to an insurer for the benefit of such
person, to the insurer, or, if prior to a Change in Control, to the
Company for redelivery to the insurer; or
(iii) Contracts held on the life of the Participant to
whom or with respect to whom the distribution is being made, to the
Participant or Beneficiary, or, if prior to a Change in Control, to
the Company for redelivery to the person to whom such distribution is
to be made; or
(iv) If a distribution is being made, in whole or in part,
of other assets, assignments or other appropriate documents or
certificates necessary to effect a transfer of title, to the
Participant or Beneficiary, or, if prior to a Change in Control, to
the Company for redelivery to such person.
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MASTER TRUST DOCUMENT FOR
Executive Deferral Plans
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(c) If the principal of the Trust, and any earnings thereon, are
not sufficient, determined on a Plan by Plan basis, to make payments of
benefits in accordance with the terms of the Plans, the Company and the
Subsidiaries shall make the balance of each such payment as it falls due.
The Trustee shall notify the Company and the Subsidiaries when principal
and earnings are not sufficient.
(d) The Company and the Subsidiaries may make payment of benefits
directly to Participants or their Beneficiaries as they become due under
the terms of the Plans. The Company and the Subsidiaries shall notify the
Trustee of their decisions to make payment of benefits directly prior to
the time amounts are payable to Participants or their Beneficiaries.
(e) Notwithstanding anything contained in this Master Trust
Agreement to the contrary, if at any time the Trust is finally determined
by the IRS not to be a "grantor trust" with the result that the income of
the Trust Fund is not treated as income of the Company or the Subsidiaries
pursuant to Sections 671 through 679 of the Internal Revenue Code of 1986,
as amended, or if a tax is finally determined by the IRS to be payable by
one or more Participants or Beneficiaries with respect to any interest in
the Plans or the Trust Fund prior to payment of such interest to any such
Participant or Beneficiary, the Trustee shall immediately determine each
Participant's share of the Trust Fund in accordance with the Plans, and the
Trustee shall immediately distribute such share in a lump sum to each
Participant or Beneficiary entitled thereto, regardless of whether such
Participant's employment has terminated (provided such Participant has a
vested interest in his or her accrued benefits under the Plans) and
regardless of form and time of payments specified in or pursuant to the
Plans. Any remaining assets (less any expenses or costs due under Sections
3.8 and 3.9 of this Master Trust Agreement) shall then be paid by the
Trustee to the Company and the Subsidiaries in such amounts, and in the
manner instructed by the Committee. If the value of the Trust Fund is less
than the benefit obligations under the Plans, the foregoing described
distributions will be limited to a Participant's share of the Trust Fund,
determined by allocating assets to the Participant based on the ratio of
the Participant's benefit obligations under the Plans to the total benefit
obligations under the Plans. Prior to a Change in Control, the Trustee
shall rely solely on the directions of the Committee with respect to the
occurrence of the foregoing events and the resulting distributions to be
made, and the Trustee shall not be responsible for any failure to act in
the absence of such direction.
(f) The Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be required to be
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withheld with respect to the payment of benefits pursuant to the terms of
the Plans and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and
paid by the Company and the Subsidiaries.
(g) Prior to a Change in Control, payments by the Trustee shall
be delivered or mailed to addresses supplied by the Committee and the
Trustee's obligation to make such payments shall be satisfied upon such
delivery or mailing. Prior to a Change in Control, the Trustee shall have
no obligation to determine the identity of persons entitled to benefits or
their mailing addresses. After a Change in Control, the Trustee shall have
such obligations.
(h) Prior to a Change in Control, the entitlement of a
Participant or his or her Beneficiaries to benefits under the Plans shall
be determined by the Company and the Subsidiaries or such party as they
shall designate under the Plans, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plans.
3.7 Trustee Responsibility Regarding Payments on Insolvency.
(a) The Trustee shall cease payment of benefits to Participants
and their Beneficiaries if the Company, or any Subsidiary, is Insolvent
(the "Insolvent Entity"). The Insolvent Entity shall be considered
"Insolvent" for purposes of this Master Trust Agreement if:
(i) the Insolvent Entity is unable to pay its debts as they
become due, or
(ii) the Insolvent Entity is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.
For purposes of this Section 3.7, if an entity is determined to be Insolvent,
each Subsidiary in which such entity has an equity interest shall also be deemed
to be an Insolvent Entity. However, the insolvency of a Subsidiary will not
cause a parent corporation to be deemed Insolvent.
(b) At all times during the continuance of this Trust, as
provided in Section 1.3 above, the principal and income of the Trust shall
be subject to claims of the general creditors of the Company and its
Subsidiaries under federal and state law as set forth below:
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(i) The Board and the president of the Company shall have
the duty to inform the Trustee in writing of the Company's or any
Subsidiary's Insolvency. If a person claiming to be a creditor of the
Company or any Subsidiary alleges in writing to the Trustee that the
Company or any Subsidiary has become Insolvent, the Trustee shall
determine whether the Company or any Subsidiary is Insolvent and,
pending such determination, the Trustee shall discontinue payment of
benefits to the Insolvent Entity's Participants or their
Beneficiaries. Prior to a Change in Control, the Trustee may
conclusively rely on any determination it receives from the Board or
the president of the Company with respect to the Insolvency of the
Company or any Subsidiary.
(ii) Unless the Trustee has actual knowledge of the
Company's or a Subsidiary's Insolvency, or has received notice from
the Company, a Subsidiary or a person claiming to be a creditor
alleging that the Company or a Subsidiary is Insolvent, the Trustee
shall have no duty to inquire whether the Company or any Subsidiary is
Insolvent. The Trustee may in all events rely on such evidence
concerning the Company's or any Subsidiary's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the Company's
or any Subsidiary's solvency. In this regard, the Trustee may rely
upon a letter from the Company's or a Subsidiary's auditors as to the
Company's or any Subsidiary's financial status.
(iii) If at any time the Trustee has determined that the
Company or any Subsidiary is Insolvent, the Trustee shall discontinue
payments to the Insolvent Entity's Participants or their
Beneficiaries, and shall hold the portion of the assets of the Trust
allocable to the Insolvent Entity for the benefit of the Insolvent
Entity's general creditors. Nothing in this Master Trust Agreement
shall in any way diminish any rights of Participants or their
Beneficiaries to pursue their rights as general creditors of the
Insolvent Entity with respect to benefits due under the Plans or
otherwise.
(iv) The Trustee shall resume the payment of benefits to
Participants or their Beneficiaries in accordance with this Article 3
of this Master Trust Agreement only after the Trustee has determined
that the alleged Insolvent Entity is not Insolvent (or is no longer
Insolvent).
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(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section
3.7(b) hereof and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all
payments due to Participants or their Beneficiaries under the terms of the
Plans for the period of such discontinuance, less the aggregate amount of
any payments made to Participants or their Beneficiaries by the Company or
any Subsidiary in lieu of the payments provided for hereunder during any
such period of discontinuance. Prior to a Change in Control, the Committee
shall instruct the Trustee as to such amounts, and after a Change in
Control, the Trustee shall determine such amounts in accordance with the
terms and provisions of the Plans.
3.8 Costs of Administration. The Trustee is authorized to incur
reasonable obligations in connection with the administration of the Trust,
including attorneys' fees, administrative fees and appraisal fees. Such
obligations shall be paid by the Company and the Subsidiaries. The Trustee is
authorized to pay such amounts from the Trust Fund if the Company or the
Subsidiaries fail to pay them within 60 days of presentation of a statement of
the amounts due.
3.9 Trustee Compensation and Expenses. The Trustee shall be entitled
to reasonable compensation for its services as from time to time agreed upon
between the Trustee and the Company. If the Trustee and the Company fail to
agree upon a compensation, or following a Change in Control, the Trustee shall
be entitled to compensation at a rate equal to the rate charged by the Trustee
for similar services rendered by it during the current fiscal year for other
trusts similar to this Trust. The Trustee shall be entitled to reimbursement
for expenses incurred by it in the performance of its duties as the Trustee,
including reasonable fees for legal counsel. The Trustee's compensation and
expenses shall be paid by the Company and the Subsidiaries. The Trustee is
authorized to withdraw such amounts from the Trust Fund if the Company or the
Subsidiaries fail to pay them within 60 days of presentation of a statement of
the amounts due.
3.10 Professional Advice. The Company and the Subsidiaries
specifically acknowledge that the Trustee may find it desirable or expedient to
retain legal counsel (who may also be legal counsel for the Company generally)
or other professional advisors to advise it in connection with the exercise of
any duty under this Master Trust Agreement, including, but not limited to, any
matter relating to or following a Change in Control or the Insolvency of the
Company or any Subsidiary. The Trustee shall be fully protected in acting upon
the advice of such legal counsel or advisors.
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3.11 Payment on Court Order. To the extend permitted by law, the
Trustee is authorized to make any payments directed by court order in any action
in which the Trustee has been named as a party. The Trustee is not obligated to
defend actions in which the Trustee is named, but shall notify the Company or
Committee of any such action and may tender defense of the action to the
Company, Committee, Participant or Beneficiary whose interest is affected. The
Trustee may in its discretion defend any action in which the Trustee is named,
and any expenses incurred by the Trustee shall be paid by the Company and the
Subsidiaries. The Trustee is authorized to pay such amounts from the Trust Fund
if the Company or the Subsidiaries fail to pay them within sixty (60) days of
presentation of a statement of the amounts due.
3.12 Protective Provisions. Notwithstanding any other provision
contained in this Master Trust Agreement to the contrary, the Trustee shall have
no obligation to (i) determine the existence of any conversion, redemption,
exchange, subscription or other right relating to any securities purchased of
which notice was given prior to the purchase of such securities and shall have
no obligation to exercise any such right unless the Trustee is advised in
writing by the Committee both of the existence of the right and the desired
exercise thereof within a reasonable time prior to the expiration of the right
to exercise, or (ii) advance any funds to the Trust. Furthermore, the Trustee
is not a party to the Plans.
3.13 Indemnifications.
(a) The Company and the Subsidiaries shall indemnify and hold the
Trustee harmless from and against all loss or liability (including expenses
and reasonable attorneys' fees) to which it may be subject by reason of its
execution of its duties under this Trust, or by reason of any acts taken in
good faith in accordance with any directions, or acts omitted in good faith
due to absence of directions, from the Company, the Committee or a
Participant, unless such loss or liability is due to the Trustee's gross
negligence or willful misconduct. The indemnity described herein shall be
provided by the Company and the Subsidiaries.
(b) In the event that the Trustee is named as a defendant in a
lawsuit or proceeding involving one or more of the Plans or the Trust Fund,
the Trustee shall be entitled to receive on a current basis the indemnity
payments provided for in this Section, provided however that if the final
judgement entered in the lawsuit or proceeding holds that the Trustee is
guilty of gross negligence or willful misconduct with respect to the Trust
Fund, the Trustee shall be required to refund the indemnity payments that
it has received.
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(c) All releases and indemnities provided in this Master Trust
Agreement shall survive the termination of this Master Trust Agreement.
ARTICLE 4
Insurance Contracts
4.1 Types of Contracts. To the extent that the Trustee is directed
by the Committee prior to a Change in Control to invest part or all of the Trust
Fund in insurance contracts, the type and amount thereof shall be specified by
the Committee. The Trustee shall be under no duty to make inquiry as to the
propriety of the type or amount so specified.
4.2 Ownership. Each insurance contract issued shall provide that the
Trustee shall be the owner thereof with the power to exercise all rights,
privileges, options and elections granted by or permitted under such contract or
under the rules of the insurer. The exercise by the Trustee of any incidents of
ownership under any contract shall, prior to a Change in Control, be subject to
the direction of the Committee.
4.3 Restrictions on Trustee's Rights. The Trustee shall have no
power to name a beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different form) other
than to a successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy. Despite the foregoing, the Trustee may (i) loan
to the Company or any Subsidiary the proceeds of any borrowing against an
insurance policy held in the Trust Fund or (ii) assign all, or any portion, of a
policy to the Company or any Subsidiary if under other provisions of this Master
Trust Agreement the Company or any Subsidiary is entitled to receive assets from
the Trust.
ARTICLE 5
Trustee's Accounts
5.1 Records. The Trustee shall maintain accurate records and
detailed accounts of all investments, receipts, disbursements and other
transactions hereunder. Such records shall be available at all reasonable times
for inspection by the Company and Subsidiaries or their authorized
representative. The Trustee, at the direction of the
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Committee, shall submit to the Committee and to any insurer such valuations,
reports or other information as the Committee may reasonably require and, in the
absence of fraud or bad faith, the valuation of the Trust Fund by the Trustee
shall be conclusive.
5.2 Annual Accounting; Final Accounting.
(a) Within 60 days following the end of each Plan Year and within
60 days after the removal or resignation of the Trustee or the termination
of the Trust, the Trustee shall file with the Committee a written account
setting forth a description of all properties purchased and sold, all
receipts, disbursements and other transactions effected by it during the
Plan Year or, in the case of removal, resignation or termination since the
close of the previous Plan Year, and listing the properties held in the
Trust Fund as of the last day of the Plan Year or other period and
indicating their values. Such values shall be either cost or market as
directed by the Committee in accordance with the terms of the Plans.
(b) The Committee may approve such account either by written
notice of approval delivered to the Trustee or by its failure to express
written objection to such account delivered to the Trustee within 60 days
after the date of which such account was delivered to the Committee.
(c) The approval by the Committee of an accounting shall be
binding as to all matters embraced in such accounting on all parties to
this Master Trust Agreement and on all Participants and Beneficiaries, to
the same extent as if such accounting had been settled by a judgment or
decree of a court of competent jurisdiction in which the Trustee, the
Committee, the Company, the Subsidiaries and all persons having or claiming
any interest in any Plan or the Trust Fund were made parties.
(d) Despite the foregoing, nothing contained in this Master Trust
Agreement shall deprive the Trustee of the right to have an accounting
judicially settled, if the Trustee, in the Trustee's sole discretion,
desires such a settlement.
5.3 Valuation. The assets of the Trust Fund shall be valued at their
respective fair market values on the date of valuation, as determined by the
Trustee based upon such sources of information as it may deem reliable,
including, but not limited to, stock market quotations, statistical valuation
services, newspapers of general circulation, financial publications, advice from
investment counselors, brokerage firms or insurance companies, or any
combination of sources. Prior to a Change in Control, the Committee shall
instruct the Trustee as to the value of assets for which market values
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are not readily obtainable by the Trustee. If the Committee fails to provide
such values, the Trustee may take whatever action it deems reasonable, including
employment of attorneys, appraisers, life insurance companies or other
professionals, the expense of which shall be an expense of administration of the
Trust Fund and payable by the Company and the Subsidiaries. The Trustee may
rely upon information from the Company and the Subsidiaries, the Committee,
appraisers or other sources and shall not incur any liability for an inaccurate
valuation based in good faith upon such information.
5.4 Delegation of Duties. The Company or the Committee, or both, may
at any time employ the Trustee as their agent to perform any act, keep any
records or accounts and make any computations that are required of the Company,
any Subsidiary or the Committee by this Master Trust Agreement or the Plans.
The Trustee may be compensated for such employment and such employment shall not
be deemed to be contrary to the Trust. Nothing done by the Trustee as such
agent shall change or increase its responsibility or liability as Trustee
hereunder.
ARTICLE 6
Resignation or Removal of Trustee
6.1 Resignation; Removal. The Trustee may resign at any time by
written notice to the Company, which shall be effective 60 days after receipt of
such notice unless the Company and the Trustee agree otherwise. Prior to a
Change in Control, the Trustee may be removed by the Company on 60 days notice
or upon shorter notice accepted by the Trustee. After a Change in Control, the
Trustee may be removed by a majority vote of the Participants, and if a
Participant is dead, his or her Beneficiaries (who collectively shall have one
vote among them and shall vote in place of such deceased Participant), on 60
days notice or upon shorter notice accepted by the Trustee.
6.2 Successor Trustee. If the Trustee resigns or is removed, a
successor shall be appointed by the Company, in accordance with this Section, by
the effective date of the resignation or removal under Section 6.1 above. The
successor shall be a bank, trust company, or similar independent third party
that is granted corporate trustee powers under state law. After the occurrence
of a Change in Control, a successor Trustee may not be appointed without the
consent of a majority of the Participants. If no such appointment has been
made, the Trustee may apply to a court of competent jurisdiction for appointment
of a successor or for instructions. All expenses of the
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Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
6.3 Settlement of Accounts. Upon resignation or removal of the
Trustee and appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed within 90
days after receipt of notice of resignation, removal or transfer, unless the
Company extends the time limit. Upon the transfer of the assets, the successor
Trustee shall succeed to all of the powers and duties given to the Trustee in
this Master Trust Agreement. The resigning or removed Trustee shall render to
the Committee an account in the form and manner and at the time prescribed in
Section 5.2. The approval of such accounting and discharge of the Trustee shall
be as provided in such Section.
ARTICLE 7
Controversies, Legal Actions and Counsel
7.1 Controversy. If any controversy arises with respect to the
Trust, the Trustee shall take action as directed by the Committee or, in the
absence of such direction or after a Change in Control, as it deems advisable,
whether by legal proceedings, compromise or otherwise. The Trustee may retain
the funds or property involved without liability pending settlement of the
controversy. The Trustee shall be under no obligation to take any legal action
of whatever nature unless there shall be sufficient property iii the Trust to
indemnify the Trustee with respect to any expenses or losses to which it may be
subjected.
7.2 Joinder of Parties. In any action or other judicial proceedings
affecting the Trust, it shall be necessary to join as parties the Trustee, the
Committee, the Company and the Subsidiaries. No Participant or other person
shall be entitled to any notice or service of process. Any judgment entered in
such a proceeding or action shall be binding on all persons claiming under the
Trust. Nothing in this Master Trust Agreement shall be construed as to deprive
a Participant or Beneficiary of his or her right to seek adjudication of his or
her rights by administrative process or by a court of competent jurisdiction.
7.3 Employment of Counsel. The Trustee may consult with legal
counsel (who may be counsel for the Company or any Subsidiary) and shall be
fully protected with respect to any action taken or omitted by it in good faith
pursuant to the advice of counsel.
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ARTICLE 8
---------
Insurers
--------
8.1 Insurer Not a Party. No insurer shall be deemed to be a party to
the Trust and an insurer's obligations shall be measured and determined solely
by the terms of contracts and other agreements executed by it.
8.2 Authority of Trustee. An insurer shall accept the signature of
the Trustee to any documents or papers executed in connection with such
contracts. The signature of the Trustee shall be conclusive proof to the
insurer that the person on whose life an application is being made is eligible
to have a contract issued on his or her life and is eligible for a contract of
the type and amount requested.
8.3 Contract Ownership. An insurer shall deal with the Trustee as
the sole and absolute owner of any insurance contracts and shall have no
obligation to inquire whether any action or failure to act on the part of the
Trustee is in accordance with or authorized by the terms of the Plans or this
Master Trust Agreement.
8.4 Limitation of Liability. An insurer shall be fully discharged
from any and all liability for any action taken or any amount paid in accordance
with the direction of the Trustee and shall have no obligation to see to the
proper application of the amounts so paid. An insurer shall have no liability
for the operation of the Trust or the Plans, whether or not in accordance with
their terms and provisions.
8.5 Change of Trustee. An insurer shall be fully discharged from any
and all liability for dealing with a party or parties indicated on its records
to be the Trustee until such time as it shall receive at its home office written
notice of the appointment and qualification of a successor Trustee.
ARTICLE 9
---------
Amendment and Termination
-------------------------
9.1 Amendment. Subject to the limitations set forth in this Section
9.1, this Master Trust Agreement may be amended by a written instrument executed
by the Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plans or shall make the Trust
revocable after it has
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become irrevocable in accordance with Section 1.3 above. Any amendment, change
or modification shall be subject to the following rules:
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(a) General Rule. Subject to Sections 9.1(b), (c) and (d) below,
this Master Trust Agreement may be amended:
(i) By the Company and the Trustee, provided, however, that
if an amendment would in any way adversely affect the rights accrued
under the Plans in the Trust Fund by any Participant or Beneficiary,
each and every Participant and Beneficiary whose rights in the Trust
Fund would be adversely affected must consent to the amendment before
this Master Trust Agreement may be so amended; and
(ii) By the Company and the Trustee as may be necessary to
comply with laws which would otherwise render the Trust void, voidable
or invalid in whole or in part.
(b) Limitation. Notwithstanding that an amendment may be
permissible under Section 9.1(a) above, this Master Trust Agreement shall
not be amended by an amendment that would:
(i) Cause any of the assets of the Trust to be used for or
diverted to purposes other than for the exclusive benefit of
Participants and Beneficiaries as set forth in the Plans, except as is
required to satisfy the claims of the Company's or a Subsidiary's
general creditors; or
(ii) Be inconsistent with the terms of any Plan, including
the terms of any Plan regarding termination, amendment or modification
of the Plan.
(c) Writing and Consent. Any amendment to this Master Trust Agreement
shall be set forth in writing and signed by the Company and the Trustee
and, if consent of any Participant or Beneficiary is required under Section
9.1(a), the Participant or Beneficiary whose consent is required. Any
amendment may be current, retroactive or prospective, in each case as
provided therein.
(d) The Company and Trustee. In connection with the exercise of the
rights under this Section 9.1:
(i) prior to a Change in Control, the Trustee shall have no
responsibility to determine whether any proposed amendment complies
with the terms and conditions set forth in Sections 9.1(a) and (b)
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above and may conclusively rely on the directions of the Committee
with respect thereto, unless the Trustee has knowledge of a proposed
transaction or transactions that would result in a Change in Control;
and
(ii) after a Change in Control, the power of the Company to
amend this Master Trust Agreement shall cease, and the power to amend
that was previously held by the Company shall, instead, be exercised
by a majority of the Participants and, if a Participant is dead, his
or her Beneficiaries (who collectively shall have one vote among them
and shall vote in place of such deceased Participant), with the
consent of the Trustee, provided that such amendment otherwise
complies with the requirements of Sections 9.1(a), (b) and (c) above.
(e) Taxation. This Master Trust Agreement shall not be amended,
altered, changed or modified in a manner that would cause the Participants
and/or Beneficiaries under any Plan to be taxed on the benefits under any
Plan in a year other than the year of actual receipt of benefits.
9.2 Final Termination. The Trust shall not terminate until the date on
which Participants and their Beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plans, and on such date the Trust shall terminate.
Upon termination of the Trust, any assets remaining in the Trust shall be
returned to the Company and the Subsidiaries. Such remaining assets shall be
paid by the Trustee to the Company and the Subsidiaries in such amounts and in
the manner instructed by the Company, whereupon the Trustee shall be released
and discharged from all obligations hereunder. From and after the date of
termination and until final distribution of the Trust Fund, the Trustee shall
continue to have all of the powers provided herein as are necessary or expedient
for the orderly liquidation and distribution of the Trust Fund.
ARTICLE 10
----------
Miscellaneous
-------------
10.1 Directions Following Change in Control. Despite any other provision
of this Master Trust Agreement that may be construed to the contrary, following
a Change in Control, all powers of the Committee, the Company and the Board to
direct the Trustee under this Master Trust Agreement shall terminate, and the
Trustee shall act on its own discretion to carry out the terms of this Master
Trust Agreement in accordance with the Plans and this Master Trust Agreement.
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10.2 Taxes. The Company and the Subsidiaries shall from time to time pay
taxes of any and all kinds whatsoever that at any time are lawfully levied or
assessed upon or become payable in respect of the Trust Fund, the income or any
property forming a part thereof, or any security transaction pertaining thereto.
To the extent that any taxes lawfully levied or assessed upon the Trust Fund are
not paid by the Company and the Subsidiaries, the Trustee shall have the power
to pay such taxes out of the Trust Fund and shall seek reimbursement from the
Company and the Subsidiaries. Prior to making any payment, the Trustee may
require such releases or other documents from any lawful taxing authority as it
shall deem necessary. The Trustee shall contest the validity of taxes in any
manner deemed appropriate by the Company or its counsel, but at the Company's
and the Subsidiaries' expense, and only if it has received an indemnity bond or
other security satisfactory to it to pay any such expenses. Prior to a Change
in Control, the Trustee (i) shall not be liable for any nonpayment of tax when
it distributes an interest hereunder on directions from the Committee, and (ii)
shall have no obligation to prepare or file any tax return on behalf of the
Trust Fund, any such return being the sole responsibility of the Committee. The
Trustee shall cooperate with the Committee in connection with the preparation
and filing of any such return. After a Change in Control, the Trustee shall have
such duties and obligations.
10.3 Third Persons. All persons dealing with the Trustee are released from
inquiring into the decisions or authority of the Trustee and from seeing to the
application of any moneys, securities or other property paid or delivered to the
Trustee.
10.4 Nonassignability; Nonalienation. Benefits payable to Participants
their Beneficiaries under this Master Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
10.5 The Plans. The Trust and the Plans are parts of a single, integrated
employee benefit plan system and shall be construed together. In the event of
any conflict between the terms of this Master Trust Agreement and the agreements
that constitute the Plans, such conflict shall be resolved in favor of this
Master Trust Agreement.
10.6 Applicable Law. Except to the extent, if any, preempted by ERISA,
this Master Trust Agreement shall be governed by and construed in accordance
with internal laws of the State of Minnesota. Any provision of this Master
Trust Agreement prohibited by law shall be ineffective to the extent of any
such prohibition, without invalidating the remaining provisions hereof.
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10.7 Notices and Directions. Whenever a notice or direction is given by
the Committee to the Trustee, it shall be in the form required by Section 2.1.
Actions by the Company shall be by the Board or a duly authorized officer, with
such actions certified to the Trustee by an appropriately certified copy of the
action taken. The Trustee shall be protected in acting upon any such notice,
resolution, order, certificate or other communication believed by it to be
genuine and to have been signed by the proper party or parties.
10.8 Successors and Assigns. This Master Trust Agreement shall be binding
upon and inure to the benefit of the Company, the Subsidiaries and the Trustee
and their respective successors and assigns.
10.9 Gender and Number. Words used in the masculine shall apply to the
feminine where applicable, and when the context requires, the plural shall be
read as the singular and the singular as the plural.
10.10 Headings. Headings in this Master Trust Agreement are inserted for
convenience of reference only and any conflict between such headings and the
text shall be resolved in favor of the text.
10.11 Counterparts. This Master Trust Agreement may be executed in an
original and any number of counterparts, each of which shall be deemed to be an
original of one and the same instrument.
10.12 Beneficial Interest. The Company and the Subsidiaries are the true
beneficiaries hereunder in that the payment of benefits directly or indirectly
to or for a Participant or Beneficiary by the Trustee, is in satisfaction of the
Company's and the Subsidiaries' liability therefor under the Plans. Nothing in
this Master Trust Agreement shall establish any beneficial interest in any
person other than the Company and the Subsidiaries.
10.13 The Trust and Plans. This Trust, the Plans and each Participant's
Plan Agreement are part of and constitute a single, integrated employee benefit
plan and trust, shall be construed together as the entire agreement between the
Company, the Trustee, the Participants and the Beneficiaries with regard to the
subject matter thereof, and shall supersede all previous negotiations,
agreements and commitments with respect thereto.
10.14 Effective Date. The effective date of this Master Trust Agreement
shall be October 1, 1993.
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IN WITNESS WHEREOF the Company and the Trustee have signed this Master
Trust Agreement as of the date first written above.
TRUSTEE: THE COMPANY:
- ------- -----------
Norwest Bank Minnesota, N.A. RYKOFF-SEXTON, INC.,
a Delaware corporation,
/s/ By: /s/
- -------------------------- ---------------------
Title:
---------------
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<PAGE>
Exhibit 10.30
AMENDMENT TO RYKOFF-SEXTON, INC.
MASTER TRUST AGREEMENT
This AMENDMENT dated as of February 28, 1996, to the Rykoff-Sexton,
Inc. Master Trust Agreement (the "Master Trust Agreement") between Rykoff-
Sexton, Inc., a Delaware corporation (the "Company"), and Norwest Bank
Minnesota, N.A. (the "Trustee"),
WITNESSETH:
----------
WHEREAS, pursuant to an Agreement and Plan of Merger dated February 2,
1996 (the "Merger Agreement"), by and among the Company, US Foodservice Inc., a
Delaware corporation ("USF"), and USF Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Company ("Acquisition"), USF
will be merged with and into Acquisition, with Acquisition as the surviving
entity (the "Merger");
WHEREAS, the Master Trust Agreement includes a provision defining the
term "Change in Control;"
WHEREAS, consummation of the Merger by and among the Company, USF and
Acquisition as described in the Merger Agreement would result in the occurrence
of a "Change in Control," as defined in the Master Trust Agreement; and
WHEREAS, the Company and the Trustee desire that neither the
transactions effected pursuant to the Merger Agreement nor certain other
transactions in the future result in a Change in Control, as so defined.
<PAGE>
NOW, THEREFORE, pursuant to Section 9.1 of the Master Trust Agreement,
the parties hereby amend the Master Trust Agreement as follows:
1. Section 1.5(c) of the Master Trust Agreement, defining the term
"Change in Control", shall be amended and restated to read as follows:
(c) "Change in Control" shall mean the first to occur of the
following events:
(i) any person (as defined in Sections 3(a)(9) and 13(d)(3)
of the Securities Act of 1934 (the "'34 Act"))
("Person") (other than an Excluded Person (as
hereinafter defined)) becomes the "beneficial owner"
(as defined in Rule 13d-3 promulgated pursuant to the
'34 Act), directly or indirectly, of 25% or more of
combined voting power of the Company's then outstanding
securities entitled to vote generally in the election
of Directors of the Company ("Voting Securities") other
than pursuant to an Excepted Transaction (as
hereinafter defined); or
(ii) the occurrence within any twelve-month period that
commences on or after October 1, 1995, of a change in
the Board with the result that the incumbent members do
not constitute a majority of the Board.
"Excluded Person" shall mean (x) Merrill Lynch Capital Partners,
Inc., Merrill Lynch Capital Appreciation Partnership No. B-XVIII,
L.P., Merrill Lynch Kecalp L.P. 1994, ML Offshore LBO Partnership
No. B-XVIII, ML IBK Positions, Inc., MLCP Associates L.P. No. II,
MLCP Associates L.P. No. IV, Merrill Lynch Kecalp L.P. 1991,
Merrill Lynch Capital Appreciation Partnership No. XIII, L.P., ML
Offshore LBO Partnership No. XIII, ML Employees LBO Partnership
No. I, L.P., Merrill Lynch Kecalp L.P. 1987, and Merchant
Banking L.P. No. II (each, an "ML Entity" and collectively the
"ML Entities"), if the ML Entities shall have executed a written
agreement with the Company (and approved by the Company's Board
of Directors) on or prior to the date on which the ML Entities
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(together with its Affiliates) became the beneficial owner of 25%
or more of the shares of Voting Securities then outstanding (the
"Standstill Agreement"), which Standstill Agreement imposes one
or more limitations on the amount of the ML Entities' beneficial
ownership of shares of Common Stock, and if, and so long as, such
Standstill Agreement (or any amendment thereto approved by the
Company's Board of Directors by the vote of a majority of the
Present Directors) continues to be in effect and binding on the
ML Entities and the ML Entities are in compliance (as determined
by the Company's Board of Directors in its discretion by the vote
of a majority of the Present Directors) with the terms of such
Standstill Agreement (including any such amendment); or (y) any
other Person acquiring Voting Securities from an ML Entity if (i)
such Voting Securities were acquired by an ML Entity pursuant to
the transactions contemplated by the Letter of Intent dated
December 5, 1995 ("Letter of Intent") from the Company to US
Foodservice Inc. ("Excluded Shares") and (ii) if, prior to such
acquisition by such other Person, a majority of the Present
Directors has expressly determined in good faith that such
acquisition is not a "Change in Control" for purposes of this
Agreement ("ML Successor"); provided, however, that an Excluded
Person shall cease to be such and a Change in Control shall occur
if either (A) the Chief Executive Officer of the Company
immediately prior to the execution of the Letter of Intent ceases
to constitute the Chief Executive Officer of the Company (or any
successor to the Company) immediately following the consummation
of the merger contemplated thereby and throughout the twelve-
month period thereafter (unless such Chief Executive Officer
ceases to constitute the Chief Executive Officer of the Company
by reason of death, Disability (as defined in such Chief
Executive Officer's Employment Agreement with the Company, as it
may be amended and restated from time to time (the "Employment
Agreement")), termination for Cause (as defined in the Employment
Agreement) or voluntary termination by such Chief Executive
Officer under circumstances that are not treated as an
involuntary termination under the Employment Agreement), or (B)
the Directors of the Company in office immediately prior to the
execution of the Letter of Intent, together with any successors
of such Directors of the Company (provided that any such
successors qualify as Present Directors), cease to constitute at
least a majority of the Board immediately after
-3-
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the consummation of the merger contemplated thereby and
throughout the twelve-month period thereafter.
"Excepted Transaction" shall mean any transaction (other than the
acquisition of the Excluded Shares by the ML Entities) initiated
by the Company in which (A) the Chief Executive Officer of the
Company immediately prior to such transaction constitutes the
Chief Executive Officer of the Company, or the surviving,
ultimate parent or other controlling corporation or other entity,
if any, resulting from any merger, consolidation, reorganization
or sale or transfer of assets of the Company effected pursuant to
such transaction ("Resulting Corporation") immediately following
the transaction and throughout the twelve-month period
thereafter, and (B) the Directors of the Company in office
immediately prior to the transaction constitute at least a
majority of the Board or the Board of Directors of the Resulting
Corporation immediately after such transaction and throughout the
twelve-month period thereafter.
"Present Director" shall mean a member of the Board who (1) is
not designated as a member of the Board by any ML Entity or ML
Successor, (2) does not otherwise have any agreement, arrangement
or understanding with any ML Entity or ML Successor for the
purpose of serving as a member of the Board, and (3) is not an
Affiliate or an Associate (as hereinafter defined) of any ML
Entity or ML Successor.
"Affiliate" and "Associate" shall have the meanings set forth in
Rule 12b-2 of the '34 Act.
The Board shall have the power to determine, for purposes of this
Agreement, on the basis of information known to the Board (a) by
a vote taken in good faith by a majority of Present Directors,
(1) whether any Person is an Excluded Person, (2) the percentage
of the Company's Voting Securities beneficially owned by an
Excluded Person, and (3) any determination to be made pursuant to
clause (x) of the definition of Excluded Person, and (b) by a
vote taken in good faith by a majority of all Directors of the
Company in office immediately prior to a transaction, whether
such transaction is an Excepted Transaction. Any such
determination shall be conclusive and binding for all purposes of
this Agreement.
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<PAGE>
2. The validity, interpretation, construction and performance of this
Amendment shall be governed by and construed in accordance with the substantive
laws of the State of Minnesota, without giving effect to the principles of
conflict of laws of such State.
3. This Amendment shall become effective immediately upon the
execution of this Amendment by the parties.
IN WITNESS WHEREOF, the Company and the Trustee have executed this
Amendment as of the date and year first above written.
RYKOFF-SEXTON, INC.
By: /s/ Mark Van Stekelenburg
--------------------------------
Mark Van Stekelenburg
President and Chief Executive
Officer
NORWEST BANK MINNESOTA, N.A.
as TRUSTEE
By: /s/
--------------------------------
-5-
<PAGE>
Exhibit 10.35
EXECUTION COPY
--------------
- --------------------------------------------------------------------------------
USFAR INC.
Transferor,
US FOODSERVICE INC.,
Master Servicer,
Certain Subsidiaries of US Foodservice Inc.
herein designated as
Servicers
and
CHEMICAL BANK,
Trustee
on behalf of the Certificateholders
USFAR MASTER TRUST
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of October 27, 1994
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS..................................................... 1
Section 1.1 Definitions............................................. 1
Section 1.2 Other Definitional Provisions........................... 23
ARTICLE II CONVEYANCE OF RECEIVABLES; ISSUANCE OF CERTIFICATES............ 24
Section 2.1 Conveyance of Receivables............................... 24
Section 2.2 Acceptance by Trustee................................... 27
Section 2.3 Representations and Warranties of the
Transferor Relating to the Transferor................... 28
Section 2.4 Representations and Warranties of the
Transferor Relating to the Receivables.................. 31
Section 2.5 Repurchase of Ineligible Receivables.................... 32
Section 2.6 Purchase of Investor Certificateholders'
Interest in Trust Portfolio............................. 33
Section 2.7 Covenants of the Transferor............................. 34
Section 2.8 Additional Originators or White Swan Divisions.......... 41
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES................... 42
Section 3.1 Acceptance of Appointment and Other Matters
Relating to the Master Servicer......................... 42
Section 3.2 Servicing Compensation.................................. 46
Section 3.3 Representations, Warranties and Covenants
of the Master Servicer and Each Servicer................ 47
Section 3.4 Reports and Records for the Trustee;
Bank Account Statements................................. 51
Section 3.5 Quarterly Master Servicer's Certificate................. 53
Section 3.6 Annual Independent Public Accountants'
Servicing Report........................................ 53
Section 3.7 Tax Treatment........................................... 54
Section 3.8 Notices to Initial Master Servicer...................... 54
Section 3.9 Adjustments............................................. 54
ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND
APPLICATION OF COLLECTIONS THE FOLLOWING PORTION OF
THIS ARTICLE IV IS APPLICABLE TO ALL SERIES............................ 55
Section 4.1 Establishment of Collection Accounts; Certain
Allocations............................................. 55
ARTICLE V ARTICLE V IS RESERVED AND MAY BE SPECIFIED IN ANY
SUPPLEMENT WITH RESPECT TO THE SERIES RELATING THERETO................. 59
<PAGE>
ARTICLE VI THE CERTIFICATES............................................... 59
Section 6.1 The Certificates........................................ 59
Section 6.2 Authentication of Certificates.......................... 60
Section 6.3 Registration of Transfer and Exchange of Certificates... 60
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates....... 63
Section 6.5 Persons Deemed Owners................................... 63
Section 6.6 Appointment of Paying Agent............................. 64
Section 6.7 Access to List of Certificateholders'
Names and Addresses..................................... 64
Section 6.8 Authenticating Agent.................................... 65
Section 6.9 Tender of Exchangeable Transferor Certificate........... 67
Section 6.10 Book-Entry Certificates................................. 69
Section 6.11 Notices to Clearing Agency.............................. 70
Section 6.12 Definitive Certificates................................. 70
ARTICLE VII OTHER MATTERS RELATING TO THE TRANSFEROR...................... 70
Section 7.1 Liability of the Transferor............................. 70
Section 7.2 Limitation on Liability of the Transferor............... 71
Section 7.3 Liabilities............................................. 71
ARTICLE VIII OTHER MATTERS RELATING TO THE MASTER SERVICER................ 71
Section 8.1 Liability of the Master Servicer........................ 71
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer..................... 71
Section 8.3 Limitation on Liability of the Master
Servicer and Others..................................... 72
Section 8.4 Indemnification of the Trust and the Trustee............ 72
Section 8.5 The Master Servicer Not to Resign....................... 73
Section 8.6 Access to Certain Documentation and
Information Regarding the Receivables................... 73
Section 8.7 Delegation of Duties.................................... 74
Section 8.8 Examination of Records.................................. 74
ARTICLE IX EARLY AMORTIZATION EVENTS...................................... 74
Section 9.1 Early Amortization Events............................... 74
Section 9.2 Additional Rights Upon the Occurrence of
Certain Events.......................................... 75
ARTICLE X MASTER SERVICER DEFAULTS........................................ 77
Section 10.1 Master Servicer Defaults................................ 77
Section 10.2 Trustee to Act; Appointment of Successor................ 80
Section 10.3. Notification to Certificateholders...................... 82
<PAGE>
Section 10.4. Waiver of Past Defaults................................. 82
ARTICLE XI THE TRUSTEE.................................................... 83
Section 11.1. Duties of Trustee....................................... 83
Section 11.2. Rights of the Trustee................................... 86
Section 11.3. Trustee Not Liable for Recitals in Certificates......... 88
Section 11.4. Trustee May Own Certificates............................ 88
Section 11.5. The Master Servicer to Pay Trustee's
Fees and Expenses....................................... 88
Section 11.6. Eligibility Requirements for Trustee.................... 89
Section 11.7. Resignation or Removal of Trustee....................... 89
Section 11.8. Successor Trustee....................................... 90
Section 11.9. Merger or Consolidation of Trustee...................... 91
Section 11.10. Appointment of Co-Trustee or Separate Trustee........... 91
Section 11.11. Tax Returns............................................. 92
Section 11.12. Trustee May Enforce Claims Without
Possession of Certificates.............................. 93
Section 11.13. Suits for Enforcement................................... 93
Section 11.14. Rights of Certificateholders to Direct Trustee.......... 93
Section 11.15. Representations and Warranties of Trustee............... 94
Section 11.16. Maintenance of Office or Agency......................... 94
Section 11.17. Limitation of Liability................................. 94
ARTICLE XII TERMINATION................................................... 95
Section 12.1. Termination of Trust; Optional Repurchase............... 95
Section 12.2. Optional Purchase and Final Termination Date of
Investor Certificates of any Series..................... 95
Section 12.3. Final Payment with Respect to Any Series................ 96
Section 12.4. Transferor's Termination Rights......................... 98
ARTICLE XIII MISCELLANEOUS PROVISIONS..................................... 98
Section 13.1. Amendment............................................... 98
Section 13.2. Protection of Right, Title and Interest to Trust........ 99
Section 13.3. Limitation on Rights of Certificateholders.............. 100
Section 13.4. Governing Law........................................... 101
Section 13.5. Notices................................................. 101
Section 13.6. Severability of Provisions.............................. 102
Section 13.7. Assignment.............................................. 103
Section 13.8. Certificates Nonassessable and Fully Paid............... 103
Section 13.9. Further Assurances...................................... 103
Section 13.10. No Waiver; Cumulative Remedies.......................... 103
<PAGE>
Section 13.11. Counterparts.......................................... 103
Section 13.12. Third-Party Beneficiaries............................. 103
Section 13.13. Actions by Certificateholders......................... 104
Section 13.14. Merger and Integration................................ 104
Section 13.15. Headings.............................................. 104
Section 13.16. Construction of Agreement............................. 104
Section 13.17. No Set-Off............................................ 104
Section 13.18. No Bankruptcy Petition................................ 104
Section 13.19. Limitation of Liability............................... 105
Schedule 1 -- Receivables
Schedule 2 -- Identification of Trust Accounts
Schedule 3 -- Identification of Lockboxes
Schedule 4 -- Location of Chief Executive Offices;
Locations of Receivables
Schedule 5 -- Fiscal Months
Schedule 6 -- Special Obligors
<PAGE>
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated as of
October 27, 1994, among USFAR INC., a Delaware corporation (the "Transferor");
US FOODSERVICE INC., a Delaware corporation (in its capacity as master servicer,
the "Master Servicer"); each of the subsidiaries of US Foodservice Inc. from
time to time parties hereto, in their capacities as servicers of receivables (in
such capacities, the "Servicers") and CHEMICAL BANK, a New York banking
corporation, not in its individual capacity but solely as trustee (the
"Trustee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto entered into a Pooling and Servicing
Agreement, dated as of September 23, 1993 (the "Existing P&S Agreement");
WHEREAS, the parties hereto wish to amend and restate the Existing P&S
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, the parties hereto
hereby agree that the Existing P&S Agreement shall be and hereby is amended and
restated in its entirety as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1 Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accrual Period" shall mean, for any Series, the period from and including
a Distribution Date, or, in the case of the initial Accrual Period for such
Series, the Issuance Date for such Series, to but excluding the succeeding
Distribution Date.
"Adjusted Invested Amount" shall mean, with respect to any Outstanding
Series, the definition assigned to such term in the related Supplement.
"Adjusted Transferor Amount" shall mean, at any time, (i) the Transferor
Amount minus (ii) the amount on deposit in the Transferor Collection Subaccount
at such time, but in no event less than zero.
"Affiliate" shall mean, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of
<PAGE>
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, no Person shall be
an Affiliate of US Foodservice Inc. and its subsidiaries solely due to the
common control of US Foodservice Inc. and such Person by Merrill Lynch Capital
Partners, Inc. and its Affiliates.
"Agent" shall mean, with respect to any Series, the Person, if any, so
designated in the related Supplement.
"Aggregate Adjusted Invested Amount" shall mean, with respect to any date
of determination, the sum of the Adjusted Invested Amount with respect to each
Outstanding Series.
"Aggregate Allocated Receivables Amount" shall mean, with respect to any
date of determination, the sum of the Allocated Receivables Amount with respect
to each Outstanding Series.
"Aggregate Certificateholders' Interest" shall have the meaning specified
in subsection 4.1(b).
"Aggregate Daily Collections" shall mean, with respect to any Business Day,
the aggregate amount of all Collections and Repurchase Payments deposited into
the Collection Account on such day.
"Aggregate Invested Amount" shall mean, at any time, the sum of the
Invested Amounts with respect to all Outstanding Series.
"Aggregate Invested Percentage" shall mean, at any time with respect to any
Collections, the sum of the Invested Percentages with respect to all Outstanding
Series applicable to such Collections. For the purpose of this definition, the
term "Invested Percentage" shall include any term defined in any Supplement as
an "Invested Percentage" modified by a prefix designating the Series to which
such Invested Percentage is applicable.
"Aggregate Overconcentration Amount" shall mean, for any date of
determination, the sum of the Overconcentration Amounts of all Eligible Obligors
at the end of the preceding Business Day.
"Aggregate Receivables Amount" shall mean, for any date of determination,
the difference between (i) the aggregate Face Amount of Eligible Receivables in
the Trust at the end of the Business Day immediately preceding such date of
determination and (ii) the Aggregate Overconcentration Amount at the end of the
Business Day immediately preceding such date of determination.
2
<PAGE>
"Aggregate Target Receivables Amount" shall mean, with respect to any date
of determination, the sum of the Target Receivables Amount with respect to all
Outstanding Series.
"Agreement" shall mean this Amended and Restated Pooling and Servicing
Agreement and all amendments hereof and supplements hereto, including, without
limitation, each Supplement.
"Allocated Receivables Amount" shall mean, with respect to any Outstanding
Series, the amount specified in the related Supplement.
"Amortization Period" shall mean, with respect to any Series, the period
following the Revolving Period which shall be either the Scheduled Amortization
Period or Early Amortization Period or any other amortization period, in each
case as defined in any related Supplement.
"Applicants" shall have the meaning specified in Section 6.7.
"ARA Percentage Adjustment" shall mean, with respect to any increase in the
Special Obligor Limit for The ARA Group Inc., the whole number equivalent of the
amount by which such Special Obligor Limit is so increased.
"Book-Entry Certificates" shall mean certificates evidencing a beneficial
interest in the Certificates, ownership and transfers of which shall be made
through book entries by a Clearing Agency as described in Section 6.10;
provided, however, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer permitted and Definitive Certificates
are to be issued to the Certificate Owners, such Certificates shall no longer be
"Book-Entry Certificates".
"Business Day" shall mean any day other than (i) a Saturday or a Sunday or
(ii) another day on which banking institutions or trust companies in the State
of New York generally or The City of New York are authorized or obligated by
law, executive order or governmental decree to be closed.
"Calculation Period" shall mean, for any Series, the period from and
including a Settlement Date (or, in the case of the initial Calculation Period
for such Series, the Issuance Date) to but excluding the succeeding Settlement
Date.
"Certificate" shall mean one of any Series of Investor Certificates, the
Exchangeable Transferor Certificate or, if applicable, any Subordinated
Transferor Certificate.
"Certificate Owner" shall mean, with respect to a Book-Entry Certificate,
the Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such
3
<PAGE>
Clearing Agency (directly or as an indirect participant, in accordance with the
rules of such Clearing Agency).
"Certificate Rate" shall mean with respect to any Series of Certificates,
the percentage interest rate (or formula on the basis of which such interest
rate shall be determined) stated in the applicable Supplement.
"Certificate Register" shall mean the register maintained pursuant to
Section 6.3, providing for the registration of the Certificates and transfers
and exchanges thereof.
"Certificateholder" shall mean the Person in whose name a Certificate is
registered in the Certificate Register.
"Certificateholders' Interest" shall have the meaning specified in
subsection 4.1(b).
"Chemical" shall mean Chemical Bank, a New York banking corporation, and
its successors or assigns.
"Class" shall mean, with respect to any Series, any one of the classes of
Certificates of that Series as specified in the related Supplement.
"Clearing Agency" shall mean each organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
such Clearing Agency.
"Collection Account" shall have the meaning specified in subsection 4.1(a).
"Collections" shall mean all collections and other proceeds received, and
any other collections deemed to have been received, in respect of the
Receivables transferred to the Trust, including Recoveries, together with all
collections and other proceeds received in respect of the Related Security
(including Recoveries) in the form of cash, checks, wire transfers or any other
form of cash payment; provided, however, that Collections shall not include any
Repurchase Payments.
"Collector" shall mean any employee employed by the Master Servicer or any
Servicer to collect payments in respect of Receivables in accordance with the
Policies.
"Corporate Trust Office" shall mean the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of the execution of this Agreement is located at 450
West 33rd Street,
4
<PAGE>
15th Floor, New York, New York 10001 (Attention: Structured Finance Group -- ABS
Team).
"Credit Agreement" shall mean the Credit Agreement, dated as of September
23, 1993, among US Foodservice Inc., various financial institutions from time to
time party thereto, The Chase Manhattan Bank, N.A. and Chemical Bank, as Co-
Agents, and The Chase Manhattan Bank, N.A. as Administrative Agent, as from time
to time amended, modified, supplemented, extended, refinanced, renewed or
replaced (provided any such replacement or refinancing shall be the "Credit
Agreement" only if (a) the administrative agent or agent under such replacement
credit agreement shall have served as either administrative agent, agent or co-
agent under the predecessor Credit Agreement immediately prior to such
replacement and (b) at least 60% of the aggregate commitments under such
replacement credit agreement shall be held by financial institutions which were
party to the predecessor Credit Agreement immediately prior to such replacement
or refinancing).
"Daily Collector" shall mean any Collector who, in accordance with the
Policies of the Servicer employing such Collector, remits Collections on a daily
basis for deposit in a Lockbox Account.
"Daily Report" shall have the meaning specified in subsection 3.4(a).
"Date of Processing" shall mean, with respect to any transaction, the date
on which such transaction is first recorded on the Master Servicer's (or any
Servicer's) computer file (without regard to the effective date of such
recordation).
"Days Past Due" shall mean, with respect to any Receivable, the number of
days after the thirtieth day following the invoice date with respect thereto.
"Defaulted Receivables" shall mean, with respect to any Settlement Period
and with respect to each Originator other than White Swan and, in the case of
White Swan, each White Swan Division, (i) all of such Originator's or such White
Swan Division's Receivables previously transferred to the Trust which are or
should be, in accordance with the Policies, classified as Write-Offs in such
Settlement Period, (ii) all such Receivables previously transferred to the Trust
in respect of which the number of Days Past Due of any portion of any payment is
more than the related Defaulted Receivables Trigger with respect to such
Originator or such White Swan Division and (iii) all such Receivables previously
transferred to the Trust with respect to which the related Obligor is then the
subject of any bankruptcy or similar proceeding.
"Defaulted Receivables Trigger" shall mean, with respect to each Originator
other than White Swan and, in the case of White Swan, each White Swan Division,
the number of Days Past Due which
5
<PAGE>
is set forth
opposite such Originator or such White Swan Division below:
Originator/White Swan Divisions Days Past Due
------------------------------- -------------
F.H. Bevevino & Company, Inc. 61 days
Biggers Brothers, Inc. 6l days
William E. Davis & Sons 31 days
King's Foodservice, Inc. 61 days
Roanoke Restaurant Service, Inc. 61 days
Standard Food Service 61 days
White Swan Mainframe Divisions 61 days
"Deficiency Amount" shall have, with respect to any Series, the meaning
specified in the applicable Supplement.
"Definitive Certificates" shall have the meaning specified in Section 6.10.
"Deposit Date" shall have the meaning specified in subsection 4.1(e).
"Depository" shall mean, with respect to any Series, the Clearing Agency
designated as the "Depository" in the related Supplement.
"Depository Agreement" shall mean, with respect to any Series, an agreement
among the Transferor, the Trustee and a Clearing Agency, in a form reasonably
satisfactory to the Clearing Agency and the Trustee.
"Determination Date" shall mean, with respect to any Settlement Period, the
date which is ten Business Days following the last day of such Settlement
Period.
"Dilutive Credits" shall mean, for any period, the aggregate amount of
discount expense, rebates, refunds, billing error expense, credits against
Receivables and other adjustments or allowances in respect of the Receivables
permitted or incurred during such period by the Master Servicer, any Servicer or
the Transferor but only to the extent the foregoing results in a decrease of the
aggregate Face Amount of the Receivables.
"Distribution Date" shall mean, for any Series (unless the Supplement with
respect to such Series shall specify otherwise), the twenty-fifth day of the
calendar month following the calendar month relating to such Settlement Period,
or if such day is not a Business Day, the next succeeding Business Day.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating Co. or any successor
thereto.
6
<PAGE>
"Early Amortization Event" shall have, with respect to any Series, each
event specified in Section 9.1 of this Agreement and the meaning specified in
any Supplement for such Series.
"Eligible Institution" shall mean a depositary institution or trust company
(which may include the Trustee) organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia; provided,
however, that at all times such depositary institution or trust company is a
member of the FDIC and has a certificate of deposit rating in the highest
investment category granted by S&P (and, if rated by Duff & Phelps at such time,
by Duff & Phelps).
"Eligible Investments" shall mean negotiable instruments or securities or
other investments (a) which, except in the case of demand or time deposits,
investments in money market funds and Repos, are represented by instruments in
bearer or registered form or ownership of which is represented by book entries
by a Clearing Agency or by a Federal Reserve Bank in favor of depository
institutions eligible to have an account with such Federal Reserve Bank who hold
such investments on behalf of their customers and (b) which evidence:
(i) direct obligations of, and obligations fully guaranteed as to full
and timely payment by, the United States of America;
(ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies incorporated under the laws of
the United States of America or any state thereof and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however, that at the time of the Trust's
investment or contractual commitment to invest therein, the short-term
unsecured debt obligations of such depository institution or trust company
shall have credit ratings from each Rating Agency in the highest investment
category granted by such Rating Agency;
(iii) commercial paper having, at the time of the Trust's investment
or contractual commitment to invest therein, a rating from each Rating
Agency in the highest investment category granted by such Rating Agency;
(iv) bankers' acceptances issued by any depository institution or
trust company referred to in (ii) above;
(v) investments in money market funds having the highest investment
category from each Rating Agency;
(vi) time deposits (having maturities of not more than 30 days) or
notes which are payable on demand by an entity the commercial paper of
which has the highest investment category granted by each Rating Agency;
and
7
<PAGE>
(vii) Repos.
"Eligible Master Servicer" shall mean a Person which, at the time of its
appointment as Master Servicer, (i) is legally qualified and has the corporate
power and authority to service the Receivables transferred to the Trust, (ii)
has demonstrated the ability to service a portfolio worth at least $75,000,000
of similar receivables in accordance with high standards of skill and care and
(iii) has a long-term unsecured debt rating of at least BBB- or its equivalent
from Duff & Phelps and either Moody's or S&P.
"Eligible Obligor" shall mean as of any date of determination, each Obligor
in respect of a Receivable:
(a) that is a United States resident;
(b) that is not the United States or any instrumentality thereof;
(c) that is not an Originator or an Affiliate of any Originator;
(d) that is not the subject of any voluntary or involuntary
bankruptcy proceeding; and
(e) with respect to each Obligor which is among the Top Five
Obligors for any Originator, no more than 25% of such Obligor's Receivables
were more than 60 Days Past Due as at the end of the fiscal month
immediately prior to the most recent Settlement Date (commencing with the
Settlement Date in respect of the Settlement Period relating to the
calendar month of December 1994) and as at each day thereafter up to and
including such date of determination.
"Eligible Receivable" shall mean, as of any date of determination, each
Receivable owing by an Eligible Obligor in existence as of such date:
(a) that constitutes an account within the meaning of Section
9-106 of the UCC of the State the law of which governs the perfection of
the interest granted in it or that constitutes chattel paper within the
meaning of Section 9-105 of such UCC or that constitutes a general
intangible (to the extent that such Receivable includes sales or other
similar taxes) within the meaning of Section 9-106 of such UCC;
(b) that is not a Defaulted Receivable and is not, as of its
purchase date, more than 30 Days Past Due;
(c) the goods related to which shall have been delivered to the
relevant Eligible Obligor or services related to which shall have been
performed and the
8
<PAGE>
Receivable shall have been invoiced and such goods or services shall have
been accepted by such Eligible Obligor;
(d) that is denominated and payable only in United States dollars
in the United States;
(e) that arose in the ordinary course of business from the sale
of goods or services of an Originator and in accordance with the Policies
of such Originator;
(f) that does not contravene any applicable law, rule or
regulation or contract between the applicable Originator and such Obligor
and in connection with which the applicable Originator or any party to such
contract is not in violation of any law, rule or regulation;
(g) that arises under an agreement having a maximum repayment
tenor not in excess of 60 days from the invoice date and that is aged from
its invoice date on the basis of a current period of 30 days or fewer;
(h) that is an account receivable representing all or part of the
sales price of merchandise, insurance or services within the meaning of
Section 3(c)(5) of the Investment Company Act of 1940, as amended (other
than the portion thereof, if any, representing sales or other similar
taxes);
(i) that is not a Receivable purchased by an Originator from any
Person;
(j) that is not a Receivable for which the applicable Originator
has established an offsetting specific reserve;
(k) that is not a Receivable in respect of which the applicable
Originator has (i) entered into an arrangement with the Obligor pursuant to
which payment of any portion of the purchase price has been extended or
deferred, whether by means of a promissory note or by any other means, to a
date more than 60 days from the invoice date or (ii) altered the basis of
the aging from the initial due date for payment;
(l) all right, title and interest in which has been validly sold
by the applicable Originator to the Transferor pursuant to the Receivables
Purchase Agreement;
(m) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with, any
Governmental Authority required to be obtained, effected or given by the
Originator in connection with the creation of such Receivable have been
9
<PAGE>
duly obtained, effected or given and are in full force and effect;
(n) with respect to which the Originator is not in default in any
material respect under the terms of the contract, if any, from which such
Receivable arose;
(o) which has been the subject of either (i) a valid transfer and
assignment from the Transferor to the Trust of all the Transferor's right,
title and interest therein (including any proceeds thereof) which results
in the Trust having good title thereto free and clear of all Liens,
encumbrances, charges and security interests, other than Liens permitted
pursuant to subsection 2.7(b) or (ii) the grant of a first priority
perfected security interest therein (and in the proceeds thereof),
effective until the termination of the Trust;
(p) with respect to which the Originator or its designee has duly
given all notices of assignment in form and substance required by, and is
otherwise in compliance in all respects with, applicable law, all such
notices are in full force and effect to permit the legal, valid and
enforceable transfer of such Receivable by the Originator to the Transferor
and such Receivable is not subject to any right of rescission, setoff,
counterclaim or any other defense that is enforceable against the
Transferor, provided that such Receivable shall be an Eligible Receivable
to the extent of the outstanding amount thereof minus the amount of such
rescission, set-off, counterclaim or defense;
(q) that will at all times be the legal, valid and binding
payment obligation of the Obligor thereon, enforceable against such Obligor
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings
in equity or at law);
(r) on the Receivables Purchase Date of which, neither the
Transferor nor the Originator has (i) taken any action that would impair
the rights of the Trust or the Certificateholders therein or (ii) failed to
take any action that was necessary to avoid impairing the rights of the
Trust or the Certificateholders therein;
(s) with respect to which each of the representations and
warranties made by the Originator thereof in the Receivables Purchase
Agreement is true and correct in all material respects and such Originator
was not at the date of sale thereof subject to any proceeding under any
bankruptcy, insolvency, reorganization or similar laws; and
10
<PAGE>
(t) with respect to which, if the Obligor was an Affiliate (as such
term is defined herein but without giving effect to the last sentence of
such definition) of the Originator, the terms and conditions of such
Receivable are substantially as favorable to such Originator as would be
obtainable by such Originator at the time in a comparable arm's length
transaction with a Person other than an Affiliate (as such term is used in
this clause).
"Eligible Segregated Account" shall mean any account established in
accordance with the terms of subsection 3.1(h) (ii).
"Eligible Segregated Account Bank" shall mean any bank or depositary
institution with whom there has been established an Eligible Segregated Account.
"Enhancement" shall mean, with respect to any Series, (i) the funds on
deposit in or credited to any bank account (or subaccount thereof) of the Trust,
(ii) any letter of credit, guaranteed rate agreement, maturity guaranty
facility, tax protection agreement, interest rate swap, currency swap or other
contract, agreement or arrangement, in each case for the benefit of any
Certificateholders of such Series, as designated in the applicable Supplement
and/or (iii) the subordination of one Class of Certificates in a Series to
another Class in such Series.
"Enhancement Provider" shall mean, with respect to any Series, that Person,
if any, designated as such in the applicable Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act of l974, as
amended from time to time.
"Exchange" shall mean either of the procedures described under Section 6.9.
"Exchange Date" shall have the meaning, with respect to any Series issued
pursuant to an Exchange, specified in Section 6.9.
"Exchange Notice" shall have the meaning, with respect to any Series issued
pursuant to an Exchange, specified in Section 6.9.
"Exchangeable Transferor Certificate" shall mean the certificate executed
by the Transferor and authenticated by the Trustee, substantially in the form of
Exhibit A and exchangeable as provided in Section 6.9.
"Existing P&S Agreement" shall have the meaning specified in the recitals
hereto.
"Face Amount" shall mean, with respect to each Receivable at any time, the
dollar amount reflected on the books and records of
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the related Originator as owing by an Obligor at such time for goods or services
provided to such Obligor by such Originator.
"Fractional Undivided Interest" shall mean the fractional undivided
interest in the Certificateholders' Interest evidenced by an Investor
Certificate.
"GAAP" shall mean generally accepted accounting principles in the United
States as in effect from time to time.
"General Opinion" shall mean, with respect to any action, an Opinion of
Counsel to the effect that (i) such action has been duly authorized by all
necessary corporate action on the part of the Master Servicer and the Transferor
and (ii) such action constitutes a legal, valid and binding obligation of the
Master Servicer and the Transferor enforceable in accordance with the terms
thereof, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereinafter
in effect, affecting the enforcement of creditors' rights and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
"Governmental Authority" shall mean the United States of America, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Indebtedness" shall mean, with respect to any Person at any date, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (ii) all obligations of such Person under capital leases, (iii) all
obligations of such Person in respect of acceptances issued or created for the
account by such Person, (iv) the face amount of any indebtedness guaranteed by
such Person pursuant to any written agreement, (v) the amount of exposure
(determined in accordance with standard International Swap Dealers Association,
Inc. documentation) of such Person under any swap arrangement and (vi) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"Independent Public Accountants" shall mean any of (a) Arthur Andersen &
Co., (b) Deloitte & Touche, (c) Coopers & Lybrand, (d) Ernst & Young, (e) KPMG
Peat Marwick, (f) Price Waterhouse and (g) any other nationally recognized
independent public accountants approved by each Rating Agency.
"Ineligible Receivable" shall have the meaning specified in Section 2.5.
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"Initial Closing Date" shall mean (i) with respect to each Initial Servicer
(or Originator), all Receivables originated by such party, all Related Security
with respect to such Receivables and all Lockbox Accounts to which payments on
such Receivables are made, September 23, 1993 and (ii) with respect to each New
Servicer, (or Originator), all Receivables originated by such party, all Related
Security with respect to such Receivables and all Lockbox Accounts to which
payments on such Receivables are made, the date on which such party shall become
a party hereto.
"Initial Invested Amount" shall mean, with respect to any Series, the
amount stated as such in the applicable Supplement.
"Initial Servicers" shall mean the collective reference to each Servicer
which was a party to the Existing P&S Agreement.
"Insolvency Event" shall mean the occurrence of any one or more of the
events specified in paragraphs (a) or (b) of section 9.1.
"Intercreditor Agreement" shall mean the intercreditor agreement dated as
of September 23, 1993 between the Trustee and The Chase Manhattan Bank, N.A., as
collateral agent, as the same may be amended, supplemented or otherwise modified
from time to time.
"Internal Operating Procedures Memorandum" shall mean the Internal
Operating Procedures Memorandum in the form attached hereto as Exhibit J.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Invested Amount" shall have, with respect to any Series, the meaning
specified in the applicable Supplement.
"Invested Percentage" shall have, with respect to any Series, the meaning
specified in the applicable Supplement.
"Investment Earnings" shall have the meaning specified in subsection
4.1(c).
"Investor Certificateholder" shall mean the holder of record of, or the
bearer of, an Investor Certificate.
"Investor Certificates" shall mean the Certificates executed by the
Transferor and authenticated by or on behalf of the Trustee, substantially in
the form attached to the applicable Supplement, but shall not include the
Exchangeable Transferor Certificate, any Subordinated Transferor Certificate or
any other Certificate held by the Transferor.
"Investor Exchange" shall have the meaning specified in Section 6.9.
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"Issuance Date" shall mean, with respect to any Series, the date of
issuance of such Series, as specified in the related Supplement.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, participation interest, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC or comparable
law of any jurisdiction to evidence any of the foregoing; provided, however,
that any assignment permitted by Section 8.2 shall not be deemed to constitute a
Lien.
"Lockbox" shall mean the post office boxes listed on Schedule 3 to which
the Obligors are instructed to remit payments on the Receivables and/or such
other post office boxes as may be established pursuant to subsection 3.1(h).
"Lockbox Account" shall mean the intervening account used by a Lockbox
Processor for deposit of funds received in a Lockbox prior to their transfer to
the Collection Account.
"Lockbox Agreement" shall mean a lockbox agreement in the form set forth as
Exhibit B.
"Lockbox Processor" shall mean the depositary institution or processing
company (which may be the Trustee) which processes payments on the Receivables
sent by the Obligors thereon forwarded to a Lockbox.
"Master Servicer" shall initially mean US Foodservice Inc.. a Delaware
corporation, in its capacity as Master Servicer under this Agreement, and, after
any Service Transfer, the Successor Master Servicer.
"Master Servicer Default" shall have the meaning specified in Section 10.1.
"Monthly Servicing Fee" shall have the meaning specified in Section 3.2.
"Monthly Settlement Statement" shall have the meaning specified in Section
3.4(b).
"Moody's" shall mean Moody's Inventors Service, Inc. or any successor
thereto.
"New Servicers" shall mean the collective reference to each Servicer which
was not a party to the Existing P&S Agreement but which has been added as a
Servicer hereunder.
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"Obligor" shall mean, with respect to any Receivable, the party obligated
to make payments for goods or services in connection therewith.
"Obligor Limit" shall mean, at any time of determination, (i) with respect
to any Eligible Obligor other than a Special Obligor, 2.5% of the Face Amount of
all Receivables in the Trust at such time, and (ii) with respect to any Special
Obligor, the Special Obligor Limit designated in respect thereof. For purposes
of applying the Obligor Limit, all Eligible Obligors that are, to the knowledge
of the Transferor, the Master Servicer or any Originator, Affiliates of each
other shall be deemed to be a single Eligible Obligor.
"Officer's Certificate" shall mean, unless otherwise specified in this
Agreement, a certificate signed by the Chairman of the Board, Vice Chairman of
the Board, President, Chief Financial Officer, any Vice President or Treasurer
of the Master Servicer or the Transferor or, in the case of a Successor Master
Servicer, a certificate signed by a Vice President and the financial controller
(or an officer holding an office with equivalent or more senior
responsibilities) of such Successor Master Servicer.
"Opinion of Counsel" shall mean a written opinion of counsel, who may be
internal counsel to the Transferor or the Master Servicer, designated by the
Transferor or the Master Servicer which is reasonably acceptable to the Trustee.
"Optional Repurchase Percentage" shall mean, with respect to any Series,
the percentage stated as such in the applicable Supplement.
"Originator" shall mean each of the subsidiaries of US Foodservice Inc.
which is a party to the Receivables Purchase Agreement from time to time.
"Outstanding Series" shall mean, at any time, a Series issued pursuant to
an effective Supplement for which the Series Termination Date for such Series
has not occurred.
"Overconcentration Amount" shall mean, for each Eligible Obligor as of any
date of determination, the excess, if any, of the aggregate amount of Eligible
Receivables of such Obligor over the Obligor Limit of such Eligible Obligor.
"Parent Note" shall have the meaning specified in the Receivables Purchase
Agreement.
"Paying Agent" shall mean any paying agent and co-paying agent appointed
pursuant to Section 6.6 and, unless otherwise specified in the related
Supplement of any Series and with respect to such Series, shall initially be
Chemical.
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"Permitted Liens" shall mean, at any time, (i) any Liens for taxes if such
taxes shall not at such time be due and payable or if the Transferor shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto and (ii) Liens on returned goods arising under the Perishable
Agricultural Commodities Act and the Packers and Stockyard Act; provided,
however, Permitted Liens may not in the aggregate materially detract from the
value of the Receivables.
"Person" shall mean any legal person, including any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, governmental entity or other entity of
similar nature.
"Plan" shall mean, at a particular time, any employee benefit plan which is
covered by ERISA.
"Policies" shall mean, with respect to any Originator other than White Swan
and, in the case of White Swan, any White Swan Division, such written credit and
collection policies as they have been applied by such Originator or such White
Swan Division in the ordinary course of its business prior to the date such
Person became an Originator or a White Swan Division (which policies as at the
date hereof are set forth in Exhibit H hereto), in each case as the same may be
amended from time to time in accordance with the Receivables Purchase Agreement.
"Potential Early Amortization Event" shall mean an event which, with the
giving of notice and/or the lapse of time, would constitute an Early
Amortization Event hereunder or under any Supplement.
"Potential Master Servicer Default" shall mean an event which, with the
giving of notice and/or the lapse of time, would constitute a Master Servicer
Default hereunder or under any Supplement.
"Principal Terms" shall have the meaning, with respect to any Series issued
pursuant to an Exchange, specified in Section 6.9.
"Rating Agency" shall mean, with respect to each Outstanding Series, any
rating agency or agencies designated as such in the related Supplement.
"Rating Agency Condition" shall mean, with respect to any action, that each
Rating Agency shall have notified the Transferor, the Master Servicer, any
Agent, each Enhancement Provider and the Trustee in writing that such action
will not result in a reduction or withdrawal of the rating of any Outstanding
Series with respect to which it is a Rating Agency.
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"Receivable" shall mean the indebtedness and payment obligation of an
Obligor to an Originator arising from the sale of goods or services by such
Originator other than White Swan and, in the case of White Swan, by White Swan
and identified on the books and records of White Swan as supplied by the White
Swan Divisions; and shall include the right to payment of any interest, sales
taxes, finance charges, returned check or late charges and other obligations of
such Person with respect thereto. Indebtedness and other obligations arising
from any one transaction, including, without limitation, indebtedness and other
obligations represented by an individual invoice or agreement, shall constitute
a Receivable separate from a Receivable consisting of the indebtedness and other
obligations arising from any other transaction.
"Receivables Purchase Agreement" shall mean the Amended and Restated
Receivables Purchase Agreement, dated as of the date hereof, among US
Foodservice Inc., each of the subsidiaries of US Foodservice Inc. from time to
time party thereto and USFAR Inc., as from time to time amended, supplemented or
otherwise modified.
"Receivables Purchase Date" shall mean, with respect to any Receivable, the
Business Day on which the Transferor purchases such Receivable from an
Originator and transfers such Receivable to the Trust.
"Receivables Record" shall have the meaning ascribed thereto in subsection
2.1(c).
"Record Date" shall mean, with respect to any Series, the date specified as
such in the applicable Supplement.
"Records" means all contracts and other documents, books, records and other
information (including without limitation computer programs, tapes, discs, punch
cards, data processing software, and related property and rights) maintained
with respect to Receivables and the related Obligors.
"Recoveries" shall mean all amounts received (net of out-of-pocket third-
party costs of collection) by the Master Servicer or any Servicer with respect
to Defaulted Receivables.
"Related Documents" shall mean this Agreement, each Supplement with respect
to any Outstanding Series, the Receivables Purchase Agreement, the Intercreditor
Agreement, the Lockbox Agreements, the Certificates and any other documents
delivered pursuant to or in connection therewith.
"Related Security" shall mean, with respect to each Receivable transferred
to the Trust:
(a) all of the applicable Originator's interest in the goods
(including returned goods), if any, relating to the sale which gave rise to
such Receivable;
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(b) all other security interests or Liens and property subject thereto
from time to time purporting to secure payment of such Receivable, whether
pursuant to the contract related to such Receivable or otherwise, together
with all financing statements signed by an Obligor describing any
collateral securing such Receivable;
(c) all guarantees, insurance and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable whether pursuant to the contract related to such Receivable or
otherwise; and
(d) all equipment in all its forms, wherever located, now or hereafter
existing (including all software, data bases, materials, books, records,
magnetic tapes, disks and cassettes) relating to the Receivables and all
other equipment in which information concerning the Receivables is stored,
and all parts thereof and accessions thereto;
"Remote Collector" shall mean any Collector other than a Daily Collector.
"Repos" shall mean repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are backed by
the full faith and credit of the United states of America (collectively,
"Eligible Collateral"), in either case entered into with (i) a depository
institution or trust company (acting as principal) described in clause (ii) of
the definition of Eligible Investments or (ii) any other depository institution
or trust company or any other Person who is a member of the Securities Investor
Protection Corporation so long as such Eligible Collateral (A) has an aggregate
market value as determined by the Master Servicer on a weekly basis of not less
than 107% of the repurchase liability under such agreement, including accrued
interest; (B) is deposited with the Trustee or with a Federal Reserve Bank for
the account of the Trustee or with a bank or trust company that is acting solely
as agent for the Trustee and has a combined net capital and surplus of at least
$250,000,000; (C) is subject to a perfected first priority security interest in
favor of the Trustee; and (D) is free and clear of Liens of third parties;
provided, however, in the event that on any weekly determination date the
aggregate market value of the Eligible Collateral as determined by the Master
Servicer pursuant to clause (A) is less than 107% of the repurchase liability
under such repurchase agreement, including accrued interest (such shortfall
being hereinafter referred to as the "Repo Collateral Shortfall"), the Master
Servicer shall so notify the repurchase obligor, and in the event that, after
the expiration of two Business Days following such valuation, such repurchase
obligor has not deposited with the Trustee additional Eligible Collateral having
an aggregate market value on the date of deposit at least equal to the Repo
Collateral Shortfall, the
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Trustee, at the direction of the Master Servicer, shall promptly sell the
Eligible Collateral relating to such repurchase agreement and invest the
proceeds of such sale that are in excess of the amounts required to be remitted
to the repurchase obligor in Eligible Investments specified by the Master
Servicer pursuant to Section 4.1.
"Repurchase Payments" shall mean the collective reference to payments of
Transfer Deposit Amounts and Servicer Repurchase Amounts.
"Repurchase Terms" shall mean, with respect to any Series, the terms and
conditions under which the Transferor may repurchase such Series pursuant to
Section 12.2, as modified by the related Supplement.
"Required Reserve Percentage" shall have, with respect to any Outstanding
Series, the definition assigned to such term in the related Supplement.
"Requirements of Law" for any Person shall mean the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or Governmental Authority, in each case applicable to or binding upon
such Person or to which such Person is subject, whether federal, state or local
(including, without limitation, usury laws, and Regulation Z and Regulation B of
the Board of Governors of the Federal Reserve System).
"Responsible Officer" shall mean (i) when used with respect to the Trustee,
any officer within the Corporate Trust Office of the Trustee including any
Senior Trust Officer, Trust Officer or Assistant Trust Officer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and (ii) when used with
respect to any other Person in connection with a particular matter, any
authorized officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Revolving Period" shall have, with respect to any Outstanding Series, the
definition assigned to such term in the related Supplement.
"Scheduled Amortization Period" shall have, if applicable with respect to
any Outstanding Series, the definition assigned to such term in the related
Supplement.
"Series" shall mean any series of Investor Certificates, the terms of which
are set forth in a Supplement.
"Series Account" shall mean any deposit, trust, escrow, reserve or similar
account maintained for the benefit of the
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Investor Certificateholders of any Series or Class, as specified in any
Supplement.
"Series Collection Subaccount" shall have the meaning specified in
subsection 4.1(a).
"Series Collection Sub-subaccount" shall have the meaning specified in
subsection 4.1(a).
"Series Non-Principal Collection Sub-subaccount" shall have the meaning
specified in subsection 4.1(a).
"Series Principal Collection Sub-subaccount" shall have the meaning
specified in subsection 4.1(a).
"Series Termination Date" shall mean, with respect to any Series, the date
specified as such in the Supplement relating to such Series.
"Service Transfer" shall have the meaning specified in Section 10.1.
"Servicer" shall have the meaning assigned in the preamble to this
Agreement.
"Servicer Repurchase Amount" shall have the meaning specified in
Section 3.3.
"Servicing Fee" shall have the meaning specified in Section 3.2.
"Servicing Fee Percentage" shall mean 1% per annum.
"Servicing Officer" shall mean any officer of the Master Servicer involved
in, or responsible for, the administration and servicing of the Receivables
whose name appears on a list of servicing officers furnished to the Trustee by
the Master Servicer as such list may from time to time be amended.
"Settlement Date" shall mean, with respect to any Settlement Period, the
day following the related Determination Date.
"Settlement Period" shall mean each fiscal month of the Master Servicer.
The fiscal months through December 1999 of the Master Servicer are set forth on
Schedule 5.
"S&P" shall mean Standard and Poor's Ratings Group (a division of McGraw
Hill Inc.) or any successor thereto.
"Special Obligor" shall mean each Eligible Obligor whose name is set forth
on Schedule 6 which Schedule may be amended from time to time upon the
satisfaction of the Rating Agency Condition.
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"Special Obligor Limit" shall mean, with respect to any Special Obligor,
the percentage set forth opposite the name of such Special Obligor on Schedule
6, which percentage may be amended from time to time in the manner provided in
the definition of "Special Obligor"; provided that, at any time when the Face
Amount of the Receivables of The ARA Group Inc. exceeds the Special Obligor
Limit then in effect for The ARA Group Inc., such Special Obligor Limit may be
increased upon notice by the Master Servicer to the Trustee, up to a percentage
equal to 5.5%, so long as, concurrently with any such increase, the Loss Reserve
Floor (as defined in each applicable Supplement) is increased by an amount equal
to the ARA Percentage Adjustment; provided, further, that such Special Obligor
Limit and Loss Reserve Floor may be subsequently decreased upon notice by the
Master Servicer to the Trustee.
"Subordinated Note" shall have the meaning specified in the Receivables
Purchase Agreement.
"Subordinated Transferor Certificate" shall mean any Certificate issued to
the Transferor pursuant to the Supplement for any Series which represents an
interest in the Trust Assets which is subordinated to the Investor Certificates
of such Series.
"Successor Master Servicer" shall have the meaning specified in subsection
10.2(a).
"Supplement shall mean, with respect to any Series, a supplement to this
Agreement complying with the terms of Section 6.9, executed in conjunction with
the issuance of any Series and substantially in the form of Exhibit E.
"Target Receivables Amount" shall mean, with respect to any Outstanding
Series, the amount specified in the related Supplement.
"Tax Opinion" shall mean, with respect to any action, an opinion of counsel
of one or more law firms which are not unacceptable to the Trustee to the effect
that, for federal income tax and Pennsylvania income tax purposes, (i) such
action will not adversely affect the characterization as debt or as an interest
in a partnership (other than a partnership taxable as a corporation), as the
case may be, of any Investor Certificates not retained by the Transferor of any
Outstanding Series or Class, (ii) such action will not cause or constitute a
sale, exchange or other disposition by the Transferor or the Trust of the Trust
Assets, or by the Investor Certificateholders of such Certificateholders'
Certificates of any Outstanding Series or Class and (iii) in the case of
subsection 6.9(b), the Investor Certificates of the new Series which are not
retained by the Transferor will be characterized as debt or as an interest in a
partnership (other than a partnership taxable as a corporation).
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"Termination Notice" shall have the meaning specified in Section 10.1.
"Top Five Obligors" shall mean, with respect to any Originator, the five
Obligors with the greatest aggregate Face Amount of Receivables generated by
such Originators.
"Transfer Agent and Registrar" shall have the meaning specified in Section
6.3 and shall initially be Chemical.
"Transfer Deposit Amount" shall have the meaning specified in subsection
2.5(b).
"Transfer Deposit Date" shall have the meaning specified in subsection
2.5(b).
"Transferred Agreement" shall have the meaning assigned in subsection
2.1(b).
"Transferor" shall mean USFAR Inc., a Delaware corporation.
"Transferor Amount" shall mean, for any date of determination, an amount
equal to (i) the Aggregate Receivables Amount on such date minus (ii) the
Aggregate Allocated Receivables Amount on such date, but in no event less than
zero.
"Transferor Collection Subaccount" shall have the meaning specified in
subsection 4.1(a).
"Transferor Exchange" shall have the meaning specified in subsection
6.9(b).
"Transferor Interest" shall have the meaning specified in subsection
4.1(b).
"Transferor's Percentage" shall mean, with respect to Collections, (i) 100%
minus (ii) the Aggregate Invested Percentage applicable to such Collections, but
in no event less than zero.
"Trust" shall mean the USFAR Master Trust created by this Agreement.
"Trust Assets" shall have the meaning specified in Section 2.1.
"Trust Termination Date" shall have the meaning specified in subsection
12.1(a).
"Trustee" shall mean the institution executing this Agreement as trustee,
or its successor in interest, or any successor trustee appointed as herein
provided.
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"UCC" shall mean the Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.
"Waiver Percentage" shall mean, with respect to any Series, the percentage
so designated in the Supplement relating to such Series.
"White Swan" shall mean White Swan, Inc.
"White Swan Divisions" shall mean the following operating divisions of
White Swan, the Receivables of which are sold to the Transferor pursuant to the
Receivables Purchase Agreement: William E. Davis & Sons, Standard Food Service
and each White Swan Mainframe Division; provided that "White Swan Divisions"
shall (i) exclude any such division which has been terminated as a "White Swan
Division" and (ii) include any additional division of White Swan which has been
added as a "White Swan Division", in each case, in accordance with the
Receivables Purchase Agreement.
"White Swan Mainframe Divisions" shall mean the collective reference to the
following operating divisions of White Swan: White Swan-Austin, White Swan-
Dallas, White Swan-Lubbock and White Swan-Lakeland.
"Write-Offs" shall mean, for any period, with respect to the Receivables
originated by any Originator, the aggregate amount of such Receivables that are
written off or reserved for during such period as uncollectible in accordance
with the Policies of such Originator.
Section 1.2 Other Definitional Provisions. (a) All terms defined in
this Agreement or in any Supplement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under GAAP, the definitions contained herein shall
control.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Section, Subsection,
Schedule and Exhibit references contained in this Agreement are references to
Sections, Subsections, Schedules and Exhibits in or to this Agreement unless
otherwise specified.
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(d) The definitions contained in Section 1.1 are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1 Conveyance of Receivables.
(a) By execution of this Agreement, the Transferor does hereby
transfer, assign, set over and otherwise convey to the Trustee for the benefit
of the Certificateholders, and does hereby grant a first priority perfected
security interest to the Trustee for the benefit of the Certificateholders to
secure the obligations of the Transferor hereunder, including any obligation to
repay the Aggregate Invested Amount, and all amounts payable pursuant to the
Certificates, without recourse (except as specifically provided herein), all of
its right, title and interest in, to and under:
(i) all Receivables owned by the Transferor at the close of business
on the first Initial Closing Date and all Receivables thereafter acquired
by the Transferor from time to time until the Trust Termination Date;
(ii) all Collections and all monies due or to become due and all
amounts received with respect thereto and all proceeds (including, without
limitation, whatever is received upon the sale, exchange, collection or
other disposition of the foregoing and all "proceeds" as defined in Section
9-306 of the UCC as in effect in the State of New York) thereof, including
all Recoveries relating thereto;
(iii) the Related Security; and
(iv) all rights (including rescission, replevin or reclamation)
relating to any Receivable transferred to the Trust or arising therefrom.
(b) The Transferor hereby transfers, assigns, sets over and otherwise
conveys to the Trustee for the benefit of the Certificateholders, and grants to
the Trustee, for the benefit of the Certificateholders, a first priority
perfected security interest in all its right, title and interest in, to and
under the following: the Receivables Purchase Agreement, including (i) all
rights of the Transferor to receive monies due and to become due under or
pursuant to such agreement, whether payable as fees, expenses, costs or
otherwise, (ii) all rights of the Transferor to receive proceeds of any
insurance, indemnity,
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warranty or guaranty with respect to such agreement, including without
limitation, the proceeds of any surety bond on employees, including Collectors,
with respect to the collection and processing of payments with respect to the
Receivables, (iii) claims of the Transferor for damages arising out of or for
breach of or default under such agreement, (iv) the right of the Transferor to
amend, waive or terminate such agreement, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder and (v) all other
rights, remedies, powers, privileges and claims of the Transferor under or in
connection with such agreement (whether arising pursuant to such agreement or
otherwise available to the Transferor at law or in equity), including the rights
of the Transferor to enforce such agreement and to give or withhold any and all
consents, requests, notices, directions, approvals, extensions or waivers under
or in connection therewith (all of the foregoing, the "Transferred Agreement").
(c) In addition, to secure the obligations of the Transferor hereunder
and all amounts payable pursuant to the Certificates, the Transferor hereby
grants to the Trustee for the benefit of the Certificateholders a first priority
perfected security interest in all right, title and interest of the Transferor
in, to and under the following, whether now owned or hereafter acquired:
(i) all the following (the "Accounts"):
(A) the Collection Account, each Eligible Segregated Account
and each Lockbox Account, all funds and other evidences of
payment held therein and all certificates and instruments, if
any, from time to time representing or evidencing any of such
Accounts or any funds and other evidences of payment held
therein;
(B) any operating account or other accounts of the
Transferor, all funds held therein and all certificates and
instruments, if any, from time to time representing or evidencing
any such account or any funds held therein;
(C) all Eligible Investments and all certificates and
instruments from time to time representing or evidencing the
Eligible Investments;
(D) all notes, certificates of deposit and other instruments
from time to time hereafter delivered to, or otherwise possessed
by, the Trustee for and on behalf of the Transferor in
substitution for or in addition to any of the then existing
Accounts; and
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(E) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any and all of the
then existing Accounts; and
(ii) all proceeds of or payments in respect of any and all of the
foregoing (including proceeds that constitute property of the types
described in paragraph (i) above and including Collections) and, to the
extent not otherwise included, all payments under insurance (whether or not
the Trustee is the loss payee in respect thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the Trust Assets.
Such property described in the foregoing clauses (a) through (c), together with
all Eligible Investments and all monies on deposit in the Collection Account and
any other bank account or accounts maintained for the benefit of any
Certificateholders and all monies available under any Enhancement to be provided
by any Enhancement Provider for any Series for payment to Certificateholders
shall constitute the assets of the Trust (the "Trust Assets").
Notwithstanding the assignment of the Transferred Agreement set forth
above, the Transferor does not hereby assign or delegate any of its duties or
obligations under the Receivables Purchase Agreement to the Trust and the Trust
does not accept such duties or obligations, and the Transferor shall continue to
have the right and the obligation to purchase Receivables from the Originators
thereunder from time to time. The foregoing transfer, assignment, set-over and
conveyance does not constitute and is not intended to result in a creation or an
assumption by the Trust, the Trustee or any Investor Certificate-holder of any
obligation of the Master Servicer, the Transferor, any Originator or any other
Person in connection with the Receivables or under any agreement or instrument
relating thereto, including, without limitation, any obligation to any Obligors.
In connection with such transfer, the Transferor agrees, on or prior
to the Initial Closing Date and at all times thereafter, to record and file, at
its own expense, any financing statements (and continuation statements with
respect to such financing statements when applicable) with respect to the
Receivables now existing and hereafter created meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect the transfer and assignment of the Receivables to the Trust, and to
deliver a file-stamped copy of such financing statement or other evidence of
such filing to the Trustee on or prior to the date of issuance of any
Certificates. The Trustee shall be under no obligation whatsoever to file such
financing statement, or a continuation
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statement to such financing statement, or to make any other filing under the UCC
in connection with such transfer. The Trustee shall be entitled to conclusively
rely on the filings made by or on behalf of the Transferor without any
independent investigation.
In connection with such transfer, the Transferor further agrees, at
its own expense, (a) on or prior to the Initial Closing Date with respect to any
Originator, to indicate, or to cause to be indicated, in its computer files (if
any) or other records or books and to cause each of such Originators to indicate
in its records that Receivables have been conveyed to the Transferor or the
Trust, as the case may be, pursuant to the Receivables Purchase Agreement or
this Agreement, respectively, for the benefit of the Certificateholders and (b)
on or prior to the Initial Closing Date with respect to any Originator, and
monthly thereafter (which monthly period shall correspond to the Settlement
Period addressed in the relevant Monthly Settlement Statement) (or, in the event
of the occurrence and continuance of a Potential Early Amortization Event,
weekly, or more frequently if requested by the Trustee), to deliver or cause to
be delivered to the Trustee computer tapes or disks or other electronic media
reasonably acceptable to the Trustee containing a true and complete list of all
Receivables transferred to the Trust specifying for each such Receivable, as of
the immediately preceding Settlement Date, such information as the Trustee may
reasonably require (the "Receivables Record"); provided, however, that until the
Settlement Date following the first full Settlement Period to occur after the
date hereof, the Transferor may deliver or cause to be delivered to the Trustee
in lieu of such Receivables Record a computer file printout (and, to the extent
available, computer tapes or disks) or microfiche list containing a true and
complete list of all Receivables transferred to the Trust specifying for each
such Receivable, as of the date of delivery, (i) the identification or reference
number assigned to such Receivables by the Transferor and (ii) the Face Amount
of such Receivables.
Section 2.2 Acceptance by Trustee. (a) The Trustee hereby
acknowledges its acceptance on behalf of the Trust of all right, title and
interest to the property, now existing and hereafter created, transferred to the
Trust pursuant to Section 2.1 and declares that it shall maintain such right,
title and interest, upon the trust herein set forth, for the benefit of all
Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Agreement, the Transferor
delivered or caused to be delivered to the Trustee the computer file printout or
microfiche list described in the last paragraph of Section 2.1.
(b) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
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Section 2.3 Representations and Warranties of the Transferor Relating
to the Transferor. The Transferor hereby represents and warrants to the Trustee
and the Trust, for the benefit of the holders of Certificates of each
Outstanding Series, (x) as of the Issuance Date of such Series and (y) as of
each Receivables Purchase Date, unless, in either case, otherwise stated in the
Supplement relating to such Series, that:
(a) Organization and Good Standing. The Transferor is a corporation
duly organized and validly existing and in good standing under the laws of
the State of Delaware and has full corporate power, authority and legal
right to own its properties and conduct its business as such properties are
presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement, the Receivables
Purchase Agreement and any Supplement and to execute and deliver to the
Trustee pursuant hereto the Certificates.
(b) Due Qualification. The Transferor is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt
from such requirements), and has obtained all necessary licenses and
approvals in each jurisdiction in which the conduct of its business
requires such qualification except where the failure to so qualify or
obtain licenses or approvals would not render any Receivable unenforceable
by the Transferor or the Trust or would not have a material adverse affect
on the Certificateholders' Interest.
(c) Due Authorization. The execution and delivery of this Agreement
and the Related Documents and the execution and delivery to the Trustee of
the Certificates by the Transferor and the consummation of the transactions
provided for in this Agreement and the Related Documents, have been duly
authorized by the Transferor by all necessary corporate action on the part
of the Transferor. This Agreement and each of the other Related Documents
to which it is a party have been duly executed and delivered by the
Transferor.
(d) Enforceability. This Agreement, each of the Related Documents
then in effect and the Supplement relating to such Series, each constitute
legal, valid and binding obligations of the Transferor enforceable against
the Transferor in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws now
or hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
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(e) No Conflict. The execution and delivery of this Agreement, the
Related Documents and the Certificates, the performance of the transactions
contemplated by this Agreement and the Related Documents and the
fulfillment of the terms hereof by the Transferor, will not (i) conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, any indenture, contract, agreement, mortgage, deed of trust, or
other instrument to which the Transferor is a party or by which it or its
properties are bound or (ii) result in, or require, the creation or
imposition of any Lien upon or with respect to any of the properties now
owned or hereafter acquired by the Transferor other than as specifically
contemplated by this Agreement.
(f) No Violation. The execution and delivery of this Agreement, the
Related Documents executed and delivered on or prior to such Issuance Date
and the Certificates, the performance of the transactions contemplated by
this Agreement or the Related Documents and the fulfillment of the terms
hereof or thereof applicable to the Transferor, will not conflict with or
violate any Requirement of Law applicable to the Transferor.
(g) No Proceedings. There are no proceedings or, to the best
knowledge of the Transferor, investigations, pending or threatened against
the Transferor, before any court, regulatory body, administrative agency,
or other tribunal or governmental instrumentality (i) asserting the
invalidity of this Agreement, any of the Related Documents or the
Certificates, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this Agreement,
the Related Documents or the Certificates, (iii) seeking any determination
or ruling that, in the reasonable judgment of the Transferor, would
materially and adversely affect the performance by the Transferor of its
obligations under this Agreement or the Related Documents, (iv) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of this Agreement, the Related Documents or the
Certificates or (v) which could reasonably be expected to affect adversely
the income tax or franchise tax attributes of the Trust under the United
States federal or any state income or franchise tax systems.
(h) All Consents Required. All filings (except for filings under the
UCC required by this Agreement) with and approvals, authorizations,
consents, orders or other actions of any Person or any Governmental
Authority required in connection with the execution and delivery by the
Transferor of this Agreement, the Related Documents and the Certificates,
the performance by the Transferor of the transactions contemplated by this
Agreement and the Related
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Documents and the fulfillment by the Transferor of the terms hereof or
thereof have been made or obtained and are in full force and effect.
(i) Compliance with Law. All applicable Requirements of Law with
respect to the Transferor, its business and properties and the Receivables
have been complied with in all material respects by the Transferor.
(j) Taxes. The Transferor has filed or caused to be filed all tax
returns which are required to be filed and has paid all taxes shown to be
due and payable on said returns or on any assessments and other
governmental charges made against it or any of its property (other than any
the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity
with GAAP have been provided on its books). The Transferor knows of no
basis for any additional tax assessment for any fiscal year for which
adequate reserves have not been established.
(k) Chief Executive Office. The chief executive office and principal
place of business of the Transferor are located at the address set forth
for the Transferor in Section 13.5 (as such location may be changed from
time to time in accordance with subsection 2.7(o)) and there is no other
such location which may be deemed to be the chief executive office or
principal place of business of the Transferor.
(l) Solvency. The Transferor is, after giving effect to the
transactions contemplated to occur on or prior to such date, Solvent (as
defined in the Receivables Purchase Agreement).
(m) Tradenames, etc. The Transferor has not been known by any legal
name other than its corporate name and the Transferor uses no trade names
other than its actual corporate name.
(n) Change in Business. The Transferor has not engaged in any
business or activity of any kind which would cause it to violate its
agreements set forth in subsection 2.7(h) or 2.7(p).
(o) Use of Proceeds. No proceeds of the issuance of any Certificate
will be used by the Transferor to acquire any security in a transaction
that is subject to Sections 13 and 14 of the Securities Exchange Act of
1934, as amended, or to purchase or carry any margin security in violation
of any applicable law or regulation.
(p) Lockbox Processors and Accounts. The Lockbox Processors are the
only institutions holding any Lockbox
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Accounts for the receipt of payments from Obligors in respect of
Receivables and no Persons other than Obligors have been instructed to make
payments to Lockbox Accounts.
(q) Not an Investment Company. The Transferor is not an "investment
company" or a company controlled by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or is exempt
from all provisions of such act.
(r) ERISA. There are no Plans in respect of which the Transferor is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
(s) Activities in Certain States. Neither the Transferor nor any
Originator (i) is incorporated in or (ii) has its chief executive office in
Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming.
(t) Subsidiaries. The Transferor has no subsidiaries.
The representations and warranties set forth in this Section 2.3 shall
survive the transfer and assignment of the Trust Assets to the Trust. Upon
discovery by the Transferor, the Master Servicer, any Originator or by a
Responsible Officer of the Trustee of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the other parties and to each Agent and each
Enhancement Provider, if any, with respect to all Outstanding Series.
Section 2.4 Representations and Warranties of the Transferor
Relating to the Receivables. The Transferor hereby represents and warrants to
the Trustee and the Trust, for the benefit of the holders of each Series of
Certificates, (x) as of the Issuance Date of such Series, and (y) with respect
to each Receivable transferred to the Trust after such Issuance Date, as of the
related Receivables Purchase Date, unless, in either case, otherwise stated in
the applicable Supplement or unless such representation or warranty expressly
relates only to a prior date, that:
(a) As of the Initial Closing Date with respect to any Originator, the
microfiche or typed or printed list which was delivered by such Originator
pursuant to subsection 3.1(b)(iv) of the Receivables Purchase Agreement set
forth a true and correct listing of the information required to be provided
therein.
(b) Each Receivable existing on the first Initial Closing Date or, in
the case of Receivables transferred to the Trust after the first Initial
Closing Date, on the date that each such Receivable shall have been
transferred to the
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Trust, has been conveyed to the Trust free and clear of any Lien other than
Liens permitted by subsection 2.7(b).
(c) On the first Initial Closing Date, each Receivable transferred to
the Trust that is included in the calculation of the initial Aggregate
Receivables Amount is an Eligible Receivable and, in the case of
Receivables transferred to the Trust after the first Initial Closing Date,
on the date such Receivable shall have been transferred to the Trust, each
such Receivable that is included in the calculation of the Aggregate
Receivables Amount on such date is an Eligible Receivable. Each Receivable
classified as an "Eligible Receivable" by the Transferor in any document or
report delivered hereunder satisfies the requirements of eligibility
contained in the definition of Eligible Receivable.
(d) The Transferor has clearly and unambiguously marked all its
computer records and all its microfiche storage files, if any, regarding
such Receivables as the property of the Trust and shall maintain such
records in a manner such that the Trust shall have a first-priority
perfected security or ownership interest in the Receivables.
The representations and warranties set forth in this Section 2.4 shall
survive the transfer and assignment of the Trust Assets to the Trust. Upon
discovery by the Transferor, the Master Servicer, any Originator or a
Responsible Officer of the Trustee of a breach of any of the representations and
warranties set forth in this Section 2.4, the party discovering such breach
shall give prompt written notice within three Business Days of such discovery to
the other parties.
Section 2.5 Repurchase of Ineligible Receivables.
(a) Repurchase Obligation. In the event (i) any representation or
warranty under subsections 2.4(b) and (c) is not true and correct in any
material respect as of the date specified therein with respect to any Receivable
transferred to the Trust or (ii) there is a breach of any covenant under
subsection 2.7(b) or 2.7(x) with respect to any Receivable and such breach has a
material adverse effect on the Certificateholders' Interest in such Receivable
(which determination shall be made without reference to the availability of any
Enhancement) (any Receivable as to which the conditions specified in any of
clause (i) or (ii) of this subsection 2.5(a) exists is referred to herein as an
"Ineligible Receivable") then, after the earlier to occur of the discovery of
any such event by the Transferor, the Master Servicer or any Servicer or receipt
by the Transferor of written notice of any such event given by the Trustee, the
Master Servicer or any Servicer, the Transferor shall purchase or cause to be
repurchased such Ineligible Receivable on the terms and conditions set forth in
subsection 2.5(b).
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(b) Repurchase of Receivables. Subject to the last sentence of this
subsection 2.5(b), the Transferor shall repurchase, or cause to be repurchased,
each Ineligible Receivable required to be repurchased pursuant to subsection
2.5(a) by depositing in the Collection Account in immediately available funds on
the Business Day (the "Transfer Deposit Date") following the date on which such
repurchase obligation arises an amount equal to the lesser of (x) the amount by
which the Aggregate Target Receivables Amount exceeds the Aggregate Allocated
Receivables Amount (after giving effect to the reduction thereof by the Face
Amount of such Ineligible Receivable) and (y) the aggregate outstanding Face
Amount of each such Ineligible Receivable (the "Transfer Deposit Amount"). Upon
transfer or deposit of the Transfer Deposit Amount, the Trust shall
automatically and without further action be deemed to transfer, assign, set over
and otherwise convey to the Transferor, without recourse, representation or
warranty, all the right, title and interest of the Trust in and to such
Ineligible Receivable, all Collections thereof (including all Recoveries
relating thereto), the Related Security relating thereto and all rights
(including rescission, replevin or reclamation) relating to such Ineligible
Receivable or arising therefrom and all proceeds thereof; and such repurchased
Ineligible Receivable shall be treated by the Trust as collected in full as of
the date on which it was transferred. The Trustee shall execute such documents
and instruments of transfer or assignment and take such other actions as shall
reasonably be requested by the Transferor to effect the conveyance of such
Receivables pursuant to this subsection. Except as otherwise specified in any
Supplement, the obligation of the Transferor to repurchase any Ineligible
Receivable shall constitute the sole remedy respecting the event giving rise to
such obligation available to Investor Certificateholders (or the Trustee on
behalf of Investor Certificateholders).
Section 2.6 Purchase of Investor Certificateholders' Interest in
Trust Portfolio. In the event of any breach of any of the representations and
warranties set forth in Section 2.3, which breach has a material adverse effect
on the interests of the holders of any Outstanding Series (without giving effect
to the availability of any Enhancement), then either the Trustee, at the written
direction of the holders of Investor Certificates evidencing undivided interests
in the Trust aggregating more than 50% of the outstanding principal balance of
such Series, or such holders by notice then given in writing to the Transferor
and the Master Servicer (and to the Trustee if given by the Investor
Certificateholders), may direct the Transferor to purchase such Outstanding
Series and the Transferor shall be obligated to make such purchase on the next
Distribution Date occurring at least five Business Days after receipt of such
notice on the terms and conditions set forth below; provided, however, that no
such purchase shall be required to be made if, by such Distribution Date, the
Master Servicer shall provide the Trustee with an Officer's Certificate to the
effect that the representations and
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warranties contained in Section 2.3 shall be satisfied in all material respects,
and any material adverse effect on the holders of the Outstanding Series caused
thereby shall have been cured.
The Transferor shall deposit into the Collection Account for credit to
the applicable subaccount of the Collection Account on the Business Day
preceding such Distribution Date an amount equal to the purchase price (as
described in the next succeeding sentence) for the Certificateholders' Interest
for each Outstanding Series on such day. The purchase price for any such
purchase will be equal to (i) the Adjusted Invested Amount of each Outstanding
Series on the date on which the purchase is made plus (ii) an amount equal to
all interest accrued but unpaid on such Series up to the Distribution Date on
which the distribution of such deposit is scheduled to be made pursuant to
Section 12.2 plus (iii) any other amount required to be paid in connection
therewith pursuant to any Supplement. Payment of such purchase price into the
Collection Account in immediately available funds shall be considered a payment
of the entire amount, if any, to be distributed to Certificateholders.
Notwithstanding anything to the contrary in this Agreement, the entire amount of
the purchase price deposited in the Collection Account, together with the entire
amount on deposit in each Series Principal Collection Sub-subaccount (in each
case not to exceed the Invested Amount with respect to the applicable Series),
shall be distributed to the Investor Certificateholders on such Distribution
Date pursuant to Section 12.2. If the Trustee or the Investor
Certificateholders give notice directing the Transferor to purchase the
Certificates as provided above, the obligation of the Transferor to purchase the
Certificates pursuant to this Section 2.6 shall constitute the sole remedy
respecting an event of the type specified in the first sentence of this Section
2.6 available to the Investor Certificateholders (or the Trustee on behalf of
the Investor Certificateholders).
Section 2.7 Covenants of the Transferor. During the term of this
Agreement and until all amounts owed by the Transferor pursuant to this
Agreement have been paid, the Transferor hereby covenants that:
(a) Receivables Not to be Evidenced by Promissory Notes. The
Transferor will take no action to cause any Eligible Receivable to be
evidenced by any instrument (other than an instrument which constitutes
chattel paper) (each as defined in the UCC as in effect in the State of New
York) except in connection with its enforcement or collection of a
Receivable, in which event Transferor shall deliver such instrument to the
Trustee as soon as reasonably practicable but in no event more than 30 days
after execution thereof.
(b) Security Interests. Except for the conveyances hereunder, the
Transferor will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur, assume or suffer to exist any Lien on any
Receivable,
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whether now existing or hereafter created, or any interest therein, and the
Transferor shall defend the right, title and interest of the Trust in, to
and under the Receivables, whether now existing or hereafter created,
against all claims of third parties claiming through or under the
Transferor or any Originator; provided, however, that nothing in this
subsection 2.7(b) shall prevent or be deemed to prohibit the Transferor
from suffering to exist upon any of the Receivables any Permitted Liens.
(c) Supplements. Each Supplement hereto relating to a Series shall be
in substantially the form of Exhibit E hereto as of the Issuance Date with
respect to such Series.
(d) Purchase of Receivables. The Transferor shall not purchase any
Receivable other than pursuant to the Receivables Purchase Agreement or
this Agreement.
(e) Delivery of Collections. In the event that the Transferor
receives Collections, the Transferor agrees to pay the Master Servicer or
any Successor Master Servicer all payments received by the Transferor in
respect of the Receivables as soon as practicable after receipt thereof by
the Transferor, but in no event later than one Business Day after the
receipt by the Transferor thereof.
(f) Notice of Liens. The Transferor shall notify the Trustee promptly
after becoming aware of any Lien on any Receivable other than the
conveyances hereunder and Liens permitted to exist pursuant to the proviso
in subsection 2.7(b).
(g) Compliance with Law. The Transferor hereby agrees to comply in
all material respects with all Requirements of Law applicable to the
Transferor.
(h) Activities of the Transferor. The Transferor shall not engage in
any business or activity of any kind or enter into any transaction or
indenture, mortgage, instrument, agreement, contract, lease or other
undertaking which is not directly related to the transactions contemplated
and authorized by this Agreement or the Related Documents. Other than as
contemplated hereunder and under the other Related Documents, the
Transferor engages in no intercompany transactions with any of the
Originators.
(i) Indebtedness. The Transferor shall not create, incur, assume or
suffer to exist any Indebtedness or other liability whatsoever, except (i)
obligations incurred or owing to the Trust under this Agreement or the
Related Documents and (ii) Indebtedness evidenced by the Subordinated Note
or the Parent Note.
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(j) Guarantees. The Transferor shall not become or remain liable,
directly or contingently, in connection with any Indebtedness or other
liability of any other Person, whether by guarantee, endorsement (other
than endorsements of negotiable instruments for deposit or collection in
the ordinary course of business), agreement to purchase or repurchase,
agreement to supply or advance funds, or otherwise.
(k) Investments. The Transferor shall not make or suffer to exist any
loans or advances to, or extend any credit to, or make any investments (by
way of transfer of property, contributions to capital, purchase of stock or
securities or evidences of indebtedness, acquisition of the business or
assets, or otherwise) in, any Person (i) except for purchases of
Receivables pursuant to the terms of the Receivables Purchase Agreement and
investments in Eligible Investments in accordance with the terms of this
Agreement and (ii) except for loans or advances to US Foodservice pursuant
to a demand promissory note and bearing a market rate of interest, provided
that such loans or advances described in this clause (ii) may only be made
at such times that the Transferor may make distributions pursuant to
subsection 2.7(m).
(l) Merger; Sales. The Transferor shall not enter into any
transaction of merger or consolidation, or liquidate or dissolve itself (or
suffer any liquidation or dissolution), or acquire or be acquired by any
Person, or convey, sell, lease or otherwise dispose of any of its property
or business, except as provided for in this Agreement.
(m) Distributions. The Transferor shall not declare or pay, directly
or indirectly, any dividend or make any other distribution (whether in cash
or other property) with respect to the profits, assets or capital of the
Transferor or any Person's interest therein, or purchase, redeem or
otherwise acquire for value any of its capital stock now or hereafter
outstanding, unless at the date of such distribution and after giving
effect thereto, (i) the Transferor shall have fulfilled all conditions
precedent to such distribution set forth in all Supplements and (ii) no
Early Amortization Event, Potential Early Amortization Event, Master
Servicer Default or Potential Master Servicer Default shall exist hereunder
or under any Supplement.
(n) Agreements. The Transferor shall not become a party to, or permit
any of its properties to be bound by, any indenture, mortgage, instrument,
contract, agreement, lease or other undertaking, except this Agreement and
the other Related Documents and leases of office space, equipment or other
facilities for use by the Transferor in its ordinary course of business, or
amend or modify its
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certificate of incorporation, or issue any power of attorney except to the
Trustee, the Master Servicer or any Servicer or amend, supplement, modify
or waive any of the provisions of the Receivables Purchase Agreement or
consent or agree to or suffer to exist or permit any such amendment,
supplement, modification or waiver, except, in any case, if done in
accordance with subsection 13.1(b). The Transferor shall promptly give the
Trustee copies of any notices, reports or certificates given or delivered
to the Transferor under the Receivables Purchase Agreement. The Transferor
agrees to take all action necessary and appropriate to enforce its rights
and claims under the Receivables Purchase Agreement.
(o) Continuous Perfection. The Transferor shall not, and shall ensure
by exercising its rights under the Receivables Purchase Agreement that each
of the Master Servicer and each Servicer shall not, change its name,
identity or structure in any manner which might make any financing or
continuation statement filed hereunder or under the Receivables Purchase
Agreement misleading within the meaning of Section 9-402(7) of the UCC (or
any other then applicable provision of the UCC) unless the Transferor or
the Master Servicer, as applicable, shall have given the Trustee at least
20 days' prior written notice thereof and shall have taken all action prior
to making such change (or made arrangements to take such action
substantially simultaneously with such change if it is impossible to take
such action in advance) necessary or advisable to amend such financing or
continuation statement so that it is not misleading. The Transferor shall
not, and shall ensure by exercising its rights under the Receivables
Purchase Agreement that each of the Master Servicer and each Servicer shall
not, change its chief executive office or change the location of its
principal records concerning the Receivables, the Related Security or the
Collections from the locations specified in Section 2.3(k) hereof or
Section 4.1(q) of the Receivables Purchase Agreement, as applicable, unless
it has given the Trustee at least 20 days' prior written notice of its
intention to do so and has taken such action as is necessary and advisable
to cause the interest of the Trustee in the Receivables and the other Trust
Assets to continue to be perfected with the priority required by this
Agreement. The Transferor shall, and shall ensure by exercising its rights
under the Receivables Purchase Agreement that each of the Master Servicer
and each Servicer shall, at all times maintain its principal executive
office and any other office at which it maintains records relating to the
Receivables and the Related Security within the United States of America.
(p) Separate Corporate Existence. The Transferor shall be operated in
a manner such that it would not be substantively consolidated in the trust
estate of any of its Affiliates and its separate existence would not be
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disregarded in the event of any bankruptcy or insolvency proceeding
involving any such Affiliate; and shall:
(i) Maintain its own deposit account or accounts, separate from
those of any Affiliate, with commercial banking institutions. The
assets of the Transferor will not be diverted to any other Person or
for other than corporate uses of the Transferor, nor will such assets
be commingled with the assets of any Affiliate of the Transferor.
(ii) To the extent that it shares the same officers or other
employees as any of its stockholders or Affiliates, the salaries and
the expenses related to providing benefits to such officers and other
employees shall be fairly allocated among such entities, and each such
entity shall bear its fair share of the salary and benefit costs
associated with all such common officers and employees.
(iii) To the extent that it jointly contracts with any of its
stockholders or Affiliates to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so
doing shall be allocated fairly among such entities, and each such
entity shall bear its fair share of such costs. To the extent that
the Transferor contracts or does business with vendors or service
providers where the goods and services provided are partially for the
benefit of any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit the goods
and services are provided, and each such entity shall bear its fair
share of such costs. All material transactions between the Transferor
and any of its Affiliates shall be only on an arm's-length basis.
(iv) Maintain a principal executive, administrative office and
telephone numbers through which its business is conducted separate
from those of any Affiliate of the Transferor. To the extent that the
Transferor and any of its stockholders or Affiliates have offices in
the same location, there shall be a fair and appropriate allocation of
overhead costs, including rent, among them, and each such entity shall
bear its fair share of such expenses, including rent.
(v) Conduct its affairs strictly in accordance with its
certificate of incorporation and observe all necessary, appropriate
and customary corporate formalities, including, but not limited to,
holding all regular and special stockholders' and directors' meetings
appropriate to authorize all corporate action,
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keeping separate and accurate minutes of its meetings, passing all
resolutions or consents necessary to authorize actions taken or to be
taken, and maintaining accurate and separate books, records and
accounts, including, but not limited to, payroll and intercompany
transaction accounts. The financial statements of the Transferor and
its Affiliates will be prepared in accordance with GAAP in a manner
that will reflect the separate corporate existence of the Transferor
and, except as otherwise contemplated by this Agreement and the other
Related Documents, no Affiliate guarantees the Transferor's
obligations hereunder or advances funds to the Transferor for payment
of the Transferor's expenses. The Transferor shall ensure that all of
its business correspondence is conducted in the Transferor's own name.
The Transferor will act solely in its corporate name and through its
own authorized officers and agents.
(vi) Prevent any Affiliate from being involved in the day-to-day
management of the Transferor and shall ensure that, except as
otherwise contemplated hereunder and under the other Related
Documents, no Affiliate acts as an agent on behalf of the Transferor
and the Transferor does not act as an agent on behalf of any of its
Affiliates.
(vii) Separately manage the Transferor's liabilities from those
of the Master Servicer or any Affiliates of the Master Servicer and
pay its own liabilities, including all administrative expenses, from
its own separate assets, except that the Master Servicer may pay the
organizational expenses of the Transferor.
(viii) Pay from the Transferor's assets all obligations and
indebtedness of any kind incurred by the Transferor. The Transferor
shall (A) pay all its liabilities, (B) not assume the liabilities of
the Master Servicer or any Affiliate of the Master Servicer, and (C)
not guarantee the liabilities of the Master Servicer or any Affiliates
of the Master Servicer. The officers and directors of the Transferor
(as appropriate) shall make decisions with respect to the business and
daily operations of the Transferor independent of and not dictated by
any controlling entity.
(q) Maintenance of Property; Insurance. The Transferor shall keep all
material tangible property useful and necessary in its business in good
working order and condition (normal wear and tear excepted), except to the
extent that the failure to do any of the foregoing with respect to any such
property would not be reasonably likely
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to materially adversely affect the value or usefulness of such property;
maintain with financially sound and reputable insurance companies insurance
on all its property in at least such amounts and against at least such
risks as are usually insured against in the same general area by companies
engaged in the same or a similar business. The Transferor shall defend the
right, title and interest of the Certificateholders in, to and under the
Receivables and the other Trust Assets, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Transferor, the Originators, the Master Servicer or the Servicers. The
Transferor will duly fulfill all material obligations on its part to be
fulfilled under or in connection with each Receivable and will do nothing
to impair the rights of the Certificateholders in such Receivable.
(r) Inspection of Property; Books and Records; Discussions. The
Transferor shall keep proper books of records and account in which full,
true and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to its
business and activities; and permit representatives of the Trustee or any
Agent for any Outstanding Series upon reasonable advance notice to visit
and inspect any of its properties and examine and make copies of and
abstracts from any of its books and records (including, without limitation,
computer tapes and disks) at any reasonable time on any Business Day and as
often as may reasonably be desired and to discuss the business, operations,
properties and financial and other condition of the Transferor with
officers and employees of the Transferor and with its independent certified
public accountants; provided, that the Trustee or such Agent shall notify
the Transferor prior to any contact with such accountants and shall give
the Transferor the opportunity to participate in such discussions.
(s) Hardware; Software; Lockboxes. (i) The Transferor shall, on the
first Initial Closing Date and on any Initial Closing Date thereafter
relating to any Originator, deliver, or cause to be delivered, to the
Trustee licenses, or the Trustee shall otherwise be satisfied with its
ability, to use any computer programs, material tapes, disks, cassettes and
data necessary or advisable to permit the collection of the Receivables by
a servicer without the participation of any such Originator or the
Transferor.
(ii) The Transferor shall, within 60 days of the first Initial
Closing Date and on any Initial Closing Date thereafter relating to any
Originator, deliver to the Trustee one or more confirmations that the
Lockbox Accounts, in the name of the Transferor, have been established in
accordance with the terms of this Agreement and deliver to
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the Trustee an executed Lockbox Agreement from each of the Lockbox
Processors.
(t) Preservation of Corporate Existence. The Transferor (i) shall
preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation and (ii) shall qualify
and remain qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualification would, if not remedied
within 30 days, materially adversely affect the Certificateholders'
Interest hereunder or in the Receivables, or the ability of the Transferor
to perform its obligations hereunder.
(u) Extension or Amendment of Receivables. The Transferor shall not
(other than in accordance with the Policies or with respect to any Dilutive
Credits) extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Receivables related
thereto in any manner which would have a material adverse effect on the
Certificateholders' Interest.
(v) Certain Documentation. The Transferor shall hold for the account
of the Trust (to the extent of its interest therein) any document
evidencing or securing a Receivable, other than instruments (as such term
is used in the applicable UCC), if any, that shall have been delivered to
the Trustee contemporaneously with the conveyance to the Trust hereunder.
Such holding by the Transferor shall be in trust and shall be deemed to be
the holding thereof by the Trustee for purposes of perfecting the Trust's
rights therein as provided in the applicable UCC.
(w) Assessments. The Transferor will promptly pay and discharge all
taxes, assessments, levies and other governmental charges imposed on it
which are reasonably likely to adversely affect any of the Receivables or
the Trust's rights with respect thereto.
(x) Certain Obligors. The Transferor shall ensure that, at all times,
the percentage of the aggregate Face Amounts of all Receivables in the
Trust at such time constituted by the aggregate Face Amounts of all
Receivables as to which the books and records of the Transferor indicate
that the Obligors thereon have billing addresses located in the states of
Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming shall not exceed
30%.
Section 2.8 Additional Originators or White Swan Divisions. The
Transferor shall not, without the prior satisfaction of each of the conditions
precedent set forth in Section 3.4 of the Receivables Purchase Agreement,
consent to the addition of an Originator (or the addition of a White Swan
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Division) pursuant to Section 9.14 of the Receivables Purchase Agreement.
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other Matters Relating to
the Master Servicer. (a) US Foodservice Inc. agrees to act as the Master
Servicer under this Agreement and the Investor Certificateholders by their
acceptance of the Certificates consent to US Foodservice Inc. acting as Master
Servicer. The Master Servicer will have responsibility for the management of
the servicing, managing and receipt of Collections on the Receivables and will
have the authority to make any management decisions relating to the Receivables
to the extent such authority is granted to the Master Servicer under this
Agreement. The Trustee and the Certificateholders shall treat US Foodservice
Inc. as the Master Servicer and may conclusively rely on the instructions,
notices and reports of US Foodservice Inc. as Master Servicer for so long as US
Foodservice Inc. is the Master Servicer. In addition, each Servicer agrees to
act as a Servicer under this Agreement and the Investor Certificateholders by
their acceptance of the Certificates consent to such Servicer acting as
Servicer. Each Servicer will be responsible, as directed by the Master
Servicer, for the servicing and administration of the Receivables originated by
it. The Master Servicer and each Servicer will act in respect of the
Receivables and the other Trust Assets for the benefit of the Trust and will
hold any such Trust Assets in its possession for the benefit of the Trust in
accordance with the terms and conditions of this Agreement and the other Related
Documents. Each of the Transferor and the Trustee hereby appoints the Master
Servicer as its agent to enforce its respective rights and interest in and under
the Receivables and the Related Security.
(b) The Master Servicer shall manage the servicing and administration
of the Receivables, the collection of payments due under the Receivables and
charging off any Receivables as uncollectible, all in accordance with the
Policies. The Master Servicer shall have full power and authority, acting alone
or through any party properly designated by it hereunder, to do any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing and
subject to Section 10.1, the Master Servicer or its designee is hereby
authorized and empowered (i) to instruct the Trustee to make withdrawals from,
and payments to, the Collection Account as set forth in this Agreement, (ii)
unless such power and authority is revoked by the Trustee on account of the
occurrence and continuance of a Master Servicer Default pursuant to Section
10.1, to instruct the Trustee to take any action
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permitted or required under any Enhancement at such time as set forth in this
Agreement or any Supplement, (iii) to execute and deliver, on behalf of the
Trust for the benefit of the Certificateholders, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable Requirements of Law, to commence enforcement
proceedings with respect to such Receivables, (iv) to make any filings, reports,
notices, applications, registrations with, and to seek any consents or
authorizations from the Securities and Exchange Commission and any state
securities authority on behalf of the Trust as may be necessary or advisable to
comply with any federal or state securities or reporting requirements or laws
and (v) to delegate certain of its servicing, collection, enforcement and
administrative duties hereunder with respect to the Receivables to a Servicer
who agrees to conduct such duties in accordance with the Policies; provided,
however, that no such delegation will relieve the Master Servicer of its
liability and responsibility with respect to such duties. Any such delegation
notwithstanding, the Master Servicer shall be jointly and severally liable with
each Servicer for the failure of such Servicer to perform any obligations
imposed upon it or delegated to it, whether expressly by this Agreement or
pursuant to the terms of this Article III. The Trustee agrees that it will
promptly follow the instructions of the Master Servicer with regard to any
Enhancement and shall be fully protected in relying thereon. The Trustee shall
furnish the Master Servicer with any documents necessary or appropriate to carry
out its servicing and administrative duties hereunder; provided that in no event
shall any such documents constitute a delegation of any of the Trustee's duties
hereunder to the Master Servicer.
(c) Neither the Master Servicer nor any Servicer shall, nor shall any
Successor Master Servicer be obligated to, use separate servicing procedures,
offices, employees or accounts for servicing the Receivables transferred to the
Trust from the procedures, offices, employees and accounts used by the Master
Servicer, such Servicer or such Successor Master Servicer, as the case may be,
in connection with servicing other receivables.
(d) During the period commencing 30 days after the first initial
Closing Date and ending on the Trust Termination Date, the Master Servicer and
each Servicer shall maintain reasonable and customary fidelity bond coverage,
naming the Transferor as beneficiary thereof, insuring against losses through
wrongdoing of its officers and employees who are involved in the servicing of
the Receivables, including, without limitation, depositor's forgery and the
proceeds of any such bond coverage shall be directly deposited by the Transferor
into the Collection Account. The Master Servicer and each Servicer shall cause
each sub-servicer engaged by it to maintain similar fidelity bond coverage.
Upon the written request of the Trustee,
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the Master Servicer and each Servicer shall deliver to the Trustee a
certification evidencing the present coverage under such fidelity bond. Subject
to and without limiting the foregoing, the Masher Servicer and each Servicer
agree that they will not cancel or modify in any material manner any fidelity
bond without giving 10 days' prior written notice to the Trustee and each Rating
Agency.
(e) The Master Servicer and each Servicer shall comply with and
perform its servicing obligations with respect to the Receivables in accordance
with the contracts, if any, relating to the Receivables and the Policies, except
insofar as any failure to so comply or perform would not materially and
adversely affect the rights of the Trust, the Trustee or the Investor
Certificateholders hereunder or under the Certificates in any Receivable. In
addition, each of the Master Servicer and the Servicers agree that it shall
carry out its obligations hereunder in a prudent manner, consistent with (i)
customary and usual servicing procedures employed by other institutional
servicers and applicable law and (ii) to the extent not inconsistent with the
foregoing, the degree of care it uses in servicing assets held for its own
account.
(f) Neither the Master Servicer nor any Servicer shall take any action
to cause any Eligible Receivable to be evidenced by any instrument (other than
an instrument which constitutes chattel paper) (each as defined in the UCC as in
effect in the State of New York) except in connection with its enforcement or
collection of a Receivable, in which event the Master Servicer or such Servicer
shall deliver such instrument to the Trustee as soon as reasonably practicable
but in no event more than 30 days after execution thereof. The Master Servicer
or such Servicer shall hold any chattel paper evidencing a Receivable as
custodian for the Trustee.
(g) Within 60 days after the first Initial Closing Date (in the case
of the Initial Servicers) and as of the related Initial Closing Date (in the
case of the New Servicers), the Master Servicer shall have instructed all
Obligors to make all payments in respect of the Receivables to a Lockbox or to a
Collector and such instructions shall thereafter continue to be in full force
and effect. Any payments collected by a Collector shall be deposited (i) in the
case of payments collected by a Daily Collector, into a Lockbox Account on the
day following collection of such payment and (ii) in the case of payments
collected by a Remote Collector, into an Eligible Segregated Account of the
related Originator no less frequently than twice per calendar week; provided
that the aggregate amount of Collections made by Remote Collectors during any
Settlement Period shall not exceed an amount equal to 25% of the aggregate
amount of all Collections made during such Settlement Period. The amounts on
deposit in each Eligible Segregated Account shall be transferred to a Lockbox
Account (x) on any date on which the amount on deposit in such Eligible
Segregated Account exceeds
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$25,000 and (y) in any event, no less frequently than on the same day (as to
each Eligible Segregated Account Bank) of each calendar week (unless, in the
case of this clause (y), on such day there has been a transfer pursuant to
clause (x) within the past six days). All Collections received in a Lockbox
shall, within one Business Day of receipt thereof be deposited in the Lockbox
Account. Except as noted in the first sentence of this clause (g), in the event
that any payments in respect of the Receivables are made directly to the Master
Servicer or any Servicer, including, without limitation, any employees thereof
or independent contractors employed thereby, the Master Servicer or such
Servicer shall, within one Business Day of receipt thereof, deposit such amounts
in a Lockbox or Eligible Segregated Account.
(h) (i) Within 60 days after the first Initial Closing Date (in the
case of the Initial Servicers) and as of the related Initial Closing Date (in
the case of the New Servicers), the Transferor, the Master Servicer, the Trustee
and each Lockbox Processor shall have entered into a Lockbox Agreement, pursuant
to which such Lockbox Processor is irrevocably directed, and such Lockbox
Processor irrevocably agrees, to (i) deposit funds received in the Lockbox
directly into the Lockbox Account and (ii) transfer available funds on deposit
in the Lockbox Account within one Business Day of receipt thereof to the Trustee
for deposit in the Collection Account. Each Lockbox Agreement shall be
substantially in the form of Exhibit B, provided that under no circumstances may
any Lockbox Agreement provide for, without the consent of the Trustee, (i) any
increase in the time between receipt of a payment and remittance of such payment
to the Trustee, (ii) a change in the payment instruction to the Trustee or (iii)
a change in the payment instruction to the Lockbox Processor. A new Lockbox
Account may be designated by the Transferor and the Master Servicer, and the
Trustee shall consent to any such change in the Lockbox Account; provided that
(i) the Trustee shall have received from the Transferor or the Master Servicer
written notice of such change at least 30 days prior to the proposed effective
date of such change and (ii) the Lockbox Processor chosen to maintain such new
Lockbox Account shall have entered into a Lockbox Agreement with the Transferor,
the Master Servicer and the Trustee. The Master Servicer and the Servicers (i)
shall enforce all terms of each Lockbox Agreement against the relevant Lockbox
Processor, (ii) shall monitor, on at least a quarterly basis, the performance of
each Lockbox Processor, and (iii) shall take steps in a prompt and timely manner
to replace any Lockbox Processor which does not substantially comply with the
provisions of the relevant Lockbox Agreement.
(ii) Within 60 days after the date hereof, there shall be established,
either by retitling current bank accounts or establishing new bank accounts, one
or more segregated bank accounts (each, an "Eligible Segregated Account") in the
name of the Transferor, and, in respect of which, each of the following shall
apply: (A) the Transferor shall have given the Eligible Segregated Account Bank
maintaining each such Eligible Segregated
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Account, with a copy to the Trustee, standing irrevocable instructions to
transfer available funds on deposit in such Eligible Segregated Account to a
designated Lockbox Account (x) on any date on which the amount on deposit in
such Eligible Segregated Account exceeds $25,000 and (y) in any event, no less
frequently than on the same day (as to each Eligible Segregated Account Bank) of
each calendar week (unless, in the case of this clause (y), on such day there
has been a transfer pursuant to clause (x) within the past six days); and (B)
each such Eligible Segregated Account Bank shall have executed an
acknowledgement substantially in the form of Exhibit I hereto, prepared by the
Master Servicer or the relevant Servicer, as the case may be, and delivered to
the Trustee, acknowledging the establishment of such Eligible Segregated Account
and its receipt of irrevocable standing instructions as set forth above, subject
solely to modification upon written instructions of the Trustee.
(i) As soon as practicable but in any event not later than the
Business Day following the date of establishment by the Master Servicer that any
of the collected funds received in any of the Lockboxes do not constitute
Collections on account of the Receivables, such monies which do not constitute
such Collections shall be remitted to the Transferor.
(j) All collections received or deposited in the Collection Account as
"Collections" shall be deemed, for purposes of this Agreement, to have been
received or deposited as of the Business Day Received (as defined in the
immediately succeeding sentence). As used herein, the term "Business Day
Received" shall mean (i) if funds are deposited in the Collection Account by
12:00 Noon (New York City time), such day of deposit and (ii) if funds are
deposited in the Collection Account after 12:00 Noon (New York City time), the
Business Day next following such day of deposit.
Section 3.2 Servicing Compensation. As full compensation for its
servicing activities hereunder and reimbursement for its expenses as set forth
in the immediately following paragraph and full compensation for the servicing
activities of the Servicers and reimbursement for their expenses as set forth in
the immediately following paragraph, the Master Servicer shall be entitled to
receive on each Distribution Date for the related Accrual Period prior to the
termination of the Trust pursuant to Section 12.1 a servicing fee (the
"Servicing Fee"). The share of the Servicing Fee allocable to each Outstanding
Series for any Accrual Period shall be an amount equal to the quotient of (w)
the product of (A) the Servicing Fee Percentage and (B) the Allocated
Receivables Amount with respect to such Series on the first day of such Accrual
Period and (C) the number of days in such Accrual Period, divided by (x) 360
(with respect to any such Series, the "Monthly Servicing Fee"); provided,
however, that if on any day US Foodservice Inc. is acting as Master Servicer and
an Early Amortization Event has occurred and is continuing with respect to any
Outstanding
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Series, the Monthly Servicing Fee with respect to such Series shall be deferred
until all amounts due under the Investor Certificates of such Series have been
paid in full. On each Distribution Date, the Servicing Fee payable by the
holder of the Exchangeable Transferor Certificate shall be an amount equal to
the quotient of (y) the product of (A) the Transferor Amount for the first day
of such Accrual Period and (B) the Servicing Fee Percentage and (C) the number
of days in such Accrual Period, divided by (z) 360. In no event shall the
Trust, the Trustee or the Investor Certificateholders be liable for the share of
the Servicing Fee to be paid by the holder of the Exchangeable Transferor
Certificate. The Servicing Fee shall be payable to the Master Servicer solely
pursuant to the terms of, and to the extent amounts are available for payment
under, Article IV.
The Master Servicer's and the Servicers' expenses include the amounts
due to the Trustee pursuant to Section 11.5 and the reasonable fees and
disbursements of independent accountants, and including all other reasonable
fees and expenses of the Trust (including reasonable counsel fees, if any) not
expressly stated herein to be for the account of the Certificateholders;
provided, however, that in no event shall the Master Servicer or any Servicer be
liable for any federal, state or local income or franchise tax, or any interest
or penalties with respect thereto, assessed on the Trust, the Trustee or the
Certificateholders except as expressly provided herein. Notwithstanding anything
to the contrary herein or in any Supplement, in the event that the Master
Servicer fails to pay any amount due to the Trustee pursuant to Section 11.5, or
during an Early Amortization Event the Trustee shall be entitled, in addition to
any other rights it may have under law, to receive directly such amounts owing
to it hereunder from, and in the same order of priority as, the Servicing Fee
before payment to the Master Servicer of any portion thereof; provided, that in
the event the Master Servicer shall have elected to waive its rights to payment
of the Servicing Fee or the Servicing Fee is deferred pursuant to the first
paragraph of this Section 3.2, the Trustee shall nonetheless be entitled to
receive such amounts from payments which would ordinarily be applied to the
payment of the Servicing Fee, in the same order of priority as though such
Servicing Fee were payable. The Master Servicer shall be required to pay
expenses for its own account, and shall not be entitled to any payment therefor
other than the Servicing Fee; provided that the Master Servicer shall not be
required to pay any expenses of, or losses in respect of Receivables collected
by, any Persons engaged by or on behalf of the Master Servicer to collect any
Defaulted Receivables.
Section 3.3 Representations, Warranties and Covenants of the Master
Servicer and Each Servicer. As of (i) the Issuance Date of each Series and (ii)
each Receivables Purchase Date, US Foodservice Inc., as initial Master Servicer,
and each of its subsidiaries, acting as a Servicer at such date, hereby makes,
and any Successor Master Servicer by its
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appointment hereunder shall make, the following representations, warranties and
covenants upon which the Trustee shall be deemed to have relied in accepting the
Receivables in trust and in authenticating the Certificates:
(a) Organization and Good Standing. Such Person is a corporation duly
organized, validly existing and in good standing under the applicable laws
of the jurisdiction of its incorporation, and has full corporate power,
authority and legal right to own its properties and conduct its servicing
business as such properties are presently owned and as such business is
presently conducted, and to execute, deliver and perform its obligations
under this Agreement and the Related Documents to which it is a party and,
in the case of the Master Servicer, under the Credit Agreement.
(b) Due Qualification. Such Person is duly qualified to do business
and is in good standing as a foreign corporation (or is exempt from such
requirements) and has obtained all necessary licenses and approvals in each
jurisdiction in which the servicing of the Receivables as required by this
Agreement requires such qualification except where the failure to so
qualify or obtain licenses or approvals would not have a material adverse
effect upon the Certificateholders' Interest or on its ability to perform
its obligations under this Agreement and the Related Documents to which it
is a party and, in the case of the Master Servicer, under the Credit
Agreement.
(c) Due Authorization. The execution, delivery, and performance of
this Agreement and the Related Documents to which it is a party, and the
consummation of the transactions provided in this Agreement and the Related
Documents to which it is a party, have been duly authorized by all
necessary corporate action on the part of such Person. This Agreement and
each of the Related Documents to which it is a party and, in the case of
the Master Servicer, the Credit Agreement, have been duly executed and
delivered by such Person.
(d) Binding Obligation. This Agreement and the Related Documents to
which it is a party and, in the case of the Master Servicer, the Credit
Agreement, constitute the legal, valid and binding obligations of such
Person, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereinafter in effect, affecting
the enforcement of creditors' rights and except as such enforceability may
be limited by general principles of equity (whether considered in a
proceeding at law or in equity).
(e) No Violation. The execution and delivery of this Agreement and
the Related Documents to which it is a party
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and, in the case of the Master Servicer, of the Credit Agreement, by such
Person, the performance of the transactions contemplated hereby and thereby
and the fulfillment of the terms hereof and thereof applicable to such
Person will not conflict with, violate, result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or
lapse of time or both) a material default under, any Requirement of Law
applicable to such Person or any indenture, contract, agreement, mortgage,
deed of trust, or other instrument to which such Person is a party or by
which it is bound.
(f) No Proceedings. There are no proceedings or, to the best
knowledge of such Person, investigations, pending or threatened against
such Person before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality seeking to prevent the
issuance of the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any Related Documents or, in the case of
the Master Servicer, of the Credit Agreement, seeking any determination or
ruling that, in the reasonable judgment of the such Person, would
materially and adversely affect the performance by such Person of its
obligations under this Agreement or any Related Document to which it is a
party or, in the case of the Master Servicer, under the Credit Agreement,
or seeking any determination or ruling that would materially and adversely
affect the validity or enforceability of this Agreement or any Related
Document or, in the case of the Master Servicer, of the Credit Agreement.
(g) Compliance with Requirements of Law. Such Person shall duly
satisfy all obligations on its part to be fulfilled under or in connection
with the Receivables and the Related Security, will maintain in effect all
qualifications required under Requirements of Law in order to permit proper
servicing of the Receivables and the Related Security and will comply in
all material respects with all Requirements of Law in connection with
servicing the Receivables and the Related Security the failure to comply
with which would have a material adverse effect on the Certificateholders.
(h) No Rescission or Cancellation. Such Person shall not permit any
rescission or cancellation of a Receivable except (i) in accordance with
the Policies or (ii) as ordered by a court of competent jurisdiction or
other Governmental Authority. Such Person shall not permit the Trust
Assets to be commingled with its own assets or any other assets controlled
by such Person.
(i) Protection of Certificateholders' Rights. Such Person shall take
no action, nor omit to take any action, which would substantially impair
the rights of
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Certificateholders in the Receivables or the Related Security, nor shall it
reschedule, revise or defer payments due on any Receivable or the Related
Security except in accordance with the Policies.
(j) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or any governmental body or official
required in connection with the execution and delivery by such Person of
this Agreement and the Related Documents to which it is a party and, in the
case of the Master Servicer, of the Credit Agreement, the performance by
such Person of the transactions contemplated by this Agreement and the
Related Documents to which it is a party and, in the case of the Master
Servicer, by the Credit Agreement, and the fulfillment by such Person of
the terms hereof and thereof, have been obtained.
(k) Security interest. Except for the conveyance hereunder and
Permitted Liens, such Person will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any
Lien on any Receivable sold and assigned to the Trust, whether now existing
or hereafter created, or any interest therein, and such Person shall defend
the right, title and interest of the Trustee in, to and under any
Receivable sold and assigned to the Trust, whether now existing or
hereafter created, against all claims of third parties claiming through or
under the Master Servicer, any Servicer or the Transferor.
(l) Location of Records. Such Person (i) will not move outside the
location of its chief executive office or outside of the location of any of
the offices where it keeps its records with respect to the Receivables, in
each case as initially set forth on Schedule 4, without 20 days' prior
written notice to the Trustee and (ii) will promptly take all actions
reasonably required (including but not limited to all filings and other
acts necessary or advisable under the UCC of each relevant jurisdiction) in
order to continue the first priority perfected ownership or security
interest of the Trust in all Receivables now owned or hereafter created
subject to subsection 2.7(b). Such Person will give the Trustee prompt
notice of a change of the location of its chief executive office or any
office where it keeps its records with respect to the Receivables within
the city or county where such office is located.
(m) Modification of Systems. Such Person agrees, promptly after the
replacement or any material modification of any computer, automation or
other operating systems (in respect of hardware or software) used to
provide such Person's services or to make any calculations or reports
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hereunder, to give notice of any such replacement or modification to the
Trustee.
In the event of any breach by the Master Servicer or any Servicer of
any of the representations, warranties or covenants contained in subsection
3.1(e) or subsection 3.3(g), (h), (i) or (k) which materially and adversely
affects the rights of the Trust or the Certificateholders' Interest or the
collectibility of any Receivable (which determination shall be made without
regard to the availability of any Enhancement) then, upon the earlier to occur
of the discovery of such event by any such Person, or receipt by the Master
Servicer of written notice of such event given by any Agent or the Trustee (in
each case whether such breach relates to such Person or to another Person bound
by such representations, warranties and covenants), the Master Servicer and the
Servicers, jointly and severally, shall purchase such Receivable from the Trust
pursuant to the next succeeding paragraph.
The Master Servicer and the Servicers, jointly and severally, shall
purchase such Receivable by depositing into the Collection Account in
immediately available funds on the Business Day following the date on which the
obligation to make such purchase arises pursuant to this Section 3.3, an amount
equal to the outstanding Face Amount of such Receivable (the "Servicer
Repurchase Amount"). Upon each such purchase by the Master Servicer or any
Servicer, the Trust shall automatically and without further action be deemed to
transfer, assign, and set over, and otherwise convey to the Master Servicer or
such Servicer, without recourse, representation or warranty, all right, title
and interest of the Trust in and to such Receivable, all Collections thereof
(including all Recoveries relating thereto), the Related Security relating
thereto and all rights (including rescission, replevin or reclamation) relating
to such Ineligible Receivable or arising therefrom and all proceeds thereof; and
such Receivable shall be treated by the Trust as collected in full as of the
date on which it was transferred. The Trustee shall execute such documents and
instruments of transfer or assignment and take such other actions as shall be
reasonably requested by the Master Servicer to effect the conveyance of any
Receivable pursuant to this Section. The obligation of the Master Servicer and
the Servicers to purchase any such Receivables shall constitute the sole remedy
respecting any breach of the representations, warranties and covenants set forth
in subsection 3.1(e), 3.3(g), (h), (i) or (k) with respect to such Receivables
available to Certificateholders or the Trustee on behalf of Certificateholders.
Section 3.4 Reports and Records for the Trustee; Bank Account
Statements. (a) Daily Reports. Unless otherwise specified in the Supplement
with respect to any Series, on each Business Day and with respect to each
Outstanding Series, the Master Servicer shall submit to the Trustee a written
report substantially in the form attached to the related Supplement of
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each such Series (the "Daily Report") setting forth (i) total Collections
received since the preceding Business Day, (ii) any Repurchase Payments made
since the preceding Business Day, (iii) the Allocated Receivables Amount, the
Target Receivables Amount and Invested Percentage with respect to such Series
and (iv) any direction to the Trustee with respect to allocation of Collections
pursuant to subsection 4.1(h), (v) if such day is a Distribution Date with
respect to such Series, the sum of all amounts payable to the Investor
Certificateholders on such Distribution Date and the aggregate amount of the
Servicing Fee to be paid to the Master Servicer on account of such Series on
such Distribution Date and (vi) such other information as may be specified in
the Supplement with respect to any Series. The Master Servicer shall complete
such Daily Report and deliver it by telecopier to the Trustee and each Agent by
2:00 p.m. (New York City time) on the next Business Day with respect to the
Receivables since the date of the last Daily Report. The Master Servicer shall
or shall cause each Servicer to, at all times, maintain its computer files with
respect to the Receivables in such a manner so that the Receivables may be
specifically identified and shall make available to the Trustee at the office of
the Master Servicer on any Business Day any computer programs necessary to make
such identification.
(b) Monthly Master Servicer's Certificate and Receivables Record. (i)
Unless otherwise specified in the Supplement with respect to any Series, on each
Determination Date with respect to the preceding Settlement Period and the next
succeeding Calculation Period, and with respect to each Outstanding Series, the
Master Servicer shall forward, as provided in Section 13.5, to the Trustee, each
Agent, the Paying Agent and each Rating Agency a certificate of a Servicing
Officer substantially in the form attached to the related Supplement of each
such Series (a "Monthly Settlement Statement") setting forth some or all of the
following, as applicable, (i) the aggregate amount of Collections received
during the preceding Settlement Period, (ii) the aggregate amount of Collections
and Repurchase Payments allocated to the Series Non-Principal Collection Sub-
subaccount and the Series Principal Collection Sub-subaccount with respect to
each Outstanding Series and the aggregate amount of Recoveries received during
such Settlement Period, (iii) the Face Amount of the Receivables as of the last
day of the immediately preceding Settlement Period, (iv) the aggregate balance
due on each Receivable that became a Defaulted Receivable during the Settlement
Period immediately preceding such date, (v) the amount of Repurchase Payments
due and received with respect to such Settlement Period, (vi) delinquency
information, (vii) the aggregate amount, if any, of the reduction in the amount
of Enhancement on such Settlement Date, (viii) the monthly statement required by
the applicable Supplement, (ix) whether an Early Amortization Event is deemed to
have occurred with respect to such Settlement Period and (x) such other
information as may be specified in the Supplement with respect to any
Outstanding Series. Such certificate shall also include a certification that
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to the best of such officer's knowledge, the Master Servicer has performed in
all material respects all of its obligations under this Agreement throughout
such preceding Settlement Period, or, if there has been a material default in
the performance of any such obligation, specifying each such default known to
such officer and the nature and status thereof.
(ii) The Master Servicer shall deliver, or cause to be delivered, to
the Trustee on or prior to the Initial Closing Date with respect to any
Originator, and monthly thereafter (which monthly period shall correspond to the
Settlement Period addressed in the relevant Monthly Settlement Statement) (or,
in the event of the occurrence and continuance of a Potential Early Amortization
Event, weekly, or more frequently if requested by the Trustee), the Receivables
Record with respect to each Originator.
Section 3.5 Quarterly Master Servicer's Certificate. Within 60 days
after the end of each fiscal quarter, the Master Servicer will deliver to the
Trustee, each Agent, each Rating Agency and each Enhancement Provider, an
Officer's Certificate substantially in the form of Exhibit D stating that (a) a
review of the activities of the Master Servicer during the preceding fiscal
quarter (or in the case of the first Officer's Certificate issued after the
first Initial Closing Date, such Initial Closing Date) and of its performance
under this Agreement was made under the supervision of the officer signing such
certificate and (b) to the best of such officer's knowledge, based on such
review, the Master Servicer has performed in all material respects its
obligations under this Agreement throughout the period covered by such
certificate, or, if there has been a material default in the performance of any
such obligation, specifying each such default known to such officer and the
nature and status thereof and the remedies being pursued in respect thereof. A
copy of such certificate may be obtained by any Investor Certificateholder by a
request in writing to the Trustee addressed to the Corporate Trust Office.
Section 3.6 Annual Independent Public Accountants' Servicing
Report. On the third and the sixth monthly anniversaries of the date hereof
and, unless required more frequently by any Rating Agency, on each six-month
anniversary thereafter, the Master Servicer shall, at its own expense, cause a
firm of Independent Public Accountants (who may also render other services to
the Master Servicer or the Transferor) to furnish a report to the Trustee, the
Master Servicer, each Agent, each Rating Agency and each Enhancement Provider
with respect to the preceding three or six fiscal months, as the case may be,
containing the information prescribed in Exhibit F, which report shall conclude
that, upon such firm's examination of certain documents and records relating to
the servicing of the Receivables and the reporting requirements with respect
thereto, such servicing and reporting requirements have been conducted in
compliance with this Agreement and the other Related Documents,
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except for (i) such exceptions as such firm shall believe to be immaterial and
(ii) such other exceptions as shall be set forth in such report. A copy of such
report may be obtained by any Certificateholder by a request in writing to the
Trustee addressed to the Corporate Trust Office.
Section 3.7 Tax Treatment. The Transferor has structured this
Agreement and the Investor Certificates with the intention that the Investor
Certificates will qualify under applicable federal, state, local and foreign tax
law as indebtedness. The Transferor, the Master Servicer, the holder of the
Exchangeable Transferor Certificate, the holder of the Subordinated Transferor
Certificate, each Investor Certificateholder, and each Certificate Owner, agree
to treat and to take no action inconsistent with the treatment of the Investor
Certificates (or beneficial interest therein) as indebtedness for purposes of
federal, state, local and foreign income or franchise taxes and any other tax
imposed on or measured by income. Each Certificateholder by acceptance of a
Certificate and each Certificate Owner, by acquisition of a beneficial interest
in a Certificate, agree to be bound by the provisions of this Section 3.7.
Furthermore, the Trustee shall treat the Trust as a security device only, and
shall not file tax returns or obtain an employer identification number on behalf
of the Trust.
Section 3.8 Notices to Initial Master Servicer. In the event that
US Foodservice Inc. is no longer acting as Master Servicer, any Successor Master
Servicer appointed pursuant to Section 10.2 shall deliver or make available to
US Foodservice Inc. each certificate and report required to be prepared,
forwarded or delivered thereafter pursuant to Sections 3.4, 3.5 and 3.6.
Section 3.9 Adjustments. (a) If the Master Servicer makes or
grants a Dilutive Credit with respect to any Receivable, then, in any such case,
the aggregate Face Amount of Receivables used to calculate the Aggregate
Receivables Amount will be automatically reduced by the principal amount of such
Dilutive Credit. In addition, the aggregate Face Amount of Receivables used to
calculate the Aggregate Receivables Amount will be similarly reduced by the
principal amount of any Receivable which (i) was discovered as having been
fraudulently created, (ii) with respect to which the covenant contained in
subsection 2.7(b) or the representation and warranty contained in subsection
2.4(b) was breached or (iii) which is not an Eligible Receivable because the
condition set forth in clause (o) of the definition of Eligible Receivable with
respect to Liens is not met. Any adjustment required to be made pursuant to
either of the preceding two sentences in the aggregate Face Amount of
Receivables used in the calculation of the Aggregate Receivables Amount shall be
made on the Business Day on which such adjustment obligation arises or is
identified, as the case may be. In either case, if as a result of such a
reduction, the Aggregate Receivables Amount is less than the Aggregate Target
Receivables
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Amount, the Transferor shall be required to pay into the Series Principal
Collection Sub-subaccount with respect to each Outstanding Series in immediately
available funds within one Business Day of such determination such Series' pro
rata share of the amount by which the Aggregate Target Receivables Amount
exceeds the Aggregate Receivables Amount.
(b) If in respect of a Collection of a Receivable the Master Servicer
deposits into the Collection Account (i) a check received in respect of such
Collection which check is not honored for any reason or (ii) an amount that is
less than or more than the actual amount of such Collection, the Master Servicer
shall, in lieu of making a reconciling withdrawal or deposit, as the case may
be, adjust the amount subsequently deposited into the Collection Account to
reflect such dishonored check or mistake. Any Receivable in respect of which a
dishonored check is received shall be deemed not to have been paid; provided
that no adjustments made pursuant to this subsection 3.9(b) will change any
amount previously reported pursuant to subsection 3.4(b).
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
THE FOLLOWING PORTION OF THIS ARTICLE IV
IS APPLICABLE TO ALL SERIES.
Section 4.1 Establishment of Collection Accounts; Certain
Allocations. (a) The Trustee, for the benefit of the Investor
Certificateholders, shall cause to be established and maintained in the name of
the Trustee on behalf of the Trust with an Eligible Institution or with the
trust department of the Trustee, a segregated trust account (the "Collection
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Investor Certificateholders. The
Collection Account shall be divided into individual subaccounts for each
Outstanding Series (each, respectively, a "Series Collection Subaccount" and,
collectively, the "Series Collection subaccounts") and for the Transferor (the
"Transferor Collection Subaccount"). For administrative purposes only, the
Trustee shall establish or cause to be established for each Series, so long as
such Series is an Outstanding Series, sub-subaccounts of the Series Collection
Subaccount with respect to such Series (respectively, a "Series Principal
Collection Sub-subaccount" and a "Series Non-Principal Collection Sub-
subaccount" and, collectively, the "Series Collection Sub-subaccounts").
(b) Authority of the Trustee in Respect of the Collection Account and
Certificateholders' Interests Therein. The Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Collection
Account and in all
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proceeds thereof. The Collection Account shall be under the sole dominion and
control of the Trustee for the benefit of the Investor Certificateholders and,
with respect to the Transferor Collection Subaccount, the Transferor, and, to
the extent set forth in any Supplement, any Enhancement Provider specified
therein. If, at any time, the Master Servicer has actual notice or knowledge
that the institution holding the Collection Account is other than the trust
department of Chemical or has ceased to be an Eligible Institution, the Master
Servicer shall direct the Trustee to establish within 30 days a substitute
account therefor with an Eligible Institution, transfer any cash and/or any
Eligible Investments to such new account and from the date any such substitute
accounts are established, such account shall be the Collection Account. Neither
the Transferor nor the Master Servicer, nor any person or entity claiming by,
through or under the Transferor or Master Servicer, shall have any right, title
or interest in, or any right to withdraw any amount from, the Collection
Account, except to the extent expressly provided under this Agreement or under
any Supplement. Pursuant to the authority granted to the Master Servicer in
subsection 3.1(b), the Master Servicer shall have the power, revocable by the
Trustee, to instruct the Trustee to make withdrawals from and payments to the
Collection Account for the purposes of carrying out the Master Servicer's or
Trustee's duties hereunder.
Each Series of Investor Certificates shall represent fractional
undivided interests in the Trust, including the benefits of any Enhancement to
be provided by an Enhancement Provider or otherwise with respect to such Series
as indicated in the Supplement relating to such Series and the right to receive
Collections, Repurchase Payments and other amounts at the times and in the
amounts specified in this Article IV to be deposited in the Collection Account
and any other accounts maintained for the benefit of the Investor
Certificateholders or paid to the Investor Certificateholders (with respect to
each outstanding Series, the "Certificateholders' Interest" and, collectively as
to all Outstanding Series, the "Aggregate Certificateholders' Interest"). The
Exchangeable Transferor Certificate shall represent the interest in the Trust
not represented by any Series of Investor Certificates or Subordinated
Transferor Certificates then outstanding, including the right to receive
Collections, Repurchase Payments and other amounts at the times and in the
amounts specified in this Article IV to be paid to the Transferor (the
"Transferor Interest"); provided, however, that such certificate shall not
represent any interest in the Collection Account and any other accounts
maintained for the benefit of the Investor Certificateholders or the benefits of
any Enhancement to be provided by an Enhancement Provider or otherwise with
respect to any Series, except as specifically provided in this Article IV.
(c) Administration of the Collection Account. At the direction of the
Transferor, funds on deposit in the Collection Account available for investment,
shall be invested by the
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Trustee in Eligible Investments. All such Eligible Investments shall be held by
the Trustee for the benefit of the Investor Certificateholders. Any funds on
deposit in the Collection Account to be so invested shall be invested solely in
Eligible Investments. Amounts on deposit in each Series Non-Principal
Collection Sub-subaccount shall, if applicable, be invested in Eligible
Investments that will mature, or that are payable or redeemable upon demand of
the holder thereof, so that such funds will be available on or before one
Business Day prior to the next succeeding Distribution Date. None of such
Eligible Investments shall be disposed of prior to the maturity date with
respect thereto. If applicable, all interest and investment earnings (net of
losses and investment expenses) on funds deposited in a Series Non-Principal
Collection Sub-subaccount shall be deposited in such sub-subaccount on or prior
to each Determination Date. Amounts on deposit in the Series Principal
Collection Sub-subaccounts shall be invested in Eligible Investments that
mature, or that are payable or redeemable upon demand of the holder thereof, so
that such funds will be available not later than the Business Day following the
date of investment or such later date as may be specified in any Supplement.
The Trustee, or its nominee or custodian, shall maintain possession of the
negotiable instruments or securities, if any, evidencing the Eligible
Investments described in clause (a) of the definition thereof from the time of
purchase thereof until the time of sale or maturity. Any earnings (net of
losses and investment expenses) (the "Investment Earnings") on such invested
funds in a Series Principal Collection Sub-subaccount will be deposited in the
related Series Non-Principal Collection Sub-subaccount.
(d) Identification of Accounts. Schedule 2, which is hereby
incorporated into and made a part of this Agreement, identifies the Collection
Account by setting forth the account number of such account, the account
designation of such account and the name of the institution with which such
account has been established.
(e) Daily Collections. (i) As promptly as possible after the Date of
Processing thereof, but in no event later than one Business Day following such
Date of Processing (the "Deposit Date"), the Master Servicer shall transfer, or
cause to be transferred, all Collections and Repurchase Payments on deposit in
the form of available funds in the Lockbox Account (or, within 60 days of the
first Initial Closing Date, any other account) directly to the Collection
Account.
(ii) On each Deposit Date, the Master Servicer shall direct the
Trustee to transfer from amounts deposited into the Collection Account pursuant
to paragraph (e)(i) above, an amount equal to the product of (x) the Invested
Percentage for each Outstanding Series and (y) the Aggregate Daily Collections
to the respective Series Collection Subaccount for each such Series.
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(iii) On each Deposit Date, after giving effect to the transfers
described in subsection 4.1(e)(ii), the Master Servicer shall direct the Trustee
to allocate funds transferred pursuant to subsection 4.1(e)(ii) to the Series
Collection Subaccount of each Outstanding Series to the Series Non-Principal
Collection Sub-subaccount and the Series Principal Collection Sub-subaccount of
each such Series in accordance with the related Supplement for such Series.
(iv) On each Deposit Date, the Master Servicer shall direct the
Trustee to transfer to the Transferor Collection Subaccount the remaining funds,
if any, on deposit in the Collection Account on such date after giving effect to
transfers to be made pursuant to clause (ii) above.
(f) Allocations for the Exchangeable Transferor Certificate. Until
the occurrence and continuance of an Early Amortization Event, on each Business
Day and, after the occurrence and continuance of an Early Amortization Event and
until the Trust Termination Date, on each Distribution Date, the Master
Servicer, at the direction of the Transferor, shall direct the Trustee to pay to
the holder of the Exchangeable Transferor Certificate the amount on deposit in
the Transferor Collection Subaccount.
(g) Set-Off. (i) in the event the Transferor shall fail to make a
payment as provided in this Agreement or any Supplement, the Master Servicer or
the Trustee may set off and apply any amounts otherwise payable to the
Transferor on account of such obligation. The Transferor hereby waives demand,
notice or declaration of such set-off and application.
(ii) In the event the Master Servicer shall fail to make a payment as
provided in this Agreement or any Supplement, the Trustee may set off and apply
any amounts otherwise payable to the Master Servicer on account of such
obligation. The Master Servicer hereby waives demand, notice or declaration of
such set-off and application.
(h) Allocation and Application of Funds. The Master Servicer will
apply all Collections and Repurchase Payments with respect to the Receivables
for each Accrual Period as described in this Article IV and in the Supplement
with respect to each Outstanding Series. The Master Servicer shall direct the
Trustee to pay Collections to the holder of the Exchangeable Transferor
Certificate to the extent such Collections are allocated to the Exchangeable
Transferor Certificate under subsection 4.1(f) and as otherwise provided in
Article IV. Notwithstanding anything in this Agreement or any Supplement to the
contrary, to the extent that the Trustee receives any Daily Report prior to 2:00
p.m. (New York City time) on any Business Day, the Trustee shall make any
applications of funds required thereby on the same Business Day and otherwise on
the next succeeding Business Day.
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THE REMAINDER OF ARTICLE IV SHALL BE SPECIFIED IN THE SUPPLEMENT WITH
RESPECT TO EACH SERIES. SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE
SERIES RELATING TO THE SUPPLEMENT IN WHICH SUCH REMAINDER APPEARS.
ARTICLE V
ARTICLE V IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates. The Investor Certificates of each
Series, any Class thereof and any Subordinated Transferor Certificates related
thereto shall be in fully registered form (the "Certificates") and shall be
substantially in the form of the exhibits with respect thereto attached to the
applicable Supplement. The Exchangeable Transferor Certificate shall be
substantially in the form of Exhibit A. The Certificates and the Exchangeable
Transferor Certificates shall, upon issue, be executed and delivered by the
Transferor to the Trustee for authentication and redelivery as provided in
Section 6.2. The Investor Certificates shall be issued in minimum denominations
of $1,000,000 and in integral multiples of $100,000 in excess thereof unless
otherwise specified in any Supplement for any Series and Class. Unless
specified in any Supplement for any Series, the Investor Certificates shall be
issued upon initial issuance as a single certificate in an original principal
amount equal to the Initial Invested Amount with respect to such Series. Each
Subordinated Transferor Certificate, if any, issued under any Supplement shall
be a single certificate and shall represent a subordinated interest in the Trust
Assets allocated to such Series, as designated in the related Supplement. The
Exchangeable Transferor Certificate shall also be a single certificate and shall
represent the entire Transferor Interest. Each Certificate shall be executed by
manual or facsimile signature on behalf of the Transferor by its President,
Treasurer or any Vice President. Certificates bearing the manual or facsimile
signature of the individual who was, at the time when such signature was
affixed, authorized to sign on behalf of the Transferor or the Trustee shall not
be rendered invalid, notwithstanding that such individual has ceased to be so
authorized prior to or on the date of the authentication and delivery of such
Certificates or does not hold such office at the date of such Certificates. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein executed by or on
behalf of the
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Trustee by the manual signature of a duly authorized signatory, and such
certificate upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 6.2 Authentication of Certificates. Contemporaneously with
the initial sale, assignment and transfer of the Receivables, whether now
existing or hereafter created, and the other Trust Assets to the Trust, the
Trustee shall authenticate and deliver the initial Series of the Investor
Certificates that is issued upon original issuance, upon the written order of
the Transferor in a form reasonably satisfactory to the Trustee, to the holders
of the initial Series of Investor Certificates, against payment to the
Transferor of the Initial Invested Amount. The Trustee shall authenticate and
deliver the Exchangeable Transferor Certificate to the Transferor simultaneously
with its delivery of the initial Series of Investor Certificates. The
Certificates shall be duly authenticated by or on behalf of the Trustee, in the
case of the Investor Certificates in authorized denominations equal to (in the
aggregate) the Initial Invested Amount, in the case of any Subordinated
Transferor Certificate, in a denomination equal to the subordinated interest in
the Trust Assets allocated to such Certificate in accordance with the terms of
the related Supplement and, in the case of the Exchangeable Transferor
Certificate, in a denomination equal to the remaining Transferor Interest from
time to time, and together evidencing the entire ownership of the Trust. Upon
an Exchange as provided in Section 6.9 and the satisfaction of certain other
conditions specified therein, the Trustee shall authenticate and deliver the
Certificates of additional Series (with the designation provided in the
applicable Supplement) (or, if provided in any Supplement, the additional
Investor Certificates of an existing Series), upon the written order of the
Transferor, to the Persons designated in such Supplement. Upon the order of the
Transferor, the Investor Certificates of any Series shall be duly authenticated
by or on behalf of the Trustee, in authorized denominations equal to (in the
aggregate) the Initial Invested Amount of such Series of Investor Certificates.
Section 6.3 Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at the office or agency to be maintained
by a transfer agent and registrar (which may be the Trustee) (the "Transfer
Agent and Registrar") in accordance with the provisions of Section 11.16 a
register (the "Certificate Register") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Transfer Agent and Registrar shall
provide for the registration of the Investor Certificates and of transfers and
exchanges of the Investor Certificates as herein provided. The Transferor
hereby appoints Chemical as Transfer Agent and Registrar for the purpose of
registering the Investor Certificates and transfers and exchanges of the
Investor Certificates as herein provided.
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Chemical shall be permitted to resign as Transfer Agent and Registrar upon 30
days' written notice to the Transferor, the Trustee and the Master Servicer;
provided, however, that such resignation shall not be effective and Chemical
shall continue to perform its duties as Transfer Agent and Registrar until the
Trust has appointed a successor Transfer Agent and Registrar reasonably
acceptable to the Transferor. If specified in such related Supplement, so long
as the Certificates relating to such Supplement are outstanding, the Transferor
shall maintain a co-transfer agent and co-registrar in New York City or any
other city designated in such Supplement and any reference in this Agreement to
the Transfer Agent and Registrar shall include any co-transfer agent and co-
registrar unless the context requires otherwise.
The Master Servicer hereby agrees to provide the Trustee from time to
time sufficient funds, on a timely basis and in accordance with and subject to
Section 11.5, for the payment of any reasonable compensation payable to the
Registrar and Transfer Agent for their services under this Section 6.3. The
Trustee hereby agrees that, upon the receipt of such funds from the Master
Servicer, it shall pay the Registrar and Transfer Agent such amounts.
Upon surrender for registration of transfer of any Investor
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose, the Transferor shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Investor Certificates in authorized denominations
of the same Series representing like aggregate Fractional Undivided Interests.
At the option of an Investor Certificateholder, Investor Certificates
may be exchanged for other Investor Certificates of the same Series in
authorized denominations of like aggregate Fractional Undivided Interests, upon
surrender of the Investor Certificates to be exchanged at any such office or
agency of the Transfer Agent and Registrar maintained for such purpose.
Whenever any Investor Certificates of any Series are so surrendered
for exchange, the Transferor shall execute, and the Trustee shall authenticate
and (unless the Transfer Agent and Registrar is different than the Trustee, in
which case the Transfer Agent and Registrar shall) deliver, the Investor
Certificates of such Series which the Certificateholder making the exchange is
entitled to receive. Every Investor Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form satisfactory to the Trustee and the Transfer
Agent and Registrar duly executed by the Certificateholder thereof or his
attorney duly authorized in writing.
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No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Transfer Agent and Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Investor
Certificates.
All Investor Certificates surrendered for registration of transfer and
exchange shall be cancelled and disposed of in a manner satisfactory to the
Trustee and the Transferor. The Trustee shall cancel and destroy each
Certificate in global form upon its exchange in full for Definitive Certificates
and shall deliver a certificate of destruction to the Transferor.
The Transferor shall execute and deliver to the Trustee or the
Transfer Agent and Registrar Certificates in such amounts and at such times as
are necessary to enable the Trustee and the, Transfer Agent and Registrar to
fulfill their respective responsibilities under this Agreement and the
Certificates.
(b) The Transfer Agent and Registrar will maintain at its expense in
the Borough of Manhattan, The City of New York and, subject to subsection
6.3(a), if specified in the related Supplement for any Series, any other city
designated in such Supplement, an office or offices or agency or agencies where
Investor Certificates may be surrendered for registration or transfer or
exchange.
(c) Unless otherwise stated in any related Supplements, registration
of transfer of Certificates containing a legend relating to restrictions on
transfer of such Certificates (which legend shall be set forth in the Supplement
relating to such investor Certificates) shall be effected only if the conditions
set forth in the related Supplement are complied with.
Certificates issued upon registration of transfer of, or in exchange
for, Certificates bearing the legend referred to above shall also bear such
legend unless the Transferor, the Master Servicer, the Trustee and the Transfer
Agent and Registrar receive an Opinion of Counsel satisfactory to each of them,
to the effect that such legend may be removed.
Whenever a Certificate containing the legend set forth in the related
Supplement is presented to the Transfer Agent and Registrar for registration of
transfer, the Transfer Agent and Registrar shall promptly seek instructions from
the Master Servicer regarding such transfer. The Transfer Agent and Registrar
shall be entitled to receive written instructions signed by a Servicing Officer
prior to registering any such transfer. The Master Servicer hereby agrees to
indemnify the Transfer Agent and Registrar and the Trustee and to hold each of
them harmless against any loss, liability or expense incurred without negligence
or bad faith on their part arising out of or
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in connection with actions taken or omitted by them in reliance on any such
written instructions furnished pursuant to this subsection 6.3(c).
(d) As a condition to the transfer of any interest in any Subordinated
Certificate, the Transferor shall have received from the holder of such
Subordinated Certificate a Tax Opinion.
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Transfer Agent and
Registrar, or the Transfer Agent and Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b) there
is delivered to the Transfer Agent and Registrar and the Trustee such security
or indemnity as may be required by them to save each of them harmless (which, in
the case of any investment-grade institutional Investor Certificateholder, may
be in the form of an unsecured agreement of indemnity), then, the Transferor
shall execute and the Trustee shall authenticate and deliver (in compliance with
applicable law), in exchange for or in lieu of any such mutilated, destroyed,
lost or stolen Certificate, a new Certificate of like tenor and aggregate
Fractional Undivided Interest. In connection with the issuance of any new
Certificate under this Section 6.4, the Trustee or the Transfer Agent and
Registrar may require the payment by the Certificateholder of a sum sufficient
to cover any tax or other governmental expenses (including the fees and expenses
of the Trustee and Transfer Agent and Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section 6.4 shall constitute
complete and indefeasible evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 6.5 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Paying Agent, the
Transfer Agent and Registrar and any agent of any of them may treat the Person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Article IV and for all other
purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer
Agent and Registrar nor any agent of any of them shall be affected by any notice
to the contrary. Notwithstanding the foregoing provisions of this Section 6.5,
in determining whether the holders of the requisite Fractional Undivided
Interests have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Certificates owned by the Transferor, the Master
Servicer or any affiliate thereof (as defined in Rule 405 under the Securities
Act of 1933), shall be disregarded and deemed not to be outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Certificates which a Responsible Officer of the Trustee actually knows to be so
owned shall be so disregarded.
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Section 6.6 Appointment of Paying Agent. The Paying Agent shall make
distributions to Investor Certificateholders from the Collection Account (and/or
any other account or accounts maintained for the benefit of Certificateholders
as specified in the related Supplement for any Series) pursuant to Articles IV
and V. The Trustee may revoke such power and remove the Paying Agent if the
Trustee determines in its sole discretion that the Paying Agent shall have
failed to perform its obligations under this Agreement in any material respect.
Unless otherwise specified in the related Supplement for any Series and with
respect to such Series, the Paying Agent shall initially be Chemical and any co-
paying agent chosen by Chemical. Each Paying Agent shall have a combined
capital and surplus of at least $50,000,000 and, if Chemical is not the Paying
Agent, shall have a long-term unsecured debt rating of at least A or its
equivalent by Duff & Phelps, Moody's and S&P. The Paying Agent shall be
permitted to resign upon 30 days' written notice to the Trustee. In the event
that the Paying Agent shall so resign, the Trustee shall appoint a successor to
act as Paying Agent. The Trustee shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Trustee to execute and deliver to the
Trustee an instrument in which such successor Paying Agent or additional Paying
Agent shall agree with the Trustee that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Investor Certificateholders in trust for the benefit of the
Investor Certificateholders entitled thereto until such sums shall be paid to
such Certificateholders. The Paying Agent shall return all unclaimed funds to
the Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Trustee. The provisions of Sections
11.1, 11.2, 11.3 and 11.5 shall apply to the Trustee also in its role as Paying
Agent, for so long as the Trustee shall act as Paying Agent. Any reference in
this Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
The Master Servicer hereby agrees to provide the Trustee from time to
time sufficient funds, on a timely basis and in accordance with and subject to
Section 11.5, for the payment of any reasonable compensation payable to the
Paying Agent for its services under this Section 6.6. The Trustee hereby agrees
that, upon the receipt of such funds from the Master Servicer, it shall pay the
Paying Agent such amounts.
If specified in the related Supplement for any Series, so long as the
Investor Certificates of such Series are outstanding, the Trustee shall maintain
a co-paying agent in New York City.
Section 6.7 Access to List of Certificateholders' Names and
Addresses. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Master Servicer or the Paying Agent, within five
Business Days after
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receipt by the Trustee of a request therefor from the Master Servicer or the
Paying Agent, respectively, in writing, of the names and addresses of the
Investor Certificateholders. If three or more Investor Certificateholders of
record or any Investor Certificateholder of any Series or a group of Investor
Certificateholders of record representing Fractional Undivided Interests
aggregating not less than 10% (the "Applicants") apply in writing to the
Trustee, and such application states that the Applicants desire to communicate
with other Investor Certificateholders of any Series with respect to their
rights under this Agreement or under the Investor Certificates and is
accompanied by a copy of the communication which such Applicants propose to
transmit, then the Trustee, after having been adequately indemnified by such
Applicants for its costs and expenses, shall transmit or shall cause the
Transfer Agent and Registrar to transmit, such communication to the
Certificateholders reasonably promptly after the receipt of such application.
Such list shall be as of a date no more than 45 days prior to the date of
receipt of such Applicants' request.
Every Certificateholder, by receiving and holding a Certificate,
agrees with the Trustee that neither the Trustee, the Transfer Agent and
Registrar, nor any of their respective agents shall be held accountable by
reason of the disclosure or mailing of any such information as to the names and
addresses of the Certificateholders hereunder, regardless of the sources from
which such information was derived.
As soon as practicable following each Record Date the Trustee shall
provide to the Paying Agent or its designee, a list of Certificateholders in
such form as the Paying Agent may reasonably request.
Section 6.8 Authenticating Agent. (a) The Trustee may appoint one
or more authenticating agents with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. Whenever reference is made in this Agreement to
the authentication of Certificates by the Trustee or the Trustee's certificate
of authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an authenticating agent and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent.
Each authenticating agent must be acceptable to the Transferor.
(b) Any institution succeeding to the corporate trust business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
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(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee. The Trustee may at any time terminate the
agency of an authenticating agent by giving notice of termination to such
authenticating agent. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an authenticating agent shall cease to be
acceptable to the Trustee, the Trustee promptly may appoint a successor
authenticating agent. Any successor authenticating agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
authenticating agent. No successor authenticating agent shall be appointed
unless acceptable to the Trustee. Upon the receipt by the Trustee of any such
notice of resignation and upon the giving of any such notice of termination by
the Trustee, the Trustee shall immediately give notice of such resignation or
termination to the Transferor.
(d) The Master Servicer hereby agrees to provide the Trustee from time
to time sufficient funds, on a timely basis and in accordance with and subject
to Section 11.5, for the payment of any reasonable compensation payable to each
authenticating agent for its services under this Section 6.8. The Trustee
hereby agrees that, upon the receipt of such funds from the Master Servicer, it
shall pay each authenticating agent such amounts.
(e) The provisions of Sections 11.1, 11.2, 11.3 and 11.5 shall be
applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
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This is one of the Certificates described in the Pooling and Servicing
Agreement.
____________________________________
____________________________________
as Authenticating Agent
for the Trustee
By______________________
Authorized Officer
Section 6.9 Tender of Exchangeable Transferor Certificate. (a)
Upon any Exchange, the Trustee shall issue to the Transferor under Section 6.1
for execution and redelivery to the Trustee for authentication under Section 6.2
one or more new Series of Investor Certificates and, if applicable, one or more
new Series of Subordinated Transferor Certificates. Any such Series of Investor
Certificates and Subordinated Transferor Certificates shall be substantially in
the form specified in the applicable Supplement and each shall bear, upon its
face, the designation for such Series to which each such certificate belongs so
selected by the Transferor. Except as specified in any Supplement for a related
Series, all Investor Certificates of any Series shall be equally and ratably
entitled as provided herein to the benefits hereof without preference, priority
or distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Agreement and
the applicable Supplement.
(b) The Transferor may tender the Exchangeable Transferor Certificate
to the Trustee in exchange for (i) one or more newly issued Series of Investor
Certificates and, if applicable, a newly issued Subordinated Transferor
Certificate and (ii) a reissued Exchangeable Transferor Certificate (any such
tender a "Transferor Exchange"). In addition, to the extent permitted for any
Series of Investor Certificates as specified in the related Supplement, the
Investor Certificateholders of such Series may tender their Certificates and the
Transferor may tender the Exchangeable Transferor Certificate and any Investor
or Subordinated Transferor Certificate or Certificate to the Trustee pursuant to
the terms and conditions set forth in such Supplement in exchange for (i) one or
more newly issued Series of Investor Certificates, (ii) if applicable, one or
more Series of Subordinated Transferor Certificates, and (iii) a reissued
Exchangeable Transferor Certificate (an "Investor Exchange"). The Transferor
Exchange and Investor Exchange are referred to collectively herein as an
"Exchange". The Transferor may perform an Exchange by notifying the Trustee, in
writing at least three days in advance (an "Exchange Notice") of the date upon
which the Exchange is to occur (an "Exchange Date"). Any Exchange Notice shall
state the designation of any Series to be issued on the Exchange Date and, with
respect to each such Series: (a) its
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Initial Invested Amount (or the method for calculating such Initial Invested
Amount), if any, which, in the aggregate, at any time, may not be greater than
the current principal amount of the Exchangeable Transferor Certificate, if
any, at such time (or in the case of an Investor Exchange, the sum of the
Invested Amount of the Series of Investor Certificates to be exchanged plus the
current principal amount of the Subordinated Transferor Certificates, if any, to
be exchanged plus the current principal amount of the Exchangeable Transferor
Certificate) and (b) its Certificate Rate (or the method for allocating interest
payments or other cash flow to such Series), if any. On the Exchange Date, the
Trustee shall only authenticate and deliver any such Series upon delivery to it
of the following: (a) a Supplement executed by the Transferor and specifying the
Principal Terms of such Series, (b) the applicable Enhancement, if any, (c) a
Tax Opinion, (d) a General Opinion, (e) an agreement, if any, pursuant to which
the Enhancement Provider agrees to provide Enhancement, (f) written confirmation
from each Rating Agency that the Exchange will not result in the Rating Agency's
reducing or withdrawing its rating on any then outstanding Series rated by it,
(g) an Officer's Certificate that the Exchange will not result in the occurrence
of a Potential Early Amortization Event or an Early Amortization Event with
respect to any Outstanding Series and (h) the existing Exchangeable Transferor
Certificate or applicable Investor Certificates and Subordinated Transferor
Certificates, as the case may be. Upon the delivery of the items listed in
clauses (a) through (h) above, the Trustee shall cancel the existing
Exchangeable Transferor Certificate, the applicable Investor Certificates and
Subordinated Transferor Certificates, as the case may be, and issue, as provided
above, such Series of Investor Certificates, such Series of Subordinated
Transferor Certificate, if applicable, and a new Exchangeable Transferor
Certificate, dated the Exchange Date. There is no limit to the number of
Exchanges that the Transferor may perform under this Agreement. If the
Transferor shall, on any Exchange Date, retain any Investor Certificates issued
on such Exchange Date, it shall, prior to transferring any such Certificates to
another Person, obtain a Tax Opinion with respect to such Certificates.
(c) In conjunction with an Exchange, the parties hereto shall execute
a Supplement, which shall define, with respect to any newly issued Series: (i)
its name or designation, (ii) its initial principal amount (or method for
calculating such amount), (iii) its coupon rate (or formula for the
determination thereof), (iv) the interest payment date or dates and the date or
dates from which interest shall accrue, (v) the method for allocating
Collections and Repurchase Payments to Certificateholders, (vi) the names of any
accounts to be used by such Series and the terms governing the operation of any
such accounts, (vii) the issuer and terms of a letter of credit or other form of
Enhancement, if any, with respect thereto, (viii) the terms on which the
certificates of such Series may be repurchased by the Transferor or may be
remarketed to other investors, (ix) the Series Termination Date, (x) any deposit
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account maintained for the benefit of Certificateholders, (xi) the number of
classes of such Series, and if more than one class, the rights and priorities of
each such class, (xii) the rights of the holder of the Exchangeable Transferor
Certificate that have been transferred to the holders of such Series, (xiii) the
designation of any Series Accounts and the terms governing the operation of any
such Series Accounts and (xiv) other relevant terms (all such terms, the
"Principal Terms" of such Series).
Section 6.10 Book-Entry Certificates. If specified in any related
Supplement, the Investor Certificates, or any portion thereof, upon original
issuance, shall be issued in the form of one or more typewritten Certificates
representing the Book-Entry Certificates, to be delivered to the Depository.
Such Investor Certificates shall initially be registered on the Certificate
Register in the name of the nominee of such Clearing Agency, and no Certificate
Owner will receive a definitive certificate representing such Certificate
Owner's interest in the Investor Certificates, except as provided in Section
6.12. Unless and until definitive, fully registered Investor Certificates
("Definitive Certificates") have been issued to beneficial owners pursuant to
Section 6.12:
(a) the provisions of this Section 6.10 shall be in full force and
effect;
(b) the Transferor, the Master Servicer and the Trustee may deal with
each Clearing Agency for all purposes (including the making of
distributions on the Investor Certificates) as the authorized
representative of the related Clearing Agency Participants and the
Certificate Owners;
(c) to the extent that the provisions of this Section 6.10 conflict
with any other provisions of this Agreement, the provisions of this Section
6.10 shall control; and
(d) the rights of Certificate Owners shall be exercised only through
the Clearing Agency and the related Clearing Agency Participants and shall
be limited to those established by law and agreements between such related
Certificate Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Depository Agreement, the Initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and
interest on the Investor Certificates to such Clearing Agency Participants.
For purposes of this Agreement or any Supplement requiring or
permitting actions with the consent of, or the direction of the Investor
Certificateholders (or classes thereof) evidencing a specified percentage of the
Aggregate Invested Amount, such direction or consent with respect to the Book-
Entry
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Certificates may be given by Certificate Owners (acting through a Clearing
Agency).
Section 6.11 Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 6.12, the Trustee shall give all such notices and
communications specified herein to be given to the Investor Certificateholders
which are Certificate Owners to the Clearing Agencies.
Section 6.12 Definitive Certificates. If (a)(i) the Transferor
advises the Trustee in writing that any Clearing Agency is no longer willing or
able to properly discharge its responsibilities under the applicable Depository
Agreement, and (ii) the Trustee or the Transferor is unable to locate a
qualified successor, (b) the Transferor, at its option, advises the Trustee in
writing that it elects to terminate the book-entry system through the Clearing
Agency or (c) after the occurrence of a Master Servicer Default, Certificate
Owners representing Fractional Undivided Interests aggregating more than 50% of
the Invested Amount held by such Certificate Owners of each affected Series then
issued and outstanding advise the Clearing Agency through the Clearing Agency
Participants in writing, and the Clearing Agency shall so notify the Trustee,
that the continuation of a book-entry system through the Clearing Agency is no
longer in the best interests of the Certificate Owners, the Trustee shall notify
the Clearing Agency, which shall be responsible to notify the Certificate
Owners, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificates Owners requesting the same. Upon
surrender to the Trustee of the Investor Certificates by the Clearing Agency,
accompanied by registration instructions from the Clearing Agency for
registration, the Trustee shall issue the Definitive Certificates. Neither the
Transferor nor the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions.
ARTICLE VII
OTHER MATTERS RELATING
TO THE TRANSFEROR
Section 7.1 Liability of the Transferor. The Transferor shall be
liable for all obligations, covenants, representations and warranties of the
Transferor arising under or related to this Agreement or any Supplement. Except
as provided in the preceding sentence, the Transferor shall be liable only to
the extent of the obligations specifically undertaken by it in its capacity as
Transferor hereunder.
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Section 7.2 Limitation on Liability of the Transferor. Subject to
Sections 7.1 and 7.3, neither the Transferor nor any of the directors or
officers or employees or agents of the Transferor in their capacities as
Transferor shall be under any liability to the Trust, the Trustee, the
Certificateholders or any other Person for any action taken or for refraining
from the taking of any action in the capacity as Transferor pursuant to this
Agreement whether arising from express or implied duties under this Agreement or
any Supplement; provided, however, that this provision shall not protect the
Transferor or any such person against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligationS and
duties hereunder. The Transferor and any director or officer or employee or
agent of the Transferor may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder.
Section 7.3 Liabilities. Notwithstanding Sections 7.2, 8.3 and
8.4, by entering into this Agreement, the Transferor agrees to be liable,
directly to the injured party, for the entire amount of any losses, claims,
damages or liabilities, other than those incurred by a Certificateholder in the
capacity of an investor in the Investor Certificates, arising out of or based on
the arrangement created by this Agreement or any Supplement and the actions of
the Master Servicer taken pursuant hereto as though this Agreement or any
Supplement created a partnership under the New York Uniform Partnership Act with
the Transferor as a general partner thereof. The Transferor agrees to pay,
indemnify and hold harmless each Investor Certificateholder against and from any
and all such losses, claims, damages and liabilities except to the extent that
they arise from any action by such Investor Certificateholder. In the event of
a Service Transfer, the Successor Master Servicer will indemnify and hold
harmless the Transferor for any losses, claims, damages and liabilities of the
Transferor arising under this Section 7.3 from the actions or omissions of such
Successor Master Servicer.
ARTICLE VIII
OTHER MATTERS RELATING
TO THE MASTER SERVICER
Section 8.1 Liability of the Master Servicer. The Master Servicer
shall be liable under this Article VIII only to the extent of the obligations
specifically undertaken by the Master Servicer in its capacity as Master
Servicer.
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer. The Master Servicer shall not consolidate
with or merge into any
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other corporation or convey or transfer its properties and assets substantially
as an entirety to any Person, unless:
(a) the corporation formed by such consolidation or into which the
Master Servicer is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Master Servicer substantially as
an entirety shall be a corporation organized and existing under the laws of
the United States of America or any State or the District of Columbia, and,
if the Master Servicer is not the surviving entity, such corporation shall
assume, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, the performance of every covenant
and obligation of the Master Servicer hereunder;
(b) the Master Servicer has delivered to the Trustee an Officer's
Certificate executed by a Vice President or more senior officer and an
Opinion of Counsel each stating that such consolidation, merger, conveyance
or transfer comply with this Section 8.2 and that all conditions precedent
herein provided for relating to such transaction have been complied with;
and
(c) The Rating Agency Condition shall have been satisfied with respect
thereto.
Section 8.3 Limitation on Liability of the Master Servicer and
Others. Except as provided in Section 8.4 with respect to the Trust and the
Trustee, neither the Master Servicer nor any of the directors or officers or
employees or agents of the Master Servicer, shall be under any liability to the
Trust, the Trustee, the Certificateholders or any other Person for any action
taken or for refraining from the taking of any action in its capacity as Master
Servicer pursuant to this Agreement or any Supplement; provided, however, that
this provision shall not protect the Master Servicer or any such person against
any liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Master Servicer and any
director or officer or employee or agent of the Master Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. The Master Servicer shall
not be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties to service the Receivables in accordance
with this Agreement which in its reasonable opinion would require the Master
Servicer to incur any expense or liability.
Section 8.4 Indemnification of the Trust and the Trustee. The
Master Servicer and each Servicer shall jointly and severally indemnify and hold
harmless the Trust, for the benefit of the Certificateholders, and the Trustee
and its directors, officers and agents, employees (an "indemnified person") from
and
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against any loss, liability, expense, damage or injury suffered or sustained by
reason of any acts, omissions or alleged acts or omissions arising from acts or
omissions of the Master Servicer or the Servicers pursuant to this Agreement or
the other Related Documents, including but not limited to any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim; provided, however, that neither the Master Servicer nor any Servicer
shall indemnify the Trust, the Trustee or the Investor Certificateholders or any
other indemnified person for any liabilities, cost or expense (i) with respect
to any action taken by the Trustee at the request of the Investor
Certificateholders nor (ii) with respect to any federal, state or local income
or franchise taxes (or any interest or penalties with respect thereto) required
to be paid by the Trust or the Investor Certificateholders in connection
herewith to any taxing authority nor (iii) arising solely from the failure of an
Obligor to make payment in respect of a Receivable. The provisions of this
indemnity shall run directly to, and be enforceable by, an injured party.
Section 8.5 The Master Servicer Not to Resign. The Master Servicer
shall not resign from the obligations and duties hereby imposed on it except
upon determination that (a) the performance of its duties hereunder is no longer
permissible under applicable law and (b) there is no reasonable action which the
Master Servicer could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Master Servicer shall be evidenced as to clause (a) above by
an Opinion of Counsel to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a Successor Master
Servicer shall have assumed the responsibilities and obligations of the Master
Servicer in accordance with Section 10.2.
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables. The Master Servicer shall provide to the Trustee and
its agents and attorneys access to the documentation regarding the Receivables
in such cases where the Trustee is required in connection with the enforcement
of the rights of the Investor Certificateholders, or by applicable statutes or
regulations to review such documentation, such access being afforded without
charge but only (a) upon reasonable request, (b) during normal business hours,
(c) subject to the Master Servicer's normal and reasonable security and
confidentiality procedures and (d) at offices designated by the Master Servicer.
Nothing in this Section 8.6 shall derogate from the obligation of the
Transferor, the Trustee or the Master Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors and the failure of
the Master Servicer to provide access as provided in this Section 8.6 as a
result of such obligation shall not constitute a breach of this Section 8.6.
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Section 8.7 Delegation of Duties. In the ordinary course of
business, the Master Servicer may at any time delegate any duties hereunder to
any Servicer who, pursuant to Section 3.1 or any written servicing agreement,
agrees to conduct such duties in accordance with the Policies and this
Agreement. Such delegation shall not relieve the Master Servicer of its
liability and responsibility with respect to such duties, and shall not
constitute a resignation within the meaning of Section 8.5.
Section 8.8 Examination of Records. Each of the Transferor and the
Master Servicer shall (or the Master Servicer shall cause each Servicer to)
indicate generally in its computer files or other records that the Receivables
have been conveyed to the Trust pursuant to this Agreement for the benefit of
the Certificateholders.
ARTICLE IX
EARLY AMORTIZATION EVENTS
Section 9.1 Early Amortization Events. Unless modified with
respect to any Series of Investor Certificates by any related Supplement, if any
one of the following events shall occur:
(a) the Transferor shall file a petition commencing a voluntary case
under any chapter of the federal bankruptcy laws; or the Transferor shall
file a petition or answer or consent seeking reorganization, arrangement,
adjustment, or composition under any other similar applicable federal law,
or shall consent to the filing of any such petition, answer or consent; or
the Transferor shall appoint or consent to the appointment of a custodian,
receiver, liquidator, trustee, assignee, sequestrator or other similar
official in bankruptcy or insolvency of it or of any substantial part of
its property; or the Transferor shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due; or the Transferor shall become unable for any
reason to transfer Receivables to the Trust in accordance with the
provisions of this Agreement;
(b) any order for relief against the Transferor shall have been
entered by a court having jurisdiction in the premises under any chapter of
the federal bankruptcy laws, and such order shall have continued
undischarged or unstayed for a period of 60 days; or a decree or order by a
court having jurisdiction in the premises shall have been entered approving
as properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of the Transferor under any other similar
applicable federal law, and such decree or order shall have continued
undischarged or unstayed for a period of 60 days; or a
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decree or order of a court having jurisdiction in the premises for the
appointment of a custodian, receiver, liquidator, trustee, assignee,
sequestrator, or other similar official in bankruptcy or insolvency of the
Transferor or of any substantial part of its property, or for the winding
up or liquidation of its affairs, shall have been entered, and such decree
or order shall have remained in force undischarged or unstayed for a period
of 60 days;
(c) the Trust shall become an "investment company" within the meaning
of the Investment Company Act of 1940, as amended; or
(d) if a Potential Early Amortization Event (other than the failure by
the Master Servicer to deliver or cause to be delivered the Receivables
Record with respect to each Originator to the Trustee) shall have occurred
and be continuing and the Master Servicer shall fail to deliver or cause to
be delivered the Receivables Record with respect to each Originator to the
Trustee within three Business Days of the day such item is due;
then, an Early Amortization Event shall occur without any notice or other action
on the part of the Trustee or any Investor Certificateholder immediately upon
the occurrence of such event. The Master Servicer shall notify each Rating
Agency and the Trustee of the occurrence of any Early Amortization Event.
Section 9.2 Additional Rights Upon the Occurrence of Certain
Events. (a) If an Insolvency Event occurs, the Transferor shall immediately
cease to transfer Receivables to the Trust and shall promptly give notice to the
Trustee of such occurrence. Notwithstanding any cessation of the transfer to
the Trust of additional Receivables, Receivables transferred to the Trust prior
to the occurrence of such Insolvency Event and Collections in respect of such
Receivables and interest, whenever created, accrued in respect of such
Receivables, shall continue to be a part of the Trust. Within 15 days of an
Insolvency Event, the Trustee shall (i) publish a notice in a newspaper with a
national circulation (an "Authorized Newspaper") that an Insolvency Event has
occurred and that the Trustee intends to sell, dispose of or otherwise liquidate
the Receivables in a commercially reasonable manner and (ii) send written notice
to the Certificateholders and request instructions from such holders, which
notice shall request each Certificateholder to advise the Trustee in writing
that it elects one of the following options: (A) the Certificateholder wishes
the Trustee to instruct the Master Servicer not to sell, dispose of or otherwise
liquidate the Receivables, or (B) the Certificateholder wishes the Trustee to
instruct the Master Servicer to sell, dispose of or otherwise liquidate the
Receivables and to instruct the Master Servicer to reconstitute the Trust upon
the same terms and conditions set forth herein, or (C) the Certificateholder
refuses to advise the Trustee as to the specific action the Trustee shall
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instruct the Master Servicer to take. If after 60 days from the day notice
pursuant to clause (i) above is first published (the "Publication Date"), the
Trustee shall not have received written instructions of (x) holders of
Certificates representing undivided interests in the Trust aggregating in excess
of 50% of the related Invested Amount of each Series (or in the case of a series
having more than one Class of Investor Certificates, each Class of such series)
selecting option (A) above and (y) if the holders of the Exchangeable Transferor
Certificate do not include the Transferor (and following the delivery of written
notice in the form referred to above by the Transferor to such holders), the
holders of such Certificate representing undivided interests in the Trust
aggregating in excess of 50% of the Transferor Interest, the Trustee shall
instruct the Master Servicer to proceed to sell, dispose of, or otherwise
liquidate the Receivables in a commercially reasonable manner and on
commercially reasonable terms, which shall include the solicitation of
competitive bids and the Master Servicer shall proceed to consummate the sale,
liquidation or disposition of the Receivables as provided above with the highest
bidder for the Receivables. The Transferor or any of its Affiliates shall be
permitted to bid for the Receivables. In addition the Transferor or any of its
Affiliates shall have the right to match any bid by a third person and be
granted the right to purchase the Receivables at such matched bid price. The
Trustee may obtain a prior determination from any such conservator, receiver or
liquidator that the terms and manner of any proposed sale, disposition or
liquidation are commercially reasonable. The provisions of Sections 9.1 and 9.2
shall not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to subsection (a) above shall be treated as Collections on
the Receivables and such proceeds will be distributed to holders of each Series
after immediately being deposited in the Collection Account. With respect to
each Outstanding Series, an amount equal to the product of (x) the Invested
Percentage for such Series on the Settlement Date occurring in the calendar
month of such deposit and (y) the amount of such deposit shall be allocated to
the Certificateholders' Interest for such Series and deposited in the applicable
Series Collection Subaccount for distribution in accordance with this Agreement
and the related Supplement for such Series. After giving effect to all such
deposits, the remainder, if any, shall be allocated to the Transferor Interest
and shall be released to the holder of the Exchangeable Transferor Certificate
upon surrender thereof.
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ARTICLE X
MASTER SERVICER DEFAULTS
Section 10.1 Master Servicer Defaults. Unless modified with respect
to any Series of Investor Certificates by any related Supplement, if any one of
the following events (a "Master Servicer Default") shall occur and be
continuing:
(a) failure by the Master Servicer to pay any interest on, or any
principal of, any Investor Certificate on the date such payment is required
to be made under this Agreement, or to deliver, within two Business Days of
the due date thereof, any Daily Report or, within three Business Days of
the due date thereof, any Monthly Settlement Statement conforming in all
material respects to the requirements of Section 3.4 or to make any
payment, deposit or transfer reflected in such Daily Report or Monthly
Settlement Statement as being required to be made on the date such report
or statement is delivered pursuant to Section 3.4;
(b) failure by the Master Servicer to pay any amount (other than as
specified in subsection (a) of this Section 10.1) on or before the date
occurring three Business Days after the date such payment is required to be
made under the terms of this Agreement;
(c) failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Master Servicer set forth in this Agreement which has a material adverse
effect on the holders of any Outstanding Series (which determination shall
be made without regard to whether any Enhancement is then available from
any Enhancement Provider) which continues unremedied for a period of 30
days after the earlier of the date on which a Responsible Officer of the
Master Servicer shall have knowledge thereof or the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Master Servicer by the Trustee or any Enhancement Provider, or
to the Master Servicer and the Trustee by the holders of Investor
Certificates evidencing Fractional Undivided Interests aggregating more
than 50% of the Invested Amount of any Series adversely affected thereby;
or the Master Servicer shall assign its duties under this Agreement, except
as permitted by Section 8.7;
(d) any representation, warranty or certification made by the Master
Servicer in this Agreement or in any certificate delivered pursuant to this
Agreement shall prove to have been incorrect when made, which has a
material adverse effect on the holders of any Outstanding Series (which
determination shall be made without regard to whether
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any Enhancement is then available from any Enhancement Provider) which
material adverse effect continues for a period of 30 days after the earlier
of the date on which a Responsible Officer of the Master Servicer shall
have knowledge thereof or the date on which written notice thereof,
requiring the same to be remedied, shall have been given to the Master
Servicer by the Trustee or any Enhancement Provider, or to the Master
Servicer and the Trustee by the holders of Investor Certificates evidencing
Fractional Undivided Interests aggregating more than 50% of the Invested
Amount of any Series adversely affected thereby;
(e) the Master Servicer shall file a petition commencing a voluntary
case under any chapter of the federal bankruptcy laws; or the Master
Servicer shall file a petition or answer or consent seeking reorganization,
arrangement, adjustment, or composition under any other similar applicable
federal law, or shall consent to the filing of any such petition, answer,
or consent; or the Master Servicer shall appoint or consent to the
appointment of a custodian, receiver, liquidator, trustee, assignee,
sequestrator or other similar official in bankruptcy or insolvency of it or
of any substantial part of its property; or the Master Servicer shall make
an assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts generally as they become due; or
(f) any order for relief against the Master Servicer shall have been
entered by a court having jurisdiction in the premises under any chapter of
the federal bankruptcy laws, and such order shall have continued
undischarged or unstayed for a period of 60 days; or a decree or order by a
court having jurisdiction in the premises shall have been entered approving
as properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of the Master Servicer under any other similar
applicable federal law, and such decree or order shall have continued
undischarged or unstayed for a period of 60 days; or a decree or order of a
court having jurisdiction in the premises for the appointment of a
custodian, receiver, liquidator, trustee, assignee, sequestrator, or other
similar official in bankruptcy or insolvency of the Master Servicer or of
any substantial part of its property, or for the winding up or liquidation
of its affairs, shall have been entered, and such decree or order shall
have remained in force undischarged or unstayed for a period of 60 days;
then, in the event of any Master Servicer Default, so long as the Master
Servicer Default shall not have been remedied, either the Trustee, or the
holders of Investor Certificates evidencing Fractional Undivided Interests
aggregating more than 50% of the Aggregate Invested Amount by notice then given
in writing to the Master Servicer, each Agent, each Enhancement Provider and
each
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Rating Agency (and to the Trustee if given by the Investor Certificateholders)
(a "Termination Notice"), may terminate all but not less than all of the rights
and obligations of the Master Servicer as Master Servicer under this Agreement
and in and to the Receivables and the proceeds thereof; provided, however, if
within 60 days of receipt of a Termination Notice the Trustee does not receive
any bids from Eligible Master Servicers in accordance with subsection 10.2(c) to
act as a Successor Master Servicer and receives an Officer's Certificate of the
Master Servicer to the effect that the Master Servicer cannot in good faith cure
the Master Servicer Default which gave rise to the Termination Notice, then the
Trustee shall grant a right of first refusal to the Master Servicer which would
permit the Master Servicer at its option to purchase the Certificateholders'
Interest on the Distribution Date in the next calendar month. The purchase
price for such interest with respect to each Series of Investor Certificates
shall be equal to the Adjusted Invested Amount for such Series on the
Distribution Date of such purchase plus an amount equal to all interest accrued
but unpaid on such Series on the date of such purchase plus any other amount
required to be paid in connection therewith pursuant to the Supplement with
respect to such Series, including, without limitation, reasonable fees and
expenses of the Trustee. The Master Servicer shall notify the Trustee in
writing prior to the Record Date for the Distribution Date of the purchase if it
is exercising such right of first refusal. If it exercises the right of first
refusal, the Master Servicer shall deposit the purchase price into the
Collection Account on the Record Date preceding such Distribution Date in
immediately available funds. Notwithstanding anything to the contrary in this
Agreement, the entire amount of the purchase price shall be distributed to the
parties owed such amounts. After receipt by the Master Servicer of a
Termination Notice, and on the date that a Successor Master Servicer shall have
been appointed by the Trustee pursuant to Section 10.2, all authority and power
of the Master Servicer under this Agreement shall pass to and be vested in a
Successor Master Servicer (a "Service Transfer"); and, without limitation, the
Trustee is hereby authorized and empowered (upon the failure of the Master
Servicer to cooperate) to execute and deliver, on behalf of the Master Servicer,
as attorney-in-fact or otherwise, all documents and other instruments upon the
failure of the Master Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such Service Transfer. The Master
Servicer agrees to cooperate with the Trustee and such Successor Master Servicer
in effecting the termination of the responsibilities and rights of the Master
Servicer to conduct servicing hereunder, including, without limitation, the
transfer to such Successor Master Servicer of all authority of the Master
Servicer to service the Receivables provided for under this Agreement,
including, without limitation, all authority over all Collections which shall on
the date of transfer be held by the Master Servicer for deposit, or which have
been deposited by the Master Servicer, in the Collection
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Account, or which shall thereafter be received with respect to the Receivables,
and in assisting the Successor Master Servicer. The Master Servicer shall
promptly transfer all of its records (including, without limitation, computer
tapes or disks) relating to the Receivables to the Successor Master Servicer in
such form as the Successor Master Servicer may reasonably request and shall
promptly transfer to the Successor Master Servicer all other records,
correspondence and documents necessary for the continued servicing of the
Receivables in the manner and at such times as the Successor Master Servicer
shall reasonably request. To the extent that compliance with this Section 10.1
shall require the Master Servicer to disclose to the Successor Master Servicer
information of any kind which the Master Servicer reasonably deems to be
confidential, the Successor Master Servicer shall be required to enter into such
customary licensing and confidentiality agreements as the Master Servicer shall
deem necessary to protect its interest.
Notwithstanding the foregoing, a delay in or failure of performance
under subsection 10.1(a) or (b) for a period of ten Business Days, shall not
constitute a Master Servicer Default if such delay or failure could not be
prevented by the exercise of reasonable diligence by the Master Servicer and
such delay or failure was caused by an act of God or the public enemy, acts of
declared or undeclared war, public disorder, rebellion or sabotage, epidemics,
landslides, lightning, fire, hurricanes, earthquakes, floods or similar causes.
The preceding sentence shall not relieve the Master Servicer from using its best
efforts to perform its respective obligations in a timely manner in accordance
with the terms of this Agreement and the Master Servicer shall provide the
Trustee, the Transferor and the Investor Certificateholders with an Officer's
Certificate giving prompt notice of such failure or delay by it, together with a
description of its efforts so to perform its obligations.
Section 10.2 Trustee to Act; Appointment of Successor. (a) On and
after the receipt by the Master Servicer of a Termination Notice pursuant to
Section 10.1, the Master Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Trustee in writing or, if no such date is
specified in such Termination Notice or otherwise specified by the Trustee,
until a date mutually agreed upon by the Master Servicer and Trustee. The
Trustee shall as promptly as possible after the giving of a Termination Notice,
and with the consent of any Enhancement Provider (if the applicable Supplement
so requires), which consent shall not be unreasonably withheld, appoint an
Eligible Master Servicer as a successor servicer (the "Successor Master
Servicer"), and such Successor Master Servicer shall accept its appointment by a
written assumption in a form acceptable to the Trustee. In the event that a
Successor Master Servicer has not been appointed or has not accepted its
appointment at the time when the Master Servicer ceases to act as Master
Servicer, the Trustee shall, as the
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liquidating agent hereunder, perform solely the duties of the Master Servicer
relating to the administration of accounts set forth in Article IV and shall use
reasonable efforts to collect payments on account of Eligible Receivables. The
standard of care, representations and warranties, covenants, liabilities, rights
of indemnification, and all other rights and obligations of the Trustee under
this Agreement shall also be applicable to the Trustee in its capacity as
liquidating agent hereunder. For performing as liquidating agent, the Trustee
shall collect a fee, not in excess of the Servicing Fee and shall be reimbursed
for its expenses as liquidating agent pursuant to Section 11.5. The Trustee, in
its capacity as the liquidating agent, may delegate any of its obligations as
liquidating agent to an Affiliate or agent in accordance with subsection 3.1(b).
Notwithstanding the above, the Trustee may, or if it is legally unable to act as
liquidating agent, shall, petition a court of competent jurisdiction to appoint
any Eligible Master Servicer as the Successor Master Servicer hereunder. The
Master Servicer shall immediately give notice to each Rating Agency upon the
appointment of a Successor Master Servicer.
(b) Upon its appointment, the Successor Master Servicer shall be the
successor in all respects (other than the Trustee, which shall act as Successor
Master Servicer in accordance with the limitations set forth in subsection
10.2(a)) to the Master Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
provisions hereof, and all references in this Agreement to the Master Servicer
shall be deemed to refer to the Successor Master Servicer. Any Successor Master
Servicer, by its acceptance of its appointment, will automatically agree to be
bound by the terms and provisions of any agreement under which an Enhancement
Provider agrees to provide Enhancement for a Series.
(c) In connection with any Termination Notice, the Trustee will review
any bids which it obtains from Eligible Master Servicers and shall be permitted
to appoint any Eligible Master Servicer submitting such a bid as a Successor
Master Servicer for servicing compensation not in excess of the Servicing Fee;
provided, however, that the Transferor shall be responsible for payment of the
Transferor's portion of the Servicing Fee as determined pursuant to Section 3.2
and all other amounts in excess of the Monthly Servicing Fee, and that no such
monthly compensation paid out of Collections shall be in excess of the Monthly
Servicing Fee permitted to the Master Servicer pursuant to Section 3.2. The
holder of the Exchangeable Transferor Certificate agrees that if US Foodservice
Inc. is terminated as Master Servicer hereunder, the portion of Collections in
respect of the Receivables that it is entitled to receive pursuant to Article IV
shall be reduced by an amount sufficient to pay its share of the compensation of
the Successor Master Servicer.
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(d) All authority and power granted to the Successor Master Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.1, and shall pass to and be vested in the
Transferor and, without limitation, the Transferor is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Master Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Successor Master Servicer
agrees to cooperate with the Transferor in effecting the termination of the
responsibilities and rights of the Successor Master Servicer to conduct
servicing on the Receivables. The Successor Master Servicer shall transfer all
of its records relating to the Receivables to the Transferor in such form as the
Transferor may reasonably request and shall transfer all other records,
correspondence and documents to the Transferor in the manner and at such times
as the Transferor shall reasonably request. To the extent that compliance with
this Section 10.2 shall require the Successor Master Servicer to disclose to the
Transferor information of any kind which the Successor Master Servicer deems to
be confidential, the Transferor shall be required to enter into such customary
licensing and confidentiality agreements as the Successor Master Servicer shall
deem necessary to protect its interests.
Section 10.3. Notification to Certificateholders. Upon the occurrence
of any Master Servicer Default or Potential Master Servicer Default, the Master
Servicer shall give prompt written notice thereof to the Trustee, each Agent,
each Rating Agency and each Enhancement Provider and the Trustee shall give
notice to the Investor Certificateholders at their respective addresses
appearing in the Certificate Register of any (i) Master Servicer Default or (ii)
Potential Master Servicer Default as to which, except in the case of a Potential
Master Servicer Default relating to the federal bankruptcy laws, any applicable
grace period (or, if such applicable grace period is in excess of ten days, as
to which a period of ten days) has expired; provided, however, that upon the
expiration of any such grace period or ten-day period, if such Potential Master
Servicer Default shall be continuing, the Trustee shall give notice thereof as
set forth above. Upon any termination or appointment of a Successor Master
Servicer pursuant to this Article X, the Trustee shall give prompt written
notice thereof to Investor Certificateholders at their respective addresses
appearing in the Certificate Register.
Section 10.4. Waiver of Past Defaults. The holders of Investor
Certificates evidencing Fractional Undivided Interests aggregating more than the
Waiver Percentage of the Invested Amount of any Series affected by any default
by the Master Servicer or Transferor may, on behalf of all Certificateholders of
such affected Series, waive any default by the Master Servicer or the Transferor
in the performance of their obligations hereunder and its consequences, except a
default in the failure
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to make any required deposits or payments of interest or principal with respect
to any Series of Certificates. Upon any such waiver of a past default, such
default shall cease to exist, and any default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.
ARTICLE XI
THE TRUSTEE
Section 11.1. Duties of Trustee. (a) The Trustee, prior to the
occurrence of a Master Servicer Default of which a Responsible Officer of the
Trustee has actual knowledge and after the curing of all Master Servicer
Defaults which may have occurred, undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the Trustee.
If a Master Servicer Default to the actual knowledge of a Responsible Officer of
the Trustee has occurred (which has not been cured or waived), the Trustee shall
exercise such of the rights and powers vested in it by this Agreement or any
Supplement and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) The Trustee, may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein upon
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments furnished to the Trustee; but in the case of any of the above
which are specifically required to be furnished to the Trustee pursuant to any
provision of this Agreement or any Supplement, the Trustee shall, subject to
Section 11.2, examine them to determine whether they substantially conform to
the requirements of this Agreement or any Supplement. The Trustee shall give
prompt written notice to the Certificateholders and each Rating Agency of any
material lack of conformity of any such instrument to the applicable
requirements of this Agreement or any Supplement discovered by the Trustee which
would entitle a specified percentage of the Certificateholders to take any
action pursuant to this Agreement or any Supplement.
(c) Subject to subsection 11.1(a), and except for subsection 6.3(c),
no provision of this Agreement or any Supplement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct; provided, however, that:
(i) The Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or
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Responsible Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(ii) The Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the
direction of the Holders of Investor Certificates evidencing Fractional
Undivided Interests aggregating more than 50% of the Invested Amount of any
Series and, to the extent not so provided herein, with respect to any act
requiring the Trustee to exercise its own discretion, relating to the time,
method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement or any Supplement;
(iii) The Trustee shall not be charged with knowledge of any failure
by the Master Servicer to comply with any of its obligations, including the
obligations of the Master Servicer referred to in Section 10.1 unless a
Responsible Officer of the Trustee obtains actual knowledge of such failure
or the Trustee receives written notice of such failure from the Master
Servicer, any Agent, any Enhancement Provider or any holders of Investor
Certificates evidencing Fractional Undivided Interests aggregating not less
than 10% of the Invested Amount of any Series;
(iv) The Trustee shall not be charged with knowledge of an Early
Amortization Event unless a Responsible Officer obtains actual knowledge of
such event or the Trustee receives written notice of such event from the
Master Servicer, any Agent, any Enhancement Provider or any holders of
Investor Certificates evidencing Fractional Undivided Interests aggregating
not less than 10% of the Invested Amount of any Series;
(v) The Trustee shall not be liable for its selection of Eligible
Investments or for any investment losses resulting from Eligible
Investments;
(vi) The Trustee shall have no duty to monitor the performance of the
Master Servicer, nor shall it have any liability in connection with
malfeasance or nonfeasance by the Master Servicer. The Trustee shall have
no liability in connection with compliance of the Master Servicer or the
Transferor with statutory or regulatory requirements related to the
Receivables; and
(vii) The Trustee shall take such actions as are set fourth in the
Internal Operating Procedures Memorandum.
(d) The Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder, or under any
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Supplement or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement or any Supplement shall in
any event require the Trustee to perform, or be responsible for the manner of
performance of, any obligations of the Master Servicer under this Agreement or
any Supplement except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Master Servicer in accordance with the terms of this Agreement or any
Supplement.
(e) Except for actions expressly authorized by this Agreement or any
Supplement, the Trustee shall take no action reasonably likely to impair the
interests of the Trust in any Receivable now existing or hereafter created or to
impair the value of any Receivable now existing or hereafter created.
(f) Except as expressly provided in this Agreement, the Trustee shall
have no power to vary the corpus of the Trust.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall fail to perform any obligation, duty or agreement in the manner
or on the day required to be performed by the Paying Agent or the Transfer Agent
and Registrar, as the case may be, under this Agreement, the Trustee shall be
obligated promptly upon actual knowledge of a Responsible Officer thereof to
perform such obligation, duty or agreement in the manner so required.
(h) Unless a Responsible Officer of the Trustee shall have obtained
actual knowledge to the contrary, the Trustee shall provide monthly notice to
each Rating Agency stating that to the knowledge of such Responsible Officer no
Early Amortization Event or Master Servicer Default shall have occurred and be
continuing as of the date of such notice.
(i) The Trustee shall aggregate the amount of Receivables reported in
each Servicer's Receivables Record (i) not less than four times per year and
shall compare the result against the ending total Receivables as reported in
Section (a) of the Monthly Settlement Statement for the corresponding Settlement
Period, and (ii) in the event of the occurrence and continuance of a Potential
Early Amortization Event, not less than on a monthly basis and shall compare the
result against the ending total Receivables as reported in Section (a) of the
Monthly Settlement Statement for the corresponding Settlement Period.
Notwithstanding any other provision of this Agreement or any Supplement, upon
the discovery of any discrepancy between the amount of Receivables reported in
each Servicer's Receivable Records and the total Receivables as reported in
Section (a) of the Monthly Settlement Statement, the Master Servicer shall have
10 days to resolve such discrepancy before the Trustee shall be obligated to
give notice to the
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Certificateholders, each Enhancement Provider and each Rating Agency.
Section 11.2. Rights of the Trustee. Except as otherwise provided in
Section 11.1:
(a) The Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accord with, any resolution, Officer's
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented to it pursuant to this
Agreement or any Supplement by the proper party or parties;
(b) The Trustee may consult with counsel and any Opinion of Counsel or
any advice of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or any Supplement, or to
institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement or any
Supplement, unless such Certificateholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby (which in the case of
any investment-grade institutional Investor Certificateholder, may be in
the form of an unsecured agreement of indemnity); provided, however, that
nothing contained herein shall relieve the Trustee of the obligations, upon
the occurrence of a Master Servicer Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement or
any Supplement, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs;
(d) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or wilful
misconduct in the performance of any such act;
(e) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement or any Supplement;
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(f) The Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, direction, order,
approval, bond, note or other paper or document, unless requested in
writing so to do by holders of Investor Certificates evidencing Fractional
Undivided Interests aggregating more than 10% of the Invested Amount of any
Series; provided, however, that such Investor Certificateholders shall
reimburse the Trustee for any expense resulting from any such investigation
requested by them prior to the occurrence of an Early Amortization Event,
and thereafter the Master Servicer (or, if US Foodservice is no longer the
Master Servicer, US Foodservice) shall reimburse the Trustee for any
reasonable expense resulting from any such investigation requested by such
Investor Certificateholders; provided further, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation shall be, in the
opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Agreement, the Trustee may
require reasonable indemnity from the Investor Certificateholders against
such cost, expense or liability (which, in the case of any investment-grade
institutional Investor Certificateholder, may be in the form of an
unsecured agreement of indemnity) as a condition to so proceeding. The
Trustee shall be entitled to make such further inquiry or investigation
into such facts or matters as it may reasonably see fit, and if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books and records of the Transferor, personally or
by agent or attorney, at the sole cost and expense of the Transferor;
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed
with due care by it hereunder;
(h) The Trustee shall not be required to make any initial or periodic
examination of any documents or records related to the Receivables or the
Accounts for the purpose of establishing the presence or absence of
defects, the compliance by the Transferor with its representations and
warranties or for any other purpose; and
(i) In the event that the Trustee is also acting as Paying Agent or
Transfer Agent and Registrar hereunder, the rights and protections afforded
to the Trustee pursuant to
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this Article XI shall also be afforded to such Paying Agent or Transfer
Agent and Registrar.
Section 11.3. Trustee Not Liable for Recitals in Certificates. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates). Except as set forth in Section 11.15, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or any
Supplement or of the Certificates (other than the certificate of authentication
on the Certificates) or of any Receivable or related document. The Trustee
shall not be accountable for the use or application by the Transferor of any of
the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Transferor in respect of the Receivables or
deposited in or withdrawn from the Collection Account or other accounts
hereafter established to effectuate the transactions contemplated herein and in
accordance with the terms hereof.
The Trustee makes no representations as to the validity or sufficiency
of this Agreement or of the Certificates (other than the signature and
authentication of the Trustee on the Certificates) or of any Receivable or
related document. The Trustee shall not be accountable for the use or
application by the Master Servicer of any of the Certificates or of the proceeds
of such Certificates, or for the use or application of any funds paid to the
Master Servicer or any Servicer in respect of the Receivable or deposited in or
withdrawn from the Collection Account by the Master Servicer or any Servicer.
The Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any Receivable.
Section 11.4. Trustee May Own Certificates. The Trustee in its
individual or any other capacity (a) may become the owner or pledgee of Investor
Certificates with the same rights as it would have if it were not the Trustee
and (b) may transact any banking and trust business with the Transferor, the
Master Servicer, any Servicer or any Originator.
Section 11.5. The Master Servicer to Pay Trustee's Fees and Expenses.
The Master Servicer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to receive, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trust hereby created and in the exercise and performance
of any of the powers and duties hereunder of the Trustee, and, subject to
Section 8.4, the Master Servicer will pay or reimburse the Trustee upon its
request for all reasonable expenses (including, without limitation, expenses
incurred in connection with notices or other communications to
Certificateholders), disbursements and advances incurred or made
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by the Trustee in accordance with any of the provisions of this Agreement or any
Supplement (including the reasonable fees and expenses of its agents, any co-
trustee and counsel) except any such expense, disbursement or advance as may
arise from its negligence or bad faith and except as provided in the final
sentence of this Section 11.5. The Master Servicer's covenant to pay the
expenses, disbursements and advances provided for in the preceding sentence
shall survive the termination of this Agreement. If the Trustee assumes the
obligations of a liquidating agent pursuant to Section 10.2, the provision of
this Section 11.5 shall apply to the reasonable expenses, disbursements and
advances made or incurred by the Trustee in its capacity as liquidating agent,
which may exceed the Servicing Fee.
Section 11.6. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business under
the laws of the United States of America or any state thereof authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $100,000,000, a long-term unsecured debt rating of at least
A or its equivalent by Duff & Phelps, Moody's and S&P and subject to supervision
or examination by Federal or State authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then, for the purpose of
this Section 11.6, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 11.6, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 11.7.
Section 11.7. Resignation or Removal of Trustee. (a) Subject to
paragraph (d) below, the Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the Transferor and
the Master Servicer. Upon receiving such notice of resignation, the Transferor
shall promptly appoint a successor trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.6 hereof and shall fail to resign
after written request therefor by the Master Servicer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or
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if a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Master Servicer may remove the Trustee and promptly appoint a successor trustee
by written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(c) Investor Certificateholders representing Fractional Undivided
Interests aggregating more than 50% of the Aggregate Invested Amount may at any
time remove the Trustee and direct the Master Servicer to promptly appoint a
successor trustee reasonably acceptable to such Investor Certificateholders by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(d) Any resignation or removal of the Trustee and appointment of
successor trustee pursuant to any of the provisions of this Section 11.7 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 11.8 and the satisfaction of the Rating Agency Condition.
(e) The respective obligations of the Transferor and the Master
Servicer described in Sections 7.3, 8.4 and 11.5 shall survive the removal or
resignation of the Trustee as provided in this Agreement.
(f) No Trustee under this Agreement shall be personally liable for any
action or omission of any successor trustee.
Section 11.8. Successor Trustee. (a) Any successor trustee
appointed as provided in Section 11.7 shall execute, acknowledge and deliver to
the Transferor and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein. The predecessor Trustee shall
deliver to the successor trustee all documents or copies thereof, at the expense
of the Master Servicer, and statements held by it hereunder; and the Transferor
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly vesting
and confirming in the successor trustee all such rights, power, duties and
obligations. The Master Servicer shall immediately give notice to each Rating
Agency upon the appointment of a successor trustee.
(b) No successor trustee shall accept appointment as provided in this
Section 11.8 unless at the time of such
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acceptance such successor trustee shall be eligible under the provisions of
Section 11.6.
(c) Upon acceptance of appointment by a successor trustee as provided
in this Section 11.8, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.
Section 11.9. Merger or Consolidation of Trustee. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 11.6, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
Section 11.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement or any Supplement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust may at the time be located, the Trustee shall have
the power and may execute and deliver all instruments to appoint one or more
persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person or
Persons, in such capacity and for the benefit of the Certificateholders, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 11.10, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 11.6 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 11.8.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any statute of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Master Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in
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which event such rights, powers, duties and obligations (including the
holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement or
any Supplement, specifically including every provision of this Agreement or any
Supplement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Master Servicer.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement or any Supplement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.11. Tax Returns. In the event the Trust shall be required
to file tax returns, the Master Servicer shall prepare or shall cause to be
prepared any tax returns required to be filed by the Trust and shall remit such
returns to the Trustee for signature at least five Business Days before such
returns are due to be filed. The Master Servicer shall also prepare or shall
cause to be prepared all tax information required by law to be distributed to
Certificateholders and shall deliver such information to the Trustee at least
five Business Days prior to the date it is required by law to be distributed to
the Certificateholders. The Trustee, upon request, will furnish the Master
Servicer with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust, and
shall, upon request, execute
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such returns. In no event shall the Trustee in its individual capacity be
liable for any liabilities, costs or expenses of the Trust, the
Certificateholders, the Transferor or the Master Servicer arising under any tax
law or regulation, including, without limitation, federal, state or local income
or excise taxes or any other tax imposed on or measured by income (or any
interest or penalty with respect thereto or arising from any failure to comply
therewith).
Section 11.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or any
Supplement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
Section 11.13. Suits for Enforcement. If a Master Servicer Default
shall occur and be continuing, the Trustee, in its discretion may, subject to
the provisions of Section 10.1, proceed to protect and enforce its rights and
the rights of the Certificateholders under this Agreement or any Supplement by
suit, action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this Agreement or
any Supplement or in aid of the execution of any power granted in this Agreement
or any Supplement or for the enforcement of any other legal, equitable or other
remedy as the Trustee, being advised by counsel, shall deem most effectual to
protect and enforce any of the rights of the Trustee or the Certificateholders.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Certificateholder any plan of
reorganization, arrangement, adjustment or composition affecting the
Certificates or the rights of any holder thereof, or authorize the Trustee to
vote in respect of the claim of any Certificateholder in any such proceeding.
Section 11.14. Rights of Certificateholders to Direct Trustee.
Holders of Investor Certificates evidencing Fractional Undivided Interests
aggregating more than 50% of the Invested Amount of any Series affected by the
conduct of any proceeding or the exercise of any right conferred on the Trustee
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee; provided, however, that, subject to Section
11.1, the Trustee shall have the right to decline to follow any such direction
if the Trustee being advised by counsel determines that the action so directed
may not lawfully be taken, or if the Trustee in good faith shall, by a
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Responsible Officer or Responsible Officers of the Trustee, determine that the
proceedings so directed would be illegal or expose it to personal liability or
be unduly prejudicial to the rights of Certificateholders not parties to such
direction; and provided, further, that nothing in this Agreement or any
Supplement shall impair the right of the Trustee to take any action deemed
proper by the Trustee and which is not inconsistent with such direction of the
Certificateholders.
Section 11.15. Representations and Warranties of Trustee. The
Trustee represents and warrants that:
(a) the Trustee is a banking corporation organized, existing and in
good standing under the laws of the State of New York and meets the
requirements of Section 11.6;
(b) the Trustee has full power, authority and right to execute,
deliver and perform this Agreement and any Supplement, and has taken all
necessary action to authorize the execution, delivery and performance by it
of this Agreement and any Supplement; and
(c) this Agreement and any Supplement has been duly executed and
delivered by the Trustee and are the legal, valid and binding obligation of
the Trustee, enforceable in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws now
or hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
Section 11.16. Maintenance of Office or Agency. The Trustee will
maintain at its expense in the Borough of Manhattan, The City of New York, an
office or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Certificates and this Agreement may be served. The
Trustee will give prompt written notice to the Master Servicer and to
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
Section 11.17. Limitation of Liability. The Certificates are
executed by the Trustee, not in its individual capacity but solely as Trustee of
the Trust, in the exercise of the powers and authority conferred and vested in
it by the Trust Agreement. Each of the undertaking and agreements made on the
part of the Trustee in the Certificates is made and intended not as a personal
undertaking or agreement by the Trustee but is made and intended for the purpose
of binding only the Trust.
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ARTICLE XII
TERMINATION
Section 12.1. Termination of Trust; Optional Repurchase. (a) The
Trust and the respective obligations and responsibilities of the Transferor, the
Master Servicer, the Servicers and the Trustee created hereby (other than the
obligation of the Trustee to make payments to Certificateholders as hereafter
set forth) shall terminate, except with respect to the duties described in
Sections 7.3 and 8.4 and subsection 12.3(b), on the earlier of (i) September 1,
2014, (ii) at the option of the Transferor, at any time when the Aggregate
Invested Amount is zero and (iii) upon completion of distribution of the amounts
referred to in Section 9.2(b) (the "Trust Termination Date").
(b) If on the Distribution Date in the month immediately preceding the
month in which the Trust Termination Date occurs (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on such date and the
payment of principal on any Series of Certificates to be made on the related
Distribution Date pursuant to Article IV) the Invested Amount of any Series
would be greater than zero, the Master Servicer shall sell within 30 days of
such Distribution Date all of the Receivables. The proceeds of such sale shall
be treated as Collections on the Receivables and shall be allocated in
accordance with Article IV. During such 30-day period, the Master Servicer
shall continue to collect Collections on the Receivables and allocate
Collections and Repurchase Payments in accordance with the provisions of Article
IV.
Section 12.2. Optional Purchase and Final Termination Date of
Investor Certificates of any Series. (a) On the Distribution Date during the
Amortization Period with respect to any Series on which the Invested Amount of
such Series is reduced to an amount equal to or less than the Optional
Repurchase Percentage of the Invested Amount for such Series as of the day
preceding the beginning of such Amortization Period, the Transferor shall have
the option to repurchase the entire Certificateholders' Interest of such Series,
at a purchase price equal (i) to the Invested Amount of such Series plus (ii)
accrued and unpaid interest through the date of such purchase (after giving
effect to any payment of principal and monthly interest on such date of
purchase) plus (iii) any other amount payable to any other party under this
Agreement and the related Supplement. The amount of the purchase price will be
deposited into the Collection Account for credit to the Series Collection
Subaccount for such Series on the Distribution Date in immediately available
funds and will be passed through first, to the applicable Investor
Certificateholders until such Investor Certificateholders are paid in full and,
second, to other parties under the related Supplement. Following any such
repurchase, such Certificateholders' Interest in the Receivables shall
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terminate and such interest therein will be allocated to the Transferor Interest
and such Certificateholders will have no further rights with respect thereto.
In the event that the Transferor fails for any reason to deposit the purchase
price for such Receivables, the Trust will continue to hold such interest in the
Receivables and monthly payments will continue to be made to the
Certificateholders.
(b) The amount deposited pursuant to subsection 12.1(b) shall be paid
to the Investor Certificateholders of the related Series pursuant to Article IV
on the Distribution Date following the date of such deposit. All Certificates
of a Series which are purchased by the Transferor pursuant to subsection 12.1(b)
of this Agreement shall be delivered by the Transferor upon such purchase to,
and be canceled by, the Transfer Agent and Registrar and be disposed of in a
manner satisfactory to the Trustee and the Transferor.
(c) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no later than the Series Termination Date
with respect to such Series. Unless otherwise provided in a Supplement, in the
event that the Invested Amount of any Series of Certificates is greater than
zero on its Series Termination Date (after giving effect to all transfers,
withdrawals, deposits and drawings to occur on such date and the payment of
principal to be made on such Series on such date), the Trustee will sell or
cause to be sold, and pay the proceeds to all Certificateholders of such Series
pro rata (except that unless expressly provided to the contrary in the related
Supplement, no payment shall be made to Certificateholders of any Class of any
Series that is by its terms subordinated to any other Class until such senior
Class of Certificates have been paid in full) in final payment of all principal
of and accrued interest on such Series of Certificates, an amount of Receivables
or interests in Receivables up to the Invested Amount of such Series at the
close of business on such date. Unless and to the extent otherwise specified in
any applicable Supplement, any proceeds of such sale in excess of such principal
and interest paid shall be treated as Collections; provided, however, that if no
Series is outstanding such proceeds shall be paid to the holder of the
Exchangeable Transferor Certificate. Upon such Series Termination Date with
respect to the applicable Series of Certificates, final payment of all amounts
allocable to any Investor Certificates of such Series shall be made in the
manner provided in Section 12.2.
Section 12.3. Final Payment with Respect to Any Series. (a) Written
notice of any termination, specifying the Distribution Date upon which the
Investor Certificateholders of any Series may surrender their Investor
Certificates for payment of the final distribution with respect to such Series
and cancellation, shall be given (subject to at least 30 days' prior written
notice from the Master Servicer to the Trustee containing all information
required for the Trustee's notice) by the Trustee
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to Investor Certificateholders of such Series mailed not later than the fifth
day of the month of such final distribution specifying (i) the Distribution Date
upon which final payment of the Investor Certificates will be made upon
presentation and surrender of Investor Certificates at the office or offices
therein designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Investor
Certificates at the office or offices therein specified. The Master Servicer's
notice to the Trustee in accordance with the preceding sentence shall be
accompanied by an Officer's Certificate setting forth the information specified
in Section 3.5 covering the period during the then current calendar year through
the date of such notice. The Trustee shall give such notice to the Transfer
Agent and Registrar and the Paying Agent at the time such notice is given to
such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 12.1(a) or the occurrence of the Series Termination Date with respect
to any Series pursuant to Section 12.2, all funds then on deposit in the
Collection Account shall continue to be held in trust for the benefit of the
Certificateholders and the Paying Agent or the Trustee shall pay such funds to
the Certificateholders upon surrender of their Certificates. Any Certificate
not surrendered on the date specified in subsection 12.3(a)(i) shall cease to
accrue any interest provided for such Certificate from and after such date. In
the event that all of the Investor Certificateholders shall not surrender their
Certificates for cancellation within six months after the date specified in the
above-mentioned written notice, the Trustee shall give a second written notice
to the remaining Investor Certificateholders of such Series to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Investor
Certificates of such Series shall not have been surrendered for cancellation,
the Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Investor Certificateholders of such
Series concerning surrender of their Certificates, and the cost thereof shall be
paid out of the funds in the Collection Account held for the benefit of such
Investor Certificateholders. The Trustee and the Paying Agent shall pay to the
Transferor upon request any monies held by them for the payment of principal or
interest that remains unclaimed for two years. After payment to the Transferor,
Certificateholders entitled to the money must look to the Transferor for payment
as general creditors unless an applicable abandoned property law designates
another Person.
(c) All Certificates surrendered for payment of the final distribution
with respect to such Certificates and cancellation shall be canceled by the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to the
Trustee and the Transferor.
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<PAGE>
Section 12.4. Transferor's Termination Rights. Upon the termination
of the Trust pursuant to Section 12.1 and the surrender of the Exchangeable
Transferor Certificate, the Trustee shall sell, assign and convey to the
Transferor (without recourse, representation or warranty) all right, title and
interest of the Trust in the Receivables, whether then existing or thereafter
created, and all proceeds thereof except for amounts held by the Trustee
pursuant to subsection 12.2(b). The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without recourse,
representation or warranty, as shall be reasonably requested by the Transferor
to vest in the Transferor all right, title and interest which the Trust had in
the Receivables.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1. Amendment. (a) This Agreement and any Supplement may
be amended in writing from time to time by the Master Servicer, the Transferor
and the Trustee, without the consent of any holder of any outstanding
Certificate, to cure any ambiguity, to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein or to add any
other provisions with respect to matters or questions raised under this
Agreement which shall not be inconsistent with the provisions of this Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any Investor Certificateholder or any Enhancement
Provider. The Trustee may, but shall not be obligated to, enter into any such
amendment pursuant to this paragraph or paragraph (b) below which affects the
Trustee's rights, duties or immunities under this Agreement or otherwise. The
Trustee shall be entitled to receive upon request an opinion of counsel
satisfactory to the Trustee with respect to any amendment to the Agreement or
any Supplement entered into without the consent of the holders of any
outstanding Certificates. In such case, the Trustee shall be entitled to an
Officer's Certificate stating that such amendment shall not adversely affect the
interests of the holders of any outstanding Certificates in any material
respect.
(b) This Agreement, any Supplement and, to the extent provided in any
Supplement, any other agreement relating to the Receivables may also be amended
from time to time by the Master Servicer, the Transferor and the Trustee with
the consent of the holders of certificates evidencing Fractional Undivided
Interests aggregating more than 50% of the Invested Amount of each outstanding
Series adversely affected by such amendment for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, any such Supplement or other agreement or of modifying in any
manner the rights of holders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any
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<PAGE>
manner the amount of, or delay the timing of, distributions which are required
to be made on any Investor Certificate of such Series without the consent of
such Investor Certificateholder of such Series; (ii) change the definition of or
the manner of calculating the interest of any Investor Certificateholder of such
Series without the consent of such Investor Certificateholder; (iii) reduce the
aforesaid percentage of fractional undivided interests the holders of which are
required to consent to any such amendment, in each case without the consent of
all certificateholders of all Series adversely affected or (iv) add to, change,
modify or eliminate any provision which may adversely affect the interests of
any Enhancement Provider without the consent of each such affected Enhancement
Provider.
(c) Notwithstanding anything in this Section 13.1 to the contrary, the
Supplement with respect to any Series may be amended on the terms and with the
procedures provided in such Supplement.
(d) The Master Servicer shall give each Agent and Enhancement Provider
20 days' prior notice of any proposed amendment. Promptly after the execution
of any such amendment or consent the Trustee shall furnish written notification
of the substance of such amendment to each Certificateholder of each Outstanding
Series (or with respect to an amendment of a Supplement, to the applicable
Series), and the Master Servicer shall furnish written notification of the
substance of such amendment to any related Enhancement Provider and each Rating
Agency. No such amendment shall be effective until the Rating Agency Condition
has been satisfied unless specified otherwise in the related Supplement.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 13.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(f) In executing or accepting any amendment pursuant to this Section
13.1, the Trustee shall, upon request, be entitled to receive, and (subject to
Sections 11.1 and 11.2) shall be fully protected in relying upon, an Opinion of
Counsel stating that (i) such amendment is authorized pursuant to a specific
provision of the Agreement or any Supplement, as the case may be, and complies
with such provision and (ii) all conditions precedent to the execution, delivery
and performance of such amendment shall have been satisfied in full.
Section 13.2. Protection of Right, Title and Interest to Trust. (a)
The Master Servicer shall cause this Agreement,
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<PAGE>
any Supplement, all amendments hereto and/or all financing statements and
continuation statements and any other necessary documents covering the
Certificateholders' and the Trustee's right, title and interest to the Trust to
be promptly recorded, registered and filed, and at all times to be kept
recorded, registered and filed, all in such manner and in such places as may be
required by law fully to preserve and protect the right, title and interest of
the Trustee hereunder to all property comprising the Trust. The Master Servicer
shall deliver to the Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. The Transferor shall cooperate
fully with the Master Servicer in connection with the obligations set forth
above and will execute any and all documents reasonably required to fulfill the
intent of this subsection 13.2(a).
(b) Within 30 days after the Transferor makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement filed in accordance with subsection 13.2(a) seriously
misleading within the meaning of Section 9-402(7) of the UCC as in effect in the
State of New York, such Transferor shall give the Trustee notice of any such
change and shall file such financing statements or amendments as may be
necessary to continue the priority and perfection of the Trust's security
interest in the Receivables and the proceeds thereof.
(c) The Masher Servicer will deliver an Opinion of Counsel,
substantially in the form of Exhibit G, to each of the Trustee and the Rating
Agency: (i) upon the execution and delivery of each amendment of Articles I, II,
III or IV hereof and each Supplement modifying Article IV hereof, other than (A)
amendments pursuant to subsection 13.1(a) and (B) Supplements adopted pursuant
to Section 6.9 for particular new Series, and (ii) on or before March 31 of each
year, beginning with March 31, 1995.
Section 13.3. Limitation on Rights of Certificateholders. (a) The
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor shall such death or incapacity entitle such
Certificateholders' legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except with
respect to the Investor Certificateholders as provided in Section 13.1 hereof)
or in any manner otherwise control the operation and management of the Trust, or
the obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates, be
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<PAGE>
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given to the Trustee, written request to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby (which, in the case of any investment-grade institutional Investor
Certificateholder, may be in the form of an unsecured agreement of indemnity),
and the Trustee, for 60 days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any such action, suit
or proceeding; it being understood and intended, and being expressly covenanted
by each Certificateholder with every other Certificateholder and the Trustee,
that no one or more Certificateholders shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of any other of the
Investor Certificates, or to obtain or seek to obtain priority over or
preference to any other such Investor Certificateholder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Investor Certificateholders. For the
protection and enforcement of the provisions of this Section 13.3, each and
every Certificateholder and the Trustee shall be entitled to such relief as can
be given either at law or in equity.
Section 13.4. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 13.5. Notices. All demands, notices and communications
hereunder shall be in writing delivered by hand or by facsimile and shall be
deemed to have been duly given, in the case of notice by facsimile, when
telecopied to the following number, or, in the case of notice by hand, if
personally delivered at the following addresses:
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(a) in the case of the Transferor:
1065 Highway 315, Cross Creek Pointe
Suite 407
Wilkes Barre, Pennsylvania 18702-6980
Attention: Kenneth B. Kozel
Telecopy: (717) 822-4187
(b) in the case of US Foodservice Inc.:
1065 Highway 315, Cross Creek Pointe
Suite 203
Wilkes Barre, Pennsylvania 18702-6980
Attention: David McAnally
Telecopy: (717) 822-0909
(c) in the case of the Trustee:
Chemical Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Group
-- ABS Team
Telecopy: (212) 946-3916
or, as to each party, at such other telecopier number or address as shall be
designated by such party in a written notice to each other party. Any notice
required or permitted to be mailed to a Certificateholder shall be given by
first-class mail, postage prepaid, at the address of such Certificateholder as
shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such notice. The Master
Servicer shall deliver or make available to each Rating Agency each certificate
and report required to be prepared, forwarded or delivered pursuant to Section
3.4, 3.5 and 3.6 and a copy of any amendment to this Agreement and any agreement
relating to the Enhancement at the address therefor specified in the applicable
Supplement; provided that a failure to deliver any such certificate, report or
amendment hereunder shall not constitute an Early Amortization Event pursuant to
Section 9.1. The Trustee shall forward to each Rating Agency each certificate
and report received by it pursuant to subsection 3.4(b) and Sections 3.5 and 3.6
upon receipt thereof.
Section 13.6. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders.
102
<PAGE>
Section 13.7. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 8.2, this Agreement may not be
assigned by the Master Servicer unless the Master Servicer shall have obtained
(a) the prior consent of holders of Investor Certificates evidencing Fractional
Undivided Interests aggregating not less than 66-2/3% of the Invested Amount of
the Investor Certificates of each Series on a Series-by-Series basis and (b) the
prior written consent of the Trustee, which consent shall not be unreasonably
withheld.
Section 13.8. Certificates Nonassessable and Fully Paid. It is the
intention of the parties to this Agreement that the Certificateholders shall not
be personally liable for obligations of the Trust, that the interests in the
Trust represented by the Certificates shall be nonassessable for any losses or
expenses of the Trust or for any reason whatsoever and that Certificates upon
authentication thereof by the Trustee pursuant to Section 6.2 are and shall be
deemed fully paid.
Section 13.9. Further Assurances. The Transferor and the Master
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
Trustee more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements or continuation statements
relating to the Receivables for filing under the provisions of the UCC of any
applicable jurisdiction.
Section 13.10. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee or the Investor
Certificateholders, any right, remedy, power or privilege, hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
Section 13.11. Counterparts. This Agreement may be executed in two
or more counterparts (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
Section 13.12. Third-Party Beneficiaries. This Agreement will inure
to the benefit of and be binding upon the parties hereto, the Certificateholders
and their respective successors and permitted assigns. Except as otherwise
provided in this Article XIII or Section 7.4, no other person will have any
right or obligation hereunder; provided, however, that if so specified in the
applicable Supplement, an Enhancement Provider may be deemed to be a third party
beneficiary of this Agreement.
103
<PAGE>
Section 13.13. Actions by Certificateholders. (a) Wherever in this
Agreement a provision is made that an action may be taken or a notice, demand or
instruction given by Investor Certificateholders, such action, notice or
instruction may be taken or given by any Investor Certificateholders of any
Series, unless such provision requires a specific percentage of Investor
Certificateholders of a certain Series or all Series.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind such Certificateholder and
every subsequent holder of such Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee or the Master Servicer in
reliance thereon, whether or not notation of such action is made upon such
Certificate.
Section 13.14. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
Section 13.15. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 13.16. Construction of Agreement. (a) The Transferor hereby
grants to the Trustee a first priority perfected security interest in all of the
Transferor's right, title and interest in, to and under the Receivables now
existing and hereafter created, all monies due or to become due and all amounts
received with respect thereto and all "proceeds" thereof (including Recoveries),
to secure all of Transferor's and Master Servicer's obligations hereunder,
including, without limitation, the Transferor's obligation to sell or transfer
Receivables hereafter created to the Trust.
(b) This Agreement shall constitute a security agreement under
applicable law.
Section 13.17. No Set-Off. Except as expressly provided in this
Agreement, the Master Servicer agrees that it shall have no right of set-off or
banker's lien against, and no right to otherwise deduct from, any funds held in
the Collection Account for any amount owed to it by the Trustee, the Trust, any
Certificateholder or any Enhancement Provider.
Section 13.18. No Bankruptcy Petition. Each of the Trustee, the
Master Servicer and each Servicer hereby covenant and agree that, prior to the
date which is one year and one day after the date of termination of the Trust
pursuant to
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Section 12.1, it will not institute against, or join any other Person in
instituting against, the Transferor any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law.
Section 13.19. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Chemical, not individually or personally but solely as Trustee of
the Trust, in the exercise of the powers and authority conferred and vested in
it, (b) except with respect to Section 11.15 hereof the representations,
undertakings and agreements herein made on the part of the Trust are made and
intended not as personal representations, undertakings and agreements by
Chemical, but are made and intended for the purpose of binding only the Trust,
(c) nothing herein contained shall be construed as creating any liability on
Chemical, individually or personally, to perform any covenant either expressed
or implied contained herein, all such liability, if any, being expressly waived
by the parties who are signatories to this Agreement and by any Person claiming
by, through or under such parties; provided, however, Chemical shall be liable
in its individual capacity for its own willful misconduct or negligence and for
any tax assessed against Chemical based on or measured by any fees, commission
or compensation received by it for acting as Trustee and (d) under no
circumstances shall Chemical be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement.
IN WITNESS WHEREOF, the Transferor, the Master Servicer, each Servicer
and the Trustee have caused this Pooling and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
USFAR INC., as Transferor
By:/s/
-------------------------------
Title:
US FOODSERVICE INC., as
Master Servicer
By:/s/
-------------------------------
Title:
105
<PAGE>
CHEMICAL BANK,
not in its individual capacity
but solely as Trustee and as
Paying Agent
By:/s/
-------------------------------
Title:
WHITE SWAN, INC., as Servicer
By:/s/
-------------------------------
Title:
BIGGERS BROTHERS, INC., as Servicer
By:/s/
-------------------------------
Title:
F.H. BEVEVINO & COMPANY, INC., as
Servicer
By:/s/
-------------------------------
Title:
ROANOKE RESTAURANT SERVICE, INC.,
as Servicer
By:/s/
-------------------------------
Title:
KING'S FOODSERVICE, INC., as
Servicer
By:/s/
-------------------------------
Title:
106
<PAGE>
Schedule 1
----------
Receivables
-----------
Submitted to Chemical Bank as of September 23, 1993.
107
<PAGE>
Schedule 2
----------
Identification of Trust Accounts
--------------------------------
The Collection Account has been established by and at Chemical Bank,
account number 323-305113.
The Collection Account is for the account of Chemical Bank, as trustee for
the USFAR Master Trust.
108
<PAGE>
Schedule 3
----------
Identification of Lockboxes
---------------------------
=======================================================================
Servicer Lockbox Bank Lockbox Account Box Number
- -----------------------------------------------------------------------
F.H. Bevevino & PNC Bank, National 9004038218 7780-4205
Company, Inc. Association
- -----------------------------------------------------------------------
Biggers Brothers, Nationsbank of 000-000-521 65007
Inc. North 000-000-521 65129
Carolina, NA 000-000-521 65331
000-000-521 65535
000-000-521 65115
- -----------------------------------------------------------------------
King's First Tennessee Bank 88-43-805 888039
Foodservice, Inc.
- -----------------------------------------------------------------------
Roanoke Restaurant First Union 2050-0000-53924 85080
Service, Inc. National
Bank of Virginia
- -----------------------------------------------------------------------
White Swan, Inc. Liberty Bank & 033-789-7 850112
Trust Company of
Oklahoma City, NA
- -----------------------------------------------------------------------
White Swan, Inc. Midlantic National 204-10775 17415
Bank
- -----------------------------------------------------------------------
White Swan, Inc. NationsBank of 001-008-98-569 100531
Georgia, NA
- -----------------------------------------------------------------------
White Swan, Inc. One Valley Bank 100-100-2664 NA
- -----------------------------------------------------------------------
White Swan, Inc. Texas Commerce Bank 08805036785 910837
07303016672 910243
09920063814 684428
=======================================================================
109
<PAGE>
Schedule 4
----------
Location of Chief Executive Offices;
Locations of Receivables
------------------------------------
<TABLE>
<CAPTION>
========================================================================================
State of Location of Offices Where
Servicer Incorporation Chief Executive Office Receivables are Kept
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Biggers Delaware 920 Black Satchel Drive, Same
Brothers, Inc. Charlotte, North Carolina
28216
- ----------------------------------------------------------------------------------------
White Swan, Inc. Delaware 400 Fuller-Wise Road, 400 Fuller-Wise Road
(including the Euless, Texas 76039 Euless, Texas 76039
White Swan or 2923 Old Tampa
Mainframe 1065 Highway 315 Highway, Lakeland,
divisions) Cross Creek Pointe, Florida 33803
Suite 203 915 East 50th Street
Wilkes Barre, PA 18702-6980 Lubbock, Texas 79404
1515 Big Town
Boulevard, Mesquite,
Texas 75149
5330 Fleming Court,
Austin, Texas 78744
- ----------------------------------------------------------------------------------------
Wm. E. Davis & Delaware 400 Fuller-Wise Road, 73 Northwest 122nd,
Sons (division Euless, Texas 76039 Oklahoma City,
of White Swan) or Oklahoma 73114
1065 Highway 315
Cross Creek Pointe
Suite 203
Wilkes Barre, PA 18702-6980
- ----------------------------------------------------------------------------------------
Standard Food Delaware 400 Fuller-Wise Road, 2575 Virginia Avenue,
Service Euless, Texas 76039 Hurricane, West
(division of or Virginia 25526
White Swan) 1065 Highway 315
Cross Creek Pointe,
Suite 203
Wilkes Barre, PA 18702-6980
- ----------------------------------------------------------------------------------------
F.H. Bevevino & Pennsylvania 13 Rutledge Drive 13 Rutledge Drive,
Company Pittston, Pennsylvania Pittston, Pennsylvania
18640 18640
- ----------------------------------------------------------------------------------------
Roanoke Virginia 145 Hammit Avenue 145 Hammit Avenue,
Restaurant Salem, Virginia 24153 Salem, Virginia 24153
Service, Inc.
- ----------------------------------------------------------------------------------------
King's Kentucky 269 Alcoa Drive 269 Alcoa Drive, Alcoa
Foodservice, Alcoa Center Center, Alcoa,
Inc. Alcoa, Tennessee 37701 Tennessee 37701
========================================================================================
</TABLE>
110
<PAGE>
Schedule 5
----------
Fiscal Months
-------------
[USF to provide]
111
<PAGE>
Schedule 6
----------
Special Obligors
----------------
Special Obligor Special Obligor Limit
--------------- ---------------------
Wyatt Cafeteria Inc. 4%
The ARA Group, Inc. 2.5%
112
<PAGE>
Exhibit 10.36
EXECUTION COPY
--------------
- --------------------------------------------------------------------------------
USFAR INC.,
Transferor
US FOODSERVICE INC.,
Master Servicer
and
CHEMICAL BANK,
Trustee
------------------------------------
SERIES 1994-1 SUPPLEMENT
Dated as of October 27, 1994
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of October 27, 1994
------------------------------------
USFAR MASTER TRUST
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CREATION OF THE TERM CERTIFICATES, SERIES 1994-1........... 1
SECTION 1.1. Designation..................................... 1
ARTICLE II DEFINITIONS............................................... 2
SECTION 2.1. Definitions..................................... 2
ARTICLE III PURCHASE AND SALE OF THE TERM CERTIFICATES............... 14
SECTION 3.1. The Term Certificates........................... 14
SECTION 3.2. Delivery........................................ 14
SECTION 3.3. Sale of Additional Term Certificates............ 16
SECTION 3.4. Application of Proceeds......................... 17
SECTION 3.5. Procedure for Decreasing the Invested
Amount.......................................... 17
SECTION 3.6. Access to List of Certificateholders'
Names and Addresses............................. 18
ARTICLE IV ARTICLE IV OF THE AGREEMENT............................... 18
SECTION 4B.2. Establishment of Trust Accounts................. 19
SECTION 4B.3. Daily Allocations............................... 20
SECTION 4B.4. Determination of Interest....................... 21
SECTION 4B.5. Determination of Series 1994-1 Monthly
Principal Payment............................... 22
SECTION 4B.6. Applications.................................... 22
ARTICLE V DISTRIBUTIONS AND REPORTS.................................. 23
SECTION 5B.1. Distributions................................... 23
SECTION 5B.2. Daily Reports................................... 24
SECTION 5B.3. Statements and Notices.......................... 24
SECTION 5B.4. Notices......................................... 25
ARTICLE VI ADDITIONAL EARLY AMORTIZATION EVENTS...................... 25
SECTION 6.1. Additional Early Amortization Events............ 25
ARTICLE VII SERVICING FEE............................................ 28
SECTION 7.1. Servicing Compensation.......................... 28
ARTICLE VIII COVENANTS, REPRESENTATIONS AND WARRANTIES............... 28
SECTION 8.1. Representations and Warranties of the
Transferor and the Master Servicer.............. 28
SECTION 8.2. Covenants of the Transferor..................... 28
SECTION 8.3. Covenants of the Master Servicer................ 30
ARTICLE IX ADDITIONAL MASTER SERVICER DEFAULTS....................... 32
SECTION 9.1. Additional Master Servicer Defaults............. 32
ARTICLE X MISCELLANEOUS.............................................. 33
SECTION 10.1. Ratification of Agreement....................... 33
SECTION 10.2. Governing Law................................... 33
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 10.3. Further Assurances.............................. 33
SECTION 10.4. No Waiver; Cumulative Remedies.................. 33
SECTION 10.5. Amendments...................................... 33
SECTION 10.6. Severability.................................... 34
SECTION 10.7. Notices......................................... 34
SECTION 10.8. Successors and Assigns.......................... 34
SECTION 10.9. Counterparts.................................... 34
SECTION 10.10. Limitation of Liability......................... 34
SECTION 10.11. Confidentiality................................. 35
ARTICLE XI FINAL DISTRIBUTIONS....................................... 36
SECTION 11.1. Certain Distributions........................... 36
</TABLE>
ii
<PAGE>
SERIES 1994-1 SUPPLEMENT, dated as of October 27, 1994 (this
"Supplement"), among USFAR INC., a Delaware corporation (the "Transferor"), US
FOODSERVICE INC., a Delaware corporation, as master servicer (the "Master
Servicer"), and CHEMICAL BANK, a New York banking corporation, in its capacity
as Trustee (the "Trustee") under the Agreement (as hereinafter defined).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the parties hereto entered into an Amended and Restated
Pooling and Servicing Agreement, dated as of October 27, 1994 (the "Agreement");
WHEREAS, the Agreement provides, among other things, that the
Transferor, the Master Servicer and the Trustee may at any time and from time to
time enter into supplements to the Agreement for the purpose of authorizing the
issuance on behalf of the Trust by the Transferor for execution and redelivery
to the Trustee for authentication of one or more Series of Investor
Certificates; and
WHEREAS, the Transferor, the Master Servicer and the Trustee wish to
supplement the Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, the parties hereto agree
as follows:
ARTICLE I
CREATION OF THE TERM CERTIFICATES, SERIES 1994-1
SECTION 1.1. Designation. (a) The Certificates created and
authorized pursuant to the Agreement and this Supplement shall be divided into
two Classes, which shall be designated respectively as (i) the "Term
Certificates, Series 1994-1" and (ii) the "Subordinated Transferor Certificate,
Series 1994-1". The Term Certificates shall be issued in the form of one
typewritten Certificate, representing the Book-Entry Certificate, to be
delivered to the Depository, except that at the initial Issuance Date each
initial Term Certificateholder shall be entitled to request issuance of a
Definitive Certificate to such Term Certificateholder. Except as provided in
the immediately preceding sentence or in Section 6.12 of the Agreement, the Term
Certificates shall not be issued as Definitive Certificates.
(b) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or
<PAGE>
provision contained in the Agreement, the terms and provisions of this
Supplement shall govern. All capitalized terms not otherwise defined herein are
defined in the Agreement. All Article, Section or subsection references herein
shall mean Article, Section or subsections of the Supplement, except as
otherwise provided herein. Unless otherwise stated herein, as the context
otherwise requires or if such term is otherwise defined in the Agreement, each
capitalized term used or defined herein shall relate only to the Series 1994-1
and no other Series of Investor Certificates issued by the Trust.
ARTICLE II
DEFINITIONS
SECTION 2.1. Definitions. The following words and phrases shall
have the following meanings with respect to Series 1994-1 and the definitions of
such terms are applicable to the singular as well as the plural form of such
terms and to the masculine as well as the feminine and neuter genders of such
terms:
"Accrued Expense Amount" shall mean, for each Business Day during an
Accrual Period, the sum of (i) the Daily Interest Expense for such Business
Day, (ii) one-twentieth of the Series 1994-1 Monthly Servicing Fee to be
paid on the next succeeding Distribution Date (up to but not exceeding the
full amount thereof) for each day since the preceding Business Day and
(iii) the Program Costs for such Business Day.
"Additional Interest" shall have the meaning assigned in subsection
4B.4(b).
"Additional Invested Amount" shall mean with respect to any additional
Term Certificates issued pursuant to Section 3.3, the initial aggregate
principal amount of such Term Certificates.
"Adjusted Invested Amount" shall mean, as of any date of
determination, (i) the Invested Amount on such date, minus (ii) the amount
on deposit in the Series 1994-1 Principal Collection Sub-subaccount on such
date.
"Aged Receivables Denominator" shall mean, with respect to each
Originator other than White Swan and, in the case of White Swan, each White
Swan Division, the prior Settlement Period which is set forth opposite such
Originator or such White Swan Division below:
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<TABLE>
<CAPTION>
=================================================================
Originator/
White Swan Divisions Aged Receivables Denominator
<S> <C>
- -----------------------------------------------------------------
F.H. Bevevino & Company, Inc. 3rd prior Settlement Period
- -----------------------------------------------------------------
Biggers Brothers, Inc. 3rd prior Settlement Period
- -----------------------------------------------------------------
William E. Davis & Sons 2nd prior Settlement Period
- -----------------------------------------------------------------
King's Foodservice, Inc. 3rd prior Settlement Period
- -----------------------------------------------------------------
Roanoke Restaurant Service, 3rd prior Settlement Period
Inc.
- -----------------------------------------------------------------
Standard Food Service 3rd prior Settlement Period
- -----------------------------------------------------------------
White Swan Mainframe Divisions 3rd prior Settlement Period
=================================================================
</TABLE>
"Aged Receivables Numerator" shall mean, with respect to each
Originator other than White Swan and, in the case of White Swan, each White
Swan Division, the number of Days Past Due which is set forth opposite such
Originator or such White Swan Division below:
<TABLE>
<CAPTION>
=================================================================
Originator/
White Swan Divisions Aged Receivables Numerator
<S> <C>
- -----------------------------------------------------------------
F.H. Bevevino & Company, Inc. 61-90 days
- -----------------------------------------------------------------
Biggers Brothers, Inc. 61-90 days
- -----------------------------------------------------------------
William E. Davis & Sons 31-60 days
- -----------------------------------------------------------------
King's Foodservice, Inc. 61-90 days
- -----------------------------------------------------------------
Roanoke Restaurant Service, 61-90 days
Inc.
- -----------------------------------------------------------------
Standard Food Service 61-90 days
- -----------------------------------------------------------------
White Swan Mainframe Divisions 61-90 days
=================================================================
</TABLE>
"Aged Receivables Percentage" shall mean, as of the last day of each
Settlement Period, the percentage equivalent to a fraction, the numerator
of which shall be the aggregate unpaid balance of Receivables originated by
each Originator other than White Swan and, in the case of White Swan, by
each White Swan Division, that were past due by the related Aged
Receivables Numerator with respect to such Originator or such White Swan
Division as of the last day of such Settlement Period, and the denominator
of which shall be the aggregate Face Amount of Receivables originated by
such Originator or such White Swan Division during the prior Settlement
Period that is the related Aged Receivables Denominator with respect to
such Originator.
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"Agreement" shall mean the Amended and Restated Pooling and Servicing
Agreement, dated as of October 27, 1994, among the Transferor, the Master
Servicer, the Servicers and the Trustee, as amended, supplemented or
otherwise modified from time to time.
"Allocated Receivables Amount" shall mean, on any date of
determination with respect to Series 1994-1, the lower of (i) the Target
Receivables Amount on such day and (ii) the Aggregate Receivables Amount on
such day times the percentage equivalent of a fraction the numerator of
which is the Adjusted Invested Amount on such day and the denominator of
which is the sum of the Aggregate Adjusted Invested Amount on such day.
"Amortization Period" shall mean the period following the Revolving
Period and ending on the earlier to occur of (i) the date when the Invested
Amount shall have been reduced to zero and all accrued interest on the Term
Certificates shall have been paid and (ii) the Trust Termination Date.
"Certificate Rate" shall mean (i) with respect to the Term
Certificates issued on the initial Issuance Date, 8.14% per annum and (ii)
with respect to any additional Term Certificates issued on any Subsequent
Issuance Date, the interest rate per annum set forth in the related
Subsequent Issuance Date Supplement.
"Confidential Information" shall mean, in relation to any Person, any
written information delivered or made available by, or on behalf of, the
Transferor, the Master Servicer or a Servicer to such Person in connection
with or pursuant to the Agreement, this Supplement or the transactions
contemplated thereby and hereby which is proprietary in nature and clearly
marked or identified in writing as being confidential information, other
than information (i) which was publicly known, or otherwise known to such
Person, at the time of disclosure (except pursuant to disclosure in
connection with any of the foregoing agreements), (ii) which subsequently
becomes publicly known through no act or omission by such Person, or (iii)
which otherwise becomes known to such Person other than through disclosure
by the Transferor, the Master Servicer or a Servicer.
"Confidentiality Letter" shall mean a letter in form of Exhibit H
hereto.
"Controlled Amortization" shall mean, with respect to the Term
Certificates, the anticipated repayment of principal in respect of such
Term Certificates, which is expected to be made in two equal installments
to the Term Certificateholders on the first and second Distribution
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Dates following the commencement of the Amortization Period due to the
occurrence of the Scheduled Termination Date.
"Daily Interest Expense" shall mean, with respect to any Business Day
during an Accrual Period, the sum of (a) one-twentieth of the Series 1994-1
Monthly Interest to be distributed on the next succeeding Distribution Date
(up to but not exceeding the full amount thereof) for each day since the
preceding Business Day, (b) the aggregate amount of all previously accrued
Daily Interest Expense the amounts of which have not been transferred to
the Series 1994-1 Accrued Interest Sub-subaccount and (c) the aggregate
amount of all Additional Interest for each day since the preceding Business
Day.
"Daily Report" shall mean a report prepared by the Master Servicer on
each Business Day for the period specified therein, in substantially the
form of Exhibit D.
"Days Sales Outstanding" shall mean, with respect to any date of
determination, the number of days equal to the product of (a) 91 and (b)
the amount obtained by dividing (i) the average of the difference between
(A) the aggregate Face Amount of Receivables and (B) the aggregate bad debt
reserve of the Originators, in each case as at the end of the three
Settlement Periods immediately preceding the most recent Settlement Date,
by (ii) aggregate net sales of the Originators for the three Settlement
Periods immediately preceding the most recent Settlement Date.
"Depository" shall mean The Depository Trust Company.
"Dilution Percentage" shall mean, as of the last day of each
Settlement Period, an amount (expressed as a percentage) equal to Dilutive
Credits during such Settlement Period divided by the aggregate Face Amount
of Receivables which were originated during such Settlement Period.
"Dilution Reserve Floor" shall mean, as of any date of determination,
an amount (expressed as a percentage) equal to the product of (a) the
average of the Dilution Percentage for the preceding twelve Settlement
Periods and (b) Days Sales Outstanding as of such date divided by 30.
"Dilution Reserve Percentage" shall mean (i) for the first three
Settlement Dates to occur following the Issuance Date, 3.0%, and (ii)
thereafter, as of any Settlement Date and continuing until the end of the
related Calculation Period, the greater of (A) the Dilution Reserve Floor
and (B) an amount (expressed as a percentage) which is calculated as
follows:
DRP = (c * d * e) + f
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Where:
DRP = Dilution Reserve Percentage;
c = the Ratings Multiple;
d = the average of the Dilution Percentage during the period of twelve
consecutive Settlement Periods (or, if shorter, the period of the
number of Settlement Periods occurring since the Issuance Date) ending
prior to such Settlement Date;
e = the quotient of (i) the product of (A) the aggregate Face Amount of
Receivables which were originated during the preceding Settlement
Period and (B) three divided by the number of days in such Settlement
Period and (ii) the aggregate unpaid balance of all Eligible
Receivables as of such Settlement Date; and
f = the product of (i) the twelve-month sample standard deviation of the
Dilution Percentage as of the end of each of the twelve consecutive
Settlement Periods (or, if shorter, the number of Settlement Periods
occurring since the Issuance Date) preceding such date and (ii) the Z
Value.
"Discount Amount" shall mean, as of any date of determination, the sum
of (a) 1.0% (b) the quotient of (i) the sum of the annual Trustee fee and
the annual Rating Agency fee over (ii) the Invested Amount and (c) the
weighted average interest rate in effect with respect to the Investor
Certificates as of such date.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Early Amortization Event" shall have the meaning assigned in Section
6.1 of this Supplement and Section 9.1 of the Agreement.
"ERISA Entity" shall mean either an "employee benefit plan" as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, (whether or not subject to the Employment Retirement Income
Security Act of 1974, as amended), a "plan" as defined in Section 4975 of
the Internal Revenue Code of 1986, as amended, or an entity deemed to hold
plan assets of any such employee benefit plan or plan; provided, however,
ERISA Entity shall not include any insurance company licensed to issue
contracts of insurance in any state which represents that the source of
funds from which its investment in Term Certificates is to be made is a
general account of such insurance company.
"Initial Invested Amount" shall mean $75,000,000.
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"Interest Shortfall" shall have the meaning assigned in subsection
4B.4(b).
"Invested Amount" shall mean, with respect to any date of
determination, an amount equal to the Initial Invested Amount minus the
aggregate amount of distributions relating solely to principal to the Term
Certificateholders made pursuant to subsections 4B.6(c) and 4B.6(d) on or
prior to such date plus the Additional Invested Amount with respect to all
additional Term Certificates issued pursuant to Section 3.3 on or prior to
such date.
"Invested Percentage" shall mean, with respect to any Business Day (i)
during the Revolving Period, the percentage equivalent of a fraction, the
numerator of which is the Allocated Receivables Amount as of the end of the
preceding Business Day and the denominator of which is the Aggregate
Receivables Amount as of the end of the preceding Business Day and (ii)
during the Amortization Period, the percentage equivalent of a fraction,
the numerator of which is the Allocated Receivables Amount as of the end of
the last Business Day of the Revolving Period and the denominator of which
is the greater of (A) the Aggregate Receivables Amount as of the end of the
preceding Business Day and (B) the sum of the numerators used to calculate
the Invested Percentage for all Series of Investor Certificates outstanding
on the Business Day for which such percentage is determined.
"Issuance-Date" shall mean October 27, 1994.
"Key Credit Agreement Financial Covenants" shall mean (a) at any time
that the Credit Agreement shall be in effect, financial negative covenants
relating to tests of or restrictions in respect of "Consolidated Fixed
Charge Coverage Ratio", "Consolidated Interest Coverage Ratio", "Leverage
Ratio", "Minimum Consolidated Cumulative Net Income" or ""Minimum EBITDA"
(which tests and restrictions, as in effect at the date hereof, are set
forth in Exhibit G), as the same may be amended, supplemented or otherwise
modified, and (b) at any time after the final termination or cancellation
of the Credit Agreement, the meaning ascribed to the term "Key Financial
Credit Agreement Financial Covenants" as of the last day that such Credit
Agreement was in effect.
"Loss Reserve Amount" shall mean, as to any Originator other than
White Swan and, in the case of White Swan, as to any White Swan Division,
the amounts equal to the Loss Reserve Percentage for such Originator or
White Swan Division times the aggregate Face Amounts of all Eligible
Receivables originated by such Originator or White Swan Division.
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"Loss Reserve Floor" shall mean, as of any date of determination, an
amount equal to the sum of 14% and each ARA Percentage Adjustment, if any,
made on or prior to such date.
"Loss Reserve Percentage" shall mean (i) for the first three
Settlement Dates to occur following the Issuance Date, 18.0%, and (ii)
thereafter, as of any Settlement Date and continuing until the end of the
related Calculation Period, with respect to each Originator other than
White Swan and, in the case of White Swan, each White Swan Division, an
amount (expressed as a percentage) which is calculated as follows:
LRP = (a * b * c) + d
where:
LRP = Loss Reserve Percentage;
a = the aggregate Face Amount of Receivables originated by such
Originator or such White Swan Division during the immediately
preceding two Settlement Periods;
b = an amount equal to (i) the highest Two-Month Rolling Average of
the Aged Receivables Percentage with respect to such Originator
or White Swan Division that occurred during the period of twelve
consecutive Settlement Periods (or, if shorter, the period of the
number of Settlement Periods occurring since the Issuance Date)
preceding such date divided by (ii) the aggregate unpaid balance
of all Eligible Receivables originated by such Originator or
White Swan Division as of such Settlement Date;
c = the Ratings Multiple; and
d = the product of (i) the Z Value and (ii) the twelve-month sample
standard deviation of the Aged Receivables Percentage with
respect to such Originator or White Swan Division as of the end
of each of the twelve consecutive Settlement Periods (or, if
shorter, the number of Settlement Periods occurring since the
Issuance Date) preceding such date.
"Make Whole Payment" shall mean, with respect to any Repayment Amount,
an amount determined on the third Business Day following the end of the
related Settlement Period in the case of any Reduction, or an amount
determined on the day of the occurrence of a Special Early Amortization
Event otherwise, which is equal to the positive difference, if
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any, between (a) the amount obtained by discounting the Remaining Scheduled
Payments with respect to such Repayment Amount from the respective
scheduled Distribution Date, with respect to payments of interest, or
scheduled Controlled Amortization, with respect to payments of principal,
to the related Special Distribution Date in accordance with accepted
financial practice and at a discount factor equal to .50% plus the
Reinvestment Yield (applied on a monthly basis) with respect to such
Repayment Amount and (b) such Repayment Amount.
"Majority Term Certificateholders" shall mean, on any day, Term
certificateholders having, in the aggregate, more than 50% of the Invested
Amount.
"Master Servicer Default" shall have the meaning assigned in Section
9.1 of this Supplement and Section 10.1 of the Agreement.
"Optional Repurchase Percentage" shall mean 10% of the Invested Amount
on the close of business on the last day of the Revolving Period.
"Placement Agent" shall mean the collective reference to Chemical
Securities Inc. and Chase Securities, Inc.
"Program Costs" shall mean, for any Business Day, the product of (a)
the sum of all unpaid fees and expenses of the Transferor, including fees
and expenses due and payable to counsel to, and independent auditors of,
the Transferor (other than fees and expenses payable on or in connection
with the closing of the issuance of the Term Certificates) and any
franchise taxes due and payable by the Transferor, in each case on such
Business Day, and (b) the Invested Percentage (expressed as a decimal) on
such Business Day; provided, however, in no event may Program Costs
previously paid pursuant to subsection 4B.6(b) (ii) exceed $500,000 in the
aggregate on any Business Day with respect to the immediately preceding
twelve-month period.
"Rating Agency" shall mean Duff & Phelps; provided, however, that for
the purposes of the definition of "Eligible Investments" in the Agreement,
Rating Agency shall mean Duff & Phelps, S&P and Moody's.
"Ratings Multiple" shall mean 2.5.
"Record Date" shall mean, with respect to any Determination Date or
Distribution Date, the last Business Day of the immediately preceding
calendar month.
"Reduction" shall have the meaning assigned in Section 3.5.
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"Reduction Amount" shall have the meaning assigned in Section 3.5.
"Reduction Threshold" shall mean, at any date of determination, an
amount equal to the product of 20% and the Invested Amount at such date.
"Reinvestment Yield" shall mean the yield on actively-traded (on-the-
run) U.S Treasury Securities with a maturity (rounded to the nearest month)
corresponding to the Remaining Average Life of the Repayment Amount as set
forth at 10:00 A.M. (New York City time) on the date of determination (1)
on the display designated as "Page 678" on the Telerate Service (or such
display as may replace Page 678 on the Telerate Service), or, (2) if
Telerate is not available, on any other nationally recognized trading
screen reporting on-line intraday trading in U.S. Treasury Securities or
(3) in the event that no such nationally recognized trading screen
reporting on-line intraday trading in U.S. Treasury Securities is
available, in Federal Reserve Statistical Release H.15 (519) using the
arithmetic mean of the two most recent yields under the heading "week
ending" opposite the caption "Treasury Constant Maturities" for the
maturity (rounded to the nearest month) corresponding to the Remaining
Average Life of the Repayment Amount being paid. If no maturity of an
actively-traded (on-the-run) U.S. Treasury Security exactly corresponds to
such Remaining Average Life, such yield shall be obtained by linear
interpolation on a straight line basis from the yields for the two
published maturities most closely corresponding to actively traded (on-the-
run) U.S. Treasury Securities having a constant maturity next longer and
shorter than the Remaining Average Life.
"Remaining Average Life" shall mean, with respect to any Repayment
Amount, the number of years (calculated to the nearest one-twelfth of a
year) obtained by dividing (a) such Repayment Amount into (b) the sum of
the products obtained by multiplying (i) each principal payment in respect
of such Repayment Amount scheduled to be made during the Controlled
Amortization by (ii) the number of years (calculated to the nearest one-
twelfth of a year) which will elapse between the related Special
Distribution Date and the respective scheduled due dates of such principal
payments.
"Remaining Scheduled Payments" shall mean, with respect to any
Repayment Amount, all principal thereof and interest thereon that would be
due on or after the Special Distribution Date with respect to such
Repayment Amount if no payment of such Repayment Amount were made prior to
the Controlled Amortization.
"Required Reserve Percentage" shall mean, as of any date of
determination, an amount (expressed as a percentage)
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equal to the product of (a) the quotient of (i) one plus the Yield Reserve
Percentage on such date and (ii) one minus the sum of the Weighted Average
Loss Reserve Percentage and the Dilution Reserve Percentage on such date
and (b) the sum of (i) the Weighted Average Loss Reserve Percentage, (ii)
the Dilution Reserve Percentage and (iii) the Yield Reserve Percentage, in
each case, on such date.
"Repayment Amount" shall mean (i) in the case of any Make Whole
Payment resulting from a Reduction, the Reduction Amount in respect thereof
and (ii) in the case of any Make Whole Payment resulting from the
occurrence of a Special Early Amortization Event, the Invested Amount
immediately prior to the related Special Distribution Date.
"Revolving Period" shall mean the period commencing on the Issuance
Date and terminating on the earlier to occur of (i) the close of business
on the date on which an Early Amortization Event occurs or (ii) the
Scheduled Termination Date.
"Scheduled Termination Date" shall mean August 26, 1999.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series 1994-1" shall mean the Series 1994-1, the Principal Terms of
which are set forth in this Supplement.
"Series 1994-1 Certificateholders' Interest" shall have the meaning
assigned in subsection 3.1(a).
"Series 1994-1 Collection Sub-subaccount" shall have the meaning
assigned in subsection 4B.2(a).
"Series 1994-1 Monthly Interest" shall have the meaning assigned in
subsection 4B.4(a).
"Series 1994-1 Monthly Principal Payment" shall have the meaning
assigned in Section 4B.5.
Series 1994-1 Monthly Servicing Fee" shall have the meaning assigned
in subsection 7.1.
"Series 1994-1 Non-Principal Collection Sub-subaccount" shall have the
meaning assigned in subsection 4B.2(a).
"Series 1994-1 Principal Collection Sub-subaccount" shall have the
meaning assigned in subsection 4B.2(a).
"Series Termination Date" shall mean the date which is six months
after the last day of the Revolving Period.
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"Special Early Amortization Event" shall mean the occurrence of an
Early Amortization Event specified in any of subsection 6.1(d), (e), (h),
(i), (j) or (k) within twelve months after (a) any optional addition or
termination of an Originator or White Swan Division pursuant to Section
9.14 or 9.15, respectively, of the Receivables Purchase Agreement, (b) the
issuance of any additional Series under the Agreement or (c) the issuance
of any additional Term Certificates pursuant to Section 3.3.
"Special Distribution Date" shall mean (i) in the case of any
Reduction, the Distribution Date on which the related Reduction Amount is
paid and (ii) in the case of any Special Early Amortization Event, the
Distribution Date following the commencement of the Amortization Period.
"Subordinated Certificate" shall mean the Subordinated Transferor
Certificate, Series 1994-1, executed by the Transferor and authenticated by
the Trustee, substantially in the form of Exhibit B.
"Subordinated Certificate Amount" shall mean, for any date of
determination, an amount equal to the Allocated Receivables Amount on such
date minus the Adjusted Invested Amount on such date.
"Subordinated Interest" shall have the meaning specified in subsection
3.1(b).
"Subsequent Issuance Date" shall mean each Distribution Date, if any,
on which the Trust issues additional Term Certificates pursuant to Section
3.3.
"Subsequent Issuance Date Supplement" shall mean a supplement prepared
and delivered by the Transferor on any Subsequent Issuance Date setting
forth for the additional Term Certificates to be issued on such date, among
other things, the applicable Certificate Rate and the Additional Invested
Amount, which supplement shall be substantially in the form of Exhibit F.
"Target Receivables Amount" shall mean, on any date of determination
with respect to Series 1994-1, an amount equal to the Adjusted Invested
Amount on such day multiplied by an amount equal to one plus the Required
Reserve Percentage on such day.
"Term Certificate" shall mean a Term Certificate, Series 1994-1,
executed by the Transferor and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit A.
"Term Certificateholder" shall mean each holder of a Term Certificate.
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"Trust Accounts" shall have the meaning assigned in subsection
4B.2(a).
"Turnover Rate" shall mean, as of any date of determination, an amount
(expressed as a percentage) equal to (a) the sum of the outstanding
Aggregate Receivables Amount as at the end of each of the three preceding
Settlement Periods divided by (b) the aggregate net sales for the three
preceding Settlement Periods.
"Two-Month Rolling Average" shall mean, for any two consecutive
Settlement Periods and with respect to the Aged Receivables Percentages of
an Originator or White Swan division calculated for each such Settlement
Period, (a) the sum of the numerators used to calculate such Aged
Receivables Percentages divided by (b) the sum of the denominators used to
calculate such Aged Receivables Percentages.
"Waiver Percentage" shall mean 50%.
"Weighted Average Loss Reserve Percentage" shall mean, as of any date
of determination, the greater of (i) the Loss Reserve Floor and (ii) an
amount (expressed as a percentage) equal to (a) the sum of the Loss Reserve
Amounts for each Originator other than White Swan and, in the case of White
Swan, for each White Swan Division, divided by (b) the aggregate Face
Amounts of all Eligible Receivables, all as of such date of determination.
"Yield Reserve Account" shall have the meaning assigned in subsection
4B.2(a).
"Yield Reserve Percentage" shall mean, (i) for the first three
Settlement Dates to occur following the Issuance Date, 1.5%, and (ii)
thereafter, with respect to any Settlement Date and continuing until the
end of the related Calculation Period, an amount (expressed as a
percentage) equal to the product of (a) 2.0, (b) the Discount Amount
divided by twelve and (c) the Turnover Rate.
"Yield Reserve Required Amount" shall mean, as of any date of
determination, an amount equal to the product of (a) 1.5 and (b) the sum of
(i) the Monthly Interest in respect of the Term Certificates, (ii) the
Series 1994-1's pro rata share of the monthly Servicing Fee and (iii) the
Series 1994-1's pro rata share of 1/12 of $500,000.
"Z Value" shall mean 2.58.
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ARTICLE III
PURCHASE AND SALE OF THE TERM CERTIFICATES
SECTION 3.1. The Term Certificates. (a) The Term Certificates shall
represent fractional undivided interests in the Trust, consisting of the right
to receive the Invested Percentage (expressed as a decimal) of (i) Collections
received with respect to the Receivables and (ii) all other funds on deposit in
the Collection Account and in any subaccount thereof (the "Series 1994-1
Certificateholders' Interest"). The Term Certificates shall be issued in
minimum denominations of $1,000,000 and in integral multiples of $500 in excess
thereof.
(b) The Subordinated Certificate shall represent a fractional
undivided interest in the Trust, consisting of the right to receive Collections
with respect to the Receivables allocated to the Series 1994-1
Certificateholders' Interest and not required to be distributed to or for the
benefit of the Term Certificateholders (the "Subordinated Interest"). The
Exchangeable Transferor Certificate and any other Series of Investor
Certificates outstanding shall represent the ownership interest in the remainder
of the Trust not allocated pursuant hereto to the Series 1994-1
Certificateholders' Interest or the Subordinated Interest.
(c) The Term Certificates and the Subordinated Certificate shall be
issued in registered form in substantially the forms of Exhibits A and B,
respectively, and shall, upon issue, be executed and delivered by the Transferor
to the Trustee for authentication and redelivery as provided in Section 3.2
hereof and Section 6.2 of the Agreement.
SECTION 3.2. Delivery. (a) (i) On the Issuance Date, the Transferor
shall sign on behalf of the Trust and shall direct in writing pursuant to
Section 6.2 of the Agreement the Trustee to duly authenticate, and the Trustee,
upon receiving such direction, shall so authenticate (A) the Term Certificates
in authorized denominations equal in the aggregate to the Initial Invested
Amount and (B) a Subordinated Certificate in a denomination equal to the
Subordinated Certificate Amount from time to time.
(ii) On each Subsequent Issuance Date, if any, the Transferor shall
sign on behalf of the Trust and shall direct in writing pursuant to Section 6.2
of the Agreement the Trustee to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate Term Certificates in authorized
denominations equal to (in the aggregate) the Additional Invested Amount with
respect to such date.
(b) Enhancement for the Term Certificates shall consist of (i)
reallocation of funds allocated to the
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Subordinated Certificate and (ii) amounts on deposit from time to time in the
Yield Reserve Account.
(c) The Transfer Agent and Registrar shall not register the transfer
of any Term Certificate unless:
(i) the person in whose name the Term Certificate is to be registered
upon transfer represents and warrants that it, and each of the accounts for
which it is purchasing, is a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act), and acknowledges that it has received
such information regarding the Trust and the Term Certificates as it has
requested and that it is aware that the transferor is relying upon the
foregoing certification to claim the exemption from registration provided
by Rule 144A; or
(ii) the Trustee has received transfer documentation from the holder
of such Term Certificate indicating, and a written opinion of counsel
(which counsel may be an employee of such Term Certificateholder)
acceptable to the Master Servicer and the Trustee confirming, that the
transfer is being made pursuant to an exemption from, or a transaction not
otherwise subject to, the registration requirements of the Securities Act;
and such transferee further represents and warrants to the Trustee, the Master
Servicer and the Transferor as to one of the following:
(x) in connection with the initial sale of the Term Certificates on
the Issuance Date, the transferee represents and warrants that the
transferee is an ERISA Entity; or
(y) the transferee represents and warrants that it is not an ERISA
Entity.
For purposes of this paragraph (c), any such advice to the Trustee in writing
may be in the form of a letter, notice or other written document and, with
respect to clauses (i), (ii) and (iii) and (x) and (y) above, the requirements
of such clauses will be deemed to be satisfied by appropriate notation on the
transfer notice set forth on such Term Certificate or by other written advice to
the Trustee stating in substance one of the entries on such transfer notice.
(d) The Transfer Agent and Registrar shall not register the transfer
of any Term Certificate to an ERISA Entity unless the transfer is in connection
with the initial sale of the Term Certificates on the Issuance Date and the
Trustee determines, that after giving effect to such transfer, no more than 25%
of any Class of the Term Certificates is held by ERISA Entities.
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(e) For so long as any of the Term Certificates are outstanding and
are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Transferor will cause to be provided to any Term
Certificateholder and any prospective purchaser of Term Certificates designated
by a holder of such Term Certificates, upon the request of such Term
Certificateholder or prospective purchaser, the information required to be
provided to such Term Certificateholder or prospective purchaser by Rule
144A(d)(4) under the Securities Act.
SECTION 3.3. Sale of Additional Term Certificates. (a) The
Transferor may, upon notice to the Trustee, the Master Servicer and the Term
Certificateholders and upon satisfaction of each of the conditions set forth in
subsection (b) of this Section 3.3, direct the Trust to issue on the following
Distribution Date (each such date, a "Subsequent Issuance Date") additional Term
Certificates, identical in all respects to the existing Term Certificates (other
than with respect to the Certificate Rate applicable thereto), in an aggregate
principal amount specified by the Transferor; provided that the Target
Receivables Amount does not exceed the Allocated Receivables Amount, after
giving effect to any increase in the Invested Amount on such Subsequent Issuance
Date; and provided further that in no event may the Transferor cause the Trustee
to issue, on a cumulative basis, additional Term Certificates in an aggregate
principal amount in excess of $15,000,000. The Transferor may arrange for the
sale of such additional Term Certificates pursuant to a private placement or any
other sale arrangement; provided that the Transferor agrees that it shall first
offer to the existing Term Certificateholders the opportunity to purchase such
additional Term Certificates on substantially the same terms and conditions that
such additional Term Certificates are to be offered to other purchasers. If no
existing Term Certificateholders elect to purchase any such additional Term
Certificates within 10 Business Days following their receipt of an offer
therefor, the yield over the relevant U.S. Treasury Security in respect of such
additional Term Certificates offered to other purchasers shall not exceed the
yield over the relevant U.S. Treasury Security offered to the existing Term
Certificateholders. In the event that the existing Term Certificateholders
subscribe to purchase more additional Term Certificates than are being offered
by the Transferor at such time, then each such existing Term Certificateholder
shall be entitled to purchase a pro rata portion of such additional Term
Certificates based on the aggregate principal amount of Term Certificates then
held by such holder. On each Subsequent Issuance Date, if any, the Invested
Amount (and each other amount set forth herein, the calculation of which is
based on such amount) shall be recalculated to include the Additional Invested
Amount with respect to the Term Certificates issued on such date.
(b) On the Subsequent Issuance Date, the Trustee shall only
authenticate and deliver any additional Term Certificates
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upon delivery to it of the following on or prior to such Subsequent Issuance
Date:
(i) the Rating Agency shall have been notified of the proposed
issuance of additional Term Certificates at least 10 days prior to the
proposed Subsequent Issuance Date, the Rating Agency shall have issued a
rating on the Additional Term Certificates that is equivalent to that
rating issued by the Rating Agency on the Issuance Date and the Rating
Agency Condition shall have been satisfied on or prior to such Subsequent
Issuance Date;
(ii) the Transferor shall have delivered to the Trustee a duly
authorized and executed Subsequent Issuance Date Supplement;
(iii) no Early Amortization Event or Potential Early Amortization
Event shall have occurred and be continuing with respect to Series 1994-1;
(iv) a Tax Opinion; and
(v) an Opinion of Counsel stating that all of the conditions to the
issuance of such additional Term Certificates shall have been satisfied.
(c) On each Subsequent Issuance Date, the Transferor, in a written
order, shall direct the Trustee to authenticate and deliver additional Term
Certificates in accordance with subsection 3.2(a)(ii).
SECTION 3.4. Application of Proceeds. On the Issuance Date, the
Transferor shall pay the net cash proceeds received by it upon the issuance of
the Term Certificates on such date to the Trustee for deposit to the Series
1994-1 Principal Collection Sub-subaccount for distribution in accordance with
Section 4B.3(c), or for the repayment of the Certificates issued under an
Outstanding Series, as directed by the Transferor; provided that, on the
Issuance Date, the Transferor shall cause an amount equal to the Yield Reserve
Required Amount to be deposited into the Yield Reserve Account. On any
Subsequent Issuance Date, the Transferor shall pay the cash proceeds received by
it upon the issuance of the additional Term Certificates on such date to the
Trustee for deposit to the Series 1994-1 Principal Collection Sub-subaccount for
distribution in accordance with subsection 4B.3(c); provided that, on such
Subsequent Issuance Date, the Transferor shall cause to be deposited into the
Yield Reserve Account an amount equal to the excess, if any, of the Yield
Reserve Required Amount over the amount on deposit in the Yield Reserve Account
on such date.
SECTION 3.5. Procedure for Decreasing the Invested Amount. If
during any two consecutive Settlement Periods the
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average excess of the Invested Amount over the Adjusted Invested Amount equals
or exceeds the Reduction Threshold, on the Distribution Date immediately
succeeding such Settlement Periods, upon the request of the Transferor, the
Invested Amount may be reduced (a "Reduction") by the distribution to the Term
Certificateholders of an amount (a "Reduction Amount") at least equal to such
Reduction Threshold. In addition, with respect to any Reduction, the Transferor
shall cause to be distributed to the Term Certificateholders an amount equal to
the Make Whole Payment, if any, in respect of such Reduction. The distribution
of the Reduction Amount and any related Make Whole Payment shall be made to the
Term Certificateholders on a pro rata basis from the funds on deposit in the
Series 1994-1 Principal Collection Sub-subaccount on such Distribution Date;
provided that (i) the Transferor shall have given the Trustee and the Master
Servicer written notice of such Reduction and the related Reduction Amount at
least 10 days prior to such Special Distribution Date, but in no case later than
three Business Days after the related Settlement Period preceding such Special
Distribution Date, setting forth the amount of such Reduction and (ii) on such
Special Distribution Date, there are available funds on deposit in the Series
1994-1 Principal Collection Account in an amount at least equal to the sum of
the Reduction Amount and any related Make Whole Payment. The Trustee shall give
prompt written notice of any proposed Reduction to the Term Certificateholders
and the Rating Agency.
SECTION 3.6. Access to List of Certificateholders' Names and
Addresses. Notwithstanding anything in the Agreement to the contrary, the
Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to any Term Certificateholder, within five Business Days after receipt
by the Trustee of a written request therefor from such Term Certificateholder, a
list of the names and addresses of the Term Certificateholders.
ARTICLE IV
ARTICLE IV OF THE AGREEMENT
Any provision of Article IV of the Agreement which distributes
Collections and Repurchase Payments to the Transferor on the basis of the
Transferor's Percentage shall continue to apply irrespective of the issuance of
the Term Certificates. Section 4.1 of the Agreement shall be read in its
entirety as provided in the Agreement. Article IV of the Agreement (except for
Section 4.1 thereof and any portion thereof relating to another Series) shall
read in its entirety as follows and shall be exclusively applicable to the Term
Certificates and the Subordinated Certificate:
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SECTION 4B.2. Establishment of Trust Accounts. (a) The Trustee shall
cause to be established and maintained in the name of the Trust (i) for the
benefit of the Term Certificateholders and for the benefit, subject to the prior
interest of the Term certificateholders, of the holder of the Subordinated
Certificate, a subaccount of the Collection Account (the "Series 1994-1
Collection Sub-subaccount"), which subaccount is the Series Collection
Subaccount with respect to Series 1994-1, bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the Term
Certificateholders and for the benefit, subject to the prior interest of the
Term Certificateholders, of the holder of the Subordinated Certificate; (ii) for
the benefit of the Term Certificateholders and for the benefit, subject to the
prior interest of the Term Certificateholders, of the holder of the Subordinated
Certificate, two subaccounts of the Series 1994-1 Collection Sub-subaccount: the
Series 1994-1 Principal Collection Sub-subaccount and the Series 1994-1 Non-
Principal Collection Sub-subaccount (respectively, the "Series 1994-1 Principal
Collection Sub-subaccount" and the "Series 1994-1 Non-Principal Collection Sub-
subaccount"), each bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Term Certificateholders and
for the benefit, subject to the prior interest of the Term Certificateholders,
of the holder of the Subordinated Certificate; and (iii) for the benefit of the
Term Certificateholders, a segregated cash collateral account (the "Yield
Reserve Account"; all accounts established pursuant to this subsection 4B.2(a)
and listed on Schedule I, collectively, the "Trust Accounts"). The Trustee
shall possess all right, title and interest in all funds from time to time on
deposit in, and all Eligible Investments credited to, the Trust Accounts and in
all proceeds thereof. The Trust Accounts shall be under the sole dominion and
control of the Trustee for the exclusive benefit of the Term Certificateholders
and to the extent applicable, subject to the prior interest of the Term
Certificateholders, of the holder of the Subordinated Certificate.
(b) All Eligible Investments in the Trust Accounts shall be held by
the Trustee for the exclusive benefit of the Term Certificateholders and,
subject to the prior interest of the Term Certificateholders, of the holder of
the Subordinated Certificate; provided, however, that funds on deposit in a
Trust Account which is a Sub-subaccount of the Collection Account may, at the
direction of the Master Servicer, be invested together with funds held in other
Sub-subaccounts of the Collection Account. After giving effect to any
distribution to the Transferor pursuant to subsection 4B.3(c), amounts on
deposit and available for investment in the Series 1994-1 Principal Collection
Sub-subaccount shall be invested by the Trustee at the written direction of the
Master Servicer in Eligible Investments that mature, or that are payable or
redeemable upon demand of the holder thereof, (i) in the case of any such
investment made during the Revolving Period, on or prior to the next Business
Day
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and (ii) in the case of any such investment made during the Amortization Period,
on or prior to one Business Day prior to the next succeeding Distribution Date.
Amounts on deposit and available for investment in the Series 1994-1 Non-
Principal Collection Sub-subaccount shall be invested by the Trustee at the
written direction of the Master Servicer in Eligible Investments that mature, or
that are payable or redeemable upon demand of the holder thereof, on or prior to
one Business Day prior to the next succeeding Distribution Date. Amounts on
deposit and available for investment in the Yield Reserve Account shall be
invested by the Trustee at the written direction of the Master Servicer in
Eligible Investments that mature, or that are payable or redeemable upon demand
of the holder thereof, on or prior to the next Business Day. All interest and
investment earnings (net of losses and investment expenses) on funds deposited
in the Series 1994-1 Principal Collection Sub-subaccount and the Yield Reserve
Account shall be deposited in the Series 1994-1 Non-Principal Collection Sub-
subaccount.
SECTION 4B.3. Daily Allocations. (a) The portion of Aggregate Daily
Collections allocated to the Term Certificateholders pursuant to Article IV of
the Agreement shall be allocated and distributed as set forth in this Article
IV.
(b) (i) On each Business Day, an amount equal to the Accrued Expense
Amount for such day shall be transferred from the Series 1994-1 Collection Sub-
subaccount to the Series 1994-1 Non-Principal Collection Sub-subaccount and any
remaining funds on deposit in the Series 1994-1 Collection Sub-subaccount shall
be transferred to the Series 1994-1 Principal Collection Sub-subaccount.
(ii) If, on any Business Day, the amount on deposit in the Series
1994-1 Collection Sub-subaccount is less than the Accrued Expense Amount on such
day, the Trustee shall transfer an amount equal to the amount of such
insufficiency from the Yield Reserve Account to the Series 1994-1 Non-Principal
Collection Sub-subaccount. On each succeeding Business Day, if the amount on
deposit in the Yield Reserve Account is less than the Yield Reserve Required
Amount, the Trustee shall transfer, to the extent funds are available therefor
following the payment of the Accrued Expense Amount for such day, an amount
equal to such deficiency from the Series 1994-1 Collection Sub-subaccount to the
Yield Reserve Account.
(c) (i) On each Business Day during the Revolving Period (including
Distribution Dates), amounts on deposit in the Series 1994-1 Principal
Collection Sub-subaccount shall be distributed by the Trustee to the Transferor;
provided that such distribution shall be made only to the extent that, after
giving effect to such distribution, the Target Receivables Amount would not
exceed the Allocated Receivables Amount; provided further that if the Transferor
shall have given a notice of a Reduction to the Trustee and the Master Servicer
pursuant to Section 3.5,
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the Transferor shall, by giving written notice to the Master Servicer, retain
until the related Special Distribution Date aggregate amounts on deposit in the
Series 1994-1 Principal Collection Sub-subaccount equal to the sum of the
Reduction Amount and any related Make Whole Payment in respect thereof. Amounts
distributed to the Transferor hereunder shall be deemed to be paid first from
Collections received directly by the Master Servicer and the Servicers and
second from Collections received in the Lockboxes.
(ii) On each Business Day during an Amortization Period (including
Distribution Dates), funds deposited in the Series 1994-1 Principal Collection
Sub-subaccount shall be invested in Eligible Investments that mature on or prior
to the next Determination Date. No amounts on deposit in the Series 1994-1
Principal Collection Sub-subaccount shall be used for reinvestment in
Receivables during an Amortization Period.
(d) The allocations to be made pursuant to this Section 4B.3 are
subject to the provisions of Sections 2.6, 9.2, 10.1 and 12.1 of the Agreement.
SECTION 4B.4. Determination of Interest. (a) The amount of interest
distributable with respect to the Term Certificates ("Series 1994-1 Monthly
Interest") on each Distribution Date shall be an amount, as calculated by the
Master Servicer, equal to the product of (i) one-twelfth of the weighted average
Certificate Rate with respect to all Term Certificates then outstanding and (ii)
the Invested Amount with respect to such Term Certificates on the first day of
the related Accrual Period (after giving effect to any distributions of
principal on such date); provided that if the Issuance Date does not occur on a
Distribution Date, the "Series 1994-1 Monthly Interest" for the initial
Distribution Date shall be an amount equal to the product of (a) the Initial
Invested Amount, (b) the Certificate Rate and (c) the number of days in the
initial Accrual Period divided by 360.
(b) On each Distribution Date, the Master Servicer shall determine the
excess, if any (the "Interest Shortfall"), of (i) the Series 1994-1 Monthly
Interest for the Accrual Period ending on such Distribution Date over (ii) the
amount which will be available to be distributed to the Term Certificateholders
on such Distribution Date in respect thereof pursuant to this Supplement. If
the Interest Shortfall with respect to any Distribution Date is greater than
zero, an additional amount ("Additional Interest") equal to the product of (A)
one-twelfth of the Certificate Rate plus 2.0% per annum and (B) such Interest
Shortfall (or the portion thereof which has not been paid to the Term
Certificateholders) shall be payable as provided herein with respect to the Term
Certificates on each Distribution Date following such Distribution Date to and
including, the Distribution Date on which such Interest Shortfall is paid in
full to the Term Certificateholders.
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SECTION 4B.5. Determination of Series 1994-1 Monthly Principal
Payment. The amount (the "Series 1994-1 Monthly Principal Payment")
distributable from the Series 1994-1 Principal Collection Sub-subaccount on each
Distribution Date during an Amortization Period shall be equal, as calculated by
the Master Servicer, to (a) if such Distribution Date occurs during the
Controlled Amortization, an amount equal to 50% of the Invested Amount as of the
last day of the Revolving Period (to the extent funds are available therefor in
such account) and (b) if such Distribution Date occurs during an Amortization
Period which follows the occurrence of an Early Amortization Event, the amount
on deposit in such account on such Distribution Date; provided, that, in either
case, Series 1994-1 Monthly Principal Payment on any Distribution Date shall not
exceed the Invested Amount on such Distribution Date.
SECTION 4B.6. Applications. (a) The Master Servicer shall cause the
Trustee to distribute, on each Distribution Date, from amounts on deposit in the
Series 1994-1 Non-Principal Collection Sub-subaccount, an amount equal to the
Series 1994-1 Monthly Interest payable on such Distribution Date, plus the
amount of any Series 1994-1 Monthly Interest previously due but not distributed
to the Term Certificateholders on a prior Distribution Date, plus the amount of
any Additional Interest for such Distribution Date and any Additional Interest
previously due but not distributed to the Term Certificateholders on a prior
Distribution Date, to the Term Certificateholders.
(b) On each Distribution Date, the Master Servicer shall cause the
Trustee to apply funds on deposit in the Series 1994-1 Non-Principal Collection
Sub-subaccount (after taking into consideration the distribution to the Term
Certificateholders from the Series 1994-1 Non-Principal Collection Sub-
subaccount pursuant to subsection 4B.6(a)) in the following order of priority to
the extent funds are available:
(i) an amount equal to the Series 1994-1 Monthly Servicing Fee for the
Accrual Period ending on such Distribution Date shall be withdrawn from the
Series 1994-1 Non-Principal Collection Sub-subaccount by the Trustee and
paid to the Master Servicer;
(ii) an amount equal to any Program Costs due and payable shall be
withdrawn from the Series 1994-1 Non-Principal Collection Sub-subaccount by
the Trustee and paid to the Persons owed such amounts; and
(iii) an amount equal to all accrued and unpaid Make Whole Payments
shall be withdrawn from the Series Non-Principal Collection Sub-subaccount
by the Trustee and paid to the Term Certificateholders.
Any remaining amount on deposit in the Series 1994-1 Non-Principal Collection
Sub-subaccount not allocated pursuant to
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clauses (i), (ii) and (iii) above shall be paid to the holder of the
Subordinated Certificate.
(c) During an Amortization Period, the Master Servicer shall cause the
Trustee to apply, on each Distribution Date, amounts on deposit in the Series
1994-1 Principal Collection Sub-subaccount in the following order of priority:
(i) an amount equal to the Series 1994-1 Monthly Principal Payment
payable in respect thereof for such Distribution Date shall be distributed
from the Series 1994-1 Principal Collection Sub-subaccount to the Term
Certificateholders;
(ii) if a Special Early Amortization Event has occurred, following the
repayment in full of the Invested Amount, an amount equal to any Make Whole
Payment in respect thereof shall be distributed from the Series 1994-1
Principal Collection Sub-subaccount to the Term Certificateholders;
(iii) following the repayment in full of the Invested Amount and any
Make Whole Payment in respect thereof, the remaining amount on deposit in
the Series 1994-1 Principal Collection Sub-subaccount on such Distribution
Date, if any, after giving effect to the payment described in subsection
4B.6(c)(i) above shall be distributed to the holder of the Subordinated
Certificate.
(d) On each Special Distribution Date in respect of a Reduction, the
Master Servicer shall cause the Trustee to distribute to the Term
Certificateholders on such Special Distribution Date from amounts on deposit in
the Series 1994-1 Principal Collection Sub-subaccount an amount equal to the sum
of the Reduction Amount and any related Make Whole Payment to be made on such
Special Distribution Date.
ARTICLE V
DISTRIBUTIONS AND REPORTS
Article V of the Agreement (except for any portion thereof relating to
another Series) shall read in its entirety as follows and shall be exclusively
applicable to the Term Certificates:
SECTION 5B.1. Distributions. (a) Notwithstanding anything to the
contrary in Section 12.3 of the Agreement, the final distribution of principal
in respect of the Term Certificates will be made after due notice by the Trustee
of the pendency of such distribution and without presentation and surrender of
such Term Certificates. By receipt of such final distribution each Term
Certificateholder shall be deemed to agree
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to present and surrender its Term Certificate within 30 days of such final
payment. Any other distribution of principal in respect of the Term
Certificates or on account of interest or fees on the Term Certificates on each
Distribution Date will be made or caused to be made by the Paying Agent or the
Trustee to the persons in whose name the Term Certificates are registered at the
close of business on the related Record Date. Each payment will be made by wire
transfer to an account maintained by each Term Certificateholder, or, in the
case of a subsequent Term Certificateholder, if no information of any such
account is provided to the Trustee at least five Business Days prior to the
related Distribution Date, by a check mailed to such Term Certificateholder at
such Term Certificateholder's registered address.
(b) All allocations and distributions hereunder shall be in accordance
with the Monthly Settlement Statement and subject to Section 4.1(h) of the
Agreement.
SECTION 5B.2. Daily Reports. The Master Servicer shall provide the
Trustee with a Daily Report with respect to such Business Day's activity by no
later than 2:00 p.m. New York City time the following Business Day.
SECTION 5B.3. Statements and Notices. (a) Monthly Settlement
Statements. On each Determination Date, the Master Servicer shall deliver to
the Trustee and the Rating Agency a Monthly Settlement Statement setting forth,
among other things, the Loss Reserve Percentage, the Dilution Reserve Percentage
and the Yield Reserve Percentage, each as recalculated for use in determining
the Required Reserve Percentage for the next succeeding Calculation Period. The
Trustee shall forward a copy of each Monthly Settlement Statement to each Term
Certificateholder promptly upon, and in any event within three Business Days of,
the receipt of such statement.
(b) Annual Certificateholders' Tax Statement. On or before April 1 of
each calendar year (or such earlier date as required by applicable law),
beginning with calendar year 1995, the Master Servicer on behalf of the Trustee
shall furnish, or cause to be furnished, to each Person who at any time during
the preceding calendar year was a Term Certificateholder, a statement prepared
by the Master Servicer containing the aggregate amount distributed to such
Person for such calendar year or the applicable portion thereof during which
such Person was a Term Certificateholder, together with such other information
as is required to be provided by an issuer of indebtedness under the Internal
Revenue Code and such other customary information as the Trustee or the Master
Servicer deems necessary or desirable to enable the Term Certificateholders to
prepare their tax returns. Such obligation of the Master Servicer shall be
deemed to have been satisfied to the extent that substantially comparable
information shall have been provided by the Trustee pursuant to
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any requirements of the Internal Revenue Code as from time to time in effect.
(c) Early Amortization Period Notices. Upon the occurrence of an
Early Amortization Event or a Potential Early Amortization Event with respect to
Series 1994-1 the Transferor or the Master Servicer, as the case may be, shall
give prompt written notice thereof to the Trustee. The Trustee shall give
notice to each Term Certificateholder and the Rating Agency within one Business
Day of the receipt of any such notice regarding (i) an Early Amortization Event
or (ii) a Potential Early Amortization Event as to which, except in the case of
a Potential Early Amortization Event relating to the federal bankruptcy laws or
specified in subsection 6.1(1) of this Supplement, any applicable grace period
(or, if such applicable grace period is in excess of ten days, as to which a
period of ten days) has expired; provided, however, that upon the expiration of
any such grace period or ten-day period, if such Potential Early Amortization
Event shall be continuing, the Trustee shall give notice thereof to each Term
Certificateholder and the Rating Agency within one Business Day.
(d) NAIC Notices. The Trustee shall forward a copy of each report
received by it pursuant to Section 3.6 of the Agreement and each statement
received by it pursuant to Sections 8.2 and 8.3 of this Supplement to the
National Association of Insurance Commissioners promptly upon such receipt.
Section 5B.4. Notices. Notices required to be given to the Term
Certificateholders hereunder or under the Agreement will be given by first class
mail to the address of such holders as they appear in the Certificate Register,
except that notices of an Early Amortization Event, a Potential Early
Amortization Event, a Master Servicer Default or a Potential Master Servicer
Default shall also be given by overnight delivery via a nationally recognized
overnight delivery service to such address.
ARTICLE VI
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION 6.1. Additional Early Amortization Events. If any one of
the events specified in Section 9.1 of the Agreement (after any grace periods or
consents applicable thereto) or any one of the following events shall occur
during the Revolving Period with respect to the Term Certificates:
(a) failure on the part of the Transferor or the Master Servicer, as
applicable, (i) to make any payment or deposit required by the terms of the
Agreement or this Supplement within two Business Days of the day such
payment or deposit is to be made, to deliver a Daily Report within two
Business Days of the day such report is due to be
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delivered or to deliver a Monthly Settlement Statement within three
Business Days of the day such item is due to be delivered or to deliver the
Receivables Record with respect to any Originator within three Business
Days of the day such item is due to be delivered, (ii) duly to observe or
perform in any material respect the covenants of the Transferor set forth
in Section 2.7(b), (m) or (p) of the Agreement or (iii) duly to observe or
perform in any material respect any other covenants or agreements of the
Transferor or the Master Servicer, as the case may be, set forth in the
Agreement or this Supplement, which failure in the case of this clause
(iii) either (A) continues unremedied for a period of 30 days after the
earlier of the date on which a Responsible Officer of the Master Servicer
shall have knowledge thereof or the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Master Servicer or the Transferor, as the case may be, by the Trustee, or
to the Master Servicer or the Transferor, as the case may be, and to the
Trustee by any Term Certificateholder or (B) if such failure is in respect
of Section 2.5 of the Agreement, is not cured by the Transferor
repurchasing such Receivables in accordance with the provisions of Section
2.5 within three Business Days of when the Transferor was obligated to do
so;
(b) any representation, warranty, certification or statement made by
the Transferor in the Agreement or this Supplement or any information
contained in a computer file or microfiche or written list required to be
delivered by the Transferor pursuant to the Agreement or this Supplement,
shall prove to have been incorrect in any material respect when made or
when delivered; provided, however, that an Early Amortization Event with
respect to Series 1994-1 shall not be deemed to have occurred under this
paragraph if the incorrectness of such representation, warranty,
certification, statement or information gives rise to an obligation to
repurchase the related Receivables pursuant to Sections 2.5 and 2.6 of the
Agreement and the Transferor has repurchased the related Receivable or all
such Receivables, if applicable, in accordance with the provisions of
Sections 2.5 and 2.6 of the Agreement within three Business Days of when
the Transferor was obligated to do so;
(c) a Purchase Termination Event (as defined in the Receivables
Purchase Agreement) shall have occurred and be continuing under the
Receivables Purchase Agreement;
(d) for any two consecutive Settlement Periods, the average of the
ratio, expressed as a percentage, for each such Settlement Period of (i)
the Receivables that are more than 30 Days Past Due as of the last day of
such Settlement Period to (ii) the aggregate Face Amount of the outstanding
Receivables on such day, shall exceed 14%;
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(e) for any Settlement Period, Days Sales Outstanding shall be more
than 40 days;
(f) the Trust shall for any reason cease to have a valid and perfected
first priority undivided ownership or security interest in the Eligible
Receivables (subject to any Permitted Liens);
(g) a Master Servicer Default shall have occurred and be continuing;
(h) for any period of three consecutive Settlement Periods the
Invested Amount shall exceed the Adjusted Invested Amount by at least 20%;
(i) the Allocated Receivables Amount shall be less than the Target
Receivables Amount for a period of five consecutive days;
(j) for any period of three consecutive Settlement Periods, the
aggregate amount of Dilutive Credits during such periods is greater than an
amount equal to 8% of the aggregate amount of Collections received during
such periods;
(k) the amount on deposit in the Yield Reserve Account shall be less
than the yield Reserve Required Amount for a period of five consecutive
days;
(l) the Master Servicer shall default in the observance or performance
of any of the Key Credit Agreement Financial Covenants and, if the Credit
Agreement shall then be in effect, either (i) such default shall not have
been waived and fifteen days shall have elapsed since the earlier of the
date on which a Responsible Officer of the Master Servicer shall have
knowledge of such default or the date on which notice of such default shall
have been given to the Master Servicer, or (ii) any waiver referred to in
clause (i) shall have expired, or (iii) the lenders under the Credit
Agreement shall have accelerated the maturity of the indebtedness
thereunder;
(m) the Master Servicer or any of its subsidiaries shall default in
any payment when due of principal of or interest on any Indebtedness
aggregating $10,000,000 or more; or
(n) one or more judgments or decrees shall be entered against the
Master Servicer or any of its subsidiaries involving in the aggregate a
liability (net of amounts covered by insurance) of $5,000.000 or more, and
all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof;
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then, in the case of any event described in the subsections above, after the
applicable grace period, if any, set forth in such subsections the Majority Term
Certificateholders, by notice then given in writing to the Transferor, the
Master Servicer and the Trustee, may declare that an amortization event (an
"Early Amortization Event") has occurred as of the date of such notice (except,
in the case of any event contained in subsection 6.1(l), (m) or (n), the
occurrence of such event shall not result in an Early Amortization Event if, at
the time such event occurs, the Master Servicer is rated by at least one
nationally recognized statistical rating agency in one of the generic rating
categories of such rating agency which signifies investment grades.
ARTICLE VII
SERVICING FEE
SECTION 7.1. Servicing Compensation. A monthly servicing fee (the
"Series 1994-1 Monthly Servicing Fee") shall be payable to the Master Servicer
on each Distribution Date for the Accrual Period then ending, in an amount equal
to the product of (a) the Servicing Fee Percentage, (b) the Allocated
Receivables Amount for the first day of such Accrual Period and (c) the number
of days in such Accrual Period divided by 360; provided, however, that if an
Early Amortization Period has commenced and US Foodservice Inc. is acting as
Master Servicer, the Series 1994-1 Monthly Servicing Fee shall be deferred until
all amounts due under the Term Certificates have been paid in full. The Series
1994-1 Monthly Servicing Fee is the Monthly Servicing Fee, referred to in
Section 3.2 of the Agreement, which is allocable to Series 1994-1.
ARTICLE VIII
COVENANTS, REPRESENTATIONS AND WARRANTIES
SECTION 8.1. Representations and Warranties of the Transferor and
the Master Servicer. The Transferor and the Master Servicer each hereby
represents and warrants to the Trustee and each of the Term Certificateholders
that each and every of their respective representations and warranties contained
in the Agreement is true and correct in all material respects as of the date
hereof and as of each Subsequent Issue Date.
SECTION 8.2. Covenants of the Transferor. The Transferor hereby
agrees that:
(a) it shall observe each and every of its respective covenants (both
affirmative and negative) contained in the Agreement and this Supplement in
all material respects;
28
<PAGE>
(b) it shall not terminate the Agreement unless in strict compliance
with the terms of the Agreement;
(c) it shall not change in any material respect the terms or
provisions of the Policies so as to adversely affect the general quality of
the Receivables without the prior written consent of the Majority Term
Certificateholders;
(d) it shall furnish the following documents to the Trustee, each Term
Certificateholder and each Rating Agency:
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Transferor, (commencing with the quarter ended October 1, 1994)
unaudited quarterly financial statements (including a balance sheet,
income statement and statement of cash flow) for the Transferor, all
of which financial statements shall be prepared in accordance with
GAAP applied on a consistent basis, certified by the chief financial
officer or chief accounting officer of the Transferor as being fairly
stated in all material respects when considered as a whole (subject to
normal year-end audit adjustments);
(ii) as soon as available and in any event within 90 days after
the end of each fiscal year of the Transferor, (commencing with the
fiscal year ended December 31, 1994) audited annual financial
statements (including a balance sheet, income statement and statement
of cash flow) for the Transferor, together with the report of such
firm on such audit, all of which financial statements must be prepared
in accordance with GAAP applied on a consistent basis, and which firm
shall be independent Public Accountants and
(iii) promptly after the filing thereof, copies of all financial
statements and reports which the Transferor may make to, or file with,
the Securities and Exchange Commission or any successor or analogous
Governmental Authority, and promptly after request therefor, any other
reasonably requested material;
(e) it shall not, without the prior written consent of the Majority
Term Certificateholders, permit the modification of Schedule 6 to the
Agreement in respect to any Special Obligor Limit and Special Obligor;
(f) it shall not appoint a successor trustee pursuant to subsection
11.7(a) or (b) of the Agreement unless such successor trustee shall be
acceptable to the Majority Term Certificateholders; and
29
<PAGE>
(g) it shall not add any Originator pursuant to subsection 9.14 of the
Receivables Purchase Agreement unless the Company shall have received a
certificate of the Master Servicer certifying that, after giving effect to
the addition of such Originator, the Required Reserve Percentage with
respect to the 1994-1 Series shall not have increased by an amount in
excess of 7% (and such certificate shall set forth the calculations
necessary to demonstrate the satisfaction of this condition).
SECTION 8.3. Covenants of the Master Servicer. The Master Servicer
hereby agrees that:
(a) it shall observe each and every of its covenants (both affirmative
and negative) contained in the Agreement and this Supplement in all
material respects;
(b) it shall furnish the following documents to the Trustee, each Term
Certificateholder and each Rating Agency:
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Master Servicer, unaudited quarterly financial statements (including a
balance sheet, income statement and statement of cash flow) for the
Master Servicer, all of which financial statements shall be prepared
in accordance with GAAP applied on a consistent basis, certified by
the chief financial officer or chief accounting officer of the Master
Servicer as being fairly stated in all material respects when
considered as a whole (subject to normal year-end audit adjustments);
(ii) as soon as available and in any event within 90 days after
the end of each fiscal year of the Master Servicer, audited annual
financial statements (including a balance sheet, income statement and
statement of cash flow) for the Master Servicer, together with the
report of such firm on such audit, all of which financial statements
must be prepared in accordance with GAAP applied on a consistent
basis, and which firm shall be Independent Public Accountants; and
(iii) promptly after the filing thereof, copies of all financial
statements and reports which the Master Servicer or any Servicer may
make to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental Authority, and promptly after
request therefor, any other reasonably requested material;
(c) it shall provide notice to the Trustee and each Rating Agency of
the appointment of a Successor Master Servicer pursuant to Section 10.2 of
the Agreement;
30
<PAGE>
(d) it shall furnish promptly to the Term Certificateholders and the
Rating Agency written notice of the declaration of an event of default
under the Credit Agreement, written notice of early termination of
commitments under the Credit Agreement and copies of any amendments or
waivers of and copies of compliance statements delivered under the Credit
Agreement;
(e) it shall, without duplication of its obligations appearing
elsewhere in this Supplement or the Agreement, furnish to the Term
Certificateholders, promptly after delivery to the Trustee or the Rating
Agency, all notices given to the Trustee or the Rating Agency under the
Agreement including, without limitation, reports or notices specified in
Sections 2.4., 3.4, 3.5 and 3.6 of the Agreement other than the Daily
Reports required thereunder, all reports and notices furnished to the
Transferor under the Receivables Purchase Agreement, and such other reports
and notices as are provided with respect to any other Series under the
related Supplement; and
(f) it shall, at any time and from time to time during the Master
Servicer's or the Servicer's, as applicable, regular business hours, on
reasonable prior notice and for a purpose reasonably related to this
Agreement, in response to any reasonable request of the Trustee, permit the
Trustee, or its agents or representatives, and any holder of Term
Certificates which, together with Term Certificates held by any Affiliates
of such holder, have an aggregate principal amount of more than 10% of the
Invested Amount, (i) to examine and make copies of and abstracts from all
books, records and documents (including, without limitation, computer
tapes, microfiche and disks) in the possession or under the control of the
Master Servicer or any Servicer relating to the affairs, finances and
accounts of the Master Servicer or any Servicer and (ii) to visit the
offices and properties of the Master Servicer or any Servicer for the
purpose of examining such materials and to discuss matters relating to the
affairs, finances and accounts of the Master Servicer or any Servicer, or
the Master Servicer's or any Servicer's performance hereunder with any of
the officers or employees of the Master Servicer or any Servicer having
knowledge thereof; provided that, in the event of a Master Servicer
Default, all the costs and expenses of the Term Certificateholders in
connection with any inspection conducted pursuant to the foregoing section
shall be paid by the Master Servicer.
31
<PAGE>
ARTICLE IX
ADDITIONAL MASTER SERVICER DEFAULTS
SECTION 9.1. Additional Master Servicer Defaults. If any of the
events specified in Section 10.1 of the Agreement (after any grace periods or
consents applicable thereto) or any one of the following events shall occur with
respect to the Term Certificates (any such event, a "Master Servicer Default"):
(a) failure by the Master Servicer to pay the Series 1994-1 Monthly
Interest or the Series 1994-1 Monthly Principal Payment on or before the
date such payment is required to be made under the terms of this Supplement
or to pay any other amount on or before the date occurring three Business
Days after the date such other payment is required to be made under the
terms of this Supplement;
(b) failure on the part of the Master Servicer duly to observe or
perform in any material respect any covenants or agreements of the Master
Servicer set forth in this Supplement or the Agreement which has a material
adverse effect on the Term Certificateholders, which failure continues
unremedied for a period of 30 days after the earlier of the date on which a
Responsible Officer of the Master Servicer shall have knowledge thereof or
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Master Servicer or the Transferor,
as the case may be, by the Trustee, or to the Master Servicer or the
Transferor, as the case may be, and the Trustee by any Term
Certificateholder; or the Master Servicer shall assign its duties under
this Supplement or the Agreement, except as permitted by Section 8.7 of the
Agreement; or
(c) any representation, warranty or certification made by the Master
Servicer in this Supplement or the Agreement or in any certificate
delivered pursuant to this Supplement or the Agreement shall prove to have
been incorrect when made, which has a material adverse effect on the Term
Certificateholders, which material adverse effect continues for a period of
30 days after the earlier of the date on which a Responsible Officer of the
Master Servicer shall have knowledge thereof or the date on which written
notice thereof, requiring the same to be remedied, shall have been given to
the Master Servicer by the Trustee, or to the Master Servicer and the
Trustee by any Term Certificateholder;
then, so long as the Master Servicer Default shall not have been remedied, the
Majority Term Certificateholders may direct that the Trustee poll the Investor
Certificateholders to obtain their approval of the delivery of a Termination
Notice pursuant to Section 10.1 of the Agreement. The Master Servicer shall
32
<PAGE>
promptly notify the Trustee of the occurrence of any Master Servicer Default.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Ratification of Agreement. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION 10.2. Governing Law. THIS SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAW.
SECTION 10.3. Further Assurances. Each of the Transferor, the Master
Servicer and the Trustee agrees, from time to time, to do and perform any and
all acts and to execute any and all further instruments required or reasonably
requested by the Majority Term Certificateholders more fully to effect the
purposes of this Supplement and the sale of the Term Certificates hereunder,
including, without limitation, in the case of the Transferor and the Master
Servicer, the execution of any financing statements or continuation statements
relating to the Receivables and the other Trust Assets for filing under the
provisions of the UCC of any applicable jurisdiction.
SECTION 10.4. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Trustee or any Term
Certificateholder, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights. remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 10.5. Amendments. (a) Notwithstanding anything in the
Agreement to the contrary, this Supplement, the Agreement and any other Related
Document may not be modified, amended, waived, supplemented or terminated in
writing by the Transferor, the Master Servicer and the Trustee without the
written consent of the Majority Term Certificateholders; provided that no such
amendment or waiver shall, unless signed or consented to in writing by all Term
Certificateholders, (i) reduce in any manner the amount of, or delay or
accelerate the timing of, distributions which are required to be made on any
Term Certificate; (ii) change the definition of or the manner of calculating the
Invested Amount or (iii) amend the definition of
33
<PAGE>
"Majority Term Certificateholders", in each case without the consent of each
Term Certificateholder.
(b) Notwithstanding anything in this Section to the contrary, no
amendment may be made to this Supplement pursuant to subsection 10.5(a) unless,
at least ten days prior to the effectiveness of such amendment, the Rating
Agency shall have received prior notice of the substance of such amendment and
such supporting material as can reasonably be provided to it.
(c) Promptly after the execution of any such amendment or consent the
Trustee shall give notice of the substance of such amendment in accordance with
Section 5B.4, and the Master Servicer shall furnish written notification of the
substance of such amendment to the Rating Agency.
(d) It shall not be necessary for the consent of the Term
Certificateholders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by the Term Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
SECTION 10.6. Severability. If any provision hereof is void or
unenforceable in any jurisdiction, such voidness or unenforceability shall not
affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION 10.7. Notices. All notices, requests and demands to or upon
any party hereto to be effective shall be given in the manner set forth in
Section 13.5 of the Agreement. Any notice required or permitted to be mailed to
a Term Certificateholder shall be given as provided in Section 5B.4.
SECTION 10.8. Successors and Assigns. This Supplement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Transferor may not assign or transfer
any of its rights under this Supplement without the prior written consent of the
Term Certificateholders.
SECTION 10.9. Counterparts. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the same agreement.
SECTION 10.10. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that (a) this Supplement is executed and
delivered by the trust department of Chemical, in its capacity as Trustee, not
34
<PAGE>
individually or personally but solely as Trustee of the Trust, in the exercise
of the powers and authority conferred and vested in it, (b) the representations,
undertakings and agreements herein made on the part of the Trust are made and
intended not as personal representations, undertakings and agreements by
Chemical, but are made and intended for the purpose of binding only the Trust,
(c) nothing herein contained shall be construed as creating any liability of
Chemical, as Trustee, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties who are signatories to this Supplement and by
any Person claiming by, through or under such parties; provided, however, that
Chemical, as Trustee, shall be liable in its individual capacity for its own
willful misconduct or gross negligence and for any tax assessed against
Chemical, based on or measured by any fees, commission or compensation received
by it for acting as Trustee and (d) under no circumstances shall Chemical be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under this Supplement.
SECTION 10.11. Confidentiality. The Trustee and each Term
Certificateholder agree to use their best efforts, and shall cause their agents
or representatives to use their best efforts, to hold in confidence all
Confidential Information; provided, that nothing herein shall prevent any Term
Certificateholder from delivering copies of any financial statements and other
documents constituting Confidential Information, and disclosing any other
Confidential Information, to (i) such Term Certificateholder's directors,
officers, employees, agents and professional consultants, (ii) any other Term
Certificateholder, (iii) any Person to which such Term Certificateholder offers
to sell such Term Certificate or any part thereof, provided that such Person
shall have delivered to the Master Servicer a Confidentiality Letter, (iv) any
Person to which such Term Certificateholder sells or offers to sell a
participation in all or any part of such Term Certificate, provided that such
Person shall have delivered to the Master Servicer a Confidentiality Letter, (v)
any federal or state regulatory authority having jurisdiction over such Term
Certificateholder, (vi) the National Association of Insurance Commissioners or
any similar organization or (vii) any other Person to which such delivery or
disclosure may be necessary or appropriate (a) in compliance with any law, rule,
regulation or order applicable to such Term Certificateholder, (b) in response
to any subpoena or other legal process, (c) in connection with any litigation to
which such Term Certificateholder is a party or (d) in order to protect such
Term Certificateholder's investment in such Term Certificate.
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ARTICLE XI
FINAL DISTRIBUTIONS
SECTION 11.1. Certain Distributions. (a) Not later than 2:00 P.M.,
New York City time, on the Distribution Date following the date on which the
proceeds are deposited into the Series 1994-1 Non-Principal Collection Sub-
subaccount and the Series 1994-1 Principal Collection Sub-subaccount pursuant to
subsection 9.2(b) of the Agreement, the Trustee shall distribute such amounts
pursuant to Article IV.
(b) Notwithstanding anything to the contrary in this Supplement or the
Agreement, any distribution made pursuant to this Section shall be deemed to be
a final distribution pursuant to Section 12.3 of the Agreement with respect to
the Term Certificates.
IN WITNESS WHEREOF, the Transferor, the Master Servicer and the
Trustee have caused this Series 1994-1 Supplement to be duly executed by their
respective officers as of the day and year first above written.
USFAR INC., as Transferor
By: /s/
------------------------------------
Name:
Title:
US FOODSERVICE INC.,
as Master Servicer
By: /s/
------------------------------------
Name:
Title:
CHEMICAL BANK, in its capacity
as Trustee
By: /s/
------------------------------------
Name:
Title:
36
<PAGE>
Schedule I
----------
Trust Accounts
--------------
The Collection Account has been established by and at Chemical Bank,
account number 323-305113.
The Collection Account is for the account of Chemical Bank, as trustee
for the USFAR Master Trust.
<PAGE>
Exhibit 10.37
EXECUTION COPY
--------------
- ------------------------------------------------------------------------------
USFAR INC.
----------------------
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
----------------------
Dated as of October 27, 1994
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS................................................ 1
1.1 Defined Terms............................................. 1
1.2 Other Definitional Provisions............................. 5
ARTICLE II PURCHASE AND SALE OF RECEIVABLES.......................... 6
2.1 Purchase and Sale of Receivables......................... 6
2.2 Purchase Price........................................... 7
2.3 Payment of Purchase Price................................ 7
2.4 No Repurchase............................................ 10
2.5 Rebates, Adjustments, Returns and Reductions;
Modifications............................................ 10
2.6 Limited Repurchase Obligation............................ 10
2.7 Purchase of Originators' Interest in Receivables......... 11
2.8 Obligations Unaffected................................... 12
2.9 Certain Charges.......................................... 12
2.10 Certain Allocations...................................... 12
ARTICLE III CONDITIONS TO PURCHASE AND SALE.......................... 12
3.1 Conditions Precedent to the Company's Initial
Purchase of Receivables................................... 12
3.2 Conditions Precedent to All the Company's
Purchases of Receivables.................................. 14
3.3 Conditions Precedent to Originators' Obligations.......... 15
3.4 Conditions Precedent to the Addition of an
Originator or a White Swan Division....................... 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES............................ 17
4.1 Representations and Warranties of the Originators
Relating to the Originators............................... 17
4.2 Representations and Warranties of the Originators
Relating to the Agreement and the Receivables............. 22
ARTICLE V AFFIRMATIVE COVENANTS...................................... 23
5.1 Certificates; Other Information........................... 24
5.2 Compliance with Laws, etc................................. 24
5.3 Preservation of Corporate Existence....................... 24
5.4 Visitation Rights......................................... 25
5.5 Keeping of Records and Books of Account................... 25
5.6 Location of Records....................................... 25
5.7 Computer Files............................................ 25
5.8 Policies.................................................. 26
5.9 Collections............................................... 26
5.10 Lockbox Agreements; Lockbox Accounts...................... 26
5.11 Furnishing Copies, etc.................................... 26
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.12 Obligations with Respect to Obligors and
Receivables............................................... 27
5.13 Responsibilities of the Originators....................... 27
5.14 Further Action............................................ 27
ARTICLE VI NEGATIVE COVENANTS........................................ 30
6.1 Liens..................................................... 30
6.2 Extension or Amendment of Receivables..................... 30
6.3 Chance in Payment Instructions to Obligors................ 30
6.4 Change in Name............................................ 30
6.5 Modification of Ledger.................................... 31
6.6 Accounting of Purchases................................... 31
6.7 Chattel Paper............................................. 31
6.8 Ineligible Receivables.................................... 31
ARTICLE VII PURCHASE TERMINATION EVENTS.............................. 31
ARTICLE VIII THE SUBORDINATED NOTE; PARENT NOTE...................... 33
8.1 Subordinated Note......................................... 33
8.2 Restrictions on Transfer of Subordinated Note............. 34
8.3 Parent Note............................................... 34
8.4 Restrictions on Transfer of Parent Note................... 35
ARTICLE IX MISCELLANEOUS............................................. 35
9.1 Further Assurances........................................ 35
9.2 Payments.................................................. 35
9.3 Costs and Expenses........................................ 35
9.4 Successors and Assigns.................................... 37
9.5 GOVERNING LAW............................................. 37
9.6 No Waiver; Cumulative Remedies............................ 37
9.7 Amendments and Waivers.................................... 37
9.8 Severability.............................................. 37
9.9 Notices................................................... 38
9.10 Counterparts.............................................. 38
9.11 Construction of Agreement as Security Agreement........... 38
9.12 WAIVERS OF JURY TRIAL..................................... 39
9.13 Submission To Jurisdiction; Waivers....................... 39
9.14 Addition of Originators or White Swan Divisions........... 40
9.15 Optional Termination of Originator or White Swan
Division.................................................. 40
9.16 No Bankruptcy Petition.................................... 41
9.17 Termination............................................... 42
9.18 Confidentiality........................................... 42
SCHEDULES
1 Locations of Chief Executive Offices; Locations of
Books and Records
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
2 Lockboxes
3 Discounted Percentage
4 Tax Matters
5 List of Tradenames, etc.
EXHIBITS
A Form of Subordinated Note
B Form of Parent Note
C Form of Additional Originator Supplement
D Form of Local Counsel Opinion
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as of
October 27, 1994, among Biggers Brothers, Inc.; White Swan, Inc.; Roanoke
Restaurant Service, Inc.; F.M. Bevevino & Company, Inc.; King's Foodservice,
Inc.; and each of the other subsidiaries of US Foodservice Inc. from time to
time parties hereto (each, an "Originator"), US Foodservice Inc., a Delaware
corporation, as Master Servicer (in such capacity, the "Master Servicer"), and
USFAR Inc., a Delaware corporation (the "Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, certain of the parties hereto entered into a Receivables
Purchase Agreement, dated as of September 23, 1993 (the "Existing RPA");
WHEREAS, in the ordinary course of business, each Originator generates
accounts receivable;
WHEREAS, pursuant to the Existing RPA, each Originator party thereto
sells to the Company, and the Company purchases from such Originator, all of
such Originator's right, title and interest in, to and under the Receivables (as
defined in the Amended and Restated Pooling and Servicing Agreement dated as of
October 27, 1994 among the Company, the Master Servicer and Chemical Bank, as
Trustee) now existing or hereafter created and in the rights of such Originator
in, to and under all Related Property related thereto;
WHEREAS, the parties hereto wish to amend and restate the Existing
RPA;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree that the Existing RPA shall
be and hereby is amended and restated in its entirety as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Capitalized terms used in this Agreement shall,
unless defined below, have the respective meanings assigned to such terms in the
Pooling and Servicing Agreement:
"Addition Date": as defined in subsection 3.4.
"Additional Originator": as defined in subsection 9.14.
<PAGE>
"Additional White Swan Division": as defined in subsection 9.14.
"Additional Originator Supplement": an instrument substantially in
the form of Exhibit C by which a subsidiary of US Foodservice, Inc. becomes an
Originator party hereto (or by which a division of White Swan is added as a
White Swan Division hereunder).
"Adjustment": as defined in subsection 2.5.
"Ease Rate": as defined in the Credit Agreement.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral Agent": The Chase Manhattan Bank, N.A., as collateral
agent for the benefit of the Secured Creditors specified in the Security
Agreement dated as of September 23, 1993 and substantially in the form of
Exhibit G to the Credit Agreement, as such Security Agreement may be modified
from time to time.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Master Servicer within the meaning of
Section 4001 of ERISA or is part of a group which includes the Master Servicer
and which is treated as a single employer under Section 414 of the Code.
"Discounted Percentage": as defined in Schedule 3.
"Documents": as defined in subsection 5.14(d)(3).
"Early Termination": as defined in Article VII.
"Effective Date": (i) with respect to each Initial Originator, all
Receivables originated by such party, all Related Property with respect to such
Receivables and all Lockbox Accounts to which payments on such Receivables are
made, September 23, 1993, and (ii) with respect to each New Originator, all
Receivables originated by such party, all Related Property with respect to such
Receivables and all Lockbox Accounts to which payments on such Receivables are
made, the date on which such party shall become a party hereto.
"Existing RPA": as defined in the recitals hereto.
"Initial Originators": collective reference to each Originator which
was a party to the Existing RPA.
2
<PAGE>
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Master Servicer and its subsidiaries taken as a whole, or (b) the
validity or enforceability of (i) this Agreement or any Sale Document or (ii)
the rights or remedies of the Company hereunder or thereunder.
"Multiemployer Plan": a multiemployer plan as defined in Section
4001(a)(3) of ERISA and covered by Title IV thereof, and to which the Master
Servicer or any Commonly Controlled Entity contributes or was obligated to
contribute in the immediately preceding five years.
"New Originators": collective reference to each Originator which was
not a party to the Existing RPA but which has been added as an Originator
hereunder on its related Effective Date.
"Originator Adjustment Payment": as defined in subsection 2.5.
"Originator Daily Report": as defined in subsection 5.1(c).
"Originator Repurchase Payment": as defined in subsection 2.6.
"Parent Note": as defined in subsection 8.3.
"Payment Date": as defined in subsection 2.3(a).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Master Servicer or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pooling and Servicing Agreement": the Amended and Restated Pooling
and Servicing Agreement, dated as of October 27, 1994, among the Company, as
seller, the Master Servicer, the
3
<PAGE>
Servicers and the Trustee, as amended, supplemented or otherwise modified from
time to time.
"Potential Purchase Termination Event": any condition or act
specified in Article VII that, with the giving of notice or the lapse of time or
both, would become a Purchase Termination Event.
"Purchase Price": as defined in subsection 2.2.
"Purchase Termination Event": as defined in Article VII.
"Purchased Receivable": any Receivable sold to the Company by any
Originator pursuant to, and in accordance with the terms of, this Agreement and
not resold to such Originator pursuant to subsection 2.1(b), 2.6 or 2.7.
"Related Property": all property referred to in subsection
2.1(a)(ii)-(iv) of the Pooling and Servicing Agreement.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S) 2615.
"Sale Documents": collective reference to each of this Agreement and
the Subordinated Note.
"Significant Originator": at any time of determination, an Originator
in respect of which the aggregate outstanding Face Amount of Purchased
Receivables sold by such Originator to the Company exceeds 10% of the aggregate
Face Amount of all outstanding Purchased Receivables sold by all Originators to
the Company.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, as of any date of
determination, (a) the amount of the "present fair saleable value" of the assets
of such Person will, as of such date, exceed the amount of all "liabilities of
such Person, contingent or otherwise", as of such date, as such quoted terms are
determined in accordance with applicable federal and state
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laws governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Subordinated Note": as defined in subsection 8.1.
1.2 Other Definitional Provisions. (a) The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section, subsection, schedule and exhibit references are to this
Agreement unless otherwise specified.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms relating to the Originators and the
Company, unless otherwise defined herein, shall have the respective meanings
given to them under generally accepted accounting principles.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1 Purchase and Sale of Receivables. (a) Subject to the terms and
conditions of this Agreement, each of the Originators hereby sells, assigns,
transfers and conveys to the Company, on the Effective Date with respect to such
Originator and from time to time thereafter, all its respective right, title and
interest, in, to and under (i) all Receivables now existing and hereafter
arising from time to time, as provided in paragraph (b) below, and all payment
and enforcement rights (but none of
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the obligations) with respect to Receivables and (ii) all Related Property in
respect of such Receivables.
(b) On the Effective Date with respect to each Originator and on the
date of creation of each newly created Receivable, all of the applicable
Originator's right, title and interest in and to (i) in the case of the
Effective Date, all existing Receivables and Related Property in respect of such
Receivables and (ii) in the case of each such date of creation, all such newly
created Receivables and all Related Property in respect of such Receivable shall
be immediately and automatically sold, assigned, transferred and conveyed to the
Company pursuant to paragraph (a) above without any further action by such
Originator or any other Person. If any Originator shall not have received
payment from the Company of the Purchase Price for any newly created Receivable
on the Payment Date therefor in accordance with the terms of subsection 2.3(c),
such newly created Receivable and the Related Property with respect thereto
shall, upon receipt of notice from the applicable Originator of such failure to
receive payment, immediately and automatically be sold, assigned, transferred
and reconveyed by the Company to such Originator without any further action by
the Company or any other Person
(c) All sales of Receivables and Related Property by any Originator
hereunder shall be without recourse to, or representation or warranty of any
kind (express or implied) by, any Originator, except as otherwise specifically
provided herein. The foregoing sale, assignment, transfer and conveyance does
not constitute and is not intended to result in the creation or assumption by
the Company of any obligation of any Originator or any other Person in
connection with the Receivables, the Related Property or any agreement or
instrument relating thereto, including any obligation to any Obligor.
(d) In connection with the foregoing conveyances, each Originator
agrees to record and file, at its own expense, financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Receivables and Related Property now existing
and hereafter acquired by the Company from the Originators meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect the purchases of the Receivables and Related Property
by the Company from the Originators, and to deliver evidence of such filings to
the Company on or prior to the Effective Date with respect to such Originator or
within five days thereof.
(e) In connection with the foregoing conveyances, each Originator
agrees at its own expense, as agent of the Company and
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as a Servicer, (i) to indicate on the computer files and other physical records
relating to the Receivables that all Receivables included in such list or print-
out and Related Property have been sold to the Company in accordance with this
Agreement and (ii) to deliver to the Company computer files, microfiche lists or
typed or printed lists containing true and complete lists of all such
Receivables, identified by Obligor and by the Receivables balance as of a date
no later than five Business Days prior to the Effective Date with respect to
such Originator.
(f) The Originators and the Company intend the purchases described in
this Section 2.1 to be sales of all of the Originators' right, title and
interest in, to and under the Receivables now existing and hereafter arising
from time to time and all Related Property in respect of such Receivables,
providing the Company with the full benefits of ownership of the same; the
Originators and the Company do not intend this transaction to be, or for any
purpose characterized as, a loan from the Company to the Originators secured by
such Receivables and Related Property with respect to such Receivables.
2.2 Purchase Price. The amount payable by the Company to an
Originator (the "Purchase Price") for newly created Receivables and Related
Property on any Payment Date under this Agreement shall be equal to the product
of (a) the aggregate outstanding Face Amount of such Receivables as set forth in
the applicable Daily Report and (b) the Discounted Percentage (as defined on
Schedule 3) with respect to such Originator.
2.3 Payment of Purchase Price. (a) Upon the fulfillment of the
conditions set forth in Article III, the Purchase Price for Receivables and the
Related Property shall be paid or provided for in the manner provided below on
each day for which a Daily Report is prepared and delivered to the Company (each
such day, a "Payment Date"). Each Originator hereby appoints the Master
Servicer as its agent to receive payment of the Purchase Price for Receivables
sold by it to the Company and hereby authorizes the Company to make all payments
due to such Originator directly to, or as directed by, the Master Servicer. The
Master Servicer hereby accepts and agrees to such appointment.
(b) The Purchase Price for Receivables and the Related Property with
respect thereto purchased on the related Effective Date from each Originator
shall be paid by the Company as follows:
(i) in cash from the net proceeds of the sale of an interest in such
Purchased Receivables by the Company to other Persons; and
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(ii) in cash from the proceeds of capital contributed by US
Foodservice Inc. to the Company in respect of its equity interest in the
Company.
(c) The Purchase Price for Receivables and Related Property with
respect thereto purchased after the Effective Date with respect to each
Originator shall be paid by the Company on each Payment Date as follows:
(i) by netting the amount of any Originator Adjustment Payments or
Originator Repurchase Payments pursuant to Sections 2.5 or 2.6 against such
Purchase Price;
(ii) to the extent available for such purpose, in cash from
Collections;
(iii) to the extent available for such purpose, in cash from the net
proceeds of the sale of an interest in such Purchased Receivables by the
Company to other Persons;
(iv) at the option of the Company, by means of an addition to the
principal amount of the Subordinated Note in an aggregate amount equal to
the remaining portion of the Purchase Price; provided, however, that the
Company may pay by means of addition to the principal amount of the
Subordinated Note only to the extent that, after giving effect to such
payment, the sum of (A) the outstanding principal amount of each of the
Subordinated Note and the Parent Note and (B) the Aggregate Invested Amount
at such date does not exceed the product of (a) 98% and (b) the aggregate
outstanding Face Amount of all Eligible Receivables sold to the Company
hereunder; and provided further that the Company may pay by means of
additions to the principal amount of the Subordinated Note only if, at the
time of such payment, the fair market value of its assets, including any
beneficial interests in or indebtedness of a trust and all Receivables and
Related Property it owns, after giving effect for this purpose to any
Adjustments with respect to the Purchased Receivables or any participation
interest therein sold to the Trust under the Pooling and Servicing
Agreement, is greater than the amount of its liabilities including its
liabilities on the Subordinated Note, the Parent Note all interest and
other fees payable under the Pooling and Servicing Agreement. Any such
addition to the principal amount of the Subordinated Note shall be
allocated among the Originators by the Master Servicer. The Master
Servicer may evidence such payments by recording the date and amount
thereof on the books and records of the Master Servicer or the Originators
or on the grid attached to the subordinated Note; provided that the
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failure to make any such recordation or any error in such grid shall not
adversely affect any Originator's rights; and
(v) in cash.
(d) The Master Servicer shall be responsible for allocating among the
Originators the payment of the Purchase Price for Receivables and any amounts
netted therefrom pursuant to subsection 2.3(c)(i). The Company shall be
entitled to pay all amounts in respect of the Purchase Price of Receivables to
an account of the Master Servicer for allocation by the Master Servicer to the
Originators. All payments under this Agreement shall be made not later than
3:00 p.m (New York City time) on the date specified therefor in Dollars in same
day funds or by check, as the Master Servicer shall elect and (i) if to any
Originator, to the bank account designated in writing by the Master Servicer to
the Company and (ii) if to the Master Servicer, to the bank account designated
in writing by the Master Servicer to the Company.
(e) Whenever any payment to be made under this Agreement shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day. Amounts not paid when due shall bear
interest at a rate equal at all times to the Base Rate (as defined in the Credit
Agreement) plus 2%, payable on demand.
2.4 No Repurchase. Except to the extent expressly set forth herein,
no Originator shall have any right or obligation under this Agreement, by
implication or otherwise, to repurchase from the Company any Purchased
Receivables or Related Property or to rescind or otherwise retroactively affect
any purchase of any Purchased Receivables or Related Property after the Payment
Date relating thereto.
2.5 Rebates, Adjustments, Returns and Reductions; Modifications.
From time to time an Originator may make Adjustments to Receivables in
accordance with subsection 6.2. The Originators, jointly and severally, agree
to pay to the Company, on the Business Day following the grant of any Adjustment
(regardless of which Originator shall have granted such Adjustment), the amount
of any such Adjustment (an "Originator Adjustment Payment"); provided, that,
prior to any Purchase Termination Event, any such payments to the Company shall
be netted against the Purchase Price of newly created Receivables in accordance
with subsection 2.3(c)(i). An "Adjustment" shall mean, for any period, the
aggregate amount of discount expense, rebates, refunds, billing error expense,
credits against Receivables and other adjustments or allowances in respect of
the Receivables permitted or incurred during such
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period by any Originator (but only to the extent the foregoing results in a
decrease of the aggregate Face Amount of the Receivables), provided an
"Adjustment" does not include any Write-Off. The amount of any Adjustment shall
be set forth on the first Daily Report prepared after the date of the grant
thereof.
2.6 Limited Repurchase Obligation. In the event that (i) any
representation or warranty contained in subsections 4.2(b) or (c) in respect of
any Receivable shall be or have been incorrect or breached at the applicable
Payment Date, (ii) there is a breach of any covenant under subsection 6.1 with
respect to any Receivable and such breach has a material adverse effect on the
Company's interest in such Receivable or (iii) the Company's interest in any
Eligible Receivable is not a first priority perfected interest at any time, then
the Originators, jointly and severally, agree to repurchase such Receivable for
an amount equal to the Purchase Price of such Receivable (whether the Company
paid such Purchase Price in cash or otherwise) less Collections received by the
Company in respect of such Receivable, regardless of which Originator shall have
been responsible for such incorrectness or breach, such payment to occur on the
earlier to occur of the discovery of any such event by any Originator or receipt
by any Originator of written notice of any such event given by the Company
(unless such breach shall have been cured on or before such discovery or receipt
of such notice); provided, that, prior to any Purchase Termination Event, any
such payments to the Company shall be netted against the Purchase Price of newly
created Receivables in accordance with subsection 2.3(c)(i). Any payment by any
Originator pursuant to this subsection is referred to as a "Originator
Repurchase Payment". The obligation to reacquire any Receivable shall
constitute the sole remedy respecting the event giving rise to such obligation
available to the Company. Simultaneously with any Originator Repurchase Payment
with respect to any Receivable, such Receivable and the Related Property with
respect thereto shall immediately and automatically be sold, assigned,
transferred and conveyed by the Company to the applicable Originator without any
further action by the Company or any other Person.
2.7 Purchase of Originators' Interest in Receivables. (a) In the
event of any breach of any of the representations and warranties set forth in
subsection 4.1(a) through (g) or (k), which breach has a material adverse effect
on the interests of the Company in the Purchased Receivables, then the Company,
by notice then given in writing to the Originators, may direct the Originators
to purchase all Purchased Receivables and the Originators, jointly and
severally, shall be obligated to make such purchase on the next Distribution
Date occurring at least
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five Business Days after receipt of such notice on the terms and conditions set
forth below; provided, however, that no such purchase shall be required to be
made if, by such Distribution Date, the representations and warranties contained
in subsections 4.1(a) through (g) and (k) shall be satisfied in all material
respects, and any material adverse effect on the Company caused thereby has been
cured.
(b) The Originators, jointly and severally, shall, as the purchase
price for the Receivables to be purchased pursuant to the immediately preceding
paragraph, pay to the Company, on the Business Day preceding such Distribution
Date, an amount equal to the Purchase Price of the Purchased Receivables, less
Collections received by the Company in respect of such Purchased Receivables, as
of such Distribution Date. Upon payment of such amount, in immediately
available funds, to the Company, the Company's rights with respect to the
Receivables shall terminate and such interest therein will be transferred to the
Originators and the Company shall have no further rights with respect thereto.
If the Company gives notice directing the Originators to purchase the Purchased
Receivables as provided above, the obligation of the Originators to purchase the
Purchased Receivables pursuant to this Section 2.7 shall constitute the sole
remedy respecting an event of the type specified in the first sentence of this
Section 2.7 available to the Company.
2.8 Obligations Unaffected. The obligations of the Originators to
the Company under this Agreement shall not be affected by reason of any
invalidity, illegality or irregularity of any Receivable or any sale of a
Receivable.
2.9 Certain Charges. Each of the Originators and the Company agrees
that late charge revenue, reversals of discounts, other fees and charges and
other similar items, whenever created, accrued in respect of Purchased
Receivables shall be the property of the Company notwithstanding the occurrence
of an Early Termination and all Collections with respect thereto shall continue
to be allocated and treated as Collections in respect of Purchased Receivables.
2.10 Certain Allocations. Following any Early Termination the
Originators agree that, unless the Originators can identify a particular
Collection to a specific Obligor and a specific Receivable, all cash collections
and other proceeds received in respect of an Obligor not so identified with
respect to both Purchased Receivables and Receivables not sold to the Company
shall be applied to pay the outstanding Face Amount of all Receivables based on
the age of such Receivable (as determined by the related invoice date of such
Receivable), with
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such cash collections and proceeds being applied first to pay in full the oldest
Receivables.
ARTICLE III
CONDITIONS TO PURCHASE AND SALE
3.1 Conditions Precedent to the Company's Initial Purchase of
Receivables. The obligation of the Company to purchase the Receivables and the
Related Property hereunder on the related Effective Date from any Originator is
subject to the conditions precedent, which may be waived by the Company, that
(a) each of the Sale Documents shall be in full force and effect and (b) the
conditions set forth below shall have been satisfied on or before the related
Effective Date:
(i) the Company shall have received copies of duly adopted resolutions
of the Board of Directors of each Originator as in effect on such Effective
Date and in form and substance reasonably satisfactory to the Company,
authorizing this Agreement, the documents to be delivered by such
Originator hereunder and the transactions contemplated hereby, certified by
the Secretary or Assistant Secretary of such Originator;
(ii) the Company shall have received duly executed certificates of the
Secretary or an Assistant Secretary of each Originator, dated such
Effective Date and in form and substance reasonably satisfactory to the
Company, certifying the names and true signatures of the officers
authorized on behalf of such Originator to sign this Agreement or any
instruments or documents in connection with this Agreement;
(iii) each Originator shall have filed and recorded or will file
within five days after such Effective Date, at its own expense, UCC-1
financing statements with respect to the Receivables and the Related
Property in such manner and in such jurisdictions as are necessary or
desirable to perfect the Company's ownership interest therein under the UCC
and delivered evidence of such filings to the Company within five days
after such Effective Date; and all other action necessary or desirable, in
the opinion of the Company, to perfect the Company's ownership of the
Receivables shall have been duly taken;
(iv) each Originator shall have delivered to the Company a microfiche,
a typed or printed list or other tangible evidence reasonably acceptable to
the Company showing as of a date acceptable to the Company prior to such
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Effective Date the Obligors whose Receivables are to be transferred to the
Company and the balance of the Receivables with respect to each such
Obligor as of such date;
(v) the Company shall have received reports of UCC-11 and other
searches of the Originators with respect to the Receivables and the Related
Property reflecting the absence of Liens thereon, except Liens created in
connection with the sale by the Company of an interest in the Purchased
Receivables and except for Liens as to which the Company has received UCC
termination statements to be filed on or prior to such Effective Date; and
(vi) the Company shall have received, with a counterpart for the
Trustee, each Placement Agent and each Rating Agency, legal opinions of
counsel satisfactory to the Trustee in each jurisdiction where the chief
executive office of each Originator is located, which opinions shall be
substantially in the form of Exhibit D.
3.2 Conditions Precedent to All the Company's Purchases of
Receivables. The obligation of the Company to pay an Originator for any
Receivable and the Related Property with respect thereto on each Payment Date
(including the Effective Date with respect to such Originator) shall be subject
to the further conditions precedent, which may be waived by the Company, that on
such Payment Date:
(a) the following statements shall be true (and the acceptance by such
Originator of the Purchase Price for any Receivables on any Payment Date
shall constitute a representation and warranty by such Originator that on
such Payment Date such statements are true):
(i) the representations and warranties of such Originator
contained in Sections 4.1 and 4.2 shall be true and correct in all
material respects on and as of such Payment Date as though made on and
as of such date, except insofar as such representations and warranties
are expressly made only as of another date;
(ii) no Purchase Termination Event or Potential Purchase
Termination Event with respect to such Originator shall have occurred
and be continuing;
(iii) no Early Amortization Event or Potential Early Amortization
Event shall have occurred and be continuing; and
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(iv) there has been no material adverse change since the date of
this Agreement in the collectibility of the Receivables (other than
due to a change in the creditworthiness of the Obligors):
(b) the Company shall be satisfied that such Originator's systems,
procedures and record keeping relating to the Purchased Receivables are in
all material respects sufficient and satisfactory in order to permit the
purchase and administration of the Purchased Receivables in accordance with
the terms and intent of this Agreement;
(c) the Company shall have received payment in full of all amounts for
which payment is due from such Originator pursuant to subsection 2.5, 2.6,
2.7 or 9.3;
(d) the Company shall have received such other approvals, opinions or
documents as the Company may reasonably request; and
(e) such Originator shall have complied with all of its covenants in
all material respects and satisfied all of its obligations in all material
respects under this Agreement required to be complied with or satisfied as
of such date;
provided, however, that the failure of any Originator to satisfy any of the
foregoing conditions shall not prevent such Originator from subsequently selling
Receivables upon satisfaction of all such conditions or exercising its rights
under subsection 2.1(b).
3.3 Conditions Precedent to Originators' Obligations. (a) The
obligations of each Originator on the Effective Date with respect to such
Originator shall be subject to the conditions precedent that such Originator
shall have received on or before such Effective Date the following, each dated
the Effective Date and in form and substance satisfactory to such Originator:
(i) a copy of duly adopted resolutions of the Board of Directors of
the Company authorizing this Agreement, the documents to be delivered by
the Company hereunder and the transactions contemplated hereby, certified
by the Secretary or Assistant Secretary of the Company; and
(ii) a duly executed certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of the
officers authorized on its behalf to sign this Agreement and the other
documents to be delivered by it hereunder.
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(b) The obligations of each Originator on each Payment Date shall be
subject to the condition precedent that no Early Amortization Event set forth in
Section 9.1 of the Pooling and Servicing Agreement shall have occurred and be
continuing.
3.4 Conditions Precedent to the Addition of an Originator or a White
Swan Division. No subsidiary of US Foodservice, Inc. or division of White Swan
approved by the Company as an Additional Originator or an Additional White Swan
Division, respectively, pursuant to subsection 9.14 shall be added as an
Originator or a White Swan Division hereunder unless the conditions set forth
below shall have bean satisfied on or before the date designated for the
addition of such Originator or such White Swan Division (the "Addition Date"):
(i) the Company shall have received an Additional Originator
Supplement duly executed and delivered by such Originator (or, in the case
of such White Swan Division, White Swan);
(ii) the Company shall have received copies of duly adopted
resolutions of the Board of Directors of such Originator (or, in the case
of such White Swan Division, of White Swan) as in effect on the related
Addition Date and in form and substance reasonably satisfactory to the
Company, authorizing this Agreement, the documents to be delivered by such
party hereunder and the transactions contemplated hereby, certified by the
Secretary or Assistant Secretary of such party;
(iii) the Company shall have received duly executed certificates of
the Secretary or an Assistant Secretary of such Originator (or in the case
of such White Swan Division, of White Swan) dated the related Addition Date
and in form and substance reasonably satisfactory to the Company,
certifying the names and true signatures of the officers authorized on
behalf of such party to sign the Additional Originator Supplement or any
instruments or documents in connection with this Agreement;
(iv) a Lockbox Account with respect to Receivables to be sold by such
Originator or such White Swan Division shall have been established and such
Originator shall have entered into a Lockbox Agreement with respect to such
Lockbox Account;
(v) such Originator (or, in the case of such White Swan Division,
White Swan) shall have filed and recorded, at its own expense, UCC-1
financing statements with respect to its Receivables and Related Property
in such manner and in
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such jurisdictions as are necessary or desirable to perfect the Company's
ownership interest therein under the UCC and delivered evidence of such
filings to the Company on or prior to the related Addition Date; and all
other action necessary or desirable, in the opinion of the Company, to
perfect the Company's ownership of such Receivables shall have been duly
taken;
(vi) such Originator (or, in the case of such White Swan Division,
White Swan) shall have delivered to the Company a microfiche, a typed or
printed list or other tangible evidence reasonably acceptable to the
Company showing as of a date acceptable to the Company prior to the related
Addition Date the Obligors whose Receivables are to be transferred to the
Company and the balance of the Receivables with respect to each such
Obligor as of such date;
(vii) the Company shall have received reports of UCC-11 and other
searches of such Originator (or, in the case of such White Swan Division,
White Swan) with respect to its Receivables and Related Property reflecting
the absence of Liens thereon, except Liens created in connection with the
sale by the Company of an interest in the Purchased Receivables and except
for Liens as to which the Company has received UCC termination statements
to be filed on or prior to the related Addition Date;
(viii) the Company shall have received legal opinions of outside legal
counsel, not unacceptable to the Company with respect to the opinions in
the following clauses (A) and (B), on behalf of such Originator as to (A)
the "true sale" nature of the sale of its Receivables hereunder, (B)
substantive consolidation issues between such party and US Foodservice Inc.
on the one hand and the Company on the other hand and (C) general corporate
matters of such party (including, without limitation, an opinion as to the
perfection and priority of the Company's ownership of or security interest
in the Receivables), all in form and substance reasonably satisfactory to
the Company; and
(ix) the Company shall have received evidence that the Rating Agency
Condition under the Pooling and Servicing Agreement shall have been
satisfied.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Originators Relating to the
Originators. Each Originator hereby represents and warrants to the Company on
the date hereof, on the Effective Date with respect to such Originator and on
each Payment Date that:
(a) Organization and Good Standing. Such Originator is a corporation
duly organized, validly existing and in good standing under the applicable
laws of the jurisdiction of its incorporation, and has, in all material
respects, full corporate power, authority and legal right to own its
properties and conduct its servicing business as such properties are
presently owned and as such business is presently conducted, and to
execute, deliver and perform its obligations under this Agreement and the
Sale Documents.
(b) Due Qualification. Such Originator is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt
from such requirements) and has obtained all necessary licenses and
approvals in each jurisdiction in which the conduct of its business
requires such qualification except where the failure to so qualify or
obtain licenses or approvals would not have a Material Adverse Effect.
(c) Due Authorization. The execution, delivery, and performance of
this Agreement and the Sale Documents has been duly authorized by all
necessary corporate action on the part of such Originator. This Agreement
and each of the Sale Documents to which it is a party have been duly
executed and delivered by such Originator.
(d) Binding Obligation. This Agreement and the Sale Documents
constitute the legal, valid and binding obligations of such Originator,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereinafter in effect, affecting the enforcement
of creditors' rights and except as such enforceability.may be limited by
general principles of equity (whether considered in a proceeding at law or
in equity).
(e) No Violation or Conflict. The execution and delivery of this
Agreement and the Sale Documents by such Originator, the performance of the
transactions contemplated
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hereby and thereby and the fulfillment of the terms hereof and thereof
applicable to such Originator will not conflict with, violate, result in
any breach of any of the material terms and provisions of, or constitute
(with or without notice or lapse of time or both) a material default under,
any Requirement of Law applicable to such Originator or any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to which
such Originator is a party or by which it is bound.
(f) No Proceedings. There are no proceedings or, to the best
knowledge of such Originator, investigations, pending or threatened against
such Originator before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
any Sale Documents, seeking any determination or ruling that, in the
reasonable judgment of such Originator, would materially and adversely
affect the performance by such Originator of its obligations under this
Agreement or any Sale Document, or seeking any determination or ruling that
would materially and adversely affect the validity or enforceability of
this Agreement or any Sale Document.
(g) Compliance with Requirements of Law. Such Originator shall duly
satisfy all obligations on its part to be fulfilled under or in connection
with the Receivables, will maintain in effect all qualifications required
under Requirements of Law in order to permit the origination of the
Receivables and will comply in all material respects with all Requirements
of Law in connection with such origination of the Receivables the failure
to comply with which would have a Material Adverse Effect.
(h) Taxes. Each of the following statements is true, except to the
extent that the potential liability to such Originator as a result of the
circumstances causing any such statement to be untrue would not be
reasonably likely to have a Material Adverse Effect: Except as set forth
on schedule 4, it has filed or caused to be filed all tax returns which are
required to be filed and has paid all taxes shown to be due and payable on
said returns or on any assessments made against it or any of its property
and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity
with GAAP have been provided on its books); no tax Lien has been filed,
and, to
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the best knowledge of such Originator, no claim is being asserted, with
respect to any such tax, fee or other charge.
(i) Ownership. All its issued and outstanding capital stock is owned,
directly or indirectly, by US Foodservice Inc.
(j) Accuracy and Completeness of Information. No representation or
warranty made (or deemed to be made) by it in this Agreement, the other
Sale Documents or in any certificate or other document or written statement
furnished to the Company by or on behalf of such Originator pursuant to the
terms of any of the Sale Documents contains, as of the date when made, any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made,
except to the extent that such untrue statement or omission was
subsequently corrected in a written statement delivered to the Company
prior to the date not later than three Business Days prior to the Effective
Date with respect to such Originator. As of the Effective Date with
respect to such Originator, no fact is known to it which has or in the
future would be reasonably likely to have a Material Adverse Effect and
which has not been disclosed herein (including the schedules hereto) or in
any of the agreements, materials, documents, certificates or written
statements referred to above or otherwise disclosed in writing to the
Company prior to the date not later than three Business Days prior to such
Effective Date.
(k) Solvency. The Master Servicer and its subsidiaries taken as a
whole were, after giving effect to the transactions contemplated to occur
on or prior to such Effective Date, Solvent.
(l) ERISA. Each of the following statements is true, except where the
amount involved in any untrue statement, either individually or in the
aggregate, would not be reasonably likely to result in any liability having
a Material Adverse Effect: Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or
Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to
any Plan, and each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of a Single
Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has
arisen, during such five-year period. The present value of
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all accrued benefits under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits. Neither it nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither it
nor any Commonly Controlled Entity would become subject to any liability
under ERISA if it or any such Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the valuation date most
closely preceding the date on which this representation is made or deemed
made. To its best knowledge, no such Multiemployer Plan is in
Reorganization or Insolvent. The present value (determined using actuarial
and other assumptions which are reasonable in respect of the benefits
provided and the employees participating) of the liability of it and each
Commonly Controlled Entity for post-retirement benefits to be provided to
their current and former employees under Plans which are welfare benefit
plans (as defined in Section 3(1) of ERISA) does not, in the aggregate,
exceed the assets under all such Plans allocable to such benefits by an
amount which would be reasonably likely to result in a liability having a
Material Adverse Effect.
(m) Indebtedness to Company. Immediately prior to consummation of the
transactions contemplated hereby on such Effective Date, it had no
outstanding Indebtedness to the Company.
(n) Lockboxes. Set forth in Schedule 2 is a complete and accurate
description as of such Effective Date of each Lockbox Account currently
maintained by such Originator. Each of the Lockbox Agreements, once
entered into, continues to be the legal, valid and binding obligation of
the parties thereto, enforceable against such parties in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
(o) Filings. On or prior to such Effective Date, all filings and
other acts necessary or advisable (including but not limited to all filings
and other acts necessary or advisable under the Uniform Commercial Code of
each relevant jurisdiction) have been made.or performed in order to grant
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the Company a first priority perfected ownership interest in respect of all
Receivables originated by such Originator.
(p) Receivables Documents. Upon the delivery, if any, by such
Originator to the Company of licenses, rights, computer programs, related
materials, computer tapes, disks, cassettes and data relating to the
administration of the Purchased Receivables pursuant to subsection
5.14(d)(5), the Company shall have been furnished with all materials and
data necessary to permit immediate collection of the Purchased Receivables
without the participation of any Originator in such collection.
(q) Location of Chief Executive Offices. The chief executive office
and principal place of business of such Originator is listed opposite its
name on Schedule 1, which office is the place where such Person is
"located" for the purposes of Section 9-103(3)(d) of the Uniform Commercial
Code of the State of New York, and the offices of such Originator where
such Originator keeps its records concerning the Receivables are also
listed in said Schedule opposite its name and there have been no other such
locations in respect of such Originator during the prior four months.
(r) Pooling and Servicing Representations and Warranties. Each and
every respective representation and warranty contained in the Pooling and
Servicing Agreement and the other Related Documents (other than this
Agreement) with respect to such Originator is true and correct in all
material respects.
(s) Tradenames, etc. Except as set forth in Schedule 5, during the
six years preceding the date hereof such Originator has not been known by
any legal name other than its corporate name, except to the extent
permitted otherwise pursuant to Section 6.4. Such Originator uses no trade
names other than its actual corporate name and the trade names set forth in
Schedule 5.
(t) Valid Business Reasons; Ability to Perform. Such Originator has
valid and appropriate business reasons for entering into this Agreement and
performing its obligations hereunder in respect of the sale of its
Receivables rather than arranging for a loan or other borrowing which would
be secured by such Receivables. Since such Effective Date, there has been
no material adverse change in the ability of such Originator to perform its
obligations under this Agreement and the transactions contemplated hereby.
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4.2 Representations and Warranties of the Originators Relating to the
Agreement and the Receivables. Each Originator hereby represents and warrants
to the Company on the date hereof, on the Effective Date with respect to such
Originator and on each Payment Date that with respect to the Receivables being
paid for as of such date:
(a) The microfiche, printed or typed list or computer file delivered
pursuant to subsection 3.1(b)(iv) is an accurate and complete listing in
all material respects of all its Receivables as of October 26, 1994 and the
information contained therein with respect to the identity of such
Receivables is true and correct in all material respects as of such date.
(b) Each Receivable sold by it hereunder and designated on any
Originator Daily Report to be an Eligible Receivable will be, at its
respective Payment Date, an Eligible Receivable. The aggregate outstanding
Face Amount of Eligible Receivables sold by it on any Payment Date is
correctly set forth on the Originator Daily Report with respect to such
Originator and with respect to such Payment Date.
(c) Other than with respect to Receivables which such Originator
states in writing (in the applicable Originator Daily Report or otherwise)
are not Eligible Receivables on such date, immediately prior to the
transfer hereunder such Originator is the sole legal and beneficial owner
of its Receivables with good title thereto, free and clear of any adverse
claims, and upon the sale of each Receivable of such Originator, the
Company will become the sole legal and beneficial owner of such Receivable,
free and clear of any Liens (except for Liens granted by such Originator in
favor of the Company and the interest in such Purchased Receivables sold
and the security interest therein granted by the Company to other Persons
and except for Permitted Liens), and no effective financing statement or
other instrument similar in effect covering all or any part of such
Purchased Receivable, Related Property or Collections with respect thereto
will at such time be on file against such Originator in any filing or
recording office except such as have been filed in favor of the Company in
accordance with this Agreement.
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ARTICLE V
AFFIRMATIVE COVENANTS
Each Originator hereby agrees that, so long as there are any amounts
outstanding with respect to Purchased Receivables previously sold by such
Originator to the Company or until an Early Termination with respect to such
Originator, whichever is later, such Originator shall:
5.1 Certificates; Other Information. Furnish to the Company (and, in
the case of subsection 5.1(a), to each Rating Agency, and, in the case of
subsection 5.1(c), to the Master Servicer):
(a) not later than 120 days after the end of each fiscal year and not
later than 45 days after the end of each of the first three fiscal quarters
of each fiscal year, a certificate of a Responsible Officer of such
Originator stating that, to the best of such Officer's knowledge, such
Originator during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in
the Sale Documents to which it is a party to be observed, performed or
satisfied by it, and that such Officer has obtained no knowledge of any
Purchase Termination Event or Potential Purchase Termination Event except
as specified in such certificate;
(b) promptly, such additional financial and other information as the
Company may from time to time reasonably request; and
(c) on each Business Day, a written report (each, an "Originator Daily
Report") with respect to the Receivables originated by such Originator and
sold to the Company since the date of the its previous Report, which Report
shall contain such information as the Master Servicer shall need or
otherwise request in order to complete its Daily Report.
5.2 Compliance with Laws, etc. Comply in all material respects with
all Requirements of Law applicable to the Purchased Receivables; provided,
however, that each of the Originators may contest any act, regulation, order,
decree or direction in any reasonable manner which shall not materially
adversely affect the rights of the Company in the Purchased Receivables or the
collectibility or validity thereof. Each Originator will comply, in all
material respects, with its obligations under contracts with Obligors relating
to the Purchased Receivables except to the extent such compliance would result
in a violation of a Requirement of Law.
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5.3 Preservation of Corporate Existence. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and maintain such legal existence separate from that of the Company,
provided that any Originator may be merged or consolidated with or into any
other Originator or US Foodservice Inc. or any subsidiary of US Foodservice,
Inc. other than the Company (so long as such subsidiary becomes an Originator
hereunder in accordance with subsection 3.4).
5.4 Visitation Rights. At any reasonable time during normal business
hours and from time to time permit (i) the Company, or any of its agents or
representatives, (A) to examine and make copies of and abstracts from the
records, books of account and documents (including computer tapes and disks) of
each Originator relating to the Purchased Receivables hereunder and (B)
following the termination of the appointment of US Foodservice Inc. as Master
Servicer or of such Originator as Servicer with respect to the Purchased
Receivables, to be present at the offices and properties of such Originator to
administer and control the Collection of the Purchased Receivables and (ii) the
Company, or any of its agents or representatives, to visit the properties of
such Originator for the purpose of examining such records, books of account and
documents, and to discuss the affairs, finances and accounts of such Originator
relating to the Purchased Receivables or such Originator's performance hereunder
with any of its officers or directors and with its independent certified public
accountants.
5.5 Keeping of Records and Books of Account. Maintain and implement,
or cause to be maintained or implemented, administrative and operating
procedures reasonably necessary or advisable for the collection of amounts owing
on all Purchased Receivables, and, until any delivery to the Company, keep and
maintain, or cause to be kept and maintained, all documents, books, records and
other information reasonably necessary or advisable for the collection of
amounts owing on all such Purchased Receivables and the Related Property with
respect thereto.
5.6 Location of Records. Keep its chief place of business and chief
executive office, and the offices where it keeps the records concerning the
Purchased Receivables (and all original documents relating thereto) at the
locations referred to for it on Schedule 1 hereto or upon 20 days' prior written
notice to the Company, at such other locations in a jurisdiction where all
action required by Section 5.14(a) shall have been taken and, completed and be
in full force and effect.
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5.7 Computer Files. At its own cost and expense, retain the ledger
used by such Originator as a master record of the Obligors and retain copies of
all documents relating to each Obligor as custodian and agent for the Company
and other Persons with interests in the Purchased Receivables and mark the
computer tape or other physical records of the Purchased Receivables to the
effect that interests in the Purchased Receivables existing with respect to the
Obligors listed thereon have been sold to the Company and that the Company has
sold an interest therein and has granted a security interest in the Company's
retained interest therein.
5.8 Policies. Perform its obligations in accordance with and comply
in all material respects with the Policies and will not change or modify the
Policies in any material respect, except (i) if such changes are necessary under
any Requirement of Law or (ii) if such change or modification could not
reasonably be expected to have a material adverse effect on the interests of the
Company in the Receivables; provided, that material changes to the Policies
shall include, without limitation, changes to the timing of Write-Offs of
Receivables and changes to the creditworthiness criteria used in determining
whether to extend credit to a Person and in determining the amount of such
credit to extend.
5.9 Collections. Direct any Obligor which currently pays its
Receivables by checks mailed to such Originator to make future payments in
respect of Receivables to a Lockbox Account or by wire transfer to a Lockbox
Account or to the Collection Account unless, in the judgment of such Originator,
such request would be detrimental to its ongoing relationship with such Obligor.
5.10 Lockbox Agreements; Lockbox Accounts. Within 60 days of the
first Effective Date (in the case of the Initial Originators) and as of the
related Effective Date (in the case of the New Originators),
(a) if such Originator has not established a Lockbox Account on such
Effective Date, it shall establish one and enter into a Lockbox Agreement
with respect thereto;
(b) if such Originator shall not have entered into a Lockbox Agreement
with respect to any existing Lockbox Account on such Effective Date, it
shall enter into such a Lockbox Agreement.
5.11 Furnishing Copies, etc. Furnish to the Company:
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(a) promptly upon obtaining knowledge of the occurrence of any
Purchase Termination Event or Potential Purchase Termination Event, written
notice thereof;
(b) promptly following request therefor, such other information,
documents, records or reports with respect to the Purchased Receivables of
the applicable Originator, as the Company may from time to time reasonably
request;
(c) immediately after the occurrence thereof, written notice of any
event of default or default under any other Sale Document; and
(d) promptly upon determining that any Purchased Receivables
designated as Eligible Receivables on the applicable Daily Report were not
Eligible Receivables as of the date provided therefor, written notice of
such determination.
5.12 Obligations with Respect to Obligors and Receivables. Take all
actions on its part reasonably necessary to maintain in full force and effect
its material rights under all contracts relating to the Purchased Receivables.
5.13 Responsibilities of the Originators. Notwithstanding anything
herein to the contrary, (i) each Originator shall perform all its obligations
under the Policies related to the Purchased Receivables to the same extent as if
such Purchased Receivables had not been transferred to the Company hereunder,
(ii) the exercise by the Company of any of its rights hereunder shall not
relieve any Originator of its obligations with respect to such Purchased
Receivables and (iii) except as provided by law, the Company shall not have any
obligation or liability with respect to any Purchased Receivables, nor shall the
Company be obligated to perform any of the obligations or duties of any
Originator thereunder.
5.14 Further Action. In addition to the foregoing:
(a) Each Originator agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable in such
Originator's reasonable judgment or that the Company may reasonably
request, in order to protect or more fully evidence the Company's right,
title and interest in the Purchased Receivables, or to enable the Company
to exercise or enforce any of its rights in respect thereof. Without
limiting the generality of the foregoing, each Originator will upon the
request of the Company (A) execute and file
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such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or, in the opinion of the
Company, advisable to maintain a first priority ownership or first priority
perfected security interest in the Receivables in favor of the Company, (B)
indicate on its books and records that the Purchased Receivables have been
purchased by the Company, and provide to the Company, upon request, copies
of any such records, and (C) obtain the agreement of any Person having a
Lien on any Receivables owned by any Originator (other than any Lien
created or imposed hereunder or under the Receivables Purchase Agreement or
any Lien expressly permitted pursuant to subsection 6.1) to release such
Lien upon the purchase of any such Receivables by the Company.
(b) Each Originator hereby irrevocably authorizes the Company to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Purchased Receivables sold and the
Related Property or to be sold by such Originator without the signature of
such Originator.
(c) If any Originator fails to perform any of its agreements or
obligations under this Agreement, the Company may (but shall not be
required to) perform, or cause performance of, such agreements or
obligations, and the expenses of the Company incurred in connection
therewith shall be payable by such Originator as provided in Section 9.3.
(d) Each Originator agrees that, whether or not a Purchase Termination
Event has occurred:
(1) the Company (and its assignees) shall have the right at any
time to notify, or require that any Originator at such Originator's
expense notify, the respective Obligors of the Company's ownership of
the Purchased Receivables and may direct that payment of all amounts
due or to become due under the Purchased Receivables be made directly
to the Company or its designee;
(2) the Company (and its assignees) shall have the right to (x)
sue for collection on any Purchased Receivables or (y) sell any
Purchased Receivables to any Person for a price that is acceptable to
the Company. If required by the terms of Sections 9-504 or 9-505 of
the UCC, the Company (and its assignees) may offer to sell any
Purchased Receivable to any Person, together, at its option, with all
other Purchased
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Receivables created by the Obligor. Any such Purchased Receivable
shall cease to be a Receivable for all purposes under this Agreement
as of the effective date of such sale;
(3) each Originator shall, upon the Company's request and at such
Originator's expense, (x) assemble all such Originator's documents,
instruments and other records (including credit files and computer
tapes or disks) that (1) evidence or will evidence or record
Receivables sold by such Originator and (2) are otherwise necessary or
desirable to effect Collections of such Purchased Receivables
(collectively, the "Documents") and (y) deliver the Documents to the
Company or its designee at a place designated by the Company. In
recognition of each Originator's need to have access to any Documents
which may be transferred to the Company hereunder, whether as a result
of its continuing business relationship with the Obligors for
Receivables purchased hereunder or as a result of its responsibilities
as Servicer, the Company hereby grants to the applicable Originator a
license to access the Documents transferred by such Originator to the
Company and to access any such transferred computer software in
connection with any activity arising in the ordinary course of such
Originator's business or in performance of such Originator's duties as
Servicer, provided that such Originator shall not disrupt or otherwise
interfere with the Company's use of and access to the Documents and
its computer software during such license period;
(4) each Originator hereby irrevocably authorizes the Company or
its designee to take any and all steps in such Originator's name
necessary or desirable, in the reasonable opinion of the Company, to
collect all amounts due under the Purchased Receivables, including
endorsing such Originator's name on checks and other instruments
representing Collections, enforcing the Purchased Receivables and
exercising all rights and remedies in respect thereof; and
(5) upon request of the Company, each Originator will (x) deliver
to the Company or a party designated by the Company all licenses,
rights, computer programs, related material, computer tapes, disks,
cassettes and data necessary to the immediate collection of the
Purchased Receivables by the Company, with or without the
participation of any Originator and (y) make such arrangements with
respect to the collection of the
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Purchased Receivables as may be reasonably required by the Company.
ARTICLE VI
NEGATIVE COVENANTS
Each Originator hereby agrees that, so long as there are any amounts
outstanding with respect to Purchased Receivables previously sold by such
Originator to the Company or until an Early Termination with respect to such
Originator, whichever is later, such Originator shall not, directly or
indirectly:
6.1 Liens. Except as otherwise herein provided, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Lien upon or with respect to, any Receivables or Related Property, or
assign any right to receive proceeds in respect thereof except for Liens created
or imposed hereunder or under the Related Documents and except for Permitted
Liens.
6.2 Extension or Amendment of Receivables. Extend, make any
Adjustment to, rescind, cancel, amend or otherwise modify, or attempt or purport
to extend, amend or otherwise modify, the terms of any Purchased Receivables,
except (i) in accordance with the terms of the Policies, (ii) as required by any
Requirement of Law, (iii) in the case of Adjustments, upon making an Adjustment
Payment pursuant to subsection 2.5, or (iv) to the extent that such modification
could not reasonably be expected to have a materially adverse effect on the
Company's interest in the Receivables, provided that the applicable Servicer may
cause Receivables to become Write-Offs.
6.3 Chance in Payment Instructions to Obligors. Instruct any Obligor
of any Purchased Receivables to make any payments with respect to any
Receivables other than in accordance with subsection 5.9.
6.4 Change in Name. Change its name, identity or corporate structure
in any manner which would or might make any financing statement or continuation
statement relating to this Agreement seriously misleading within the meaning of
Section 9-402(7) of the UCC without (i) 20 days' prior written notice to the
Company and the Trustee and (ii) filing all necessary amended or new financing
statements.
6.5 Modification of Ledger. Delete or otherwise modify the marking
on the ledger referred to in Section 5.7.
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6.6 Accounting of Purchases. Prepare any financial statements which
shall account for the transactions contemplated hereby (other than capital
contributions, the Subordinated Note and the Parent Note) in any manner other
than as sales of the Purchased Receivables by such Originator to the Company or
in any other respect account for or treat the transactions contemplated hereby
(including for accounting purposes and, where taxes are not consolidated, for
tax reporting purposes, except as required by law) (other than capital
contributions, the Subordinated Note and the Parent Note) in any manner other
than as sales of the Purchased Receivables by such Originator to the company.
6.7 Chattel Paper. Take any action to cause any Eligible Receivable
to be evidenced by any instrument (other than an instrument which constitutes
chattel paper) (each as defined in the Uniform Commercial Code as in effect in
the state of New York) except in connection with the enforcement or collection
of a Receivable.
6.8 Ineligible Receivables. Without the prior written approval of
the Company, take any action to cause, or which would permit, an Eligible
Receivable to cease to be an Eligible Receivable, except as otherwise expressly
provided by this Agreement.
ARTICLE VII
PURCHASE TERMINATION EVENTS
If, with respect to any Originator, any of the following events
(herein called "Purchase Termination Events") shall have occurred and be
continuing:
(a) such Originator shall fail (i) to pay any amount due pursuant to
subsection 2.5, 2.6 or 2.7 in accordance with the provisions thereof and
such failure shall continue unremedied for a period of five Business Days
from the earlier of (A) the date any officer of such Originator obtains
knowledge of such default and (B) the date such Originator receives notice
of such default from the Company or (ii) to pay any other amount required
to be paid by such Originator hereunder within two Business Days of the
date when due; or
(b) such Originator shall fail to observe or perform in any material
respect any covenant or agreement applicable to it contained herein (other
than as specified in paragraph (a) of this Article VII), provided that no
such failure shall constitute a Purchase Termination Event under this
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paragraph (b) unless such default shall continue unremedied for a period of
30 days from the earlier of (A) the date any officer of such Originator
obtains knowledge of such default and (B) the date such Originator receives
notice of such default from the Company; or
(c) any representation, warranty, certification or statement made or
deemed made by such Originator in this Agreement or in any statement,
record, certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect in any
material respect on or as of the date made or deemed made, provided, that a
Purchase Termination Event shall not be deemed to have occurred under this
paragraph (c) based upon a breach of any representation or warranty set
forth in subsection 4.1 or 4.2 if the Originators shall have complied with
the provisions of subsection 2.6 or 2.7, as the case may be, in respect
thereof; or
(d) (i) such Originator shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or any Originator shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against any Originator any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
any Originator or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 such
days from the entry thereof; or (iv) any Originator or any of its
respective Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) any Originator shall
admit in writing its inability to pay its debts as they become due; or
31
<PAGE>
(e) there shall have occurred an Early Amortization Event under the
Pooling and Servicing Agreement or any related Supplement;
then, (x) if such event is a Purchase Termination Event described in paragraph
(d) or (e) above, automatically the obligation of the Company to purchase
Receivables from such Originator shall thereupon terminate without notice of any
kind, which is hereby waived by the Originators, (y) if such event is any other
Purchase Termination Event, so long as such Purchase Termination Event shall be
continuing, the Company may by notice to such Originator terminate its
obligation to purchase Receivables from such Originator; (z) if such event is a
Purchase Termination Event with respect to any Significant Originator, so long
as such Purchase Termination Event is continuing, the Company may by notice to
the Originator terminate its obligation to purchase Receivables from any
Originator (any termination pursuant to clause (x), (y) or (z) of this Article
VII which affects an Originator is herein called an "Early Termination" with
respect to such Originator).
ARTICLE VIII
THE SUBORDINATED NOTE; PARENT NOTE
8.1 Subordinated Note. On the first Effective Date, the Company
shall issue to the Originators a subordinated note substantially in the form of
Exhibit A (the "Subordinated Note"). The aggregate principal amount of the
Subordinated Note at any time shall be equal to the difference between (a) the
aggregate principal amount on the issuance thereof and each addition to the
principal amount of such Subordinated Note with respect to each Originator
pursuant to the terms of Section 2.3 minus (b) the aggregate amount of all
payments made in respect of the principal of such Subordinated Note. All
payments made in respect of the Subordinated Note shall be allocated among the
Originators by the Master Servicer. Each Originator's interest in the
Subordinated Note shall equal the sum of each addition thereto allocated to such
Originator pursuant to subsection 2.3(c) less the sum of each repayment thereof
allocated to such Originator. Interest on the principal amount of the
Subordinated Note shall accrue on the last day of each fiscal month of the
Originators at the Base Rate plus 2% from and including the first Effective Date
and shall be paid on each Distribution Date with respect to amounts accrued and
not paid as of the last day of the preceding Accrual Period and/or the maturity
date thereof. Principal not prepaid pursuant to the terms hereof and of the
other Sale Documents shall be payable on the maturity date thereof. Default in
the payment of principal or interest under the Subordinated Note shall not
32
<PAGE>
constitute a default or event of default or a Purchase Termination Event
hereunder or an Early Amortization Event under the Pooling and Servicing
Agreement.
8.2 Restrictions on Transfer of Subordinated Note. Neither the
Subordinated Note, nor any right of any Originator to receive payments
thereunder, shall be assigned, transferred, exchanged, pledged, hypothecated,
participated or otherwise conveyed; provided, however, that any Originator may
pledge its rights to receive payments under the Subordinated Note to the lenders
under the Credit Agreement subject to the conditions that the Collateral Agent
and any present or future holder of such note agrees, in its capacity as such to
be bound by all the terms and conditions of this Agreement, including without
limitation, Section 9.16 hereof.
8.3 Parent Note. On the first Effective Date, the Company shall
issue to US Foodservice Inc. a subordinated note substantially in the form of
Exhibit B (the "Parent Note"). The aggregate principal amount of the Parent
Note at any time shall be equal to the difference between (a) the aggregate
principal amount of each loan by US Foodservice Inc. to the Company in
connection with the payment of any Purchase Price pursuant to Section 2.3 minus
(b) the aggregate amount of all payments made in respect of the principal of
such Parent Note. Interest on the principal amount of the Parent Note shall
accrue on the last day of each fiscal month of the Originators at the Base Rate
plus 2% from and including the first Effective Date and shall be paid on each
Distribution Date with respect to amounts accrued and not paid as of the last
day of the preceding Accrual Period and/or the maturity date thereof. Principal
not prepaid pursuant to the terms hereof and of the other Sale Documents shall
be payable on the maturity date thereof. Default in the payment of principal or
interest under the Parent Note shall not constitute a default or event of
default or a Purchase Termination Event hereunder or an Early Amortization Event
under the Pooling and Servicing Agreement.
8.4 Restrictions on Transfer of Parent Note. Neither the Parent
Note, nor any right of US Foodservice Inc. to receive payments thereunder, shall
be assigned, transferred, exchanged, pledged, hypothecated, participated or
otherwise conveyed; provided, however, that US Foodservice Inc. may pledge its
rights to receive payments under the Parent Note to the lenders under the Credit
Agreement subject to the conditions that the Collateral Agent and any present or
future holder of such note agrees to be bound by all the terms and conditions of
this Agreement, including without limitation, Section 9.16 hereof.
33
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1 Further Assurances. (a) Each Originator agrees, from time to
time, to do and perform any and all acts and to execute any and all further
instruments reasonably required or requested by the Company more fully to effect
the purposes of this Agreement and the sales of the Receivables hereunder,
including, without limitation, the execution of any financing statements or
continuation statements relating to the Receivables for filing under the
provisions of the Uniform Commercial Code, or any similar law, of any applicable
jurisdiction.
(b) From time to time at the request of an Originator, the Company
shall deliver to such Originator such documents, assignments, releases and
instruments of termination as such Originator may reasonably request to evidence
the reconveyance by the Company to such Originator of a Receivable pursuant to
the terms of Section 2.1(b), 2.6 or 2.7, provided that the Company shall have
been paid all amounts due thereunder; and the Company and the Master Servicer
shall take such action as such Originator may reasonably request, at the expense
of such Originator, to assure that any such Receivable, the Related Property
with respect thereto and the proceeds thereof do not remain commingled with
Collections hereunder.
9.2 Payments. Each cash payment to be made by any of the Company or
the Originators hereunder shall be made on the required payment date in Dollars
and in immediately available funds at the office of the payee set forth on
Schedule l or to such other office as may be specified by either party in a
notice to the other party hereto.
9.3 Costs and Expenses. The Originators, jointly and severally,
agree (a) to pay or reimburse the Company for all its out-of-pocket costs and
expenses incurred in connection with the preparation and execution of, and any
amendment, supplement or modification to, this Agreement, the other Sale
Documents and any other documents prepared in connection herewith and therewith
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, all fees and disbursements of
counsel, (b) to pay or reimburse the Company for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement and any of the other Related Documents, including, without
limitation, the reasonable fees and disbursements of counsel to the Company, (c)
to pay, indemnify, and hold the Company harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
34
<PAGE>
delay in paying, stamp, excise and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement and any such other documents
and (d) to pay, indemnify, and hold the Company harmless from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (i) which may at any time be imposed on, incurred by or asserted
against the Company in any way relating to or arising out of this Agreement or
the transactions contemplated hereby or in connection herewith or any action
taken or omitted by the Company under or in connection with any of the foregoing
(all such other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements being herein called
"Indemnified Liabilities") or (ii) which would not have been imposed on,
incurred by or asserted against the Company but for its having purchased the
Receivables hereunder, provided, that the Originators shall have no obligation
under this subsection 9.3 to the Company with respect to Indemnified Liabilities
arising from (i) the gross negligence or willful misconduct of the Company, its
agents or assignees, (ii) any action taken, or omitted to be taken, by a
Servicer which is not an Affiliate of the Originators, (iii) any Eligible
Receivable which becomes a Write-Off as a result of non-payment by the Obligor
with respect thereto or (iv) any action taken by the Trustee or the Company at
the direction of the Trustee in collecting from an Obligor. The agreements in
this subsection shall survive the collection of all Receivables, the termination
of this Agreement and the payment of all amounts payable hereunder.
9.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Originators and the Company and their respective
successors (whether by merger, consolidation or otherwise) and assigns. Except
as expressly permitted pursuant to Sections 8.2 and 8.4, each Originator agrees
that it will not assign or transfer all or any portion of its rights or
obligations hereunder without the prior written consent of the Company. The
Originators acknowledge that the Company shall assign all of its rights
hereunder to the Trustee. Each Originator consents to such assignment and
agrees that the Trustee, the Agent and the Certificateholders, to the extent
provided in the Pooling and Servicing Agreement, shall be entitled to enforce
the terms of this Agreement and the rights (including, without limitation, the
right to grant or withhold any consent or waiver) of the Company directly
against such Originator, whether or not a Purchase Termination Event or a
35
<PAGE>
Potential Purchase Termination Event has occurred. Each Originator further
agrees that, in respect of its obligations hereunder, it will act at the
direction of and in accordance with all requests and instructions from the
Trustee until all amounts due to the Investor Certificateholders are paid in
full. The Trustee, on behalf of the Investor Certificateholders, shall have the
rights of a third-party beneficiary under this Agreement.
9.5 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.6 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Company, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
9.7 Amendments and Waivers. Neither this Agreement nor any terms
hereof may be amended, supplemented or modified except in a writing signed by
the Company and any affected Originator.
9.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.9 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Company and US Foodservice
Inc., and as set forth on Schedule 1 hereof in the case of the Originators, or
to such other address as may be hereafter notified by the respective parties
hereto:
The Company: USFAR INC.
1065 Highway 315 - Suite 407
Wilkes Barre, PA 18702-6980
36
<PAGE>
Attention: Kenneth B. Kozel
Telecopy: (717) 822-4187
The Master Servicer: US Foodservice Inc.
1065 Highway 315 - Suite 203
Wilkes Barre, PA 18702-6980
Attention: David McAnally
Telecopy: (717) 822-0909
9.10 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Company.
9.11 Construction of Agreement as Security Agreement. (a) The
parties to this Agreement intend that the transactions contemplated hereby shall
be, and shall be treated as, a purchase by the Company and a sale by the
applicable Originator of the Purchased Receivables and Related Property with
respect thereto and not as a lending transaction. If, however, notwithstanding
the intent of the parties, such transactions are deemed to be loans, each
Originator hereby grants to the Company a first priority perfected security
interest in all of such Originator's right, title and interest in and to the
Receivables and the Related Property now existing and hereafter created, all
monies due or to become due and all amounts received with respect thereto,
including, without limitation, Recoveries, and all "proceeds" (as defined in
Section 9-306 of the UCC as in effect in the State of New York) thereof, to
secure all such Originator's obligations hereunder.
(b) This Agreement shall constitute a security agreement under
applicable law.
9.12 WAIVERS OF JURY TRIAL. THE ORIGINATORS AND THE COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.13 Submission To Jurisdiction; Waivers. Each Originator and the
Company hereby irrevocably and unconditionally:
(a) submits itself and its property in any legal action or proceeding
relating to this Agreement and the other Sale Documents to which it is a
party, or for recognition and enforcement of any judgement in respect
thereof, to the non-exclusive general jurisdiction of the
37
<PAGE>
Courts of the State of New York, the courts of the United States of America
for the Southern District of New York, and appellate courts from any
thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the such
Person at its address set forth in subsection 9.9 or at such other address
of which the Company shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
9.14 Addition of Originators or White Swan Divisions. Subject to the
terms and conditions hereof, from time to time one or more additional
subsidiaries of US Foodservice Inc. may become Originators parties hereto (or
one or more divisions of White Swan may become White Swan Divisions hereunder)
(an "Additional Originator" or an "Additional White Swan Division",
respectively). If any such subsidiary or division wishes to become an
Additional Originator or an Additional White Swan Division, it shall submit a
request to such effect in writing to the Company. The Company, in its sole and
absolute discretion, may agree to or deny any such request, provided that, if
the Company shall have failed to respond to any such request within 30 days
after receipt thereof, such request shall be deemed to have been denied. If the
Company shall have agreed to any such request, such subsidiary or division shall
become an Originator party hereto or a White Swan Division hereunder, as the
case may be, on the related Addition Date following satisfaction of the
conditions set forth in subsection 3.4.
9.15 Optional Termination of Originator or White Swan Division. (a)
Any Originator may be terminated as an Originator
38
<PAGE>
hereunder on the date such Originator ceases to be a wholly owned direct or
indirect subsidiary of US Foodservice Inc., provided that no Purchase
Termination Event or Potential Purchase Termination Event has occurred and is
continuing, or would result as a result thereof. From and after the date any
such Originator ceases to be a wholly owned subsidiary of US Foodservice Inc.,
(x) the Company shall cease buying Receivables and Related Property from such
Originator, and (y) such Originator shall have the option to repurchase all
Purchased Receivables previously sold by such Originator to the Company for
their original Purchase Price less Collections and Repurchase Payments with
respect thereto. The consideration for such repurchase shall be (i) cash to the
extent that the Company paid for such Purchased Receivables in cash or by
netting pursuant to subsection 2.3(c)(i); and (ii) cancellation of indebtedness
under the Subordinated Note to the extent that the Company paid for such
Purchased Receivables by increasing the amount of the Subordinated Note. Each
such Originator shall be released as an Originator party hereto for all
purposes, shall cease to be a party hereto and shall be released from all
liabilities hereunder on the date on which there are no amounts outstanding with
respect to Purchased Receivables previously sold by such Originator to the
Company, whether such amounts have been repurchased, collected or written off in
accordance with the Policies. Prior to such date, such Originator shall be
obligated to perform its servicing and other obligations hereunder and under the
Related Documents with respect to Purchased Receivables previously sold by such
Originator to the Company, including, without limitation, its obligation to
deposit Collections into the appropriate Lockboxes. A terminated Originator
shall have no obligation, other than pursuant to subsection 2.6, to repurchase
Receivables previously sold by it to the Company.
(b) Any White Swan Division may be terminated as a White Swan Division
hereunder on the date on which (i) it ceases to be an operating division of
White Swan or (ii) White Swan (or US Foodservice Inc. on behalf of White Swan)
requests in writing that such White Swan Division shall cease to be a White Swan
Division hereunder; provided that, in either case, no Purchase Termination Event
or Potential Purchase Termination Event has occurred and is continuing, or would
result as a result thereof. From and after the date any such White Swan
Division ceases to be a White Swan Division hereunder, (x) the Company shall
cease buying Receivables and Related Property originated by such White Swan
Division, (y) such White Swan Division shall be released as a White Swan
Division hereunder for all purposes (and shall be released from all liabilities
arising hereunder) and (z) White Swan, on behalf of such White Swan Division,
shall have the option to repurchase all Purchased Receivables generated by such
White Swan Division which have been previously sold by White Swan
39
<PAGE>
to the Company for their original Purchase Price less Collections and Repurchase
Payments with respect thereto. The consideration for such repurchase shall be
(i) cash to the extent that the Company paid for such Purchased Receivables in
cash or by netting pursuant to subsection 2.3(c)(i); and (ii) cancellation of
indebtedness under the Subordinated Note to the extent that the Company paid for
such Purchased Receivables by increasing the amount of the Subordinated Note.
Notwithstanding the foregoing, White Swan shall be obligated to perform its
servicing and other obligations hereunder and under the Related Documents, on
behalf of such terminated White Swan Division, until the date on which there are
no amounts outstanding with respect to Purchased Receivables generated by such
White Swan Division which have been previously sold by White Swan to the
Company, whether such amounts have been repurchased, collected or written off in
accordance with the Policies.
9.16 No Bankruptcy Petition. Each Originator and US Foodservice Inc.
and any present or future holder of the Subordinated Note or the Parent Note
covenants and agrees that, prior to the date which is one year and one day after
the date of termination of this Agreement pursuant to subsection 9.17, it will
not institute against, or join any other Person in instituting against, the
Company any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state bankruptcy or
similar law.
9.17 Termination. This Agreement will terminate at such time as (a)
the Trust Termination Date shall have occurred and (b) all Receivables sold
hereunder have been collected and the proceeds thereof turned over to the
Company and all other amounts owing to the Company hereunder shall have been
paid in full or, if Receivables sold hereunder have not been collected such
Receivables have become Defaulted Receivables and the Company shall have
completed its collection efforts in respect thereto; provided, however, that the
indemnities of the Originators to the Company set forth in this Agreement shall
survive such termination and provided further that the Company shall remain
entitled to receive any Collections on Receivables sold hereunder which have
become Defaulted Receivables after it shall have completed its collection
efforts in respect thereof.
9.18 Confidentiality. The Company agrees to keep confidential all
non-public information provided to it by the Originators pursuant to this
Agreement; provided that nothing herein shall prevent the Company from
disclosing any such information (i) to the Trustee or the Agent, (ii) to any
Investor Certificateholder or prospective Investor Certificateholder which
receives such information having been made aware of the confidential nature
thereof, (iii) to its employees, directors,
40
<PAGE>
agents, attorneys, accountants and other professional advisors, (iv) upon the
request or demand of any Governmental Authority having jurisdiction over the
Company (provided that notice of such request or demand shall be furnished to
the affected Originator unless such notice is legally prohibited or such
Governmental Authority requests that such notice not be furnished to such
affected Originator), (v) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law (provided that notice of such order or requirement shall be
furnished to the affected Originator unless such notice is legally prohibited or
such court or Governmental Authority requests that such notice or requirement
not be furnished to such affected Originator), (vi) which has been publicly
disclosed other than in breach of this Agreement, or (vii) in connection with
the collection of any Purchased Receivable or the exercise of any remedy
hereunder or under the Pooling and Servicing Agreement.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the day and year first above written.
USFAR INC.
By: /s/
-----------------------------------
Title:
US FOODSERVICE INC.
By: /s/
-----------------------------------
Title:
BIGGERS BROTHERS, INC.
By: /s/
-----------------------------------
Title:
WHITE SWAN, INC.
By: /s/
-----------------------------------
Title:
ROANOKE RESTAURANT SERVICE, INC.
By: /s/
-----------------------------------
Title:
F.H. BEVEVINO & COMPANY, INC.
By: /s/
-----------------------------------
Title:
KING'S FOODSERVICE, INC.
By: /s/
-----------------------------------
Title:
42
<PAGE>
SCHEDULE 1
----------
LOCATIONS OF CHIEF EXECUTIVE OFFICES;
LOCATIONS OF BOOKS AND RECORDS
------------------------------
<TABLE>
<CAPTION>
Location of Offices Where Records are
Originator State of Incorporation Chief Executive Office Kept
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Biggers Brothers, Inc. Delaware 920 Black Satchel Drive Same
Charlotte, North Carolina
28216
- ----------------------------------------------------------------------------------------------------------------------
White Swan, Inc. (including the Delaware 400 Fuller-Wise Road 400 Fuller-Wise Road
White Swan Mainframe Euless, Texas 76039 Euless, Texas 76039
Divisions) or 2923 Old Tampa Highway
1065 Highway 315 Lakeland, Florida 33803
Cross Creek Pointe 915 East 50th Street
Suite 203 Lubbock, Texas 79404
Wilkes Barre, PA 18702-6980 1515 Big Town Boulevard
Mesquite, Texas 75149
5330 Fleming Court
Austin, Texas 78744
- ----------------------------------------------------------------------------------------------------------------------
Wm. E. Davis & Sons (division Delaware 400 Fuller-Wise Road 73 Northwest 122nd
of White Swan) Euless, Texas 76039 Oklahoma City, Oklahoma
or 73114
1065 Highway 315
Cross Creek Pointe
Suite 203
Wilkes Barre, PA 18702-6980
- ----------------------------------------------------------------------------------------------------------------------
Standard Food Service (division Delaware 400 Fuller-Wise Road 2575 Virginia Avenue
of White Swan) Euless, Texas 76039 Hurricane, West Virginia
or 25526
1065 Highway 315
Cross Creek Pointe
Suite 203
Wilkes Barre, PA 18702-6980
- ----------------------------------------------------------------------------------------------------------------------
F.H. Bevevino & Company, Inc. Pennsylvania 13 Rutledge Drive 13 Rutledge Drive
Pittston, Pennsylvania 18640 Pittston, Pennsylvania
18640
- ----------------------------------------------------------------------------------------------------------------------
Roanoke Restaurant Service, Virginia 145 Hammit Avenue 145 Hammit Avenue
Inc. Salem, Virginia 24153 Salem, Virginia 24153
- ----------------------------------------------------------------------------------------------------------------------
King's Foodservice, Inc. Kentucky 269 Alcoa Drive 269 Alcoa Drive
Alcoa Center Alcoa Center
Alcoa, Tennessee 37701 Alcoa, Tennessee 37701
======================================================================================================================
</TABLE>
43
<PAGE>
SCHEDULE 2
----------
LOCKBOXES
---------
<TABLE>
<CAPTION>
SERVICER LOCKBOX BANK LOCKBOX ACCOUNT BOX NUMBER
- -------- ------------ --------------- ----------
<S> <C> <C> <C>
F.H. Bevevino & PNC Bank, National 9004038219 7780-4205
Company, Inc. Association
Biggers Brothers, Nationsbank of North 000-000-521 65007
Inc. Carolina, NA 000-000-521 65129
000-000-521 65331
000-000-521 65535
000-000-521 65115
King's Foodservice, First Tennessee Bank 88-43-805 888039
Inc.
Roanoke Restaurant First Union National 2050-0000-53924 85080
Service, Inc. Bank of Virginia
White Swan, Inc. Libert Bank & Trust 033-789-7 850112
Company of Oklahoma
City, NA
White Swan, Inc. Medlantic National 204-10775 17415
Bank
White Swan, Inc. NationsBank of 001-008-98-569 100531
Georgia, NA
White Swan, Inc. One Valley Bank 100-100-2664 NA
White Swan, Inc. Texas Commerce Bank 08805036785 910837
07303016672 910243
09920063814 684428
</TABLE>
44
<PAGE>
SCHEDULE 3
----------
DISCOUNTED PERCENTAGE
---------------------
The Discounted Percentage applicable to the Receivables purchased on any date
from any Originator shall equal (a) until the date which is 90 days after the
first Effective Date, 99.33% and (b) thereafter, the percentage obtained from
the following formula:
100% - (A + B + C + D)
all determined by the Company as of the related Payment Date,
Where
A = Adjusted Loss Reserve Percentage, which as of such Payment Date will equal
the ratio obtained by dividing (a) Write-Offs (net of recoveries in respect
of Write-Offs) with respect to such Originator during the six-fiscal-month
period immediately preceding the Settlement Date most recently preceding
such Payment Date by (b) two times the aggregate amount of Collections
during the three-fiscal-month period immediately preceding the Settlement
Date most recent to such Payment Date with respect to ReceivableS
originated by such Originator.
B = Adjusted Yield Reserve Percentage, which as of such Payment Date will equal
the amount obtained by dividing (a) the product of (i) 1.5, (ii) Days Sales
Outstanding and (iii) the Adjusted Discount Rate by (b) 360.
C = the Servicing Fee percentage divided by 360.
----------
D = Processing Expense Reserve Percentage, which will equal 1/2% and reflects
the cost of the Company's overhead, including costs of processing the
purchase of Receivables and other normal operating costs and a reasonable
profit margin.
None of the elements of the above-referenced formula, in respect of any purchase
of Receivables, will be adjusted following the related Payment Date.
"Adjusted Discount Rate" means as of such Payment Date the sum of (a) the
weighted average of (i) the weighted average rate of interest payable to the
Investor Certificateholders in respect of Series 1994-1 or any Subsequent
Financing Party with respect to the outstanding Term Certificates and (ii) the
rate of interest payable to the Originators with respect to the outstanding
principal amount of the Subordinated Note and to US Foodservice Inc. in respect
of the Parent Note in each case as such rates are
45
<PAGE>
in effect as at the end of the fiscal month immediately preceding the Settlement
Date most recent to such Payment Date and (iii) an assumed return on the
shareholders' equity in the Company at a rate to be determined from time to time
by the Master Servicer and (b) the amount obtained by dividing (i) the aggregate
amount of fees (other than the Servicing Fee) accrued with respect to the
Pooling and Servicing Agreement during the fiscal month immediately preceding
the Settlement Date most recent to such Payment Date by (ii) the average
outstanding principal amount of the Receivables during such fiscal month.
With respect to each calculation set forth above with respect to a Settlement
Date, such calculation as calculated on each Determination Date and included in
the applicable Settlement Statement shall remain in effect from and including
the related Settlement Date to but excluding the following Statement Date.
46
<PAGE>
SCHEDULE 4
----------
TAX MATTERS
-----------
NONE
47
<PAGE>
SCHEDULE 5
----------
List of Tradenames, Etc.
-----------------------
[to be provided by USF for each Originator]
48
<PAGE>
Exhibit 10.38
Modification No. 1
------------------
Modification No. 1 dated as of June 23, 1995 (this "Modification") among
USFAR INC., a Delaware corporation (together with its successors and assigns
("USFAR"), US FOODSERVICE INC., a Delaware corporation ("US Foodservice"), each
of the subsidiaries of US Foodservice party hereto other than USFAR (the
"Subsidiaries") and Chemical Bank, a New York banking corporation, not in its
individual capacity but solely as trustee (the "Trustee").
WHEREAS, USFAR, US Foodservice, the Subsidiaries and the Trustee have
entered into an Amended and Restated Pooling and Servicing Agreement, dated as
of October 27, 1994 (the "Pooling and Servicing Agreement");
WHEREAS, USFAR, US Foodservice, and the Trustee have entered into a Series
1994-1 supplement, dated as of October 27, 1994 to the Pooling and Servicing
Agreement (the "Supplement"); and
WHEREAS, concurrently with the execution and delivery of this Modification,
the parties hereto are entering into Modification No. 2 providing for, among
other things, the issuance of additional Term Certificates under the Supplement
in the aggregate principal amount of $15,000,000;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Modification shall,
unless defined herein, have the respective meetings assigned to such terms in
the Pooling and Servicing Agreement.
2. Pooling and Servicing Agreement.
(a) Subsection 2.7(l) of the Pooling and Servicing Agreement is hereby
waived to permit USFAR to merge (the "Merger") with and into USFAR Inc., a
Nevada corporation ("USFAR Nevada") with USFAR Nevada being the surviving
corporation.
(b) Section 1.1 of the Pooling and Servicing Agreement is hereby amended by
deleting the definition of "ARA Percentage Adjustment" and by restating and
adding the following definitions:
"Special Obligor" shall mean any Eligible Obligor which is designated
as a Special Obligor in a supplement to Schedule 6 by the Master Servicer
to the Trustee; provided, that any Special Obligor will no longer be a
Special Obligor upon notice by the Master Servicer to the Trustee.
1
<PAGE>
"Special Obligor Limit" shall mean, with respect to any Special
Obligor, the percentage expressed as a percentage of the Face Amount of
Receivables in the Trust as specified on Schedule 6 as the Special Obligor
Limit for such Special Obligor.
"Trustee's Expense Account" shall have the meaning specified in
subsection 11.18.
(c) The last paragraph of subsection 2.1(c) of the Pooling and
Servicing Agreement shall be amended to replace the words "immediately preceding
Settlement Date" with the words "last day of the immediately preceding
Settlement Period."
(d) Effective upon the occurrence of the Merger, Subsection 2.3(a) of
the Pooling and Servicing Agreement shall be amended to replace the word
"Delaware" with the word "Nevada."
(e) Subsection 4.1(e) is hereby amended by restating and adding the
following subparts as follows:
(iv) On each Deposit Date on and after the date that a
Termination Notice has been given to the Master Servicer pursuant to
Section 10.1, the Master Servicer shall direct the Trustee to transfer
to the Trustee's Expense Account the remaining funds, if any, in
deposit in the Collection Account on such date, after giving effect to
transfers to be made pursuant to clause (ii) above; provided that no
more than $50,000 shall be transferred on any Deposit Date and no more
than $250,000 in the aggregate shall be transferred to the Trustee's
Expense Account.
(v) On each Deposit Date, the Master Servicer shall direct
the Trustee to transfer to the Transferor Collection Subaccount the
remaining funds, if any, on deposit in the Collection Account on such
date after giving effect to transfers to be made pursuant to clauses
(ii) and (iv) above.
(f) Subsection 9.2(b) is hereby amended by restating the final
sentence of said subsection 9.2(b) as follows:
Following the repayment in full of the Aggregate Invested Amount plus
accrued and unpaid interest and any make whole payments in respect thereof,
the remainder, if any shall be released (i) to the Trustee in an amount
equal to the amount of any expenses incurred by the Trustee acting in its
capacity either as Trustee or liquidating agent pursuant to Section 10.2,
which have not otherwise been reimbursed prior thereto and (ii) after
giving effect to the transfer to be made pursuant to clause (i) above, the
remainder, if any, shall be allocated to the Transferor Interest and shall
be
2
<PAGE>
released to the holder of the Exchangeable Transferor Certificate upon
surrender thereof.
(g) Section 11.1(i) is hereby restated in its entirety as follows:
The Trustee shall aggregate the amount of Receivables reported in each
Servicer's Receivables Record each month and shall compare the result
against the ending total Receivables as reported in Section (a) of the
Monthly Settlement Statement (or on an exhibit thereto in the case of
Receivables of any particular Originator) for the corresponding Settlement
Period. Notwithstanding any other provision of this Agreement or any
Supplement, if there exists a discrepancy between the amount of Receivables
reported in each Servicer's Receivables Record and the total Receivables as
reported in Section (a) of the Monthly Settlement Statement,
(A) if (I) such discrepancy is greater than 7% of the total
Receivables as reported in Section (a) of the Monthly Settlement Statement
or (II) a Potential Early Amortization Event has occurred and is
continuing, then the Master Servicer shall use its best efforts to resolve,
in the case of clause (I), any discrepancy of greater than 5% with respect
to any particular Originator and, in the case of clause (II), any
discrepancy with respect to any Originator, in each case, within 10 days of
the Determination Date relating thereto and if such discrepancy is not
resolved within such period the Trustee shall be obligated to give notice
of such discrepancy to the Certificateholders, each Enhancement Provider
and each Rating Agency; or
(B) if there is a discrepancy relating to Receivables generated
by any Specified Originator and such discrepancy is greater than the
Specified Percentage of the total Receivables as reported by such Specified
Originator in the Monthly Settlement Statement, the Master Servicer shall
use its best efforts to resolve such discrepancy within 10 days of the
Determination Date relating thereto and if such discrepancy is not resolved
within such period the Trustee shall be obligated to give notice of such
discrepancy to the Certificateholders, each Enhancement Provider and each
Rating Agency; and
For purposes of this paragraph (B):
"Specified Originator" means (i) Biggers Brothers, Inc., (ii) White Swan
Mainframe Divisions, and (iii) any Originator the Receivables of which
exceed 20% of the Face Amount of all Receivables in the Trust at the end of
such Monthly Settlement Period.
3
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"Specified Percentage" means (i) in the case of Biggers Brothers, Inc., 8%;
(ii) in the case of White Swan Mainframe Divisions, 9%; and (iii) in the
case of any other Specified Originator, 0% or such greater percentage as
the Master Servicer and Majority Holders may agree in writing; provided
however, with respect to any Specified Originator (including Biggers
Brothers, Inc. and White Swan Mainframe Divisions) for which the Master
Servicer shall not have been required to reconcile any discrepancies
pursuant to this paragraph (B) in the five preceding Settlement Periods,
Specified Percentage means 0%.
(h) Article 11 is hereby amended inserting a new Section 11.18 which shall
provide as follows:
Section 11.18. Trustee Expense Account. (a) The Trustee, for
the benefit of the Trustee as liquidating agent hereunder, shall establish
and maintain in the name of the Trustee with an Eligible Institution, by
way of security, a segregated trust account accessible only by, and under
the sole control and dominion of, the Trustee (such account, the "Trustee's
Expense Account").
(b) On each Business Day after the Trustee shall have assumed the
duties of the liquidating agent pursuant to Section 10.2, amounts on
deposit in the Trustee's Expense Account shall be withdrawn by the Trustee
in payment of the reasonable expenses, disbursements and advances made or
incurred by the Trustee in its capacity as liquidating agent which have not
otherwise been reimbursed prior thereto; provided, that such amounts may
only be withdrawn by the Trustee only if the Trustee has made a demand for
payment of such amounts on the Master Servicer and the Servicers, 30 days
have elapsed since the date of such demand and the Trustee has not received
payment of such amounts.
(c) Upon the day which is one year and one day after the Trust
Termination Date, the Trustee shall distribute all remaining funds in the
Trustee's Expense Account pursuant to the terms of Subsection 9.2(b).
(i) Schedule 6 to the Pooling and Servicing Agreement is hereby restated as
attached to this Modification.
3. Supplement. (a) Section 2.1 of the Supplement is hereby amended by
restating the following definition:
"Loss Reserve Floor" shall mean, as of any date of determination,
an amount equal to the sum of 12.5% and the required adjustments, if any,
set forth in the definition of Special Obligor Limit, which are made on or
prior to such date.
4
<PAGE>
(b) Subsection 4B.6(c) of the Supplement is hereby restated as follows:
(iii) following the repayment in full of the Invested Amount and
any Make Whole Payment in respect thereof, the remaining amount on deposit
in the Series 1994-1 Principal Collection Subsubaccount on such
Distribution Date, if any, after giving effect to the payment described in
subsection 4B.6(c)(i) above shall be distributed to (A) the Trustee in an
amount equal to the amount of any expenses incurred by the Trustee acting
in its capacity either as Trustee or liquidating agent pursuant to Section
10.2, which have not otherwise been reimbursed prior thereto and (B) after
giving effect to the transfer to be made pursuant to clause (A) above, the
holder of the Subordinated Certificate.
4. Receivables Purchase Agreement. Each of Exhibits A and B to the
Receivables Purchase Agreement is hereby amended to insert the following proviso
immediately preceding the period in the third paragraph immediately preceding
the signature blocks:
;provided, however, that any payee hereof may pledge its rights to receive
payments under this note to the lenders under the Credit Agreement subject
to the conditions that such Collateral Agent and any present or future
holder of such note agrees, in its capacity as such, to be bound by all the
terms and conditions of the Receivables Purchase Agreement, including
without limitation, Section 9.16 thereof.
5. Parent Note and Subordinated Note. Each of the Parent Note and
Subordinate Note may be amended to reflect the amendments to Exhibits A and B to
the Receivables Purchasing Agreement.
6. Related Documents. Effective upon the occurrence of the Merger, all
references in the Pooling and Servicing Agreement, the Supplement and all other
Related Documents which refer to USFAR Inc. as a Delaware corporation shall be
amended to refer to USFAR Inc. as a Nevada corporation.
7. No Other Amendments. Except as expressly amended, modified and
supplemented hereby, the provisions of the Pooling and Servicing Agreement, the
Supplement and the Related Documents are and shall remain in full force and
effect.
8. Conditions to Effectiveness. This modification shall become effective
on the date (the "Modification Date") on which all of the following shall have
occurred:
(a) each party hereto shall have executed and delivered to the Trustee this
Modification;
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(b) the holders of certificates evidencing Fractional Undivided Interest
aggregating more than 50% of the Invested Amount of each outstanding Series
shall have consented to this Modification;
(c) the Rating Agency Condition shall have been satisfied;
(d) the Master Servicer shall have delivered an Opinion of Counsel to each
of the Trustee and the Rating Agency in accordance with Section 13.2(c) of the
Pooling and Servicing Agreement which opinion shall also be to the effect that
(i) to the extent the obligations under the Pooling and Servicing Agreement and
the Related Documents were valid and binding on USFAR Delaware and enforceable
in accordance with its terms prior to the Merger, such obligations are valid,
binding and enforceable on USFAR Nevada after the Merger and (ii) to the extent
the security interest of the Trustee in the Receivables was a perfected security
interest prior to the Merger, such security interest will be a perfected
security interest after the Merger.
9. Representations and Warranties. The representations and warranties
made by USFAR, US Foodservice and the Subsidiaries in the Pooling and Servicing
Agreement, the Supplement and the other Related Documents are true and correct
in all material respects on and as of the Modification Date, before and after
giving effect to the effectiveness of this Modification, as if made on and as of
the Modification Date except for representations and warranties which relate to
a specific date in which case such representations and warranties are true and
correct in all material respects on and as of such specific date.
10. Governing Law; Counterparts. This Modification shall be construed in
accordance with the law of the State of New York, and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such law. This Modification may be executed in any number of counterparts and
by the different parties hereto and separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Modification to be
duly executed and delivered by their respective officers as of the day and year
first written above.
USFAR INC.
By: /s/ Ken Kozel
---------------------------
Title: Treasurer
6
<PAGE>
US FOODSERVICE INC.
By: /s/ David F. McAnally
--------------------------------
Title:
WHITE SWAN, INC.
By: /s/ David F. McAnally
--------------------------------
Title:
BIGGERS BROTHERS, INC.
By: /s/ David F. McAnally
--------------------------------
Title:
F.H. BEVEVINO & COMPANY, INC.
By: /s/ David F. McAnally
--------------------------------
Title:
ROANOKE RESTAURANT SERVICE, INC.
By: /s/ David F. McAnally
--------------------------------
Title:
KING'S FOODSERVICE, INC.
By: /s/ David F. McAnally
--------------------------------
Title:
CHEMICAL BANK, as Trustee
By: /s/
--------------------------------
Title:
7
<PAGE>
Schedule 6
----------
Special Obligors
----------------
With respect to any Special Obligor, the Special Obligor Limit shall
be the percentage set forth below opposite the long term unsecured debt ratings
of such Special Obligor by the Rating Agency:
Rating (or equivalent) Special Obligor Limit
---------------------- ---------------------
AAA 12.5%
AA+, AA, AA- 6%
A+, A, A- 4%
BBB+, BBB, BBB- 3%
other or not rated 2.5%;
provided, that: (a) if such Special Obligor is rated by more than one Rating
Agency, the Special Obligor Limit shall correspond to the lower of the ratings;
(b) at any time when the Face Amount of the Receivables of such Special Obligor
exceeds the Special Obligor Limit then in effect for such Special Obligor, the
Special Obligor Limit for such Special Obligor may be increased upon notice by
the Master Servicer to the Trustee, so long as, concurrently with any such
increase, the Loss Reserve Floor (as defined in each applicable Supplement) is
increased by an amount equal to the amount by which such Special Obligor Limit
is so increased; and (c) any Special Obligor Limit and Loss Reserve Floor may be
subsequently decreased upon notice by the Master Servicer to the Trustee.
Notwithstanding the foregoing, (x) in no event shall the Master Servicer
increase the Special Obligor Limit for any Special Obligor above the maximum
limit specified for such Special Obligor by the Rating Agency (or the lower of
the maximum limits if there is more than one Rating Agency) at the time such
Eligible Obligor becomes a Special Obligor and (y) for the purposes of
determining the Special Obligor Limit and the Overconcentration Amount in no
event shall Eligible Receivables owing by all Special Obligors whose Special
Obligor Limit exceeds 2.5% with long term unsecured debt ratings, by the Rating
Agency of (i) AA- (or equivalent) or better exceed 50% of the Face Amount of all
Receivables in the Trust at any time or (ii) A+, A, and A- (or equivalent)
exceed 20% of the Face Amount of all Receivables in the Trust at any time. The
maximum limit for each Special Obligor as of the date of the Modification No. 1
to this Agreement is as follows:
Wyatt Cafeteria, Inc. 4%
The ARA Group, Inc. 5.5%
Marriott International, Inc. 6%
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
Pruco Life Insurance Company
--------------------------------
as a Term Certificateholder
By: /s/
-----------------------------
Name:
Title: Assistant Vice President
Date: June __, 1995
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
The Prudential Insurance Company of America
-------------------------------------------
as a Term Certificateholder
By: /s/
-----------------------------------
Name:
Title: Vice President
Date: June __, 1995
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
ALLSTATE LIFE INSURANCE
3100 Sanders Road
Northbrook, IL 60062-7154
---------------------------------
as a Term Certificateholder
By: /s/
------------------------------
Name:
Title:
Date: June __, 1995
By: /s/
------------------------------
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
The Travelers Insurance Company
----------------------------------
as a Term Certificateholder
By: /s/
-------------------------------
Name:
Title:
Date: June 21, 1995
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
AUSA Life Insurance Company, Inc.
----------------------------------
as a Term Certificateholder
By: /s/ Gregory W. Theobald
-------------------------------
Name: Gregory W. Theobald
Title: VP & Assist. Secretary
Date: June 23, 1995
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
Bankers United Life Assurance Company
-------------------------------------
as a Term Certificateholder
By: /s/ Gregory W. Theobald
----------------------------------
Name: Gregory W. Theobald
Title: VP & Assist. Secretary
Date: June 23, 1995
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
International Life Investors Insurance Co.
------------------------------------------
as a Term Certificateholder
By: /s/ Gregory W. Theobald
---------------------------------------
Name: Gregory W. Theobald
Title: VP & Assist. Secretary
Date: June 23, 1995
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
Life Investors Insurance Company of America
-------------------------------------------
as a Term Certificateholder
By: /s/ Gregory W. Theobald
----------------------------------------
Name: Gregory W. Theobald
Title: VP & Assist. Secretary
Date: June 23, 1995
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
Monumental Life Insurance Company
---------------------------------
as a Term Certificateholder
By: /s/ Gregory W. Theobald
------------------------------
Name: Gregory W. Theobald
Title: VP & Assist. Secretary
Date: June 23, 1995
<PAGE>
Consent to Modification No. 1
-----------------------------
The undersigned Term Certificateholder hereby consents to all of the
provisions of the foregoing Modification No. 1.
PFL Life Insurance Company
----------------------------------
as a Term Certificateholder
By: /s/ Gregory W. Theobald
-------------------------------
Name: Gregory W. Theobald
Title: VP & Assist. Secretary
Date: June 23, 1995
<PAGE>
Appendix to Modification No. 1
------------------------------
USFAR Inc., a Nevada corporation (the "Company"), as successor by
merger to USFAR Inc., a Delaware corporation, does hereby transfer, assign, set
over and otherwise convey to the Trustee for the benefit of the
Certificateholders, and does hereby grant a first priority perfected security
interest to the Trustee for the benefit of the Certificateholders to secure the
obligations of the Company described in Section 2.1 of the Pooling and Servicing
Agreement, all of its right, title and interest in, to and under all of the
property described in Section 2.1 of the Pooling and Servicing Agreement.
This instrument shall be construed in accordance with the law of the
State of New York.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed and delivered by its respective officers as of the day and year
written below.
USFAR INC.
By: /s/ Ann B. Cianflone
---------------------------
Name: Ann B. Cianflone
Title: Secretary
Date: June 26, 1995
<PAGE>
Exhibit 10.39
MODIFICATION NO. 2
MODIFICATION NO. 2, dated as of June 26, 1995 (this "Modification"),
with respect to:
(i) the AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as of
October 27, 1994 (as amended, supplemented or otherwise modified from time to
time, the "Receivables Purchase Agreement"), among Biggers Brothers, Inc., White
Swan, Inc., Roanoke Restaurant Service, Inc., F.H. Bevevino & Company, Inc.,
King's Foodservice, Inc. and each of the other subsidiaries of US Foodservice
Inc. from time to time parties thereto (each, an "Originator"), US Foodservice
Inc., a Delaware corporation, as Master Servicer (in such capacity, the "Master
Servicer"), and USFAR Inc., a Nevada corporation (as successor by merger to
USFAR Inc., a Delaware corporation, hereinafter, the "Company");
(ii) the AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated as of
October 27, 1994 (as amended, supplemented or otherwise modified from time to
time, the "Pooling and Servicing Agreement"), among the Company, the Master
Servicer, each of the subsidiaries of the Master Servicer from time to time
parties thereto (each, a "Servicer") and Chemical Bank, a New York banking
corporation, not in its individual capacity but solely as trustee (the
"Trustee"); and
(iii) the SERIES 1994-1 SUPPLEMENT, dated as of October 27, 1994 (as
amended, supplemented or otherwise modified from time to time, the
"Supplement"), among the Company, the Master Servicer and the Trustee under the
Pooling and Servicing Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to Section 3.3 of the Supplement (and subject to the
satisfaction of the conditions precedent contained therein), the Company is
directing the Trust to issue additional Term Certificates in the aggregate
principal amount of $15,000,000 (the "Additional Term Certificates");
WHEREAS, in accordance with Section 9.14 of the Receivables Purchase
Agreement, the Company has agreed to the addition of (i) Daniel's Foodservice of
Florida Inc., a Delaware corporation, and Goode Foodservice, Inc., a Delaware
corporation, as Additional Originators (as defined in the Receivables Purchase
Agreement) and (ii) The Ohio Division of White Swan as an Additional White Swan
Division (as defined in the Receivables Purchase Agreement);
WHEREAS, in connection with the addition of the Additional Originators and
the Additional White Swan Division,
<PAGE>
the Company desires to amend (i) the Pooling and Servicing Agreement pursuant to
Section 13.1 thereof and (ii) the Supplement pursuant to Section 10.5 thereof,
in each case to facilitate the addition of Additional Originators and Additional
White Swan Divisions thereunder; and
WHEREAS, the parties hereto have agreed to amend each of the Receivables
Purchase Agreement, the Pooling and Servicing Agreement and the Supplement in
the manner amended herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Pooling and Servicing Agreement and used herein shall have the meanings ascribed
to them in the Pooling and Servicing Agreement.
2. Amendments to the Receivables Purchase Agreement. (a) Schedule 1 to
the Receivables Purchase Agreement is hereby amended by deleting such Schedule
in its entirety and inserting in lieu thereof a new Schedule 1 in the form of
Annex A hereto.
(b) Schedule 2 to the Receivables Purchase Agreement is hereby amended by
deleting such Schedule in its entirety and inserting in lieu thereof a new
Schedule 2 in the form of Annex B hereto.
(c) Schedule 5 to the Receivables Purchase Agreement is hereby amended by
inserting at the end thereof the following:
"The Ohio Division of White Swan, Inc.
Daniel's Foodservice of Florida Inc.
------------------------------------
Daniel's
US Foodservice Inc. -- Orlando
US Foodservice Inc. -- Riviera Beach
US Foodservice Inc. -- CP
Goode Foodservice, Inc.
-----------------------
US Foodservice Inc. -- Atlanta Division"
(d) Exhibit C to the Receivables Purchase Agreement is hereby amended by
deleting such Exhibit in its entirety and inserting in lieu thereof a new
Exhibit C in the form of Annex C hereto.
2
<PAGE>
3. Amendments to the Pooling and Servicing Agreement. (a) Section 1.1 of
the Pooling and Servicing Agreement is hereby amended by (i) deleting therefrom
the definitions of "Defaulted Receivables Trigger" and "White Swan Divisions" in
their entirety and (ii) inserting therein the following new definitions in
correct alphabetical order:
"Additional Servicer Supplement" shall mean an instrument
substantially in the form of Exhibit K hereto by which a subsidiary of US
Foodservice Inc. becomes a Servicer party to this Agreement.
"Defaulted Receivables Trigger" shall mean, with respect to each
Originator other than White Swan and, in the case of White Swan, each White
Swan Division, the number of Days Past Due which is set forth opposite such
Originator or such White Swan Division below (and, with respect to any
Originator or White Swan Division added after the Initial Closing Date, the
"Defaulted Receivables Trigger" set forth on the Additional Originator
Supplement for such Originator or such White Swan Division, provided that
the Defaulted Receivables Trigger for any such Originator or any such White
Swan Division so added shall not exceed 61 Days Past Due):
Originator/White Swan Divisions Days Past Due
------------------------------- -------------
F.H. Bevevino & Company, Inc. 61 days
Biggers Brothers, Inc. 61 days
Daniel's Foodservice of Florida, Inc.
Orlando division 61 days
Riviera Beach division 61 days
Ft. Myers division 61 days
Ormond Beach division
(d/b/a CP Foodservice) 31 days
William E. Davis & Sons 31 days
Goode Foodservice, Inc. 61 days
King's Foodservice, Inc. 61 days
The Ohio Division of White Swan 61 days
Roanoke Restaurant Service, Inc. 61 days
Standard Food Service 61 days
White Swan Mainframe Divisions 61 days
'White Swan Divisions' shall mean the following operating divisions of
White Swan, the Receivables of which are sold to the Transferor pursuant to the
Receivables Purchase Agreement: William E. Davis & Sons, Standard Food Service,
The Ohio Division of White Swan and each White Swan Mainframe Division; provided
that 'White Swan Divisions' shall (i) exclude any such division which has been
terminated as a "White Swan Division" and (ii) include any additional division
of White Swan which has been added as a 'White Swan Division', in each case, in
accordance with the Receivables Purchase Agreement."
3
<PAGE>
(b) Article III of the Pooling and Servicing Agreement is hereby
amended by changing Section 3.10 thereto to read as follows:
"Section 3.10. Addition of Servicers. Subject to the terms and
conditions thereof, from time to time any subsidiary of US Foodservice Inc.
which is added as an Additional Originator (as defined in the Receivables
Purchase Agreement) may be added as an additional Servicer hereunder upon (a)
execution by such subsidiary of an Additional Servicer Supplement and (b) the
prior satisfaction with respect to such subsidiary of each of the conditions
precedent set forth in Sections 9.14 and 3.4 of the Receivables Purchase
Agreement".
(c) Section 6.9 of the Pooling and Servicing Agreement is hereby
amended by changing a paragraph (d) thereto to read as follows:
"(d) The Exchangeable Transferor Certificate may not be transferred
except in accordance with this Section 6.9."
(d) Schedule 1 to the Pooling and Servicing Agreement is hereby
amended by deleting such Schedule in its entirety and inserting in lieu thereof
a new Schedule 1 in the form of Annex D hereto.
(e) Schedule 3 to the Pooling and Servicing Agreement is hereby
amended by deleting such Schedule in its entirety and inserting in lieu thereof
a new Schedule 3 in the form of Annex B hereto.
(f) Schedule 4 to the Pooling and Servicing Agreement is hereby
amended by deleting such Schedule in its entirety and inserting in lieu thereof
a new Schedule 4 in the form of Annex E hereto.
(g) The Pooling and Servicing Agreement is hereby further amended by
adding an Exhibit K thereto in the form of Annex C hereto.
4. Amendment to, and Waiver with Respect to, the Supplement. (a)
Section 2.1 of the Supplement is hereby amended by (i) deleting therefrom the
definitions of "Aged Receivables Denominator" and "Aged Receivables Numerator"
in their entirety and (ii) inserting therein the following new definitions in
correct alphabetical order:
'Additional Originator Supplement' shall mean the Additional
Originator Supplement (as defined in the Receivables Purchase Agreement).
'Aged Receivables Denominator' shall mean, with respect to each
Originator other than White Swan and, in the case of White Swan, each White Swan
Division, the prior Settlement Period
4
<PAGE>
which is set forth opposite such Originator or such White Swan Division below
(and, with respect to any Originator or White Swan Division added after the
Initial Closing Date, the "Aged Receivables Denominator" set forth on the
Additional Originator Supplement for such Originator or such White Swan
Division, provided that the Aged Receivables Denominator for any such Originator
or any such White Swan Division so added shall not be earlier than the 3rd prior
Settlement Period):
Originator/White Swan Divisions Aged Receivables Denominator
------------------------------- ----------------------------
F.H. Bevevino & Company, Inc. 3rd prior Settlement Period
Biggers Brothers, Inc. 3rd prior Settlement Period
Daniel's Foodservice of Florida Inc.
Orlando division 3rd prior Settlement Period
Riviera Beach division 3rd prior Settlement Period
Ft. Myers division 3rd prior Settlement Period
Ormond Beach division
(d/b/a CP Foodservice) 2nd prior Settlement Period
William E. Davis & Sons 2nd prior Settlement Period
Goode Foodservice, Inc. 3rd prior Settlement Period
King's Foodservice, Inc. 3rd prior Settlement Period
The Ohio Division of White Swan 3rd prior Settlement Period
Roanoke Restaurant Service, Inc. 3rd prior Settlement Period
Standard Food Service 3rd prior Settlement Period
White Swan Mainframe Divisions 3rd prior Settlement Period.
'Aged Receivables Numerator' shall mean, with respect to each
Originator other than White Swan and, in the case of White Swan, each White Swan
Division, the number of Days Past Due which is set forth opposite such
Originator or such White Swan Division below (and, with due respect to any
Originator or White Swan Division added after the Initial Closing Date, the
"Aged Receivables Numerator" set forth on the Additional Originator Supplement
for such Originator and such White Swan Division, provided that the Aged
Receivables Numerator for any such Originator and any such White Swan Division
so added shall not exceed 61-90 days):
Originator/White Swan Divisions Aged Receivables Numerator
------------------------------- --------------------------
F.H. Bevevino & Company, Inc. 61-90 days
Biggers Brothers, Inc. 61-90 days
Daniel's Foodservice of Florida, Inc.
Orlando division 61-90 days
Riviera Beach division 61-90 days
Ft. Myers division 61-90 days
Ormond Beach division
(d/b/a CP Foodservice) 31-60 days
William E. Davis & Sons 31-60 days
Goode Foodservice, Inc. 61-90 days
King's Foodservice, Inc. 61-90 days
The Ohio Division of White Swan 61-90 days
Roanoke Restaurant Service, Inc. 61-90 days
5
<PAGE>
Standard Food Service 61-90 days
White Swan Mainframe Divisions 61-90 days."
(b) Solely in connection with the issuance of the Additional Term
Certificates, the parties hereto hereby agree to waive as a condition to the
authentication and delivery by the Trustee the Additional Term Certificates the
requirement under Section 3.3(b)(iv) of the Supplement that opinion of counsel
relating to the Pennsylvania income tax be delivered to the Trustee.
5. No Change. Except as expressly provided herein, no term or
provision of the Receivables Purchase Agreement, the Pooling and Servicing
Agreement or the Supplement shall be amended, modified or supplemented, and each
term and provision of each of the Receivables Purchase Agreement, Pooling and
Servicing Agreement and the Supplement shall remain in full force and effect.
6. Effectiveness. This Modification shall become effective, and the
Additional Originators shall be added as Originators and Servicers under the
Related Documents and the Additional White Swan Division shall be added as a
White Swan Division under the Related Documents, as of the date hereof upon the
Trustee's receipt (or confirmation) of the following:
(a) (i) executed counterparts of this Modification by the Additional
Originators, White Swan, Inc. (on behalf of the Additional White Swan Division),
the Company, the Master Servicer, the Originators (in such capacities and in
their capacities as Servicers) and the Trustee and (ii) executed consents to
this Modification, substantially in the form of Annex F hereto, from the
Majority Term Certificateholders (as defined in the Supplement);
(b) with respect to the amendment to the Receivables Purchase
Agreement, the satisfaction of each of the terms and conditions set forth in
Section 3.4 of the Receivables Purchase Agreement;
(c) with respect to the amendment to the Pooling and Servicing
Agreement, the satisfaction of each of the terms and conditions set forth in
Section 13.1 of the Pooling and Servicing Agreement (including, without
limitation, the satisfaction of the Rating Agency Condition); and
(d) with respect to the amendment to the Supplement, the satisfaction
of each of the terms and conditions set forth in Section 10.5 of the Supplement
and, to the extent applicable, Section 13.1 of the Pooling and Servicing
Agreement.
7. Representations and Warranties. Each of the Transferor, the
Master Servicer, the Servicers, the Originators and the Additional Originators
hereby confirms that the
6
<PAGE>
representations and warranties made by it in the Related Documents are true and
correct in all material respects on and as of the date hereof, after giving
effect to this Modification, as if made on and as of the date hereof.
8. Counterparts. This Modification may be executed by the parties
hereto in a number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
9. GOVERNING LAW. THIS MODIFICATION AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Modification
to be duly executed and delivered by their proper and duly authorized officers
as of the date first above written.
DANIEL'S FOODSERVICE OF FLORIDA INC.
By: /s/ Ann B. Cianflone
---------------------------
Title: Secretary
GOODE FOODSERVICE, INC.
By: /s/ Ann B. Cianflone
---------------------------
Title: Secretary
WHITE SWAN, INC., as Originator, as Servicer and
on behalf of its Ohio Division
By: /s/ Ann B. Cianflone
---------------------------
Title: Secretary
USFAR INC.
By: /s/ Ann B. Cianflone
---------------------------
Title: Secretary
US FOODSERVICE INC., as Master Servicer
By: /s/ Ann B. Cianflone
---------------------------
Title: Secretary
BIGGERS BROTHERS, INC., as Originator and as
Servicer
By: /s/ Kenneth B. Kozel
---------------------------
Title: Assistant Secretary
8
<PAGE>
F.H. BEVEVINO & COMPANY, INC., as Originator and
as Servicer
By: /s/ Kenneth B. Kozel
-------------------------------
Title: Assistant Secretary
ROANOKE RESTAURANT SERVICE, INC., as Originator
and as Servicer
By: /s/ Kenneth B. Kozel
-------------------------------
Title: Assistant Secretary
KING'S FOODSERVICE, INC., as Originator and as
Servicer
By: /s/ Kenneth B. Kozel
-------------------------------
Title: Assistant Secretary
CHEMICAL BANK, as Trustee
By: /s/
-------------------------------
Title:
9
<PAGE>
CONSENT TO MODIFICATION NO. 2
The undersigned Term Certificateholder hereby consents to all of the
provisions of Modification No. 2, dated as of June 26, 1995, with respect to
each of the following:
(i) the AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as
of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Receivables Purchase Agreement"), among Biggers
Brothers, Inc., White Swan, Inc., Roanoke Restaurant Service, Inc., F.H.
Bevevino & Company, Inc., King's Foodservice, Inc. and each of the other
subsidiaries of US Foodservice Inc. from time to time parties thereto
(each, an "Originator"), US Foodservice Inc., a Delaware corporation, as
Master Servicer (in such capacity, the "Master Servicer"), and USFAR Inc.,
a Nevada corporation (as successor by merger to USFAR Inc., a Delaware
corporation, hereinafter, the "Company");
(ii) the AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated
as of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Pooling and Servicing Agreement"), among the Company,
the Master Servicer, each of the subsidiaries of the Master Servicer from
time to time parties thereto (each, a "Servicer") and Chemical Bank, a New
York banking corporation, not in its individual capacity but solely as
trustee (the "Trustee"); and
(iii) the SERIES 1994-1 SUPPLEMENT, dated as of October 27, 1994 (as
amended, supplemented or otherwise modified from time to time, the
"Supplement"), among the Company, the Master Servicer and the Trustee under
the Pooling and Servicing Agreement.
Date: June 26, 1995
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as a
Term Certificateholder
By: /s/
----------------------------------------------
Name:
Title:
10
<PAGE>
CONSENT TO MODIFICATION NO. 2
The undersigned Term Certificateholder hereby consents to all of the
provisions of Modification No. 2, dated as of June 26, 1995, with respect to
each of the following:
(i) the AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as
of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Receivables Purchase Agreement"), among Biggers
Brothers, Inc., White Swan, Inc., Roanoke Restaurant Service, Inc., F.H.
Bevevino & Company, Inc., King's Foodservice, Inc. and each of the other
subsidiaries of US Foodservice Inc. from time to time parties thereto
(each, an "Originator"), US Foodservice Inc., a Delaware corporation, as
Master Servicer (in such capacity, the "Master Servicer"), and USFAR Inc.,
a Nevada corporation (as successor by merger to USFAR Inc., a Delaware
corporation, hereinafter, the "Company");
(ii) the AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated
as of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Pooling and Servicing Agreement"), among the Company,
the Master Servicer, each of the subsidiaries of the Master Servicer from
time to time parties thereto (each, a "Servicer") and Chemical Bank, a New
York banking corporation, not in its individual capacity but solely as
trustee (the "Trustee"); and
(iii) the SERIES 1994-1 SUPPLEMENT, dated as of October 27, 1994 (as
amended, supplemented or otherwise modified from time to time, the
"Supplement"), among the Company, the Master Servicer and the Trustee under
the Pooling and Servicing Agreement.
Date: June 26, 1995
PRUCO LIFE INSURANCE COMPANY, as a Term
Certificateholder
By: /s/
----------------------------------------------
Name:
Title:
11
<PAGE>
CONSENT TO MODIFICATION NO. 2
The undersigned Term Certificateholder hereby consents to all of the
provisions of Modification No. 2, dated as of June 26, 1995, with respect to
each of the following:
(i) the AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as
of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Receivables Purchase Agreement"), among Biggers
Brothers, Inc., White Swan, Inc., Roanoke Restaurant Service, Inc., F.H.
Bevevino & Company, Inc., King's Foodservice, Inc. and each of the other
subsidiaries of US Foodservice Inc. from time to time parties thereto
(each, an "Originator"), US Foodservice Inc., a Delaware corporation, as
Master Servicer (in such capacity, the "Master Servicer"), and USFAR Inc.,
a Nevada corporation (as successor by merger to USFAR Inc., a Delaware
corporation, hereinafter, the "Company");
(ii) the AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated
as of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Pooling and Servicing Agreement"), among the Company,
the Master Servicer, each of the subsidiaries of the Master Servicer from
time to time parties thereto (each, a "Servicer") and Chemical Bank, a New
York banking corporation, not in its individual capacity but solely as
trustee (the "Trustee"); and
(iii) the SERIES 1994-1 SUPPLEMENT, dated as of October 27, 1994 (as
amended, supplemented or otherwise modified from time to time, the
"Supplement"), among the Company, the Master Servicer and the Trustee under
the Pooling and Servicing Agreement.
Date: June 26, 1995
AUSA LIFE INSURANCE COMPANY, INC.
BANKERS UNITED LIFE ASSURANCE COMPANY
INTERNATIONAL LIFE INVESTORS INSURANCE
COMPANY
LIFE INVESTORS INSURANCE COMPANY OF
AMERICA
MONUMENTAL LIFE INSURANCE COMPANY
FFL LIFE INSURANCE COMPANY, each as a
Term Certificateholder
By: /s/
----------------------------------------------
Name:
Title:
12
<PAGE>
CONSENT TO MODIFICATION NO. 2
The undersigned Term Certificateholder hereby consents to all of the
provisions of Modification No. 2, dated as of June 26, 1995, with respect to
each of the following:
(i) the AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as
of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Receivables Purchase Agreement"), among Biggers
Brothers, Inc., White Swan, Inc., Roanoke Restaurant Service, Inc., F.H.
Bevevino & Company, Inc., King's Foodservice, Inc. and each of the other
subsidiaries of US Foodservice Inc. from time to time parties thereto
(each, an "Originator"), US Foodservice Inc., a Delaware corporation, as
Master Servicer (in such capacity, the "Master Servicer"), and USFAR Inc.,
a Nevada corporation (as successor by merger to USFAR Inc., a Delaware
corporation, hereinafter, the "Company");
(ii) the AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated
as of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Pooling and Servicing Agreement"), among the Company,
the Master Servicer, each of the subsidiaries of the Master Servicer from
time to time parties thereto (each, a "Servicer") and Chemical Bank, a New
York banking corporation, not in its individual capacity but solely as
trustee (the "Trustee"); and
(iii) the SERIES 1994-1 SUPPLEMENT, dated as of October 27, 1994 (as
amended, supplemented or otherwise modified from time to time, the
"Supplement"), among the Company, the Master Servicer and the Trustee under
the Pooling and Servicing Agreement.
Date: June 26, 1995
THE TRAVELERS INSURANCE COMPANY, as a Term
Certificateholder
By: /s/
----------------------------------------------
Name:
Title:
13
<PAGE>
CONSENT TO MODIFICATION NO. 2
The undersigned Term Certificateholder hereby consents to all of the
provisions of Modification No. 2, dated as of June 26, 1995, with respect to
each of the following:
(i) the AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as
of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Receivables Purchase Agreement"), among Biggers
Brothers, Inc., White Swan, Inc., Roanoke Restaurant Service, Inc., F.H.
Bevevino & Company, Inc., King's Foodservice, Inc. and each of the other
subsidiaries of US Foodservice Inc. from time to time parties thereto
(each, an "Originator"), US Foodservice Inc., a Delaware corporation, as
Master Servicer (in such capacity, the "Master Servicer"), and USFAR Inc.,
a Nevada corporation (as successor by merger to USFAR Inc., a Delaware
corporation, hereinafter, the "Company");
(ii) the AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated
as of October 27, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Pooling and Servicing Agreement"), among the Company,
the Master Servicer, each of the subsidiaries of the Master Servicer from
time to time parties thereto (each, a "Servicer") and Chemical Bank, a New
York banking corporation, not in its individual capacity but solely as
trustee (the "Trustee"); and
(iii) the SERIES 1994-1 SUPPLEMENT, dated as of October 27, 1994 (as
amended, supplemented or otherwise modified from time to time, the
"Supplement"), among the Company, the Master Servicer and the Trustee under
the Pooling and Servicing Agreement.
Date: June 26, 1995
ALLSTATE LIFE INSURANCE COMPANY, as a Term
Certificateholder
By: /s/
----------------------------------------------
Name:
Title:
By: /s/
-----------------------------------------------
Name:
Title:
14
<PAGE>
Exhibit 10.40
COMMITMENT AGREEMENT
This COMMITMENT AGREEMENT (this "Agreement") is dated as of August 10,
1992 and entered into by and between BRB HOLDINGS, INC., a Delaware
corporation ("BRB"), and SARA LEE CORPORATION, a Maryland corporation ("Sara
Lee" and together with its subsidiaries and affiliates, the "Sara Lee
Companies").
WHEREAS, in the twelve-month period ended December 31, 1991, BRB and
its subsidiaries (the "BRB Group") purchased form the Sara Lee Companies food
and other products with an aggregate original invoice amount net of applicable
trade and cash discounts, returns and replacements ("dollar value") of
approximately $14 million (the "1991 Volume");
WHEREAS, Sara Lee desires to create an incentive for the BRB Group to
increase the dollar value of such purchases from the Sara Lee Companies and BRB
desires to create an incentive for Sara Lee to continue to supply products of a
quality equal to or exceeding the quality of products currently supplied by
them, at competitive prices; and
WHEREAS, WS HOLDINGS, INC., a Delaware corporation ("WSH"), and Sara
Lee have entered into an agreement (the "WSH Agreement"; capitalized terms used
herein and not otherwise defined have the meanings given in the WSH Agreement)
of even date herewith on substantially similar terms and conditions.
NOW, THEREFORE, in consideration of the premises and on the terms and
subject to the conditions hereinafter set forth, the parties hereto agree:
SECTION 1. Commitment. (a) Subject to the limitations set forth
herein, BRB hereby agrees to cause the BRB Group to increase the aggregate
dollar value of purchases made from the Sara Lee Companies to $16,100,000 during
the twelve-month period ending on the first anniversary of the Closing (as
defined below), and thereafter to increase the aggregate dollar value of such
purchases made during each succeeding twelve-month period by ten percent per
annum over the aggregate dollar value of such purchases made during the
immediately preceding twelve-month period.
(b) To promote achievement of the foregoing commitment by the BRB
Group, Sara Lee agrees to encourage the Sara Lee Companies to supply products to
the BRB Group on commercially reasonable terms.
SECTION 2. Liquidated Payments. (a) In the event that, during the
three-year period ending on the third
<PAGE>
anniversary of the Closing, the BRB Group has made aggregate purchases from the
Sara Lee Companies ("BRB Three-Year Purchases") of less than $52,500,000 (the
"BRB Three-Year Target"), then BRB agrees to pay to Sara Lee within ninety days
an amount equal to (i) $10,500,000 minus the amount by which BRB Three-Year
Purchases have exceeded $42,000,000, divided by (ii) $10,500,000, multiplied by
(iii) $500,000; provided, however, that, in the event BRB Three-Year Purchases
are less than the BRB Three-Year Target, the amount of WSH Three-Year Purchases
in excess of the WSH Three-Year Target (the "WSH Three-Year Credit") shall be
added to the amount of BRB Three-Year Purchases for purposes of the calculation
to be made under this Section 2(a); and provided, further, that payments made
under this subsection (a) shall in no event exceed $500,000.
(b) In the event that, during the six-year period ending on the sixth
anniversary of the Closing, the BRB Group has made aggregate purchases from the
Sara Lee Companies ("BRB Six-Year Purchases) of less than $125,000,000 the ("BRB
Six-Year Target"), then BRB agrees to pay to Sara Lee within ninety days an
amount equal to (i) $40,000,000 minus the amount by which BRB Six-Year Purchases
have exceeded $84,000,000, divided by (ii) $40,000,000, multiplied by (iii)
$1,000,000; minus the amount of any payment made pursuant to subsection (a) of
this Section 2; provided, however, that (A) the amount of the WSH Three-Year
Credit shall not be included in BRB Six-Year Purchases for purposes of the
foregoing calculation, and (B) in the event BRB Six-Year Purchases are less than
the BRB Six-Year Target, the amount of WSH Six-Year Purchases in excess of the
WSH Six-Year Target shall be added to the amount of BRB Six-Year Purchases for
purposes of the calculation to be made under this subsection (b); and provided,
further, that payments made under this subsection (b), taken together with any
payment made under subsection (a), shall in no event exceed $1,000,000 in the
aggregate.
(c) The parties hereto acknowledge that WSH is entering into the WSH
Agreement in reliance on the agreements set forth in this Section 2.
Accordingly, the parties hereto agree that, without the prior written consent of
WSH, no amendment or modification of this Section 2 shall be effective to the
extent it would increase the amount of either the BRB Three-Year Target or the
BRB Six-Year Target.
(d) In the event BRB fails to make any payment required to be made
pursuant to this Section 2, and a court, arbitrator or other tribunal issues a
judgment, decision or order requiring BRB to make such payment to Sara Lee, BRB
agrees to indemnify Sara Lee for its reasonably attorneys' fees and expenses, to
the extent actually incurred for enforcement of this Agreement.
SECTION 3. Term. This Agreement shall become effective on and as of
the date of the Closing (as defined in the Stock Purchase and Exchange
Agreement, dated as of the date
2
<PAGE>
hereof (the "Stock Purchase and Exchange Agreement") between Unifax Holdings,
Inc., a Delaware corporation, and Sara Lee), and shall terminate upon the date
of termination of the Stock Purchase and Exchange Agreement, or the date six
years and three months after the date of the Closing, whichever shall first
occur, unless earlier terminated in writing by the parties or by written notice
from Sara Lee to BRB.
SECTION 4. Notices. All orders, notices, requests, demands, waivers
and other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally or mailed, certified or registered mail with postage prepaid, or sent
by telex, telegram, telecopy or electronic mail, as follows:
(a) if to BRB, to:
BRB Holdings, Inc.
c/o Unifax, Inc.
Cross Creek Pointe
1065 Highway 315
Wilkes-Barre, Pennsylvania 18702
Attention: Frank H. Bevevino
Telecopy: (717) 822-0909
(b) if to Sara Lee, to:
Sara Lee Corporation
Three First National Plaza
Chicago, Illinois 60602
Attention: Mark J. McCarville
Telecopy: (312) 558-4913
or to such other person or address as the party concerned shall specify by
notice in writing to the other parties hereto. All such notices, requests,
demands, waivers and communications shall be effective when received.
SECTION 5. Binding Effect; Benefit. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except that WSH shall be
deemed to be a third party beneficiary of the agreements set forth in Section
2(c).
SECTION 6. Assignment. This Agreement shall not be assigned by any
of the parties hereto without the prior written consent of the other parties
hereto, provided that each of the parties may assign all or any part of its
interest hereunder to one or more of its affiliates, but no such assignment
shall
3
<PAGE>
release the assignor from its obligations hereunder, and the assignee shall
assume the assignor's obligations hereunder.
SECTION 7. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all other prior agreements, understandings and representations, both
written and oral, between or among any of the parties with respect to the
subject matter hereof.
SECTION 8. Amendment and Waiver. Subject to applicable law and
Section 2(c), this Agreement may be amended, modified and supplemented by
written instruments authorized and executed by the parties hereto at any time
prior to the termination hereof with respect to any of the terms contained
herein. In the event that Sara Lee divests any of the Sara Lee Companies or one
or more products constituting a significant portion of the 1991 Volume, the
parties agree to use their best efforts to amend this Agreement to adjust the
targets set forth in Section 2 to equitably reflect the effect of such
divestiture. The wavier by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach, provided that failure to achieve the annual purchase targets
set forth in Section 1 shall not be deemed to be a breach of this Agreement and
shall not entitle any party to any remedy at law or in equity other than the
right to liquidated damages set forth in Section 2 hereof.
SECTION 9. Counterparts. This Agreement may be executed and
delivered in one or more counterparts (including by facsimile transmission),
each of which when so executed and delivered shall be deemed to be an original
copy of the same agreement.
SECTION 10. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
BRB HOLDINGS, INC.
By: /s/
----------------------------------
SARA LEE CORPORATION
By: /s/
----------------------------------
4
<PAGE>
Exhibit 10.41
AMENDMENT NUMBER ONE TO BRB HOLDINGS
COMMITMENT AGREEMENT
This Addendum, effective as of September 27, 1995, hereby amends the
Commitment Agreement ("Agreement"), effective as of September 4, 1992 by and
between Sara Lee Corporation ("Sara Lee") and BRB Holdings, Inc. ("BRB"). The
parties agree that the term "Closing" or "Closing Date" shall mean September 4,
1995 and, unless otherwise expressly defined herein, the capitalized terms used
herein without further definition shall have the same meaning as in the
Agreement.
W I T N E S S E T H
WHEREAS; Sara Lee and US Foodservice, Inc. ("USF") have agreed that
USF shall pay Sara Lee $19,600,000 in redemption of all of the USF preferred
shares owned by Sara Lee, such redemption to be effected pursuant to a Stock
Redemption Agreement between USF and Sara Lee; and
WHEREAS, as a condition to and in further consideration of the
parties' agreement to enter into the Stock Redemption Agreement, the parties
have agreed to amend the Agreement as provided for herein.
NOW, THEREFORE, Sara Lee and BRB hereby agree to amend the Agreement
as follows:
1. Amendment to Section 1. The parties agree that the following new
sentence shall be added to the end of Section 1 of the Agreement:
"Notwithstanding the other provisions of this Section 1, the parties agree that
the purchase commitment for the last three years of this Agreement, ending on
September 4, 2001, shall reflect an increase of four percent per annum over the
aggregate dollar value of purchases made during the twelve-month period
immediately preceding September 4, 1998. Notwithstanding the preceding
sentence, in the event of a conflict between the terms of this Section 1 and the
purchase targets specified in Section 2, the provisions of Section 2 shall
control."
2. New Section 2(c). The parties agree that the following new
Section 2(c) shall be added to the Agreement, and that Sections 2(c) and 2(d) of
the Agreement shall be respectively redesignated as Sections 2(d) and 2(e):
"In the event that, during the nine-year period ending on the
ninth anniversary of the Closing, USF has made aggregate purchases
from the Sara Lee Companies ("USF Nine-Year Purchases") of less than
$170,000,000, USF agrees to pay to Sara Lee within ninety days an
amount equal to (i) $35,000,000 minus the amount by which USF
<PAGE>
Nine-Year Purchases have exceeded $135,000,000, divided by (ii)
$35,000,000 multiplied by (iii) $1,862,500; minus the amount of any
payments made pursuant to subsections (a) and (b) of this Section 2,
provided, however, that payments made under this subsection (c), taken
together with payments made under subsections (a) and (b), shall in no
event exceed $1,862,500 in the aggregate."
3. Amendment to Section 2(e). The following sentence shall be added
to the end of Section 2(e) (as redesignated pursuant to paragraph 3 of this
Amendment): "The payment of liquidated payments, if any, due to Sara Lee
pursuant to Sections 2(a), (b) or (c) above shall be paid no later than the
October 31 of the year in which the purchases are aggregated and the liquidated
payments calculated.
4. Guarantee of USF. By its signature below, USF hereby
unconditionally guarantees the performance of BRB under the Agreement and prompt
payment of liquidated payments, if any, due from BRB to Sara Lee. USF expressly
agrees that this guarantee is direct and primary and that Sara Lee may, at its
option, proceed to enforce this guarantee directly against without having
commenced any action, or having obtained any judgment, against BRB.
5. Other Provisions. All other provisions of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, this Amendment was executed by Sara Lee and WS
effective as the date first above written.
SARA LEE CORPORATION WS HOLDINGS CORPORATION
By: /s/ By: /s/
-------------------------- -----------------------------
Vice President Vice President
US Foodservice, Inc. hereby agrees to be bound by the guarantee
provisions of Section 5 of this Amendment.
US FOODSERVICE, INC.
By: /s/
-----------------------------
Vice President
2
<PAGE>
Exhibit 10.42
COMMITMENT AGREEMENT
This COMMITMENT AGREEMENT (this "Agreement") is dated as of August __,
1992 and entered into by and between WS HOLDINGS CORPORATION, a Delaware
corporation ("WSH"), and SARA LEE CORPORATION, a Maryland corporation ("Sara
Lee" and together with its subsidiaries and affiliates, the "Sara Lee
Companies").
WHEREAS, in the twelve-month period ended December 31, 1991, WSH and
its subsidiaries (the "WSH Group") purchased form the Sara Lee Companies food
and other products with an aggregate original invoice amount net of applicable
trade and cash discounts, returns and replacements ("dollar value") of
approximately $14 million (the "1991 Volume");
WHEREAS, Sara Lee desires to create an incentive for the WSH Group to
increase the dollar value of such purchases from the Sara Lee Companies and WSH
desires to create an incentive for Sara Lee to continue to supply products of a
quality equal to or exceeding the quality of products currently supplied by
them, at competitive prices; and
WHEREAS, BRB HOLDINGS, INC., a Delaware corporation ("BRB"), and Sara
Lee have entered into an agreement (the "BRB Agreement"; capitalized terms used
herein and not otherwise defined have the meanings given in the BRB Agreement)
or even date herewith on substantially similar terms and conditions.
NOW, THEREFORE, in consideration of the premises and on the terms and
subject to the conditions hereinafter set forth, the parties hereto agree:
SECTION 1. Commitment. (a) Subject to the limitations set forth
herein, WSH hereby agrees to cause the WSH Group to increase the aggregate
dollar value of purchases made from the Sara Lee Companies to $16,100,000 during
the twelve-month period ending on the first anniversary of the Closing (as
defined below), and thereafter to increase the aggregate dollar value of such
purchases made during each succeeding twelve-month period by ten percent per
annum over the aggregate dollar value of such purchases made during the
immediately preceding twelve-month period.
(b) To promote achievement of the foregoing commitment by the WSH
Group, Sara Lee agrees to encourage the Sara Lee Companies to supply products to
the WSH Group on commercially reasonable terms.
SECTION 2. Liquidated Payments. (a) In the event that, during the
three-year period ending on the third anniversary of the Closing, the WSH Group
has made aggregate purchases from the Sara Lee Companies ("WSH Three-Year
Purchases") of less than $52,500,000 (the "WSH Three-Year
<PAGE>
Unifax Holdings, Inc., a Delaware corporation, and Sara Lee), and shall
terminate upon the date of termination of the Stock Target"), then WSH agrees to
pay to Sara Lee within ninety days an amount equal to (i) $10,500,000 minus the
amount by which WSH Three-Year Purchases have exceeded $42,000,000, divided by
(ii) $10,500,000, multiplied by (iii) $500,000; provided, however, that, in the
event WSH Three-Year Purchases are less than the WSH Three-Year Target, the
amount of BRB Three-Year Purchases in excess of the BRB Three-Year Target (the
"BRB Three-Year Credit") shall be added to the amount of WSH Three-Year
Purchases for purposes of the calculation to be made under this Section 2(a);
and provided, further, that payments made under this subsection (a) shall in no
event exceed $500,000.
(b) In the event that, during the six-year period ending on the sixth
anniversary of the Closing, the WSH Group has made aggregate purchases from the
Sara Lee Companies ("WSH Six-Year Purchases) of less than $125,000,000 the ("WSH
Six-Year Target"), then WSH agrees to pay to Sara Lee within ninety days an
amount equal to (i) $40,000,000 minus the amount by which WSH Six-Year Purchases
have exceeded $84,000,000, divided by (ii) $40,000,000, multiplied by (iii)
$1,000,000; minus the amount of any payment made pursuant to subsection (a) of
this Section 2; provided, however, that (A) the amount of the BRB Three-Year
Credit shall not be included in WSH Six-Year Purchases for purposes of the
foregoing calculation, and (B) in the event WSH Six-Year Purchases are less than
the WSH Six-Year Target, the amount of BRB Six-Year Purchases in excess of the
BRB Six-Year Target shall be added to the amount of WSH Six-Year Purchases for
purposes of the calculation to be made under this subsection (b); and provided,
further, that payments made under this subsection (b), taken together with any
payment made under subsection (a), shall in no event exceed $1,000,000 in the
aggregate.
(c) The parties hereto acknowledge that BRB is entering into the BRB
Agreement in reliance on the agreements set forth in this Section 2.
Accordingly, the parties hereto agree that, without the prior written consent of
BRB, no amendment or modification of this Section 2 shall be effective to the
extent it would increase the amount of either the WSH Three-Year Target or the
WSH Six-Year Target.
(d) In the event WSH fails to make any payment required to be made
pursuant to this Section 2, and a court, arbitrator or other tribunal issues a
judgment, decision or order requiring WSH to make such payment to Sara Lee, WSH
agrees to indemnify Sara Lee for its reasonably attorneys' fees and expenses, to
the extent actually incurred for enforcement of this Agreement.
SECTION 3. Term. This Agreement shall become effective on and as of
the date of the Closing (as defined in the Stock Purchase and Exchange
Agreement, dated as of the date hereof (the "Stock Purchase and Exchange
Agreement") between
<PAGE>
Purchase and Exchange Agreement, or the date six years and three months after
the date of the Closing, whichever shall first occur, unless earlier terminated
in writing by the parties or by written notice from Sara Lee to WSH.
SECTION 4. Notices. All orders, notices, requests, demands, waivers
and other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally or mailed, certified or registered mail with postage prepaid, or sent
by telex, telegram, telecopy or electronic mail, as follows:
(a) if to WSH, to:
WS Holdings Corporation
500 Fuller-Wiser Road
Suite 300
Euless, Texas 76039
Attention: Mr. Ronald Elmquist
Telecopy: (817) 283-0393
(b) if to Sara Lee, to:
Sara Lee Corporation
Three First National Plaza
Chicago, Illinois 60602
Attention: Mark J. McCarville
Telecopy: (312) 558-4913
or to such other person or address as the party concerned shall specify by
notice in writing to the other parties hereto. All such notices, requests,
demands, waivers and communications shall be effective when received.
SECTION 5. Binding Effect; Benefit. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except that BRB shall be
deemed to be a third party beneficiary of the agreements set forth in Section
2(c).
SECTION 6. Assignment. This Agreement shall not be assigned by any
of the parties hereto without the prior written consent of the other parties
hereto, provided that each of the parties may assign all or any part of its
interest hereunder to one or more of its affiliates, but no such assignment
shall release the assignor from its obligations hereunder, and the assignee
shall assume the assignor's obligations hereunder.
SECTION 7. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with
<PAGE>
respect to the subject matter hereof and supersedes all other prior agreements,
understandings and representations, both written and oral, between or among any
of the parties with respect to the subject matter hereof.
SECTION 8. Amendment and Waiver. Subject to applicable law and
Section 2(c), this Agreement may be amended, modified and supplemented by
written instruments authorized and executed by the parties hereto at any time
prior to the termination hereof with respect to any time prior to the
termination hereof with respect to any of the terms contained herein. In the
event that Sara Lee divests any of the Sara Lee Companies or one or more
products constituting a significant portion of the 1991 Volume, the parties
agree to use their best efforts to amend this Agreement to adjust the targets
set forth in Section 2 to equitably reflect the effect of such divestiture. The
wavier by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any other or subsequent breach,
provided that failure to achieve the annual purchase targets set forth in
Section 1 shall not be deemed to be a breach of this Agreement and shall not
entitle any party to any remedy at law or in equity other than the right to
liquidated damages set forth in Section 2 hereof.
SECTION 9. Counterparts. This Agreement may be executed and
delivered in one or more counterparts (including by facsimile transmission),
each of which when so executed and delivered shall be deemed to be an original
copy of the same agreement.
SECTION 10. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
WS HOLDINGS CORPORATION
By: /s/
--------------------------------------
SARA LEE CORPORATION
By: /s/
--------------------------------------
<PAGE>
EXHIBIT 10.43
AMENDMENT NUMBER ONE TO WS HOLDINGS
COMMITMENT AGREEMENT
This Addendum, effective as of September 27, 1995, hereby amends the
Commitment Agreement ("Agreement"), effective as of September 4, 1992 by and
between Sara Lee Corporation ("Sara Lee") and WS Holdings Corporation ("WS").
The parties agree that the term "Closing" or "Closing Date" shall mean September
4, 1995 and, unless otherwise expressly defined herein, the capitalized terms
used herein without further definition shall have the same meaning as in the
Agreement.
W I T N E S S E T H
WHEREAS, Sara Lee and US Foodservice, Inc. ("USF") have agreed that USF
shall pay Sara Lee $19,600,000 in redemption of all of the USF preferred shares
owned by Sara Lee, such redemption to be effected pursuant to a Stock Redemption
Agreement between USF and Sara Lee; and
WHEREAS, as a condition to and in further consideration of the parties'
agreement to enter into the Stock Redemption Agreement, the parties have agreed
to amend the Agreement as provided for herein.
NOW, THEREFORE, Sara Lee and WS hereby agree to amend the Agreement as
follows:
1. Amendment to Section 1. The parties agree that following new sentence
shall be added to the end of Section 1 of the Agreement: "Notwithstanding the
other provisions of this Section 1, the parties agree that the purchase
commitment for the last three years of this Agreement, ending on September 4,
2001, shall reflect an increase of four percent per annum over the aggregate
dollar value of purchases made during the twelve-month period immediately
preceding September 4, 1998. Notwithstanding the preceding sentence, in the
event of a conflict between the terms of this Section 1 and the purchase targets
specified in Section 2, the provisions of Section 2 shall control."
2. New Section 2(c). The parties agree that the following new Section
2(c) shall be added to the Agreement, and that Sections 2(c) and 2(d) of the
Agreement shall be respectively redesignated as Sections 2(d) and 2(e):
"In the event that, during the nine-year period ending on the ninth
anniversary of the Closing, USF has made aggregate purchases from the Sara
Lee Companies ("USF Nine-Year Purchases") of less than $170,000,000, USF
agrees to pay to Sara Lee within ninety days an amount equal to (i)
$35,000,000 minus the amount by
1
<PAGE>
which USF Nine-Year Purchases have exceeded $135,000,000, divided by (ii)
$35,000,000, multiplied by (iii) $1,862,500; minus the amount of any
payments made pursuant to subsections (a) and (b) of this Section 2;
provided, however, that payments made under this subsection (c), taken
together with payments made under subsections (a) and (b), shall in no
event exceed $1,862,500 in the aggregate."
3. Amendment to Section 2(e). The following sentence shall be added
to the end of Section 2(e)(as redesignated pursuant to paragraph 3 of this
Amendment): "The payment of liquidated payments, if any, due to Sara Lee
pursuant to Sections 2(a), (b) or (c) above shall be paid no later than the
October 31 of the year in which the purchases are aggregated and the liquidated
payments calculated.
4. Guarantee of USF. By its signature below, USF hereby
unconditionally guarantees the performance of WS under the Agreement and prompt
payment of liquidated payments, if any, due from WS to Sara Lee. USF expressly
agrees that this guarantee is direct and primary and that Sara Lee may, at its
option, proceed to enforce this guarantee directly against without having
commenced any action, or having obtained any judgment, against WS.
5. Other Provisions. All other provisions of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, this Amendment was executed by Sara Lee and BRB
effective as of the date first above written.
SARA LEE CORPORATION BRB HOLDINGS, INC.
By: /s/ By: /s/
---------------------------- ----------------------------
Vice President Vice President
US Foodservice, Inc. hereby agrees to be bound by the guarantee
provisions of Section 5 of this Amendment.
US FOODSERVICE, INC.
By: /s/
----------------------------
Vice President
<PAGE>
Exhibit 10.44
AGREEMENT OF LEASE
------------------
THIS AGREEMENT OF LEASE (the "Lease") is made as of this 28th day of
February, 1996, by and between PAUL-FRANCIS REALTY, L.P., a Pennsylvania limited
partnership, with offices located at 303 Market Street, Kingston, Pennsylvania
18704 (the "Lessor") and US FOODSERVICE INC., a Delaware corporation, with
offices located at Cross-Creek Point, Route 315, Wilkes-Barre, Pennsylvania
18702 (the "Lessee").
W I T N E S S E T H:
WHEREAS, Lessor is the fee simple owner of certain real property consisting
of approximately 5.34 acres of land known as Parcel 17 situated in the East
Mountain Corporate Center, Township of Plains, Luzerne County, Pennsylvania, as
more particularly described on Exhibit "A" attached hereto and made a part
hereof (the "Real Property"); and
WHEREAS, the Real Property will be improved with, inter alia, a commercial
office building containing approximately sixty-one thousand seven hundred
twenty-five (61,725) square feet of space, as shown by the shaded area on
Exhibit "B" attached hereto and made a part hereof (the "Building"); and
WHEREAS, the Lessor desires to lease to the Lessee (i) a portion of the
Building, said portion containing approximately twenty-five thousand (25,000)
rentable square feet of space, subject to adjustment pursuant to Paragraph 2 of
this Lease, located on the first (1st) and the third (3rd) floors of the
Building, as shown by the shaded area on Exhibit "C" attached hereto and made a
part hereof (the "Leased Premises"), (ii) a portion of the Real Property as
shown by the shaded area on Exhibit "D" attached hereto and made a part hereof
for the Lessee's non-exclusive use for the parking of vehicles as hereinafter
set forth (the "Parking Area"), and (iii) another portion of the Real Property
as shown by the shaded area on Exhibit "E", attached hereto and made a part
hereof for the Lessee's non-exclusive use for purposes of vehicular and
pedestrian ingress and egress as hereinafter set forth (the "Access Area"), all
upon the terms and provisions hereinafter contained; and
WHEREAS, the Lessee desires to lease the Leased Premises, the Parking Area
and the Access Area from Lessor, all upon the terms and provisions hereinafter
contained.
NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) to each
in hand paid, the receipt whereof is hereby acknowledged, and the mutual
covenants, promises and agreements herein set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged between the parties, the Lessor and Lessee, intending to be legally
bound, hereby agree as follows:
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<PAGE>
1. Lease of Leased Premises; Use. Lessor does hereby demise and let unto
the Lessee the Leased Premises and the Lessee does hereby hire and rent from the
Lessor the Leased Premises, all upon the terms and conditions set forth in this
Lease. The use of the Leased Premises by Lessee shall be for general office
space, provided, further, that no retail uses shall be conducted from the Leased
Premises and all of such uses shall be subject to all applicable local zoning
regulations, the Declaration of Covenants, Conditions and Restrictions for the
East Mountain Corporate Center (as the same are, or may be, recorded in the
Office of the Recorder of Deeds in and for Luzerne County, Pennsylvania and as
the same may, from time to time, be amended or modified), the covenants, terms
and conditions hereinafter contained and the Rules and Regulations (hereinafter
defined). It is understood that, unless the Lessor otherwise expressly agrees
in writing, the Leased Premises will be occupied by the Lessee. The Lessee
shall continuously occupy the Leased Premises from and after the Commencement
Date (hereinafter defined) through the Termination Date (hereinafter defined)
except for any periods during which the Lessee has subleased the Leased Premises
or assigned this Lease pursuant to, and in accordance with, the terms and
provisions of this Lease.
The Lessee acknowledges and agrees that the Leased Premises constitute
only a portion of the Building and, therefore, the Lessor and/or other tenant(s)
will occupy other portions of the Building and utilize the Parking Area, the
Access Area, the Common Areas (hereinafter defined) and other portions of the
Real Property. Accordingly, the Lessee covenants and agrees that its use of the
Leased Premises, the Parking Area, the Access Area and the Common Areas shall
not in any way unreasonably disturb or interfere with the use and enjoyment by
the Lessor or such other tenant(s) of the remaining portions of the Building,
the Access Area, the Common Areas and such other portions of the Real Property.
Without the Lessor's prior consent, Lessee shall not utilize within the Leased
Premises any equipment or machinery which would generate noise or vibration
which could be heard or felt outside of the Leased Premises.
2. Final Measurement of the Leased Premises and the Building. The
rentable area of the Leased Premises is approximately 25,000 rentable square
feet and the rentable area of the Building is approximately 61,725 rentable
square feet, but the exact rentable area of the Leased Premises and the Building
shall be specifically calculated by the Lessor's architect, upon the completion
of the final floor plans of the Leased Premises and the Building in accordance
with the Building Owners and Management Association (BOMA) Method (ANSI-Z 65.1 -
1989) (the "BOMA Method"). Upon the calculation by the Lessor's architect of
the exact rentable area of the Leased Premises and the Building, as hereinabove
set forth, the Lessor shall so notify the Lessee of such calculation, as well as
the exact Minimum Rent (hereinafter defined) pursuant to Paragraph 5 of this
Lease and the Lessee's exact Proportionate Share (hereinafter defined) pursuant
to Paragraph 7 of the Lease. The Lessor's architect shall make such calculation
of the exact rentable area of the Leased Premises and the Building in good faith
in accordance with the BOMA Method applying all the standards of professional
conduct applicable to the professional practice of architecture.
3. Parking Area; Access Area; and Common Areas. The Lessee, its agents,
employees, licensees, and invitees are entitled, at no additional cost or
expense and subject
-2-
<PAGE>
to the Rules and Regulations, to parking privileges with respect to one hundred
(100) parking spaces located within the Parking Area; provided, however, if the
Lessee and the Lessor mutually agree to increase the total number of rentable
square feet of space contained within the Leased Premises in excess of the
number of rentable square feet as contemplated under Paragraph 2 above, then and
in such event, the number of parking spaces attributable to the Lessee within
the Parking Area shall be increased on the basis of four (4) parking spaces per
one thousand (1,000) rentable square feet of space actually contained in the
Leased Premises. In addition, the Lessee, its agents, employees, licensees, and
invitees are entitled to the non-exclusive use, at no additional cost or expense
and subject to the Rules and Regulations, for vehicular and pedestrian traffic
through the Access Area. The Lessee may not park, nor authorize, nor, to the
extent reasonably possible, allow, its agents, employees, visitors or invitees
to park within the Access Area at any time and the Lessee shall, to the extent
reasonably possible, cause the Access Area to be kept open and accessible at all
times to provide vehicular and pedestrian access to and through the Real
Property for other lessees of the Building and their respective agents,
employees, visitors or invitees or any others that are given permission therefor
by the Lessor. Finally, the Lessee, its agents, employees, licensees, and
invitees are entitled to the non-exclusive use, at no additional cost or
expense, but only for the purposes for which they were designed, constructed and
intended and subject to the Rules and Regulations, of those certain portions of,
and facilities and improvements on, the Building and the Real Property which
are, from time to time, provided and made available by the Lessor for the use or
benefit of all lessees of the Building and their employees, clients, customers,
licensees and invitees or for the use or benefit by the public in general, which
facilities and improvements include any and all public access corridors,
elevators and cabs, foyers and lobbies, public vending areas, public restrooms
(as opposed to any restrooms located entirely within an individual lessee's
leased premises), electrical and telephone rooms, mechanical rooms and all
grounds, parks, landscape areas, plazas, sidewalks, pedestrian ways, loading
docks and other facilities and improvements as are specifically so designated as
common areas, from time to time, by the Lessor (collectively, the "Common
Areas"). The Common Areas shall also include, without limitation, that certain
area of the Building which the Lessor has designated, or may, from time to time,
designate as the health and fitness facility (the "Health Facility"). The
Lessor reserves the right, at any time and from time to time, to alter, relocate
or eliminate the Health Facility. So long as the Lessor provides the Health
Facility within the Building, however, then all lessees of the Building,
including, without limitation, the Lessee and all of their respective employees
may utilize the Health Facility; provided, however, the use thereof shall be in
accordance with, and subject to, all rules and regulations as may be established
therefor, from time to time, by the Lessor and provided, further, that prior to
the use of the Health Facility, each lessee and all of their respective
employees who will utilize the Health Facility shall be required to execute and
deliver to the Lessor a waiver and release of liability in favor of the Lessor
and its Management Agent, which release and waiver shall be in form and
substance acceptable to the Lessor. Anything contained in this Paragraph 3 to
the contrary notwithstanding, the Lessor may, at any time and from time to time,
promulgate rules and regulations governing the use of the Health Facility, if
any, including, without limitation, the operating hours therefor. Any and all
costs and expenses associated with the furnishing, operation, maintenance,
cleaning and insuring of the Health Facility (including, without limitation, all
utilities thereto) shall be included in the Additional
-3-
<PAGE>
Rent and, therefore, the Lessee shall be responsible for the payment of its
Proportionate Share (hereinafter defined) thereof.
4. Term. The term of this Lease (the "Term") shall be for a period of
twelve (12) years commencing on the date upon which the Lessor delivers to the
Lessee the Leased Premises with the Lessor's Improvements (hereinafter defined)
substantially completed in accordance with Paragraph 21 of this Lease (the
"Commencement Date") and expiring on that date which is the day immediately
preceding the twelfth (12th) anniversary of the Commencement Date (the
"Termination Date"), unless the Lease is sooner terminated or otherwise extended
as expressly provided in this Lease. The Lessor and the Lessee anticipate that
the Commencement Date shall be August 1, 1996 (the "Anticipated Commencement
Date"); provided, however, the Anticipated Commencement Date is a target date
only and shall not be binding upon the Lessor. Upon the Termination Date, this
Lease shall terminate and the Lessee shall surrender the Leased Premises, the
Parking Area and its non-exclusive use of the Access Area and the Common Areas
to the Lessor in accordance with the terms and conditions of this Lease.
5. Minimum Rent. Subject to the terms and conditions of this Lease,
Lessee shall pay to Lessor as minimum rent (the "Minimum Rent") for the Leased
Premises, and its use of the Parking Area, the Access Area and the Common Areas
the following:
(a) Commencing on the Commencement Date, and continuing thereafter
during the next thirty-six (36) months, the annual Minimum Rent shall be Twelve
and 50/100 Dollars ($12.50) per rentable square foot contained in the Leased
Premises for a total annual Minimum Rent of approximately Three Hundred Twelve
Thousand Five Hundred and 00/100 Dollars ($312,500.00), which shall be payable
in equal monthly installments of Twenty-Six Thousand Forty-One and 67/100
Dollars ($26,041.67) each, based upon an annual Minimum Rent of Twelve and
50/100 Dollars ($12.50) multiplied by the total number of rentable square feet
contained in the Leased Premises (i.e., approximately 25,000 rentable square
feet). The foregoing notwithstanding, the exact Minimum Rent shall be adjusted
to reflect the exact rentable area contained in the Leased Premises, as
determined in accordance with Paragraph 2 above. On the third (3rd) anniversary
of the Commencement Date (the "First Adjustment Date"), the Minimum Rent shall
be adjusted by an amount equal to the percentage change in the CPI (hereinafter
defined) for the period from the Commencement Date to the First Adjustment Date.
Commencing on the fourth (4th) anniversary of the Commencement Date and
continuing thereafter on the same day of each year through the Termination Date
(each of said dates is hereinafter referred to as a "Subsequent Adjustment
Date") (the First Adjustment Date and each Subsequent Adjustment Date is
hereinafter referred to singularly as an "Adjustment Date"), the Minimum Rent
shall be adjusted by an amount equal to the percentage change in the CPI which
has occurred in the one (1) year period since the last annual Adjustment Date.
For purposes of this Lease, the "CPI" shall be the Consumer Price Index (U.S.
City Average, All Items 1982-84 = 100) published by the United States Department
of Labor, Bureau of Labor Statistics.
-4-
<PAGE>
(b) In each instance, the Minimum Rent, and all Additional Rent
(hereinafter defined) (the Minimum Rent and the Additional Rent are hereinafter
collectively referred to as the "Rent") shall be payable in advance, on the
first day of each month, the first of such monthly installments to be payable on
the Commencement Date (and if any month of the Term is less than a full calendar
month, then the Minimum Rent shall be pro-rated for the actual number of days in
such month). The Rent shall be payable without prior notice or demand, at the
address of the Lessor. In the event that any Rent is not received by Lessor by
no later than five (5) days after the date set forth for payment, then Lessee
shall pay to Lessor (i) a late fee equal to five percent (5%) of the delinquent
installment of Rent (the "Late Fee"), and (ii) interest on such delinquent
installment of Rent that is not received by the Lessor on the date set forth for
such payment (the "Delinquent Interest") at a rate equal to the Prime Rate of
Interest published, from time to time, in the "Money Mart" Section of the Wall
Street Journal plus two percent (2%) from the date that such installment was due
through the date that such installment is actually received by the Lessor;
provided, however, in no event shall the Delinquent Interest be greater than the
highest rate of interest permitted by applicable law.
6. Security Deposit. The Lessee has delivered to the Lessor on or before
the date of this Lease the aggregate sum of Thirty-four Thousand Three Hundred
Seventy-Five and 00/100 Dollars ($34,375.00) [which amount is equal to the sum
of one (1) monthly payment of Minimum Rent plus 1/12 of the initial Annual
Estimated Operating Expenses (hereinafter defined)] as the security deposit
under this Lease (together with any interest earned thereon, the "Deposit").
The Deposit shall be held by Lessor as security for the full and faithful
performance by Lessee of Lessee's obligations under this Lease and for the
payment of repairing any damages to the Leased Premises, the Parking Area, the
Access Area or the Common Areas which arise during this Lease and for which the
Lessee is liable hereunder. The Deposit shall be held in an interest-bearing
account in a financial institution of Lessor's choice, and shall be deposited by
Lessor in such account within thirty (30) days of receipt thereof. Lessor and
Lessee further agree that any interest accruing while the Deposit is in the
account shall be charged to Employer Identification Number 52-177-6750, said
Employer Identification Number being the Employer Identification Number of the
Lessee. Lessor shall inform Lessee of the name of said institution and the
account number under which the Deposit is being held within ten (10) days from
the date of the deposit thereof.
7. Property Taxes. The Lessee shall pay to the Lessor its Proportionate
Share of any and all real property taxes and assessments attributable to the
Building and the Real Property payable for the Term of this Lease including, but
not limited to, taxes resulting from any increases in the assessed value of, or
for improvements made to, the Building and the Real Property. So long as the
Lessee pays to the Lessor its Proportionate Share of all real property taxes and
assessments on the date that such payment thereof is due from the Lessee to the
Lessor, the Lessor covenants and agrees to pay all real property taxes and
assessments attributable to the Building and the Real Property during the
rebate/discount period for the payment thereof. The Lessee's "Proportionate
Share" shall be that percentage derived by dividing the rentable area, from time
to time of the Leased Premises (i.e., approximately 25,000 square feet), by the
total rentable area, from time to time, of the
-5-
<PAGE>
Building (i.e., approximately 61,725 square feet square feet) and, therefore,
the Lessee's Proportionate Share, as of the date of this Lease, is approximately
forty and one-half percent (40.50%); provided, however, the exact Proportionate
Share shall be adjusted upon the final calculation of the exact rentable area
contained in each of the Leased Premises and the Building, as determined in
accordance with Paragraph 2 above. The Lessee's Proportionate Share of such
property taxes and assessments shall be payable by Lessee, as Additional Rent to
Lessor. The Lessor shall provide to the Lessee a copy of the bill or invoice
for such taxes or assessments which Lessor receives from the applicable taxing
authority, together with a written explanation indicating in reasonable detail
the manner in which the Lessor calculated the amount of taxes and assessments
due by the Lessee pursuant to this Paragraph 7. If, at any time during the
Term, (1) a surcharge, fee, excise or tax is levied or imposed upon utilities
consumed at, or waste discharged from, the Leased Premises, or upon parking
spaces which are a part of the Parking Area, or for any governmental service
furnished to the Building or the Real Property or persons visiting or occupying
the same; or (2) the method of taxation of real property is changed from the
method in existence on the date of this Lease, so that real estate taxes are
replaced by one or more other types of alternative tax (collectively hereinafter
referred to as "replacement taxes"); then, the Lessee shall pay either to the
governmental body involved or to the Lessor, as determined by the Lessor, as
Additional Rent, its Proportionate Share of the amount of such (1) surcharge,
fee, excise or tax on utilities, waste, parking spaces or governmental services;
and (2) such replacement taxes. Nothing herein contained is intended to require
the Lessee to pay any tax levied, assessed or imposed upon Lessor based upon
Lessor's net income, excise profits or net taxable revenues or receipts.
8. Utilities; Mechanics' Liens. The Lessee agrees to pay all bills, when
due, which may be incurred for all utilities to the Leased Premises and the
Parking Area and to pay its Proportionate Share of all bills, when due, which
may be incurred for all utilities to the Access Area and the Common Areas
including, without limitation, all light, electric power, gas, heat and any and
all other utilities used or consumed upon the Leased Premises (all of which
shall be separately metered if reasonably possible), the Parking Area, the
Access Area and the Common Areas during the Term and also all bills for water,
sewer and trash removal which may accrue during the Term and any and all other
fees, costs, expenses or charges applicable to any other utilities consumed by
the Lessee or applicable to the Leased Premises, the Parking Area, the Access
Area and the Common Areas. Should the Lessee fail to pay any bills as
aforesaid, the Lessor shall have the right, after providing written notice to
the Lessee and Lessee's failure to pay the same within ten (10) days after the
date of Lessor's notice, to pay the same, and the amount so paid, together with
interest thereon at the rate set forth in Paragraph 5(b)(ii), shall be
chargeable to the Lessee as Additional Rent, to be paid at the time of the next
installment of Minimum Rent falling due hereunder, with interest allowable at
the maximum rate permitted under the laws of the Commonwealth of Pennsylvania
from the date of such payment by the Lessor. All of the utilities to the Leased
Premises shall be separately metered if reasonably practicable; provided,
however, if, in the Lessor's reasonable judgment, any such utilities to the
Leased Premises cannot be separately metered in a reasonably practicable manner,
then the Lessee shall be responsible for the payment of its Proportionate Share
of the total cost and expense of all the utilities incurred with respect to the
entire Building and the entire Parking Area,
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Access Area and Common Areas. If any mechanics' liens are placed upon the
Leased Premises or the Real Property as a result of Lessee's act or omission,
Lessee will, upon being notified of same, promptly remove them either by payment
or by bonding at Lessee's option.
9. Quiet Enjoyment. If the Lessee faithfully and diligently performs the
terms of this Lease imposed on Lessee, the Lessee shall have exclusive, peaceful
possession, use, and quiet enjoyment of the Leased Premises during the Term, as
well as the continued use of the Parking Area, the Access Area and the Common
Areas, on a non-exclusive basis, during the Term.
10. Additional Rent. It is the agreement and intention of the Lessor and
the Lessee that the Minimum Rent to Lessor shall be net, net, net of any and all
utility costs, property taxes, insurance costs and any and all other costs,
expenses and fees associated in any way with the Leased Premises, the Parking
Area, the Access Area, the Common Areas and/or the Building and/or the Real
Property and the management, maintenance, insuring and operation thereof
provided that such costs, expenses and fees are commercially reasonable and are
customarily payable by lessees under triple net leases. The Lessor and the
Lessee acknowledge and agree that pursuant to the Budget (hereinafter defined)
for the first year of the Term, the estimate of all of the Operating Expenses
(hereinafter defined) for the Leased Premises for the first year of the Term is
Four and 00/100 Dollars ($4.00) per rentable square foot of space contained in
the Leased Premises (i.e., approximately $100,000.00 based upon $4.00 per
rentable square foot multiplied by approximately 25,000 square feet contained in
the Leased Premises) (the "Annual Estimated Operating Expenses"). Accordingly,
the Lessee shall pay for (i) all utility costs to the Leased Premises and the
Parking Area or its Proportionate Share of all utilities costs to the entire
Building and the Real Property if such utilities to the Leased Premises are not
separately metered, (ii) its Proportionate Share of all utility costs to the
Access Area and the Common Areas, as hereinbefore set forth in Paragraph 8 of
this Lease), (iii) its Proportionate Share of all property taxes as hereinabove
set forth in Paragraph 7 of this Lease, and (iv) its Proportionate Share of all
Grounds Maintenance Costs (hereinafter defined) of the Real Property, and (v)
its Proportionate Share of any and all other fees, costs and expenses
attributable to the management, maintenance, insuring and operation of the
Building, the Parking Area, the Access Area, the Common Areas and the Real
Property (all of the aforesaid items are hereinafter collectively referred to as
the "Operating Expenses"). Anything contained in this Lease to the contrary
notwithstanding, the standard business hours for the operation of the Building
shall be 7:00 a.m. to 7:00 p.m. Mondays through Fridays and 8:00 a.m. to 1:00
p.m. on Saturdays excluding all legal holidays (collectively, the "Building
Standard Hours"). All utilities, if not separately metered for the Leased
Premises, applicable to the Leased Premises during Building Standard Hours shall
be billed to, and paid by, the Lessee based upon the Lessee's Proportionate
Share of the aggregate cost and expense thereof attributable to the entire
Building. If, however, the Lessee is desirous of utilizing HVAC services or
other utilities within the Building or the Leased Premises during hours other
than during Building Standard Hours, then the Lessee shall coordinate such
after-hours use of the same with the Lessor, or the Lessor's management agent,
and the Lessee shall be responsible for the payment of an additional charge
therefor equal to
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Twenty-Five Dollars ($25.00) per hour for each floor (or portions of a floor)
within the Leased Premises which are the subject of the Lessee's after-hours
use. For purposes of this Paragraph 10, "Grounds Maintenance Costs" shall be
all costs and expenses incurred by the Lessor with respect to the grounds
maintenance and upkeep of the Real Property including, without limitation, all
landscape maintenance and replacement costs, such as grass cutting, the upkeep,
maintenance and replacement of all shrubs, plantings and other landscape
materials, snow and ice removal from all exterior portions of the Building
including all sidewalks, stairways, entrances and exits with respect to all
areas of the Building and the Real Property including, without limitation, the
Parking Area, the Access Area and the Common Areas and all cleaning and sweeping
of the Parking Area, the Access Area and the Common Areas and all other items of
maintenance and upkeep associated therewith. Accordingly, all costs, expenses
and obligations relating to the Leased Premises, the Parking Area, the Access
Area and the Common Areas which may arise or become due during the Term
including, but not limited to, any and all costs for utilities, heat, repairs
(except for structural repairs to the Leased Premises which shall be the
Lessor's sole responsibility as hereinafter provided for) and maintenance costs
relating to the Leased Premises, the Parking Area, the Access Area and the
Common Areas (other than those maintenance obligations and costs expressly
required to be performed, and paid for, respectively, by the Lessor under this
Lease), shall be borne, and paid for, by the Lessee as Additional Rent. Any and
all sums which may become due and payable by Lessee under the terms of this
Lease (other than the Minimum Rent), together with any late fees, penalties or
additional interest thereon for non-payment shall hereinafter collectively be
referred to as "Additional Rent." The Lessor shall be indemnified, defended and
held harmless by Lessee against any such costs, expenses and obligations which
Lessor may be called upon to pay; provided, however, such costs, expenses and
obligations shall be limited to those costs, expenses and obligations directly
applying to the Leased Premises, the Parking Area, the Access Area and the
Common Areas during the Term which the Lessee shall be required to pay pursuant
to the terms of this Lease.
11. Annual Budgets. The Lessor has, prior to the execution of this Lease,
provided to the Lessee, and shall, as soon as reasonably practicable after the
end of each calendar year during the Term, provide to the Lessee, an annual
budget (as the same may be amended at any time and from time to time by the
Lessor, the "Budget") setting forth the Lessor's projection of the Lessee's
Operating Expenses for the current calendar year of the Term. Anything contained
in this Lease to the contrary notwithstanding, the Lessor's preparation of the
Budget shall be Lessor's good faith estimate of such Operating Expenses only and
the Lessor shall have no liability for any errors or omissions therein and the
Lessee shall be responsible for the full payment of any and all actual Operating
Expenses incurred irrespective of the amounts therefor set forth in the Budget.
The Lessee shall pay to the Lessor on the first (1st) day of each calendar month
during the Term of this Lease one-twelfth (1/12th) of the amount set forth in
the applicable Budget for the Operating Expenses, the first of such monthly
installments to be payable on the Commencement Date. As soon as reasonably
practicable after the expiration of each calendar year, the Lessor shall provide
the Lessee with an invoice indicating the difference between the amounts
actually incurred for the Operating Expenses for such calendar year and the
amounts paid thereon by the Lessee. The Lessee shall, within thirty (30) days
after the Lessee's receipt of such
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invoice, pay to the Lessor any amount set forth therein which represents an
underpayment of the amount actually incurred therefor during such calendar year
or, if the amount paid by the Lessee toward such Operating Expenses exceeds the
actual amounts incurred therefor during such calendar year, then the Lessor
shall credit to the Lessee's next monthly payment(s) of such Operating Expenses
such excess amounts. In the event that the Lessor does not so credit the
Lessee, the Lessee may, after providing thirty (30) days' prior written notice
to the Lessor, set off such excess amounts against the Rent due to the Lessor.
The foregoing notwithstanding, if at any time during the Term, the Lessor
determines that the Budget is inaccurate, the Lessor may amend such Budget by
providing written notice thereof to the Lessee, together with an explanation
(including accompanying calculations) of the reason why the Lessor has
determined that the Budget is inaccurate. In addition, the Lessor may at any
time during the Term provide the Lessee with an additional invoice for any
significant amounts of Operating Expenses not included in the Budget, whereupon
the Lessee shall, within thirty (30) days after the Lessee's receipt of such
invoice, pay to the Lessor any amount set forth therein.
12. Liability Insurance. The Lessee, at its sole cost and expense, shall
secure and maintain throughout the Term general public liability insurance,
insuring both Lessor and Lessee against death and personal injuries to one or
more persons in the amount equal to that which prudent owners of property
similar to the Leased Premises using the same for the purposes as herein
provided and in the manner actually used by Lessee would, from time to time,
reasonably procure and maintain, but in no event less than Two Million Dollars
($2,000,000.00) with respect to property damage/bodily injury or death to more
than one person in any one occurrence in connection with Lessee's use and
occupancy of the Leased Premises, the Parking Area, the Access Area, the Common
Areas, and the Real Property, except for such liability which arises as a
consequence of the negligence of Lessor, its agents, servants or employees.
Lessee shall, prior to the Commencement Date, furnish to Lessor a certificate of
the insurance company issuing such insurance evidencing such coverage with the
Lessor included as an additional insured, which certificate shall contain a
provision to the effect that such coverage may not be cancelled, materially
changed or not renewed without at least thirty (30) days' prior written notice
to Lessor.
13. Casualty Insurance. The Lessor shall secure and maintain throughout
the Term, or any extension or renewal thereof, fire, casualty and extended
coverage insurance, covering the Building, the Leased Premises, the Parking
Area, the Access Area and the Common Areas including all improvements now or
hereafter made, for at least one hundred percent (100%) of the replacement cost
thereof. Lessee shall, however, be responsible for and pay to the Lessor, as
Additional Rent, within thirty (30) days following notice of the amount due from
Lessor to Lessee, the premiums for any such insurance which are attributable to
the Leased Premises if separately identified on any invoice therefor received by
the Lessor from the insurer or, if the premium attributable to the Leased
Premises is not separately identified on any invoice received by the Lessor from
the insurer, then the Lessee shall be responsible for paying to the Lessor the
Lessee's Proportionate Share of the total premium due for such insurance with
respect to the entire Building. The Lessee, at its sole cost and expense, shall
be responsible for and pay the cost of fire and extended coverage insurance on
all contents located within the Leased Premises including, but not limited to,
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trade fixtures and equipment. Lessee further agrees to install in the Leased
Premises, such fire extinguishing equipment, or any other devices, as is
reasonably required by Lessor's insurance carrier and local building codes prior
to the occupancy of the Leased Premises and further agrees that in the event the
insurance company or local building codes should require reasonable change in
the nature of this equipment, Lessee will effect such changes at Lessee's sole
cost and expense; provided, however, the Lessee shall not be required to install
any such equipment if such equipment would be considered to be a capital
expenditure under generally accepted accounting principles consistently applied.
14. Waiver of Subrogation. Each party hereby waives any and every claim
which arises or may arise in its favor and against the other party hereto during
the Term for any and all loss or damage to any of its property located within or
upon or constituting a part of the Leased Premises, which loss or damage is or
is to be covered, by the terms of this Lease, by valid and collectible fire and
extended coverage insurance policies, and if and to the extent reimbursement is
made, even if such loss or damage shall be brought about by default or
negligence of the other party or by its employees, agents, servants or any
persons claiming under them.
15. Damage or Destruction of the Leased Premises. Except as otherwise
hereinafter set forth, in the event the Leased Premises (or any other portion of
the Building, the use of which is reasonably necessary for Lessee's use of the
Leased Premises) or the Parking Area, the Access Area or the Common Areas are
damaged or partially destroyed by fire or other casualty, Lessor, utilizing the
insurance proceeds, if any, shall restore the same to substantially the same
condition as existed prior to the occurrence of such fire or other casualty.
However, in the event the Leased Premises, the Parking Area, the Access Area or
the Common Areas, as the case may be, shall be damaged or destroyed by fire or
other casualty to such extent as to preclude the repair and replacement thereof
within ninety (90) days subsequent to the date of such event, Lessor shall have
the right to either utilize the insurance proceeds, if any, to reconstruct the
Leased Premises, the Parking Area, the Access Area or the Common Areas, as the
case may be, or, in the alternative, elect to receive payment of the insurance
proceeds and terminate this Lease. In addition, if the Lessor elects to restore
any such damage to the Leased Premises (or any such other portions of the
Building, the use of which is reasonably necessary for the Lessee's use of the
Leased Premises) and the Lessor has not substantially completed the restoration
thereof within six (6) months of the date of the occurrence of such fire or
other casualty, then the Lessee may, at its option by providing written notice
thereof to the Lessor, elect to terminate this Lease, whereupon this Lease shall
terminate and, thereafter, the parties shall be relieved of all further
liability hereunder. Lessee shall not be obligated to pay any rentals or other
amounts under this Lease applicable to any period when the Leased Premises, or
any material part thereof are untenantable due to any such damage or destruction
of any part of the Leased Premises.
16. Maintenance of Leased Premises; Parking Area and Access Area and
Common Areas.
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(a) The Lessor shall be responsible for the exterior landscape
maintenance of the Real Property, the Parking Area, the Access Area and the
Common Areas (including grass cutting, the upkeep, maintenance and replacement
of all shrubs, plantings and other landscape materials), and snow and ice
removal from the Parking Area, the Access Area and the Common Areas, and all
sidewalks, stairways, entrances and exits on the Real Property serving the
Leased Premises; provided, however, the Lessee shall reimburse to the Lessor,
within thirty (30) days after its receipt of an invoice therefor, its
Proportionate Share of all Grounds Maintenance Costs as set forth in Paragraph
10 of this Lease and its Proportionate Share with respect to all of the
maintenance and upkeep of the Parking Area, the Access Area and the Common Areas
also as set forth in Paragraph 10 of this Lease. Security services, if any,
provided by Lessor for the Building are as a convenience only and Lessor shall
have no liability whatsoever for any damages to person or property of the
Lessee, its agents, employees or invitees for any failure of such security,
unless such damages are the result of an intentional act or negligence on the
part of the Lessor or its agents or employees. The Lessee shall take such
reasonable precautions as it may deem necessary for the protection of its
property, agents, employees and invitees in a manner that will not interfere
with any other lessee of the Building.
(b) The Lessee shall, during the Term of this Lease, at Lessee's own
cost and expense, keep in good order, condition and repair the interior of the
Leased Premises including, without limitation, the interior portions of all
doors, windows, plate glass, all plumbing and heating and air conditioning
equipment and apparatus within, and directly serving, the Leased Premises, all
of the fixtures, lighting and bulbs and other equipment therein (exclusive of
the Building's structural items, which shall include only the roof (including
the gutters, downspout and flashing in connection therewith), foundation and
exterior walls of the Building, for which the Lessor shall be responsible). The
Lessor shall, however, regularly service and maintain the heating, ventilation
and air conditioning equipment within the Leased Premises; provided, however,
all of the costs and expenses associated therewith shall be included in the
Operating Expenses and, therefore, shall be paid for by the Lessee. If the
Lessee fails to keep in good order or repair the interior of the Leased
Premises, as provided herein, the Lessor shall have the right, after notifying
the Lessee of Lessee's failure and allowing ten (10) days for the Lessee to
remedy the condition, or if such remedy shall take the Lessee longer than ten
(10) days to effectuate, and if within such ten (10) day period, the Lessee has
not commenced such remedy or is not diligently pursuing such remedy, then the
Lessor shall have the right, to remedy the Lessee's failure and bill the Lessee
for the actual and reasonable cost of such remedy. The amount of the bill shall
be due and payable by the Lessee within ten (10) days of receipt and shall be
considered as Additional Rent under this Lease. The Lessee shall be responsible
for all repairs to the Leased Premises (excluding structural repairs, which
shall include only the roof, foundation, and outside walls of the Building for
which the Lessor shall be responsible) and shall maintain the same in good
condition and repair, normal wear and tear excepted, and shall furnish Lessor
prompt written notice of any and all accidents, fires or other damage occurring
on or to the Leased Premises. The Lessor, or its management agent, shall retain
a reputable office cleaning company to provide routine office cleaning and
janitorial services to the Building including to the Leased Premises. All of
the costs and expenses associated with such office cleaning and janitorial
services shall be included in the Operating
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Expenses and, therefore, shall be paid for by the Lessee. In addition, the
Lessee shall be solely responsible for any extraordinary cleaning services which
it may request. All refuse of any kind shall be removed from the Leased
Premises at reasonable intervals by such office cleaning company; provided,
however, the cost and expense thereof shall also be included in the Operating
Expenses and, therefore, shall be paid for by the Lessee. The Lessor shall make
or cause to be made, but the Lessee shall be responsible for the payment of any
and all costs and expenses associated with making, any and all other repairs to
the Leased Premises and the Parking Area.
17. No Waste. No waste shall be committed by the Lessee, and at the end
of the Term, the Leased Premises shall be delivered in substantially as good
condition as on the Commencement Date, ordinary wear and tear and damage by
casualty excepted.
18. Hazardous Substances. The Lessee represents and warrants to the
Lessor that the Leased Premises, the Parking Area, the Access Area, the Common
Areas and the Real Property shall be kept free from contamination by or from any
hazardous substances or hazardous waste (as such terms are defined and/or used
in applicable state or federal law or in the regulations issued thereunder
including, without limitation, the Federal Comprehensive Environmental Response,
Compensation and Liability Act) except for such minor quantities of ordinary
office supplies and materials as are incidental to Lessee's ordinary business
pursuits and its operation and occupancy of the Leased Premises m connection
therewith. Except as otherwise expressly set forth herein, the Lessee also
agrees that it will not store, utilize or engage in operations at or upon the
Leased Premises, the Parking Area, the Access Area, the Common Areas and the
Real Property or affecting the Leased Premises, the Parking Area, the Access
Area, the Common Areas and the Real Property which involve the generation,
manufacture, refining, transportation, treatment, storage, handling or disposal
of hazardous substances or hazardous waste, medical waste or medical waste
products or environmentally deleterious material and the Lessee will at all
times comply with and conform to all laws, statutes, ordinances, rules,
regulations, notices and orders of all governmental and regulating authorities
or any board of fire underwriters, or any insurance organization or company with
respect to the treatment of any hazardous substances or waste on or which affect
the Leased Premises, the Parking Area, the Access Area, the Common Areas and the
Real Property. The Lessee shall not cause or permit to exist as a result of an
intentional or unintentional action or omission on its part or on the part of
any of the Lessee's agents of releasing, spilling, leaking, pumping, pouring,
emitting, emptying or dumping from, on or about the Leased Premises or the Real
Property of any such hazardous substances or waste.
The Lessee shall indemnify, defend and hold harmless, the Lessor, its
successors and assigns, any officer, director, shareholder, employee or any
agent of Lessor from any and all liability, damages, costs, claims, suits,
actions, legal or administrative proceedings, interests, losses, expenses, and
attorney's fees and appellate attorneys' fees (including any such fees and
expenses incurred in enforcing this indemnity) resulting from or arising out of,
or in any way connected with, injury to, or the death of, any person (including
any indemnified party) or physical damage to property of any kind wherever
located and by whomever owned (including that of any indemnified party) arising
out of, or
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in any way connected with, the presence on, in or under the Leased Premises, the
Parking Area, the Access Area, the Common Areas and the Real Property of any
hazardous substances or hazardous waste; provided, however, that it must be
shown that such hazardous substance or hazardous waste were introduced in or
under the Leased Premises, the Parking Area, the Access Area, the Common Areas
and the Real Property during the Term, or any extension or renewal thereof or at
any other time by the Lessee, or its employees, contractors, agents, invitees,
guests, or its successors, assigns or sublessees, if any. Lessee will not be
liable in any way for any environmental contamination occurring prior to the
Commencement Date or resulting from acts or omissions that took place prior
thereto unless caused by the acts or omissions of the Lessee. This
indemnification is an independent covenant and shall survive the expiration or
earlier termination of this Lease.
19. Compliance with Laws. Lessee and Lessor shall each comply with all
requirements of duly constituted public authorities, and with the terms of any
state or federal statute, regulation, and of any local ordinance, applicable to
them or to the use of the Leased Premises, the Parking Area and the Access Area
and the Common Areas and each party shall indemnify, defend and save the other
party harmless from any and all penalties, fines costs or other damages
resulting from its failure to do so. The foregoing notwithstanding, the Lessee
and the Lessor shall each comply with all enforcement actions or other actions
brought against them to enforce its compliance with all requirements of duly
constituted public authorities or any statute, regulation, ordinance or law
irrespective of the materiality thereof. The Lessee shall not carry on any
unlawful business in or about the Leased Premises, and shall not carry on any
business which shall endanger the Leased Premises or any portion thereof from
fire or cause a forfeiture of any fire insurance that the Lessor has or may
hereafter have on the Leased Premises or any improvements thereof.
20. Hold Over. Except as Lessor may otherwise consent in writing, Lessee
agrees, without further notice or demand, to promptly surrender possession of
the Leased Premises to Lessor at the expiration, or earlier termination, of this
Lease. Any holding over by Lessee beyond the Term shall be under and subject to
the same terms and provisions as contained herein, except, however, that the
Minimum Rent shall: (i) for the first thirty (30) days following the end of the
Term to be equal to one hundred and twenty-five percent (125%) of the Minimum
Rent as existed in the immediately preceding month and (ii) thereafter, be equal
to one hundred and fifty percent (150%) of the Minimum Rent as existed in the
immediately preceding month and, in all such events, the term of any such hold
over shall be on a month-to-month basis and shall be terminable upon thirty (30)
days notice to either party by the other.
21. Improvements to Leased Premises; Alterations. The Lessor shall, prior
to the Commencement Date, substantially complete those improvements to the
Leased Premises as are more particularly described on the Plans and
Specifications set forth on Exhibit "F" attached hereto and made a part hereof
(the "Lessor's Improvements"). The Lessor shall construct the Lessor's
Improvements in a good and workmanlike manner. The Lessee shall, prior to the
Commencement Date, substantially complete, or cause the substantial completion
of, those improvements to the Leased Premises as are more particularly described
on the Plans and Specifications set forth on Exhibit "G" attached hereto and
made
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a part hereof (the "Lessee's Improvements"); provided, however, the Lessee's
failure or inability to substantially complete the construction of the Lessee's
Improvements by the Commencement Date shall in no way impact upon the
Commencement Date or the establishment thereof. The Lessee may commence
construction of the Lessee's Improvements only after providing reasonable prior
notice to the Lessor and/or coordinating with the Lessor so as not to interfere
with the Lessor's construction of the Lessor's Improvements. The Lessee shall
construct, or cause to be constructed, the Lessee's Improvements in a good and
workmanlike manner.
The Lessee may not make any structural alterations or any improvements
(other than the Lessee's Improvements as hereinabove defined) to the Leased
Premises without Lessor's prior written consent, which consent shall be in the
sole and absolute discretion of the Lessor. All such alterations and
improvements made with the Lessor's prior written consent as hereinabove set
forth shall become the property of the Lessor upon the termination of this Lease
unless otherwise provided in Lessor's consent therefor; provided, however, that,
notwithstanding the foregoing, so long as the Lessee is not in default under
this Lease, the Lessor shall not have title to, and Lessee shall have the right
to remove, trade fixtures, moveable office equipment and furniture. The Lessee
may, however, at its sole cost and expense, decorate the Leased Premises.
Anything contained herein to the contrary notwithstanding, the Lessee
shall, at its own cost and expense, immediately upon the expiration or earlier
termination of this Lease, restore the Leased Premises to the condition as
existed as of the Commencement Date and, in the event that the Lessee does not
do so in a good and workmanlike manner, the Lessor may do so and, in such event,
the Lessee shall be responsible for all costs and expenses associated therewith
and the Lessor may, in addition to all other rights and remedies available to it
in law or at equity, apply the Deposit toward the same. The foregoing
notwithstanding, the Lessee shall not be obligated to remove any of the Lessor's
Improvements or those portions of the Lessee's Improvements which were
constructed in the Leased Premises with the prior written approval of the Lessor
and to which the Lessor did not indicate in writing, at the time of its
providing such prior written approval for the construction thereof, that the
Lessee would be under an obligation to remove the same at the expiration or
earlier termination of this Lease; provided, however, the Lessor's Improvements
and such Lessee's Improvements shall immediately and automatically become the
property of the Lessor upon the expiration or earlier termination of this Lease
without the necessity of any further notice or action on the part of the Lessor
or the Lessee and without any reimbursement or compensation therefor by the
Lessor to the Lessee. Any Lessee's Improvements or other alterations made to
the Leased Premises either without the Lessor's prior written consent, or with
such prior written consent of the Lessor but to which the Lessor indicated must
be removed upon the expiration or earlier termination of this Lease, shall be
removed by the Lessee upon the expiration or earlier termination of this Lease
and the Leased Premises shall be restored by the Lessee to the same condition as
existed as of the Commencement Date, all at the Lessee's sole cost and expense.
22. Signage. Except as hereinafter expressly set forth, the Lessee hereby
agrees that it will not place or suffer to be placed or maintained on any
exterior door, exterior wall
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or window of the Leased Premises any sign, awning or canopy, or advertising
matter or other thing of any kind, and will not place or maintain any
decoration, lettering or advertising matter on the glass of any window or
exterior door of the Leased Premises which is not in conformity with the Rules
and Regulations of the Leased Premises as set forth by Lessor from time to time
and further, without first obtaining Lessor's prior written approval and
consent. Lessee further agrees to maintain such sign, awning, canopy,
decoration, lettering, advertising matter or other thing as may be approved by
Lessor in good condition and repair at all times. Lessee acknowledges that
Lessor, at its option, may regulate the lettering size, style and color of signs
so that all signs within the Leased Premises and the Building and on the Real
Property are of a coordinated and complementary size, color, style of lettering
and material. The foregoing notwithstanding, the Lessor and the Lessee
acknowledge and agree that so long as the Lessee continues to lease and occupy a
significant portion of the rentable space in the Building, the Lessee shall have
the exclusive right, at its sole cost and expense, to install a sign on the
exterior of the Building to identify the Lessee's presence within the Building;
provided, however, the size, style, color and method of installation of any such
signage shall be subject to the prior written approval thereof by the Lessor,
such approval not to be unreasonably withheld, conditioned or delayed. Upon the
termination of this Lease, or the Lessee's failure to lease and occupy a
significant portion of the rentable space in the Building, the Lessee shall, at
its sole cost and expense, remove any such signage from the Building and shall
restore the Building to the condition as existed immediately prior to the
installation of any such signage.
23. Liability. The Lessor shall not be liable for any injury to any
person while on the Leased Premises or the Real Property or for damage to
property while located on the Leased Premises or the Real Property, whether
owned by Lessor, Lessee or third parties, whether caused by or resulting from
any act, omission, or negligence of Lessor or any of its respective agents,
servants or employees, or by fire, or by any other casualty or condition
existing on or resulting to the Leased Premises or the Real Property during the
Term (except for acts caused intentionally or by the negligence of Lessor), and
Lessee shall maintain all of the insurance policies and coverages referred to in
this Lease to insure Lessor against any loss or liability on account of any such
claim. Lessor shall not be liable for any damage to any property at any time
located within or about the Leased Premises or the Real Property including, but
not limited to, property of Lessee, by whatsoever cause (except for acts caused
intentionally or by the negligence of Lessor), nor shall Lessor be liable in any
claim for damages by reason of inconvenience or interruption to the business of
Lessee, irrespective of the cause therefor (except for acts caused intentionally
or by the negligence of Lessor).
24. Assignment and Sublease. Except as hereinafter expressly set forth,
the Lessee may not assign this Lease or sublet the Leased Premises or any
portion thereof without the prior written consent of the Lessor, such consent
not to be unreasonably withheld, conditioned or delayed. The foregoing
notwithstanding, the Lessee may assign this Lease or sublet the Leased Premises
or a portion thereof to any entity which is owned and controlled by the Lessee
provided that the Lessee shall, in the event of any such subletting or
assignment, continue to remain fully liable to Lessor for all sums due under
this Lease and for the performance of all of the covenants and duties of the
Lessee hereunder.
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Anything contained in this Lease to the contrary notwithstanding, any approval
or consent of the Lessor with respect to any such requested assignment of
subletting of the Leased Premises by the Lessee shall not be deemed to be the
approval or the consent of the Lessor with respect to any such other or future
assignment or subletting request of the Lessee with respect to the Leased
Premises.
25. Inspection of Leased Premises. It is further agreed and understood
that the Lessor may enter the Leased Premises at any time during the Term, upon
reasonable advance notice to Lessee, in the presence of the Lessee and during
Lessee's business hours for the purposes of (a) ascertaining whether the Leased
Premises are kept in good order and repair; except, however, in an emergency
situation, in which event, the Lessor shall have the right to enter in and upon
the Leased Premises absolutely and without notice, (b) accessing, tying into,
repairing or replacing all plumbing, electrical, heating and air conditioning
facilities in the Leased Premises, and (c) showing the Leased Premises and/or
the Building for the Lessor's marketing purposes to other prospective tenants,
purchasers, lenders or other parties with whom the Lessor conducts, or is
interested in conducting, business. Lessee agrees that Lessor shall have the
right to enter upon the Leased Premises at any time during the last six (6)
months of the Term in the presence of the Lessee and during Lessee's business
hours in order to show the Leased Premises to prospective tenants.
26. Default. If the Lessee (a) does not pay in full any installment of
Rent, and/or other charge or payment herein agreed to be paid by Lessee, within
the period of ten (10) days after notice thereof from the Lessor to the Lessee,
or (b) violates or fails to perform or otherwise breaches any covenant or
agreement herein contained, which violation, failure or breach remains uncured
for a period of thirty (30) days after written notice has been given by Lessor
to Lessee, or if such violation, failure or breach is of such a nature that the
same cannot be completely cured or remedied during such thirty (30) day period,
and Lessee fails to promptly commence and diligently and in good faith pursue
curing such violation, failure or breach within such thirty (30) day period, or
(c) makes an assignment for the benefit of creditors, or if a petition is filed
by (and granted) or filed against Lessee for the appointment of a receiver,
resulting in an order or decree which continues unstayed and in effect for a
period in excess of sixty (60) days, or a bill in equity or other proceeding for
the appointment of a receiver of Lessee is filed and granted, resulting in an
order or decree which continues unstayed and in effect for a period in excess of
sixty (60) days or if proceedings for reorganization or composition of creditors
under any state or federal law is instituted by or against Lessee, resulting in
an order or decree which continues unstayed and in effect for a period in excess
of sixty (60) days, THEN, and in any of said events, there shall be deemed to be
by virtue thereof, a breach of this Lease and Lessor may:
(a) assert such remedies against Lessee for breach of this Lease as
Lessor is entitled to assert by applicable law and/or in a court of equity;
and/or
(b) terminate the Term of this Lease as to all future periods of time
and retain the Deposit pursuant to the terms of this Lease; and/or
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(c) collect from Lessee any and all costs and expenses incurred by
Lessor or as a result of the Lessee's breach including, without limitation,
reasonable attorneys' fees which Lessor was required to incur in enforcing the
terms of this Lease and utilize the Deposit, if any, toward paying the same.
27. Representations and Warranties.
-------------------------------
(a) Lessee's Representations and Warranties. The Lessee hereby
represents and warrants to the Lessor as follows:
(i) the Lessee is a corporation legally organized and validly
existing and qualified to do business under the laws of the
State of Delaware and has qualified to do business in the
Commonwealth of Pennsylvania;
(ii) the Lessee has the full legal authority and power to enter
into, and to perform its obligations under, this Agreement;
(iii) all requisite corporate action has been taken by the
Lessee to legally authorize the execution and delivery of
this Agreement and the performance of its obligations
hereunder; and
(iv) this Agreement is, and shall be, legally binding upon, and
enforceable against, the Lessee in accordance with its
terms.
(b) Lessor's Representations and Warranties. The Lessor hereby
represents and warrants to the Lessee as follows:
(i) the Lessor is a limited partnership legally organized and
validly existing and qualified to do business under the laws
of the Commonwealth of Pennsylvania;
(ii) the Lessor has the full legal authority and power to enter
into, and to perform its obligations under, this Agreement;
(iii) all requisite action has been taken by the Lessor to
legally authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder;
and
(iv) this Agreement is, and shall be, legally binding upon, and
enforceable against, the Lessor in accordance with its
terms.
28. Condemnation. In the event that all or five percent (5%) or more of
the Leased Premises is taken by any condemnation or eminent domain proceedings,
then either the Lessee or Lessor shall have the right to terminate this Lease by
delivering written notice of such election to the other party, and, in such
event, all obligations of Lessee and Lessor
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hereunder with respect to the period of time subsequent to such taking, shall,
thereafter, terminate and this Lease shall be null and void and of no further
force and effect. If, however, less than five percent (5%) of the Leased
Premises is taken by the exercise of the right of condemnation or eminent
domain, this Lease shall continue with respect to the remaining portion of the
Leased Premises, and the Minimum Rent herein specified to be paid by Lessee
shall be ratably reduced according to the area of the Leased Premises which is
taken. Lessor and Lessee shall separately be entitled to assert and receive any
damages due to either of them from the condemning governmental unit or other
corporation or entity exercising any such right of condemnation or eminent
domain.
29. Cumulative Remedies. All of the remedies hereinbefore given to Lessor
and Lessee and all rights and remedies given to them by law or equity shall be
cumulative and concurrent. The exercise by either Lessor or Lessee of any
particular right shall not be a waiver by either party of any other right herein
granted to Lessor and/or Lessee. If Lessor, at any time or times, shall accept
the Rent or the payment of other charges due from Lessee hereunder after the
same shall become due and payable, such acceptance shall not excuse delay upon
subsequent occasion or constitute or be construed as a waiver of any of Lessor's
rights.
30. Binding Upon Successors and Assigns. All rights and liabilities
herein given to or imposed upon the respective parties hereto shall extend to,
and be binding upon, their respective heirs, personal representatives,
successors and permitted assigns.
31. Mortgages. Subject to the provisions of Paragraph 9 hereof, this
Lease shall be subject and subordinate to all mortgages which now or hereafter
affect this Lease or the Leased Premises, and to all renewals, modifications,
consolidations, replacements and extensions thereof. In confirmation of such
subordination, non-disturbance and attornment, the Lessee shall execute promptly
any reasonable certificate that Lessor, or its mortgagee(s), may request
pursuant thereto. Lessor agrees to perform the terms imposed upon Lessor by all
mortgages and renewals, modifications, consolidations, replacements and
extensions thereof in order that the rights, occupancy and use of the Leased
Premises by Lessee under this Lease will not be interrupted or adversely
affected.
32. Severable. The terms, covenants and provisions of this Lease are
severable and divisible and, if any of the said terms, covenants and provisions
shall be invalidated by law or for other reason, the force and effect of the
other terms, covenants and provisions shall be deemed to be unaffected and be
legally enforceable as though the provisions invalidated had not been herein set
forth.
33. Notice. Any notice required to be given hereunder shall be given to
parties hereto as follows or at such other addresses as the parties hereto, or
either of them, may from time to time designate by notification to the other in
writing by registered or certified mail, postage prepaid:
If to Lessor: Paul-Francis Realty, L.P.
303 Market Street
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Kingston, PA 18704
Attention: Paul J. Siegel, Jr.
With a copy to: Rosenn Jenkins & Greenwald, L.L.P.
15 South Franklin Street
Wilkes-Barre, PA 18711
Attention: Lewis A. Sebia, Esquire
If to Lessee: US Foodservice Inc.
Cross Creek Pointe
Route 315
Wilkes-Barre, PA 18702
Attention: William Griffin, Vice President-
Administration
With a copy to: US Foodservice Inc.
Cross Creek Pointe
Route 315
Wilkes-Barre, PA 18702
Attention: Ann Cianflone, Esquire, General Counsel
34. No Recording. This Lease shall not be recorded with the Recorder of
Deeds or in any other public office for the recording of documents. Both Lessor
and Lessee agree that this Lease is binding upon each of them and is enforceable
with respect to all of the Leased Premises without such recording.
35. No Broker. This Lease was brought about by direct negotiations
between Lessor and Lessee, and neither party has any responsibility to
compensate any broker in connection with the execution of this Lease. Each
party hereby agrees to indemnify, defend and hold the other harmless from and
against any liability, obligation, cost, fee or expenses arising as a result of
any claim by or through the indemnitor.
36. Force Majeure. Whenever a period of time is prescribed in this Lease
for action to be taken by the Lessor regarding the substantial completion of the
construction of the Lessor's Improvements, the Lessor shall not be liable or
responsible for, and there shall be excluded from the computation for any such
period of time, any delays due to force majeure, which term shall include
strikes, riots, acts of God, shortages of labor or materials, war, governmental
approvals, laws, regulations or restrictions or any other cause of any kind
whatsoever which is beyond the reasonable control of the Lessor.
37. Estoppel Certificates. The Lessee agrees at any time, within ten (10)
days of Lessor's written request, to execute, acknowledge and deliver to Lessor
a written statement certifying that this Lease is unmodified and in full force
and effect (or, if there have been modifications), and the dates to which the
Minimum Rent, Additional Rent and other charges have been paid in advance, if
any, it being intended that any such statement
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pursuant to this Paragraph 37 may be relied upon by any prospective purchaser or
mortgagee of the Building or Real Property.
38. Rules and Regulations. The Lessee, its agents, employees, invitees,
servants and guests shall abide by and observe such reasonable rules and
regulations from the time of actual notice thereof, as may be promulgated from
time to time by the Lessor for the operation and maintenance of the Building
(collectively, the "Rules and Regulations"), provided a copy of such Rules and
Regulations is sent to the Lessee. Nothing contained in this Lease shall be
construed to impose upon the Lessor any duty or obligation to enforce such Rules
and Regulations, or the terms, conditions or covenants contained in any other
lease as against any other lessee, and the Lessor shall not be liable to the
Lessee for violation of the same by any other lessee, any other lessee's
employees, agents, business invitees, licensees, customers, clients, family
members or guests. The Lessor shall use reasonable efforts to apply and enforce
the Rules and Regulations uniformly and consistently with respect to all of the
lessees in the Building.
39. Financial Information. Upon the request of the Lessor, the Lessee
shall deliver to the Lessor's designated lender(s), from time to time, the most
recent financial statements of the Lessee as the Lessor's lender(s) may request
in connection with any financing or re-financing being conducted by the Lessor,
all of which shall be prepared in accordance with generally accepted accounting
principles consistently applied (collectively, the "Financial Information").
40. Limited Liability of Lessor. Notwithstanding any provision to the
contrary contained herein, Lessee shall look solely to the estate of Lessor in
and to the Real Property and the Building only (the "Specified Assets") in the
event of any claim against Lessor arising out of or in connection with this
Lease, the relationship of Lessor and Lessee or Lessee's use of the Leased
Premises (collectively, "Lessee's Claims"), and Lessee agrees that the liability
of Lessor arising out of or in connection therewith shall be limited to the
Specified Assets. No properties or assets of Lessor, other than the Specified
Assets, shall be subject to levy, execution or other enforcement procedures for
the satisfaction of any judgment (or other judicial process) or for the
satisfaction of any other remedy of Lessee arising out of or in connection with
the Lessee's Claims.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have caused this Lease to be duly executed as of the day and year first above
written.
WITNESS: LESSOR:
PAUL-FRANCIS REALTY, L.P.
a Pennsylvania limited partnership
/s/ Ann B. Cianflone BY:/s/ Paul J. Siegel, Jr.
- -------------------- -----------------------
ITS: Managing General Partner
ATTEST: LESSEE:
US FOODSERVICE INC.,
a Delaware corporation
/s/ Ann B. Cianflone BY:/s/ William Griffin
- -------------------- -------------------
Title: Secretary Its:Vice President
--------- --------------
(CORP SEAL)
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EXHIBIT "A"
(Real Property)
Exhibit "A" is the design documented in the Architect's schematic drawing LD-1,
as drawn by Kyle Kinsman Architecture & Design, dated August 15, 1995. Exhibit
"A" describes the real property on which a 61,725 square foot facility is to be
constructed on Lot #17, +/- 5.3 acres, in the East Mountain Business Park in
Plains Township, Pennsylvania. The subject of Exhibit "A" is further described
in Exhibit "F".
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EXHIBIT "B"
(Building)
Exhibit "B" is the design documented in the Architect's schematic drawing LD-1,
as drawn by Kyle Kinsman Architecture & Design, dated August 15, 1995. Exhibit
"B" describes a 3-story 61,725 square foot structure, with overall dimensions of
200' x 100' (200,000 square feet) per floor plus an entrance feature of 575
square feet per floor, that is to be constructed on Lot #17, +/- 5.3 acres, in
the East Mountain Business Park in Plains Township, Pennsylvania. The subject of
Exhibit "B" is further described in Exhibit "F".
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EXHIBIT "C"
(Leased Premises)
Exhibit "C" is the design documented in the Architect's schematic drawings A-1
and A-3, as drawn by Kyle Kinsman Architecture & Design, each dated August 15,
1995. Exhibit "C" describes the premises that will be leased by Paul-Francis
Realty, L.P. to US Foodservice Inc. pursuant to the Agreement of Lease dated as
of February 28, 1996. The subject of Exhibit "C" is further described in Exhibit
"F".
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EXHIBIT "D"
(Parking Area)
Exhibit "D" is the design documented in the Architect's schematic drawing LD-1,
as drawn by Kyle Kinsman Architecture & Design, dated August 15, 1995. Exhibit
"D" describes a parking area with spaces for 203 cars that is to be constructed
on Lot #17, +/- 5.3 acres, in the East Mountain Business Park in Plains
Township, Pennsylvania. The subject of Exhibit "D" is further described in
Exhibit "F".
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EXHIBIT "E"
(Access Area)
Exhibit "E" is the design documented in the Architect's schematic drawing LD-1,
as drawn by Kyle Kinsman Architecture & Design, dated August 15, 1995. Exhibit
"E" describes the access area to Lot #17, +/- 5.3 acres, in the East Mountain
Business Park in Plains Township, Pennsylvania. The subject of Exhibit "E" is
further described in Exhibit "F".
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EXHIBIT "F"
(Lessor's Improvements)
PAUL FRANCIS REALTY, L.P.
61,725 SQUARE FOOT FACILITY
PLAINS TOWNSHIP, PENNSYLVANIA
OCTOBER 13, 1995
BASIC SCOPE
-----------
The Project Scope of Work is generally described by the design documented in the
Architect's schematic drawings LD-1, C-1, C-2, C-3, C-4, C-5, C-6, as drawn by
Kyle Kinsman Architecture & Design, dated 8/15/95: It is understood that these
drawings are schematic in nature, and as such describe the relative size, shape,
and materials of the major building components as to general design intent; and
therefore describe only general aspects of the project and it is further
understood that the drawings will evolve to a greater level of specificity in
detail which is allowed for in the project scope, insofar as there is no
significant change in the general project description.
The project is to be constructed in the East Mountain Business Park (E.M.B.P.)
on Lot #17, +/- 5.3 acres. The building shall be a 3-story 61,725 s.f.
structure, with overall dimensions of 200' x 100' (20,000 SF) per floor plus an
entrance feature of 575 SF per floor. Typical floor to floor height shall be
+/-14'0". Vertical transportation shall be provided by two 3-stop hydraulic
elevators and via 2 stairtowers, one of which will be intercommunicating.
Plumbing, heating, ventilating, air conditioning, electrical, and sprinkler
systems shall be appropriate for standard office occupancy. These building
systems shall be designed on a design/build basis by the general contractor's
sub-contractors, in accordance with all applicable codes and ordinances. On-
site parking will be provided for 203 cars.
SITE CONSTRUCTION
-----------------
GRADING AND DRAINAGE
The site is to be graded to achieve as close to a balanced cut and fill of
earthwork as possible. Drainage will comply with local, state, and federal
agencies having jurisdiction. Storm water detention is not accommodated on-
site, but is included in the East Mountain Business Park storm water management
plan of which this project will be a part. All grading and drainage work shall
be in accordance with the approved Erosion and Sediment Pollution Control Plans
and the Architect's land development plans, including drawings ES-l and ES-2
dated 8/4/95; and C-1, C-2 (revised), LD-l dated 8/15/95.
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SITE UTILITIES
Sanitary sewer, water, natural gas, electric, telephone, and cable TV service
laterals are assumed to be stubbed on to the property and to be of adequate size
and capacity to service the proposed building. The General Contractor will
cause to provide the extension of all utility services to the building. All
utility service lines and conduits shall be adequately sized by the General
Contractor. Storm water will be controlled by catch basins and a piping system,
and delivered to the Business Park storm water collection system, in accordance
with the approved plans.
SITE CONCRETE
Two (2) concrete driveway entrance aprons will be constructed onto Baltimore
Drive. Concrete curbs will be installed along the front of the building, as
shown on the drawings. 4" thick concrete sidewalks over min. 4" crushed stone
base will be installed at the entrance to the building and along Baltimore
Drive, as shown on the drawings. All exterior concrete shall be broom finished
with troweled edges at joints at 5' on center.
LANDSCAPING
Landscaping will be designed by a PA registered Landscape Architect to
compliment the building and comply with E.M.B.P. requirements. An allowance of
$30,000 is established for the following items: topsoil, seeding, sod, plants,
shrubs, trees, and other landscape items.
BUILDING DESIGN
SUPERSTRUCTURE
The proposed building will be a 3-story pre-engineered steel frame structure, as
manufactured by Butler Manufacturing Company, each floor having an area of
approximately 20,575 s.f. All structural steel sections shall be designed in
accordance with the latest edition of the AISC "Specifications for the Design
Fabrication and Reaction of Structural Steel for Buildings." All cold-formed
steel structural members shall be designed in accordance with the latest edition
of the AISC "Specifications for the Design of Cold-formed Steel Structural
Members." All bar joists shall be in accordance with the latest edition of the
Standard Specifications of the Steel Joist Institute.
The building's roof shall be Butler's MR-24, Standing-Seam Roof System. This
system is designed to move independently with respect to the structural system
and carries a 20-year Extended Life Endorsement Warranty, a 20-year
Weathertightness Endorsement Warranty, and an Underwriters's Laboratories 90
mile per hour wind uplift rating.
The building's footings and foundations shall be designed by an independent PA
registered structural Engineer in accordance with recommended practices
applicable to the specific soil conditions of the building site. All reactions
for the proper design of the foundations shall
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be supplied by Butler Manufacturing Company, and all footings shall be
constructed using reinforced concrete and shall be formed, in accordance with
local codes. All foundation walls shall be constructed using stone aggregate
concrete masonry units, and shall be reinforced vertically with steel
reinforcing rods and horizontally with "Durawall" truss-type reinforcing at
alternating courses, or as per the structural drawings.
The building's floors shall be constructed using 4" thick, 3,500 psi concrete
slabs reinforced with fibermesh or welded wire fabric reinforcing on the first,
second, and third floors. All concrete floors shall have an adequate system of
control joints, as per the structural drawings. Surfaces shall be given a
smooth, hard, dense, troweled finish, and shall be level within the following
tolerances: FF=35 and FL=25, except in a 3' radius from any floor drain which
will be sloped for positive drainage. All exposed surfaces shall be treated
with one coat of commercial curing material. Control joints shall be sawn
within 12 hours after the floor is poured. The first floor slab shall be
installed over a six mil polyethylene vapor barrier or as direct by the
Structural Engineer.
ENGINEERED MASONRY
The elevator hoistway and pit, and the two stairtowers shall be constructed
using 10" stone aggregate concrete masonry units reinforced vertically with
steel reinforcing rods, and horizontally with "Durawall" truss-type reinforcing
at alternating courses, or as per the structural drawings.
EXTERIOR WALL SYSTEMS
All light gauge metal framing at the building's exterior perimeter walls shall
be constructed using 6" 16 gauge G60 metal studs at 16" o.c., or as recommended
by the steel stud manufacturer in order to achieve proper load requirements,
with 6" Rl9 batt insulation as manufactured by Owens-Corning CertainTeed or
equal with 1/2" type-x one hour fire rated gypsum board at the inside face, from
top of floor slab to underside of metal deck.
The building's exterior wall finishes consist of E.I.F.S. ("Dryvit",) brick
veneer, and areas of aluminum frame windows and curtainwall, as shown on the
Architect's schematic drawings A-5 and A-6.
The exterior insulation and finish system, specifically "Dryvit's" OUTSULATION
system, includes 2" of rigid foam board over 1/2" exterior gypsum sheathing over
light gauge metal framing as specified above: the E.I.F.S. shall be installed in
profiles of varying thicknesses, with size, shape, and configuration as
generally depicted in schematic drawings A-5 and A-6.
The 4" brick veneer shall be provided in limited areas as per schematic drawings
A-5 and A-6; the brick allowance for material shall be $400.00/M.
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The windows shall be a thermally-broken aluminum framing system, with 5' typical
height, with clear anodized finish and 1" tinted low, reflective insulating
glass. The aluminum curtainwall system at the entrance shall be Kawneer's 1600
series curtainwall, or equal, with opaque spandrel glass panels at floor levels;
all aluminum frames and members shall be extruded.
HARDWALL OFFICE PARTITIONAL CONSTRUCTION
The allowable area enclosed by hardwall partition construction per floor shall
be as follows:
1st floor: 2,250 s.f. (Eastern Insurance Group)
2nd floor: 0 s.f.
3rd floor: 5,000 s.f. (U.S. Foodservice, Inc.)
All interior partitions and dividing walls shall be constructed using 3-5/8" 25
gauge metal studs with 3 1/2" batt insulation and 1/2" gypsum board sheathing on
both sides to a height from floor to the underside of the ceiling. All
structural columns shall be enclosed using 1-5/8" 25 gauge metal studs, and 1/2"
gypsum board sheathing to a height of approximately 9'6" above the finished
floor. Walls surrounding restroom areas shall be constructed using 3-5/8" 25
gauge metal studs with 3-1/2" batt insulation and 1/2" gypsum board sheathing on
both sides to a height from floor to the underside of the deck.
The elevator tower shall be furred-out with 1-5/8" 25 gauge metal studs, and
1/2" gypsum board sheathing to a height of approximately 9'6" above the finished
floor. Interior construction separating the rear (eastern) stair tower shall be
one hour fire rated using 3-5/8" 25 gauge metal studs, and 5/8" type-X gypsum
board sheathing on both sides, equal to a height from floor to underside of the
deck. Interior construction on the second and third floors partitioning the
open lobby and the front (western) stair tower shall have one hour rated walls
using 3-5/8" 25 gauge metal studs, and 5/8" type-X gypsum board sheathing on
both sides, equal to a height from the second floor level to the underside of
the deck.
ENTRANCE
The entrance and central service core of the building consists of an area which
includes support space for the elevators, a stair tower, and mechanical and
electrical spaces.
The building's entrance includes a full height glass vestibule and a curved
steel canopy with metal roof deck and finished metal edges as per schematic
drawings A-5 and A-6. The entrance doors shall be Kawneer narrowline full-lite
doors, or equal, with hardware and pulls of matching finish.
INTERIOR FINISH
---------------
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The following interior finishes are included in this proposal. These finishes
have been selected to provide standard treatments for an office project.
Materials have been selected to insure durability and flexibility for the
building while providing positive work environments and projecting a desirable
corporate image.
DOORS
All interior doors shall be flush, solid-core oak wood veneer as manufactured by
Crown Doors or equal, with hollow metal frames as manufactured by Amweld or
equal; all doors shall be stained and sealed. Hollow metal frames shall have
oak wood veneer covering to match the wood doors.
The General Contractor will provide a pair of full-lite interior aluminum
narrowline doors with frames at each tenant suite main entrance.
HARDWARE
All locksets will be Yale commercial grace Augusta lever style 5300 Series or
equal. Door hinges shall be 4 1/2" Stanley F179 Series commercial grade.
Locksets will be master keyed.
WINDOWS
All interior frames and mullions shall be clear anodized aluminum; all cased
heads, jambs, and sills shall be painted gypsum board.
FLOOR COVERINGS
Carpet in all office areas shall be commercial grade direct glued own type with
an allowance of fifteen ($15.00) per square yard, color and pattern approved by
Owner. Vinyl composition tile in the kitchen and gym shall be 12" x 12", 1/8"
thick premium commercial grade vinyl composition tile manufactured by Kentile or
its equivalent, color approved by Owner. Cover base shall be 4" rubber in
standard color by VPI or equal, color approved by Owner.
All lobby areas shall have quarry tile floor and base, color approved by Owner.
The toilet rooms shall have ceramic tile floors, color approved by Owner.
The stair treads, nosings, and risers shall be rubber with non-skid abrasive
nosing, color approved by Owner.
WALL TREATMENTS
Entry, lobby, and executive office walls shall receive vinyl wallcovering in a
single standard pattern as manufactured by the Warner Company or equal. The
pattern shall have a total
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weight of 25 oz. per linear yard and conform to the GSA Federal Specification
CCC-W-408A&B for type 2 wall covering, with color approved by Owner.
All remaining interior gypsum board walls shall be taped, spackled, and painted
with two coats of Cook & Dunn latex eggshell or satin finish, color approved by
Owner.
The toilet rooms shall have ceramic tile wainscoting to a height of 48" above
the finished floor, color approved by Owner.
CEILINGS
All acoustical tile ceilings at the office areas shall be suspended to a nominal
height of 9'0". Ceilings throughout shall be 2' x 4' x 5/8" scored in a 2' x 2'
pattern, recessed white ceiling panels with standard 15/16" white grid as
manufactured by U.S.G. or equal. The entry lobby ceiling shall be a combination
of gypsum and acoustical tile.
PLUMBING
--------
GENERAL
The plumbing design shall be provided by the General Contractor's design/build
subcontractor, and shall be in accordance with applicable state and local codes.
The building shall be serviced by a 8" PVC Sanitary sewer main extension, an 8"
ductile iron water main for the fire service, a 2" domestic water service, and a
high pressure gas main. Metering for gas and water shall be supplied by
Pennsylvania Gas and Water Co. The storm water from the parking and roof areas
shall be conducted to a storm water management system via surface runoff
drainage, catch basins, and piping as per the approved Erosion and Sediment
Control Plans.
All piping shall be schedule 40 black steel for gas and type L copper for water.
All plumbing work shall be in accordance with all applicable code, standards and
governing agencies, including but not limited to:
a. Occupational Safety and Health Act Standards (OSHA)
b. All building codes
c. All health department regulators
d. Pennsylvania Department of Labor & Industry
e. American Disabilities Act
SPRINKLER SYSTEM
A complete sprinkler system will be furnished and installed. The design is in
accordance with the National Fire Protection Association requirements.
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The building shall be equipped with an ordinary hazard wet sprinkler system in
accordance with NFPA 13 regulations throughout the entire 61,725 square foot
facility. The sprinkler system shall be hydraulically calculated and designed
to meet all NFPA regulations for an ordinary use factor, and shall be ISO rated.
The Sprinkler system will be comprised of all ULFM approved Back flow
preventers, Alarm valves, Water Motor gongs, Fire Dept. connections, interior
system piping and fittings, and sprinkler heads. An eight inch ductile iron
fire protection main shall be extended from the property line to the riser
location in the building.
All sprinkler heads shall be dropped to the nominal height of the ceiling using
standard chrome finished pendant sprinkler heads.
One fire extinguisher and cabinet shall be provided in each of the lobby areas.
FIXTURES
All plumbing fixtures shall be of good commercial grade and meet local code
requirements in accordance with the attached Architectural Plans. Restroom
areas include appropriate accessory items for men's restrooms and women's
restrooms including soap dispensers, mirrors, toilet paper dispensers, paper
towel dispensers, handicap grab bars, and sanitary napkin dispensers, as
manufactured by McKinney and Franklin. Partitions dividing bathroom fixtures
shall be AAMCO or equal constructed of 1" thick formed material clad in 20-22
gauge sheet metal with a baked enamel standard finish.
MECHANICAL
----------
GENERAL
All mechanical systems shall be designed by the general contractor's
design/build subcontractor in accordance with all applicable codes, including,
but not limited to, BOCA 1993 Mechanical Code.
H.V.A.C.
The design of the heating and ventilation system shall be one ton of air
conditioning/400 s.f. The equipment shall include four Trane or equivalent
roof-top, packaged gas heat and electric cool HVAC units with economizers and
thermostats. Roof-top units shall consist of two (2) fifty ton and two (2)
thirty-five ton units.
The system shall be ducted supply with a plenum return.
All ductwork shall be galvanized sheet metal with standard fiberglass duct wrap
insulation, as manufactured by Knauf or equal, flexible duct of up to 10' in
length may be used for connections to "T" bar ceiling lay-in diffusers, Hart &
Cooley or equal, and lay-in return grills, quantity as necessary according to
the final floor plan layout.
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The system shall be designed as follows:
- Summer Conditions - to maintain a 75 degrees
Fahrenheit Dry Bulb temperature,
plus or minus 2 degrees Fahrenheit, and a 50%
relative humidity, plus or minus 5%, at 90 degrees
Fahrenheit Dry Bulb outdoor temperature.
- Winter Conditions - to maintain a 72 degrees Fahrenheit
Dry Bulb temperature, plus or minus 2 degrees
Fahrenheit, and a relative humidity greater than
40%, at 1 degree Fahrenheit Dry Bulb outdoor
temperature.
The HVAC system shall be designed using a minimum of forty-nine (49) variable
volume cooling control zones with room thermostats. A minimum of twenty-seven
(27) perimeter zones shall have hot water reheat coils for zone tempering
control which will be supplied by one roof mounted hot water boiler.
The HVAC system shall at all times provide fresh air in accordance with
mechanical building code.
Seven wall heaters shall be installed in the stair towers and entry foyer.
The following areas shall each be exhausted with a roof mounted exhaust fan in
accordance with applicable codes:
- Toilet rooms
- Kitchen area
The HVAC system shall be managed using electronic control systems with four (4)
central monitoring and management panels. These panels shall be centrally
located in electrical room and be remotely located on ceilings.
ELECTRICAL
----------
GENERAL
The electrical design shall be provided by the General Contractor's design/build
subcontractor, and shall be in accordance with applicable state and local codes.
Electrical design shall also be in accordance with the latest edition of the
National Electrical Code.
ELECTRICAL SERVICE/POWER DISTRIBUTION
Building power requirements shall be designed to include a 120/208 Volt, 1,600
amp service, as manufactured by Square D or its equivalent, with power to the
transformer provided by
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the local utility company. An appropriately sized transformer will be provided
by the utility company.
Power and lighting panels shall be supplied in separate tenant spaces to provide
individual sub-distribution of power.
One duplex receptacle shall be mounted on each of the office walls. A maximum
of eight duplex receptacles will be connected to a single branch circuit.
Power requirement for all electrical systems will be a maximum 8 watts/s.f.
Power distribution is as follows:
- Lighting 2 1/2 watts/s.f.
- Small Power 4 watts/s.f.
- Mechanical 4 to 5 watts/s.f.
- Misc. 1 watt/s.f.
Power to the low landscape partitioned areas will be from a power grid network
located approximately 2' - 3' above the suspended ceiling in a configuration of
approximately 20' x 25'. The power will be distributed throughout the entire
61,725 s.f. of all 3 floors of the building. At each 20' x 25' intersection,
there shall be an electrical junction box capable of supplying the power for the
required watts/s.f as denoted above. The Owner shall be responsible to
distribute that available power through an approved supply conduit to their
power poles which serve the low rise partitions in accordance with applicable
electrical codes.
LIGHTING FIXTURES
Lighting fixtures throughout the entire facility shall be 120 volt 2' x 4'
recessed 3 bulb fluorescent type fixtures with 3" deep 18 cell parabolic
louvers, energy saving ballasts and lamps, as manufactured by Hubbell or its
equivalent.
The lighting design will be based on the following foot candle levels:
a. Office areas 80 FC
b. Corridors and lobby 40 FC
c. Toilet rooms, small storage & misc. 20 FC
Specialty lighting fixtures (recessed incandescent, wall sconces) shall be
provided in limited quantities in lobbies and conference rooms.
SITE LIGHTING
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To provide twelve 25' free standing poles (SSP-425) with eighteen pole-mounted
parking lot light fixtures (RCSG400s 400 watt Magnuform II) as manufactured by
Hubell or its equivalent, installed on 18" round concrete bases with appropriate
anchor bolts.
FIRE PROTECTION ALARM SYSTEMS
The main 8" riser for the fire protection system will be monitored through a
main security system. The system shall include the necessary alarm panels,
ceiling mounted detectors, flow switches, camper switches, and wiring. The
General Contractor shall coordinate with the Owner's security system installer
to verify that the alarm panel may also be used for the Owner's security system.
SPECIALTIES
-----------
ELEVATOR
The building shall be equipped with two (2) Otis or equal 2,500 lb. capacity,
medium speed holeless hydraulic passenger elevator with three (3) stops each.
The elevators shall include a single slide door, baked enamel doors and frames,
in-car lantern, handrails at sides and rear, and provisions for Seismic Zone 2
design.
CODE INTERPRETATION AND ENFORCEMENT
-----------------------------------
All work shall comply with both the applicable Plains Township building codes
(BOCA Building Code of 1993; the BOCA Plumbing Code of 1993; the BOCA Mechanical
Code of 1993; The National Electrical Code of 1993; and PA Labor and Industry's
Chapters 49-59 as applicable to Group F Uses); and the Pennsylvania Department
of Labor and Industry Codes (PA Labor and Industry's Fire and Panic Regulations,
Chapters 49-59; Act 222, The Building Energy Conservation Act; and Act 235/166,
the American Disabilities Act).
QUALITY AND SERVICE
-------------------
Working in cooperation with the Architect, the General Contractor will work to
facilitate the execution of the project's objectives and maintain the standards
expected of the build-to-suit team, which have been established for all project
participants by the Owner. Progress against these objectives will be monitored
for the duration of the project by the Owner's representative.
Workmanship shall in all instances meet minimum industry standards for workman-
like quality in all respects, and shall be in accordance with the best modern
construction methods.
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SAFETY
------
It is the policy of Sordoni Construction Services that people and property are
our most important corporate assets; and the conservation thereof has
Management's highest priority, support and participation. Accidents which
result in personal injury and/or damage to property and equipment represents
needless waste and loss. To mitigate the effects of accidents on corporate
resources, both human and material, all operations shall be conducted in a safe
and efficient manner.
Sordoni Construction Services employs a full time Director of Safety to
implement and monitor our Safety Policy.
ASSUMPTIONS
The following assumptions have been utilized to allow us to offer the enclosed
proposal for your new facilities:
1. Costs for soils boring test holes in the area of the new construction
have been included. It is assumed that these tests will confirm:
A. 4,000 lb. soil bearing pressure
B. Water tables will be below all excavations necessary for new
construction
C. Soil to be excavated will be usable for construction purposes
intended: we assume no contaminated soils will be encountered.
D. No "sink holes" located on property.
If soil tests results indicate other than above, additional
construction costs may result. We have assumed there are no
underground or overhead utilities to interfere with construction.
2. It is assumed that entrances to the property as indicated on our
drawings will be allowed by the appropriate governing agencies.
3. We assume that our fire protection sprinkler system, as proposed, will
meet the requirements of your insurance company.
4. We have based our construction costs on merit shop labor rates.
5. This proposal assumes existing off-site utilities are adequate for new
construction and will be available adjacent to the property line at
the time of construction.
6. Estimate costs assumes that the design will achieve a cut-and-fill
balance on site.
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Exhibit "F" also contains the following Architect's schematic drawings, as drawn
by Kyle Kinsman Architecture & Design and each dated August 15, 1995: A-1,
Project Cover Sheet, LD-1, A-3, A-5, A-6, A-2, A-7, A-8, A-9, A-10, A-11, A-13,
A-14 and A-15. The schematic drawings are the Architect's descriptions of what
is described in the text of Exhibit "F".
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EXHIBIT "G"
-----------
(Lessee's Improvements)
EXCLUSIONS
The following items are specifically excluded from this proposal.
1. Unloading, storing, setting, wiring or piping for any of your company's
machinery, furnishings, or process equipment.
2. Special footings or foundations.
3. Telephone System or paging systems.
4. Equipment for kitchen and health club.
5. Millwork, cabinetry and shelving.
6. Building standard window treatments.
7. Building interior and exterior signage.
8. Security System, except as stated above.
9. Energy Management System, except as stated above.
10. Demountable partitions/ work stations.
11. Radon or Underground Degasification System.
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Exhibit 10.45
AGREEMENT
AGREEMENT, dated as of February 2, 1996, by and among Rykoff-Sexton, Inc., a
Delaware corporation ("RSI"), on the one hand, and the other Persons set forth
on the signature pages hereto (collectively, the "ML Entities"), on the other
hand.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently herewith, RSI, USF Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of RSI ("Merger Sub"), and US
Foodservice Inc., a Delaware corporation (the "Company"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement", capitalized terms used
without definition herein having the meanings ascribed thereto in the Merger
Agreement);
WHEREAS, the ML Entities are the beneficial and record owners of the number
of shares of Class A Common Stock described in Schedule I hereto (collectively,
the "ML Entities Shares"); and
WHEREAS, as a condition to its entering into the Merger Agreement, RSI has
required that the ML Entities agree, and the ML Entities have agreed, to enter
into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
Section 1. Covenants of ML Entities.
(a) During the term of this Agreement, each of the ML Entities agrees that it
shall not:
(i) sell, transfer, pledge, assign or otherwise dispose of, or enter
into any contract, option or other agreement with respect to the transfer,
pledge, assignment or other disposition of, any ML Entities Shares;
(ii) acquire any additional shares of Class A Common Stock without the
prior written consent of RSI;
(iii) enter into a voting agreement (other than the Standstill
Agreement in the form attached hereto as Exhibit B) with respect to any ML
Entities Shares; or
(iv) solicit or initiate any Company Alternative Proposal, participate
in any negotiations with respect to any Company Alternative Proposal,
furnish to any other person any confidential information with respect to
the
<PAGE>
Company or its business, or otherwise cooperate in any way with or assist
or participate in, or facilitate any Company Alternative Proposal. MLCP
shall promptly notify RSI if any such Company Alternative Proposal is made
to any ML Entity.
(b) Each of the ML Entities hereby agrees that at all times prior to the
Effective Time, they shall collectively continue to own and exercise voting
rights with respect to the shares of Class A Common Stock described in Schedule
I.
(c) Each ML Entity hereby agrees that at any meeting of the stockholders of
the Company, however called, and in any action by written consent of the
stockholders of the Company, it shall (i) vote the ML Entities Shares in favor
of the Merger and the Merger Agreement; and (ii) vote the ML Entities Shares
against any action or agreement which would result in a breach of any covenant,
representation or warranty of the Company under the Merger Agreement.
(d) As soon as practicable after the execution of this Agreement, each ML
Entity shall cause the following legend to be placed on the certificates
representing the ML Entities Shares:
"The shares of common stock represented by this certificate are
subject to an Agreement, dated as of February 2, 1996, with Rykoff-
Sexton, Inc. which imposes, among other things, certain restrictions
on the transfer of such shares."
(e) To the extent inconsistent with the foregoing provisions of this
Section 1, each of the ML Entities hereby revokes any and all previous proxies
or consents with respect to such ML Entity's Shares or any other voting
securities of the Company.
Section 2. Securities Act Covenants and Representations. Each of the ML
Entities hereby agrees and represents to RSI as follows:
(a) Such ML Entity has been advised that the offering, sale and delivery of
RSI Common Shares pursuant to the Merger will be registered under the Securities
Act on a Registration Statement on Form S-4. Such ML Entity has also been
advised, however, that to the extent such ML Entity is an "affiliate" of the
Company for purposes of the Securities Act at the time the Merger Agreement is
submitted for a vote of the stockholders of RSI, any public offering or sale by
such ML Entity of any RSI Common Shares received by such ML Entity in the Merger
will, under current law, require either (i) the further registration under the
Securities Act of any RSI Common Shares to be sold by such ML Entity, (ii)
compliance with Rule 145 promulgated by the SEC under the Securities Act or
(iii) the availability of another exemption from such registration under the
Securities Act.
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(b) Such ML Entity understands that stop transfer instructions will be
given to RSI's transfer agents with respect to RSI Common Shares and that a
legend will be placed on the certificates for the RSI Common Shares issued to
such ML Entity, or any substitutions therefor, to the extent such ML Entity is
considered an "affiliate" of the Company for purposes of the Securities Act at
the time the Merger Agreement is submitted for a vote of the stockholders of the
Company.
Section 3. Registration Rights; Standstill Agreement; Other Agreements;
Legal Opinion. At the Effective Time, RSI and the ML Entities shall enter into
(a) a Registration Rights Agreement in the form attached hereto as Exhibit A,
(b) a Standstill Agreement in the form attached hereto as Exhibit B and (c) an
Agreement in the form attached hereto as Exhibit C. At the Effective Time, the
ML Entities shall also execute and deliver to RSI an agreement in the form
attached hereto as Exhibit D. In addition, at or prior to the Effective Time,
each ML Entity shall execute and deliver to RSI an Affiliate Letter in the form
attached to the Merger Agreement as Exhibit A. At the Effective Time, the ML
Entities shall also cause Shearman & Sterling or other counsel for the ML
Entities satisfactory to RSI to deliver opinions to such ML Entities, dated the
Effective Time, in the form of Exhibit E-3 to the Merger Agreement and covering
the items specified in Exhibit E to this Agreement. In rendering the opinion in
the form of Exhibit E-3 to the Merger Agreement, Shearman & Sterling or such
other counsel may receive and rely upon the representations contained in the
agreement referred to in clause (c) of this Section 3 and on certificates of the
Company, stockholders of the Company, RSI, Merger Sub and others, including,
without limitation, the Company Tax Matters Certificate and the RSI Tax Matters
Certificate.
Section 4. Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of their obligations under this Agreement.
Section 5. Representations and Warranties of RSI. RSI represents and
warrants to each of the ML Entities as follows: Each of this Agreement and the
Merger Agreement has been approved by the Board of Directors of RSI, and the
Merger Agreement has been approved by the Board of Directors of Merger Sub and
by RSI as the sole stockholder of Merger Sub. Each of this Agreement and the
Merger Agreement has been duly executed and delivered by a duly authorized
officer of RSI and, in the case of the Merger Agreement, Merger Sub. Each of
this Agreement and the Merger Agreement constitutes a valid and binding
agreement of RSI and, in the case of the Merger Agreement, Merger Sub,
enforceable against RSI and, in the case of the Merger Agreement, Merger Sub in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
application which may affect the
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<PAGE>
enforcement of creditors' rights generally and by general equitable principles.
Section 6. Representations and Warranties of the ML Entities. Each ML
Entity represents and warrants to RSI as follows: This Agreement has been duly
authorized, executed and delivered by such ML Entity. This Agreement
constitutes the valid and binding agreement of such ML Entity, enforceable
against such ML Entity in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application which may affect the enforcement of creditors'
rights generally and by general equitable principles. Such ML Entity is the
record and beneficial owner of the ML Entities Shares set forth opposite its
respective name on Schedule I to this Agreement, and at the Closing shall be the
record and beneficial owner of the ML Entities Shares set forth opposite its
respective name on Schedule II to this Agreement, in each case free and clear of
all claims, liens, pledges, security interests, restrictions or encumbrances of
any nature whatsoever, with no restrictions on voting rights and other incidents
of record and beneficial ownership incident thereto, other than the Stockholders
Agreement. Neither the execution or delivery of this Agreement nor the
consummation by such ML Entity of the transactions contemplated hereby will
violate (a) the certificate of incorporation, by-laws or partnership agreement
of any such ML Entity, or (b) any provisions of any law, rule or regulation
applicable to such ML Entity or any contract or agreement to which such ML
Entity is a party, other than such violations described in the foregoing clause
(b) as would not prevent or materially delay the performance by such ML Entity
of its obligations hereunder or impose any liability or obligation on RSI.
Neither such ML Entity nor any of its Affiliates is, or at any time within the
preceding 12 months has been, directly or indirectly through any affiliate (as
defined in Article Twelfth C. of RSI's Restated Certificate of Incorporation),
the beneficial owner of 5% or more of the outstanding RSI Common Shares.
Section 7. Effectiveness and Termination. It is a condition precedent to
the effectiveness of this Agreement that the Merger Agreement shall have been
executed and delivered and be in full force and effect. This Agreement shall
automatically terminate and be of no further force or effect upon the earlier to
occur of (i) the termination of the Merger Agreement in accordance with its
terms or (ii) the Effective Time. Upon such termination of this Agreement,
except for any rights any party may have in respect of any breach by any other
party of its obligations or (subject to the following proviso) representations
or warranties hereunder, none of the parties hereto shall have any further
obligation or liability hereunder; provided, however, that the representations
and warranties hereunder shall survive for a period of 6 months following the
termination of this Agreement (and any party breaching any such representation
and
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<PAGE>
warranty shall be liable to the non-breaching party for any losses or damages
arising out of such breach) if (x) the Merger Agreement is terminated following,
and in reliance upon, any breach of any such representation and warranty
hereunder, and (y) notice of such breach is delivered to the breaching party
within such 6 month period.
Section 8. Miscellaneous.
(a) Notices, Etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party when delivered personally
(by courier service or otherwise), when delivered by telecopy and confirmed by
return telecopy, or seven days after being mailed by first-class mail, postage
prepaid in each case to the applicable addresses set forth below:
If to the ML Entities:
Merrill Lynch Capital Partners, Inc.
225 Liberty Street
New York, NY 10080-6123
Attn: James V. Caruso
Telecopy: (212) 236-7364
with a copy to:
Marcia L. Tu, Esq.
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281-1323
Telecopy: (212) 449-3207
with a copy to:
Bonnie Greaves, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
If to RSI:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive
Officer
Telecopy: (708) 971-6588
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<PAGE>
with a copy to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, IL 60601-1692
Telecopy: (312) 782-8585
or to such other address as such party shall have designated by notice so given
to each other party.
(b) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated except by an instrument
in writing signed by each of the parties hereto.
(c) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns, including without limitation in the case of any
corporate party hereto any corporate successor by merger or otherwise. Except
with the prior written consent of the other parties hereto, no party may assign
any of its rights or obligations hereunder.
(d) Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter. There are no representations, warranties or covenants by the parties
hereto relating to such subject matter other than those expressly set forth in
this Agreement. The parties hereto acknowledge and agree that RSI has executed
the Merger Agreement in reliance upon the representations, warranties and
agreements of the ML Entities set forth in this Agreement.
(e) Severability. If any term of this Agreement or the application thereof
to any party or circumstance shall be held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such term to the
other parties or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by applicable law, provided that in
such event the parties shall negotiate in good faith in an attempt to agree to
another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
(f) Specific Performance. The parties acknowledge that money damages are
not an adequate remedy for violations of this Agreement and that any party may,
in its sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any
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<PAGE>
violation hereof and, to the extent permitted by applicable law, each party
waives any objection to the imposition of such relief.
(g) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(h) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(i) No Third Party Beneficiaries. This Agreement is not intended to be for
the benefit of and shall not be enforceable by any person or entity who or which
is not a party hereto.
(j) Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
venue therein); provided, however, that such consent to jurisdiction is solely
for the purpose referred to in this paragraph (j) and shall not be deemed to be
a general submission to the jurisdiction of said Court or in the State of
Delaware other than for such purposes. Each party hereto hereby waives any
right to a trial by jury in connection with any such action, suit or proceeding.
(k) Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the law of the State
of Delaware.
(l) Name, Captions. The name assigned to this Agreement and the section
captions used herein are for convenience of reference only and shall not affect
the interpretation or construction hereof.
(m) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
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(n) Expenses. Each of the parties hereto shall bear its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, except that in the event of a dispute concerning the terms or
enforcement of this Agreement, the prevailing party in any such dispute shall be
entitled to reimbursement of reasonable legal fees and disbursements from the
other party or parties to such dispute.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
RYKOFF-SEXTON, INC.
By: /s/ Mark Van Stekelenburg
---------------------------------------
Name: Mark Van Stekelenburg
Title: Chairman, President and
Chief Executive Officer
MERRILL LYNCH CAPITAL PARTNERS, INC.
By: /s/ James V. Caruso
---------------------------------------
Name and Title: James V. Caruso
Vice President
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. B-XVIII, L.P.
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as General
Partner
By: Merrill Lynch Capital Partners,
Inc., as General Partner
By: /s/ James V. Caruso
---------------------------------------
Name and Title: James V. Caruso
Vice President
MERRILL LYNCH KECALP L.P. 1994
By: KECALP Inc., as General Partner
By: /s/ James V. Caruso
---------------------------------------
Name and Title: James V. Caruso
Vice President
ML OFFSHORE LBO PARTNERSHIP
NO. B-XVIII
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as Investment
General Partner
-9-
<PAGE>
By: Merrill Lynch Capital Partners,
Inc., as General Partner
By: /s/ James V. Caruso
--------------------------------------
Name and Title: James V. Caruso
Vice President
ML IBK POSITIONS, INC.
By: /s/ James V. Caruso
--------------------------------------
Name and Title: James V. Caruso
Vice President
MLCP ASSOCIATES L.P. NO. II
By: Merrill Lynch Capital Partners,
Inc., as General Partner
By: /s/ James V. Caruso
--------------------------------------
Name and Title: James V. Caruso
Vice President
MERRILL LYNCH KECALP L.P. 1991
By: KECALP Inc., as General Partner
By: /s/ James V. Caruso
--------------------------------------
Name and Title: James V. Caruso
Vice President
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. XIII, L.P.
By: Merrill Lynch LBO Partners
No. IV, L.P., as General Partner
By: Merrill Lynch Capital Partners,
Inc., as General Partner
By: /s/ James V. Caruso
--------------------------------------
Name and Title: James V. Caruso
Vice President
ML OFFSHORE LBO PARTNERSHIP NO. XIII
By: Merrill Lynch LBO Partners
No. IV, L.P., as Investment
General Partner
-10-
<PAGE>
By: Merrill Lynch Capital Partners,
Inc., as General Partner
By: /s/ James V. Caruso
---------------------------------------
Name and Title: James V. Caruso
Vice President
ML EMPLOYEES LBO PARTNERSHIP NO. I, L.P.
By: ML Employees LBO Managers, Inc.,
as General Partner
By: /s/ James V. Caruso
---------------------------------------
Name and Title: James V. Caruso
Vice President
MERRILL LYNCH KECALP L.P. 1987
By: KECALP Inc., as General Partner
By: /s/ James V. Caruso
---------------------------------------
Name and Title: James V. Caruso
Vice President
MERCHANT BANKING L.P. NO. II
By: Merrill Lynch MBP Inc., as
General Partner
By: /s/ James V. Caruso
---------------------------------------
Name and Title: James V. Caruso
Vice President
MLCP ASSOCIATES L.P. NO. IV
By: Merrill Lynch Capital Partners,
Inc., as General Partner
By: /s/ James V. Caruso
---------------------------------------
Name and Title: James V. Caruso
Vice President
-11-
<PAGE>
SCHEDULE I
SHARE OWNERSHIP
<TABLE>
<CAPTION>
Name of Stockholder Class A Common Stock
- ------------------------ --------------------
<S> <C>
MERRILL LYNCH CAPITAL
APPRECIATION PARTNER-
SHIP NO. B-XVIII, L.P. 2,990,738.3
MERRILL LYNCH KECALP
L.P. 1994 46,588.2
ML OFFSHORE LBO
PARTNERSHIP NO.
B-XVIII 1,504,723.9
ML IBK POSITIONS, INC. 988,456.7
MLCP ASSOCIATES L.P.
NO. II 35,866.7
MLCP ASSOCIATES L.P.
NO. IV 9,317.5
MERRILL LYNCH KECALP
L.P. 1991 130,263.0
MERRILL LYNCH CAPITAL
APPRECIATION PARTNER-
SHIP NO. XIII, L.P. 1,111,944.8
ML OFFSHORE LBO
PARTNERSHIP NO. XIII 28,269.6
ML EMPLOYEES LBO
PARTNERSHIP NO. I,
L.P. 27,641.7
MERRILL LYNCH KECALP
L.P. 1987 20,888.4
MERCHANT BANKING L.P.
NO. II 20,888.4
TOTAL 6,915,587.1
</TABLE>
-12-
<PAGE>
Exhibit A
---------
Registration Rights Agreement
-----------------------------
See Exhibit 10.46 to Form S-4
-13-
<PAGE>
Exhibit B
---------
Standstill Agreement
--------------------
See Exhibit 10.47 to Form S-4
-14-
<PAGE>
Exhibit C
---------
Tax Agreement
-------------
See Exhibit 10.48 to Form S-4
-15-
<PAGE>
Exhibit D
---------
Waiver
------
-16-
<PAGE>
Exhibit E
---------
Legal Opinion
-------------
-17-
<PAGE>
Exhibit 10.46
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of _______________, 1996, between
RYKOFF-SEXTON, INC., a Delaware corporation (the "Company"), and the other
signatories hereto listed on the signature pages hereof.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to an Agreement and Plan of Merger dated February 2,
1996 (the "Merger Agreement"), between the Company, USF Acquisition Corporation,
a Delaware corporation ("Merger Sub") and a wholly owned subsidiary of the
Company, and US Foodservice Inc., a Delaware corporation ("USF"), USF has merged
into Merger Sub on the date hereof, and pursuant thereto shares of Class A
Common Stock, par value $.01 per share, and Class B Common Stock, par value $.01
per share, of USF ("USF Common Stock"), held by the USF stockholders have been
converted into shares of Common Stock, of the par value of $.10 per share, of
the Company ("Common Stock"); and
WHEREAS, pursuant to an Agreement dated as of February 2, 1996 (the
"ML Agreement"), the Company has agreed to enter into this Agreement to provide
certain registration rights to the Shareholders with respect to such shares of
Common Stock.
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Merger Agreement.
For purposes of this Agreement, the following terms shall have the following
meanings:
"Affiliate" has the meaning specified in Rule 12b-2 under the Exchange
Act.
"Blackout Period" has the meaning specified in Section 6(a).
"Business Day" means a day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or in the case of determining a
date on which any payment is due, a day other than Saturday, Sunday or any day
on which banks located in New York City are authorized or obligated by law to
close.
"Counsel to the Holders" means the single law firm from time to time
representing the Holders, as appointed by the Holders of a majority in number of
the Registrable Securities.
<PAGE>
"Effective Period" means, with respect to any Holder, a period
commencing on the date of this Agreement and ending on the earlier of (i) the
first date as of which all Registrable Securities cease to be Registrable
Securities and (ii) the date on which such Holder may sell Registrable
Securities in accordance with Rule 145(d)(3) under the Securities Act.
"Equitable Holder" means each of the Equitable Entities (as such term
in defined in the Merger Agreement) that is a holder of Registrable Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means each Shareholder, and each Person who is an Affiliate
of such Shareholder, that is a holder of Registrable Securities.
"Initiating Holder" has the meaning specified in Section 3(a).
"Inspectors" has the meaning specified in Section 7(l).
"ML Holder" means each of the ML Entities (as such term in defined in
the Merger Agreement), and each Affiliate of ML IBK Positions, Inc., that is a
holder of Registrable Securities.
"NASD" means the National Association of Securities Dealers, Inc.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by any Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Records" has the meaning specified in Section 7(l).
"Registrable Securities" means, collectively, (i) the shares of Common
Stock issued to the Persons signatory hereto pursuant to the Merger,
(collectively, the "Shares") and (ii) any securities paid, issued or distributed
in respect of any Shares by way of stock dividend or distribution or stock split
or in connection with a combination of shares, recapitalization, reorganization,
merger, consolidation or otherwise. Securities will cease to be Registrable
Securities in accordance with Section 2 hereof.
"Registration Expenses" means any and all out-of-pocket expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, (i) all SEC,
2
<PAGE>
NASD and securities exchange registration and filing fees, (ii) all fees and
expenses of complying with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange or automated quotation system pursuant to Section 7(h), (v) the fees
and disbursements of counsel for the Company and of its independent public
accountants, (vi) the reasonable fees and expenses of any special experts
retained by the Company in connection with the requested registration, (vii) the
reasonable fees and expenses of Counsel to the Holders and (viii) out-of-pocket
expenses of underwriters customarily paid by the issuer to the extent provided
for in any underwriting agreement, but excluding (x) underwriting discounts and
commissions, transfer taxes, if any, and documentary stamp taxes, if any, and
(y) any fees or disbursements of counsel to the Holders or any Holder (other
than Counsel to the Holders).
"Registration Statement" means any registration statement of the
Company referred to in Section 3 or 4, including any Prospectus, amendments and
supplements to any such registration statement, including post-effective
amendments, and all exhibits and all material incorporated by reference in any
such registration statement.
"Registration Hold Period" means a Section 7(e) Period or a Section
7(m) Period.
"Related Securities" means any securities of the Company similar or
identical to any of the Registrable Securities, including, without limitation,
Common Stock and all options, warrants, rights and other securities convertible
into, or exchangeable or exercisable for, Common Stock.
"Requesting Holder" has the meaning specified in Section 3(a).
"SEC" means the Securities and Exchange Commission.
"Section 7(e) Period" has the meaning specified in Section 7(e).
"Section 7(m) Period" has the meaning specified in Section 7(m).
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder" means each of the Persons other than the Company who are
parties to this Agreement; provided, however, that for purposes of Section 3 of
this Agreement, Frank H.
3
<PAGE>
Bevevino shall be a Shareholder only as of such date he ceases to be an employee
of the Company or any Subsidiary of the Company.
"Shelf Registration" means a "shelf" registration statement on an
appropriate form pursuant to Rule 415 under the Securities Act (or any successor
rule that may be adopted by the SEC).
"Underwritten Registration or Underwritten Offering" shall mean an
underwritten offering in which securities of the Company are sold to an
underwriter for reoffering to the public.
2. Securities Subject to This Agreement. The securities entitled to
the benefits of this Agreement are the Registrable Securities. For the purposes
of this Agreement, any particular Registrable Securities will cease to be
Registrable Securities when and to the extent that (i) a Registration Statement
covering such Registrable Securities has been declared effective under the
Securities Act and such Registerable Securities have been disposed of pursuant
to such effective Registration Statement, (ii) such Registrable Securities are
distributed to the public pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act, (iii) such Registrable Securities shall have
been otherwise transferred or disposed of, new certificates therefor not bearing
a legend restricting further transfer shall have been delivered by the Company
and, at such time, subsequent transfer or disposition of such securities shall
not require registration or qualification of such securities under the
Securities Act or any similar state law then in force or (iv) such Registrable
Securities have ceased to be outstanding.
3. Piggy-Back Registration Rights. a. Whenever during the Effective
Period the Company shall propose to file a registration statement under the
Securities Act relating to the public offering of Company Common Stock for the
Company's own account (other than pursuant to a registration statement on Form
S-4 or Form S-8 or any successor forms, or filed in connection with an exchange
offer or an offering of securities solely to existing stockholders or employees
of the Company) or for the account of any holder of Common Stock (the
"Initiating Holder") and on a form and in a manner that would permit
registration of Registrable Securities for sale to the public under the
Securities Act, the Company shall (i) give written notice at least 20 Business
Days prior to the filing thereof to each Holder of Registrable Securities then
outstanding, specifying the approximate date on which the Company proposes to
file such registration statement and advising such Holder of its right to have
any or all of the Registrable Securities then held by such Holder included among
the securities to be covered thereby and (ii) at the written request of any such
Holder given to the Company within 15 days after such Holder's receipt of
written notice from the Company, include among the securities covered by such
registration statement the number of Registrable Securities
4
<PAGE>
which such Holder ("Requesting Holder") shall have requested be so included
(subject, however, to reduction in accordance with paragraph (b) of this
Section).
b. Each Holder of Registrable Securities desiring to participate in
an offering pursuant to Section 3(a) may include shares of Company Common Stock
in any Registration Statement relating to such offering to the extent that the
inclusion of such shares of Company Common Stock shall not reduce the number of
shares of Company Common Stock to be offered and sold by the Company or any
Initiating Holder pursuant thereto. If the lead managing underwriter selected
by the Company for an underwritten offering pursuant to Section 3(a) determines
that marketing factors require a limitation on the number of shares of Company
Common Stock to be offered and sold by Requesting Holders in such offering,
there shall be included in the offering only that number of shares of Company
Common Stock, if any, that such lead managing underwriter reasonably and in good
faith believes will not jeopardize the success of the offering of all the shares
of Company Common Stock that the Company desires to sell for its own account or
that the Initiating Holder desires to sell for its own account, as the case may
be. In such event and provided the lead managing underwriter has so notified
the Company in writing, the shares of Company Common Stock to be included in
such offering shall consist of (i) first, the securities the Company or the
Initiating Holder, as the case may be, proposes to sell, and (ii) second, the
number, if any, of Registrable Securities requested to be included in such
registration that, in the opinion of such lead managing underwriter can be sold
without jeopardizing the success of the offering of all the securities that the
Company or the Initiating Holder, as the case may be, desires to sell for its
own account, such amount to be allocated on a pro rata basis among the
Requesting Holders based on the number of Registrable Securities that each such
Requesting Holder has requested to be so included.
c. Nothing in this Section 3 shall create any liability on the part
of the Company to the Holders of Registrable Securities if the Company for any
reason should decide not to file a registration statement proposed to be filed
under Section 3(a) or to withdraw such registration statement subsequent to its
filing, regardless of any action whatsoever that a Holder may have taken,
whether as a result of the issuance by the Company of any notice hereunder or
otherwise.
d. A request by Holders to include Registrable Securities in a
proposed underwritten offering pursuant to Section 3(a) shall not be deemed to
be a request for a demand registration pursuant to Section 4.
4. Demand Registration Rights. (a) Upon the written request during
the Effective Period of ML Holders holding at least a majority in number of the
Registrable Securities held by the ML Holders that the Company effect the
registration with the
5
<PAGE>
SEC under and in accordance with the provisions of the Securities Act of all or
part of such ML Holder's or ML Holders' Registrable Securities (which written
request shall specify the aggregate number of shares of Registrable Securities
requested to be registered and the means of distribution), the Company will file
a Registration Statement covering such ML Holder's or ML Holders' Registrable
Securities requested to be registered within 30 Business Days after receipt of
such request; provided, however, that the Company shall not be required to take
any action pursuant to this Section 4:
(1) if prior to the date of such request the Company shall
have effected four registrations pursuant to this Section 4;
(2) if the Company has effected a registration pursuant to
this Section 4 within the 180-day period next preceding such request
which permitted ML Holders holding Registrable Securities to register
Registrable Securities;
(3) if the Company shall at the time have effective a Shelf
Registration pursuant to which the ML Holder or ML Holders that
requested registration could effect the disposition of such ML
Holder's or ML Holders' Registrable Securities in the manner
requested;
(4) if the Registrable Securities which the Company shall
have been requested to register shall have a then current market value
of less than $50,000,000, unless such registration request is for all
remaining Registrable Securities held by the ML Holders; or
(5) during the pendency of any Blackout Period;
provided, however, that the Company shall be permitted to satisfy its
obligations under this Section 4(a) by amending (to the extent permitted by
applicable law) within 10 Business Days after a written request for
registration, any Registration Statement previously filed by the Company under
the Securities Act so that such Registration Statement (as amended) shall permit
the disposition (in accordance with the intended methods of disposition
specified as aforesaid) of all of the Registrable Securities for which a demand
for registration has been made under this Section 4(a). If the Company shall so
amend a previously filed Registration Statement, it shall be deemed to have
effected a registration for purposes of this Section 4.
b. The ML Holders delivering such request may distribute the
Registrable Securities covered by such request by means of an underwritten
offering or any other means, as
6
<PAGE>
determined by the ML Holders holding a majority of Registrable Securities so
requested to be registered.
c. Except for a Registration Statement subject to Section 4(d),
a registration requested pursuant to this Section 4 shall not be deemed to be
effected for purposes of this Section 4 if it has not been declared effective by
the SEC or become effective in accordance with the Securities Act and the rules
and regulations thereunder.
d. ML Holders holding a majority in number of the Registrable
Securities held by ML Holders to be included in a Registration Statement
pursuant to this Section 4 may, at any time prior to the effective date of the
Registration Statement relating to such registration, revoke such request by
providing a written notice to the Company revoking such request. If a
Registration Statement is so revoked, the ML Holders holding Registrable
Securities requesting the filing of such Registration Statement shall reimburse
the Company for all its out-of-pocket expenses incurred in the preparation,
filing and processing of the Registration Statement.
e. The Company will not include any securities which are not
Registrable Securities in any Registration Statement filed pursuant to a demand
made under this Section 4 without the prior written consent of the ML Holders
holding a majority in number of the Registrable Securities held by ML Holders
and covered by such Registration Statement.
5. Selection of Underwriters. In connection with any underwritten
offering pursuant to a Registration Statement filed pursuant to a demand made
pursuant to Section 4, ML Holders holding a majority in number of the
Registrable Securities to be included in the Registration Statement shall have
the right to select a lead managing underwriter or underwriters to administer
the offering, which lead managing underwriter or underwriters shall be
reasonably satisfactory to the Company; provided, however, that the Company
shall have the right to select a co-managing underwriter or underwriters for the
offering, which co-managing underwriter or underwriters shall be reasonably
satisfactory to the ML Holders holding a majority in number of the Registrable
Securities held by ML Holders to be included in the Registration Statement.
6. Blackout Periods; Holdback. a. If the Company determines in good
faith that the registration and distribution of Registrable Securities (i) would
materially impede, delay, interfere with or otherwise adversely affect any
pending financing, registration of securities, acquisition, corporate
reorganization or other significant transaction involving the Company or (ii)
would require disclosure of non-public material information that the Company has
a bona fide business purpose for preserving as confidential, as determined by
the Board of Directors of the Company in good faith, the Company shall
7
<PAGE>
promptly give the Holders notice of such determination and shall be entitled to
postpone the filing or effectiveness of a Registration Statement for the
shortest period of time reasonably required, but in any event not to exceed 180
days with respect to matters covered by clause (i) above, and not to exceed 90
days with respect to matters covered by clause (ii) above (a "Blackout Period");
provided, that a Blackout Period with respect to a registration of securities
proposed by the Company may, at the election of the Company, commence on the
date that is 30 days prior to the date the Company in good faith estimates will
be the date of filing of, and end no later than the date, following the
effective date of such registration, specified in the form of underwriting
agreement relating to such registration during which the Company shall be
prohibited from selling, offering or otherwise disposing of Common Stock, but in
no event to exceed 180 days; provided further, that the Company shall not obtain
any deferral under this Section 6(a) more than once in any twelve-month period,
other than normal deferrals required prior to the public release of quarterly
financial results of the Company. The Company shall promptly notify each Holder
of the expiration or earlier termination of a Blackout Period.
b. Each Holder from time to time of more than 1% of Company
Common Stock agrees by acquisition of the Registrable Securities, if so
requested in writing by any managing underwriter, not to effect any public sale
or distribution of such securities or Related Securities during the seven days
prior to and the 120 days after the effective time of any underwritten
registration by the Company (either for its own account, or for the benefit of
the Holders of any securities of the Company, including Registrable Securities,
in each case as to which the Holders are entitled to request to be included
pursuant to Section 3) has become effective or such period of time shorter than
120 days that is sufficient and appropriate, in the opinion of the managing
underwriter, in order to complete the sale and distribution of securities
included in such registration.
7. Registration Procedures. If and whenever the Company is required
to use reasonable best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company will:
a. prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate, and
which form shall be available for the sale of the Registrable Securities in
accordance with the intended methods of distribution thereof (including, if
so requested by the Holders, distributions under Rule 415 under the
Securities Act pursuant to a Shelf Registration Statement), and use its
reasonable best efforts to cause such Registration Statement to become and
remain effective;
8
<PAGE>
b. prepare and file with the SEC amendments and post-effective
amendments to such Registration Statement (including any Shelf Registration
referred to in Section 4(a)) and such amendments and supplements to the
Prospectus used in connection therewith as may be necessary to maintain the
effectiveness of such registration or as may be required by the rules,
regulations or instructions applicable to the registration form utilized by
the Company or by the Securities Act or rules and regulations thereunder
necessary to keep such Registration Statement effective (i) in the case of
a firm commitment underwritten public offering, until each underwriter has
completed the distribution of all securities purchased by it and (ii) in
the case of any other registration, for up to 90 days (or longer period in
the event of a Registration Hold Period during such offering, as provided
in this Section 7) and cause the Prospectus as so supplemented to be filed
pursuant to Rule 424 under the Securities Act, and to otherwise comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement until the earlier of (x)
such 90th day (or longer period) and (y) such time as all Registrable
Securities covered by such Registration Statement have ceased to be
Registrable Securities;
c. furnish to each Holder of such Registrable Securities such number
of copies of such Registration Statement and of each amendment and post-
effective amendment thereto, any Prospectus or Prospectus supplement and
such other documents as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities by such Holder
(the Company hereby consenting to the use (subject to the limitations set
forth in the last paragraph of this Section 7) of the Prospectus or any
amendment or supplement thereto in connection with such disposition);
d. use its reasonable best efforts to register or qualify such
Registrable Securities covered by such Registration Statement under such
other securities or blue sky laws of such jurisdictions as each Holder
shall reasonably request, and do any and all other acts and things which
may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Holder, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction where, but for the requirements of this
Section 7(d), it would not be obligated to be so qualified, to subject
itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
9
<PAGE>
e. notify each Holder of any such Registrable Securities covered by
such Registration Statement, at any time when a Prospectus relating thereto
is required to be delivered under the Securities Act within the appropriate
period mentioned in Section 7(b), of the Company's becoming aware that the
Prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing (the period during which the Holders are required to refrain from
effecting public sales or distributions in such case being referred to as a
"Section 7(e) Period"), and prepare and furnish to such Holder a reasonable
number of copies of an amendment to such Registration Statement or related
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and the
time during which such Registration Statement shall remain effective
pursuant to Section 7(b) shall be extended by the number of days in the
Section 7(e) Period;
f. notify each Holder of Registrable Securities covered by such
Registration Statement at any time,
(1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same
has become effective;
(2) of any request by the SEC for amendments or supplements
to the Registration Statement or the Prospectus or for additional
information;
(3) of the issuance by the SEC of any stop order of which
the Company or its counsel is aware or should be aware suspending the
effectiveness of the Registration Statement or any order preventing
the use of a related Prospectus, or the initiation or any threats of
any proceedings for such purposes; and
(4) of the receipt by the Company of any written
notification of the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation
or any threats of any proceeding for that purpose;
g. otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC,
10
<PAGE>
and make available to its stockholders an earnings statement which shall
satisfy the provisions of Section 11(a) of the Securities Act, provided
that the Company shall be deemed to have complied with this paragraph if it
has complied with Rule 158 under the Securities Act;
h. use its reasonable best efforts to cause all such Registrable
Securities to be listed on any securities exchange or automated quotation
system on which the Common Stock is then listed, if such Registrable
Securities are not already so listed and if such listing is then permitted
under the rules of such exchange or automated quotation system, and to
provide a transfer agent and registrar for such Registrable Securities
covered by such Registration Statement no later than the effective date of
such Registration Statement;
i. if the registration is an underwritten registration, enter into a
customary underwriting agreement and in connection therewith:
(1) make such representations and warranties to the
underwriters in form, substance and scope as are customarily made by
issuers to underwriters in comparable underwritten offerings;
(2) obtain opinions of counsel to the Company (in form,
scope and substance reasonably satisfactory to the managing
underwriters), addressed to the underwriters, and covering the matters
customarily covered in opinions requested in comparable underwritten
offerings;
(3) obtain "cold comfort" letters and bring-downs thereof
from the Company's independent certified public accountants addressed
to the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters by
independent accountants in connection with underwritten offerings;
(4) if requested, provide indemnification in accordance with
the provisions and procedures of Section 10 hereof to all parties to
be indemnified pursuant to said Section; and
(5) deliver such documents and certificates as may be
reasonably requested by the managing underwriters to evidence
compliance with clause (f) above and with any customary conditions
contained in the underwriting agreement.
j. cooperate with the Holders of Registrable Securities covered by
such Registration Statement and the
11
<PAGE>
managing underwriter or underwriters or agents, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any
restrictive legends) representing the securities to be sold under such
Registration Statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters or agents, if any, or such Holders may request;
k. if reasonably requested by the managing underwriter or
underwriters or a Holder of Registrable Securities being sold in connection
with an underwritten offering, incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters and
the Holders of a majority in number of the Registrable Securities being
sold agree should be included therein relating to the plan of distribution
with respect to such Registrable Securities, including, without limitation,
information with respect to the principal amount of Registrable Securities
being sold to such underwriters, the purchase price being paid therefor by
such underwriters and with respect to any other terms of the underwritten
offering of the Registrable Securities to be sold in such offering and make
all required filings of such Prospectus supplement or post-effective
amendment as promptly as practicable upon being notified of the matters to
be incorporated in such Prospectus supplement or post-effective amendment;
l. provide any Holder of Registrable Securities included in such
Registration Statement, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or
other agent retained by any such Holder or underwriter (collectively, the
"Inspectors") with reasonable access during normal business hours to
appropriate officers of the Company and the Company's subsidiaries to ask
questions and to obtain information reasonably requested by any such
Inspector and make available for inspection all financial and other records
and other information, pertinent corporate documents and properties of any
of the Company and its subsidiaries and affiliates (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise
their due diligence responsibility; provided, however, that the Records
that the Company determines, in good faith, to be confidential and which it
notifies the Inspectors in writing are confidential shall not be disclosed
to any Inspector unless such Inspector signs or is otherwise bound by a
confidentiality agreement reasonably satisfactory to the Company; and
m. in the event of the issuance of any stop order of which the
Company or its counsel is aware or should be aware suspending the
effectiveness of the Registration Statement or of any order suspending or
preventing the use of any
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<PAGE>
related Prospectus or suspending the qualification of any Registrable
Securities included in the Registration Statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain its withdrawal; and the period for which the Registration Statement
shall be kept effective shall be extended by a number of days equal to the
number of days between the issuance and withdrawal of any stop orders (a
"Section 7(m) Period").
The Company may require each Holder of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such Holder and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request.
Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Sections 7(e) or 7(m), such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the Prospectus or Registration Statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 7(e) or the
withdrawal of any stop order contemplated by Section 7(m), and, if so directed
by the Company, such Holder will deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities at the time of receipt of such notice.
8. Registration Expenses. The Company will pay all Registration
Expenses in connection with all registrations of Registrable Securities pursuant
to Sections 3 and 4, and each Holder shall pay (x) any fees or disbursements of
counsel to such Holder (other than Counsel to the Holders) and (y) all
underwriting discounts and commissions and transfer taxes, if any, and
documentary stamp taxes, if any, relating to the sale or disposition of such
Holder's Registrable Securities pursuant to the Registration Statement.
9. Reports Under the Exchange Act. The Company agrees to:
a. file with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act; and
b. furnish to any Holder, during the Effective Period, forthwith upon
request (A) a written statement by the Company that it has complied with
the current public information and reporting requirements of Rule 144 under
the Securities Act and the Exchange Act and (B) a copy of the most recent
annual or quarterly report of the Company and
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<PAGE>
such other reports and documents so filed by the Company with the SEC under
the Exchange Act.
10. Indemnification; Contribution.
a. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder of Registrable Securities, its officers,
directors, agents, trustees, stockholders and each Person who controls such
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act), against all losses, claims, damages, liabilities and expenses
(including reasonable attorneys' fees, disbursements and expenses, as incurred)
incurred by such party pursuant to any actual or threatened action, suit,
proceeding or investigation arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in the Registration Statement, any
Prospectus or preliminary Prospectus, or any amendment or supplement to any of
the foregoing or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of a Prospectus or a preliminary Prospectus, in light of the
circumstances then existing) not misleading, except in each case insofar as the
same arise out of or are based upon any such untrue statement or omission made
in reliance on and in conformity with information with respect to such
indemnified party furnished in writing to the Company by such indemnified party
or its counsel expressly for use therein. In connection with an underwritten
offering, the Company will indemnify the underwriters thereof, their officers,
directors, agents, trustees, stockholders and each Person who controls such
underwriters (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Holders of Registrable Securities. Notwithstanding the
foregoing provisions of this Section 10(a), the Company will not be liable to
any Person who participates as an underwriter in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act), under the indemnity agreement in this Section 10(a) for
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense that arises out of such Person's failure to send or deliver
a copy of the final Prospectus to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of the Registrable Securities to such Person if
such statement or omission was corrected in such final Prospectus and the
Company has previously furnished copies thereof to such Holder or other Person
in accordance with this Agreement.
b. Indemnification by Holders of Registrable Securities. In
connection with any Registration Statement filed pursuant hereto, each Holder of
Registrable Securities to be
14
<PAGE>
covered thereby will furnish to the Company in writing such information with
respect to such Holder, including the name, address and the amount of
Registrable Securities held by such Holder, as the Company reasonably requests
for use in such Registration Statement or the related Prospectus and agrees
severally and not jointly to indemnify and hold harmless the Company, all other
Holders or any underwriter, as the case may be, and their respective directors,
officers, agents, trustees, stockholders and controlling Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act),
against any losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees, disbursements and expenses, as incurred), incurred
by such party pursuant to any actual or threatened action, suit, proceeding or
investigation arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in, or any omission or alleged omission
of a material fact required to be stated in, such Registration Statement,
Prospectus or preliminary Prospectus or any amendment or supplement to any of
the foregoing or necessary to make the statements therein (in case of a
Prospectus or preliminary Prospectus, in the light of the circumstances then
existing) not misleading, but only to the extent that any such untrue statement
or omission is made in reliance on and in conformity with information with
respect to such Holder furnished in writing to the Company by such Holder or its
counsel specifically for inclusion therein; provided, however, that the
liability of each Holder hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense that is equal to the proportion
that the net proceeds from the sale of shares sold by such Holder under such
registration statement bears to the total net proceeds from the sale of all
securities sold thereunder, but not in any event to exceed the net proceeds
received by such Holder from the sale of Registrable Securities covered by such
Registration Statement.
c. Conduct of Indemnification Proceedings. Any Person entitled
to indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such indemnified party of any written
notice of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such indemnified party may claim
indemnification or contribution pursuant to this Agreement (provided that
failure to give such notification shall not affect the obligations of the
indemnifying party pursuant to this Section 10 except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure). In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the
15
<PAGE>
defense thereof, the indemnifying party shall not be liable to such indemnified
party under these indemnification provisions for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation, unless in the reasonable judgement of any indemnified
party a conflict of interest is likely to exist, based on the written opinion of
counsel, between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
not be liable for the fees and expenses of (i) more than one counsel for all
Holders of Registrable Securities who are indemnified parties, selected by a
majority of the Holders of Registrable Securities who are indemnified parties
(which choice shall be reasonably satisfactory to the Company), (ii) more than
one counsel for the underwriters or (iii) more than one counsel for the Company
in connection with any one action or separate but similar or related actions.
An indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with
respect to such claims, unless in the reasonable judgment of any indemnified
party based on the written opinion of counsel a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels. No
indemnifying party, in defense of any such action, suit, proceeding or
investigation, shall, except with the consent of each indemnified party, consent
to the entry of any judgment or entry into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such action,
suit, proceeding or investigation to the extent the same is covered by the
indemnity obligation set forth in this Section 10. No indemnified party shall
consent to entry of any judgment or enter into any settlement without the
consent of each indemnifying party.
d. Contribution. If the indemnification from the indemnifying
party provided for in this Section 10 is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities and
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the actions
which resulted in such losses, claims, damages, liabilities and expenses, as
well as any other relevant equitable considerations; provided, however, that the
liability of each Holder hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense that is equal to the proportion
that
16
<PAGE>
the net proceeds from the sale of shares sold by such Holder under such
Registration Statement bears to the total net proceeds from the sale of all
securities sold thereunder, but not in any event to exceed the net proceeds
received by such Holder from the sale of Registrable Securities covered by such
Registration Statement. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 10(c), any legal and other fees and expenses
reasonably incurred by such indemnified party in connection with any
investigation or proceeding.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 10, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 10(a) or (b), as the case may be, without regard to the
relative fault of said indemnifying parties or indemnified party or any other
equitable consideration provided for in this Section 10(d).
e. The provisions of this Section 10 shall be in addition to
any liability which any indemnifying party may have to any indemnified party and
shall survive the termination of this Agreement.
11. Participation in Underwritten Offerings. No Holder of
Registrable Securities may participate in any underwritten offering pursuant to
Section 3 hereunder unless such Holder (a) agrees to sell such Holder's
securities on the basis provided in any underwriting arrangements approved by
the Company in its reasonable discretion and (b) completes and executes all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
12. Miscellaneous. a. Remedies. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement
17
<PAGE>
or prevent any violation hereof and, to the extent permitted by applicable law,
each party waives any objection to the imposition of such relief.
b. Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority in number of the Registrable Securities then outstanding.
c. Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
(i) if to an ML Holder to:
Merrill Lynch Capital Partners, Inc.
225 Liberty Street
New York, NY 10080-6123
Attn: James V. Caruso
Telecopy: (212) 236-7364
with a copy to:
Marcia L. Tu, Esq.
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281-1323
Telecopy: (212) 449-3207
with a copy to:
Bonnie Greaves, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
(ii) if to an Equitable Holder to:
Alliance Corporate Finance
Group Incorporated
1285 Avenue of the Americas
19th Floor
New York, NY 10019
Attention: Corporate Finance
Department
18
<PAGE>
Telecopy: (212) 554-1032
(iii) if to Frank H. Bevevino to:
Frank H. Bevevino
US Foodservice Inc.
Crosscreek Pointe
1065 Highway 315, Suite 101
Wilkes-Barre, PA 18702
Telecopy: (717) 822-0909
(iv) if to the Company to:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive
Officer
Telecopy: (708) 971-6588
with copies to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, IL 60601-1692
Telecopy: (312) 782-8585
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
d. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, any Holder other than the
Shareholders and any successors thereof; provided, however, that (i) any Holder
shall have agreed in writing to become a Holder under this Agreement and to be
bound by the terms and conditions hereof and (ii) subject to clause (i), this
Agreement and the provisions of this Agreement that are for the benefit of the
Holders shall not be assignable by any Holder to any Person that is not so
permitted to be a Holder, and any such purported assignment shall be null and
void.
e. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
f. Descriptive Headings. The descriptive heading used herein
are inserted for convenience of reference
19
<PAGE>
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
g. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
h. Severability. If any term of this Agreement or the
application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such term to the other parties or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by applicable law,
provided that in such event the parties shall negotiate in good faith in an
attempt to agree to another provision (in lieu of the term or application held
to be invalid or unenforceable) that will be valid and enforceable and will
carry out the parties' intentions hereunder.
i. Entire Agreement. This Agreement constitutes the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. There are no representations, warranties or covenants by the
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
RYKOFF-SEXTON, INC.
By: __________________________________________
Mark Van Stekelenburg
Chairman, President and Chief
Executive Officer
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. B-XVIII, L.P.
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as General
Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: __________________________________________
Name and Title:
MERRILL LYNCH KECALP L.P. 1994
By: KECALP Inc., as General Partner
By: __________________________________________
Name and Title:
ML OFFSHORE LBO PARTNERSHIP
NO. B-XVIII
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as Investment
General Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: __________________________________________
Name and Title:
21
<PAGE>
ML IBK POSITIONS, INC.
By: __________________________________________
Name and Title:
MLCP ASSOCIATES L.P. NO. II
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: ___________________________________________
Name and Title:
MERRILL LYNCH KECALP L.P. 1991
By: KECALP Inc., as General Partner
By: ___________________________________________
Name and Title:
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. XIII, L.P.
By: Merrill Lynch LBO Partners No. IV, L.P., as
General Partner
By: Merrill Lynch Capital Partners, Inc., as
General Partner
By: ___________________________________________
Name and Title:
ML OFFSHORE LBO PARTNERSHIP NO. XIII
By: Merrill Lynch LBO Partners
No. IV, L.P., as Investment
General Partner
22
<PAGE>
By: Merrill Lynch Capital Partners, Inc., as
General Partner
By: ___________________________________________
Name and Title:
ML EMPLOYEES LBO PARTNERSHIP NO. I, L.P.
By: ML Employees LBO Managers, Inc., as General
Partner
By: ___________________________________________
Name and Title:
MERRILL LYNCH KECALP L.P. 1987
By: KECALP Inc., as General Partner
By: ___________________________________________
Name and Title:
MERCHANT BANKING L.P. NO. II
By: Merrill Lynch MBP Inc., as General Partner
By: ___________________________________________
Name and Title:
MLCP ASSOCIATES L.P. NO. IV
By: Merrill Lynch Capital Partners, Inc., as
General Partner
By: ___________________________________________
Name and Title:
23
<PAGE>
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: ___________________________________________
Name and Title:
EQUITABLE DEAL FLOW FUND, L.P.
By: EQUITABLE MANAGED ASSETS, L.P., as General
Partner
By: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES, as General Partner
By: ___________________________________________
Name and Title:
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
By: ___________________________________________
Name and Title:
________________________________________________
Frank H. Bevevino
24
<PAGE>
Exhibit 10.47
FORM OF STANDSTILL AGREEMENT
----------------------------
STANDSTILL AGREEMENT (the "Agreement"), dated as of ____________, 1996, by
and between RYKOFF-SEXTON, INC., a Delaware corporation ("RSI"), on the one
hand, and the other Persons set forth on the signature pages hereto
(collectively, the "ML Entities"), on the other hand.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, RSI, USF Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of RSI ("Merger Sub"), and US Foodservice Inc., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger dated February 2, 1996 (the "Merger Agreement"; capitalized terms used
without definition herein having the meanings ascribed thereto in the Merger
Agreement);
WHEREAS, as a result of the Merger, the ML Entities will beneficially own
approximately 36.4% of the issued and outstanding RSI Common Shares, depending
upon the Exchange Ratio; and
WHEREAS, pursuant to the Agreement dated as of February 2, 1996 (the "ML
Agreement") between RSI, on the one hand, and the ML Entities, on the other
hand, RSI and the ML Entities have agreed that at the Effective Time they shall
enter into a Standstill Agreement in the form of this Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, RSI and the ML Entities hereby agree
as follows:
ARTICLE I
DEFINITIONS
-----------
For purposes of this Agreement, the following terms have the following
meanings:
(a) "Additional Percentage" shall mean (w) 2% of the Total Voting Power,
in the event that the ML Entities and their Affiliates beneficially own Voting
Securities representing in the aggregate at least 30% of the Total Voting Power;
(x) 3% of the Total Voting Power, in the event that the ML Entities and their
Affiliates beneficially own Voting Securities representing in the aggregate less
than 30%, but at least 22%, of the Total Voting Power; (y) 4% of the Total
Voting Power, in the event that the ML Entities and their Affiliates
beneficially own Voting Securities representing in the aggregate less than 22%,
but at least 16%, of
<PAGE>
the Total Voting Power; and (z) 5% of the Total Voting Power, in the event that
the ML Entities and their Affiliates beneficially own Voting Securities
representing in the aggregate less than 16%, but at least 10%, of the Total
Voting Power.
(b) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"); provided,
however, that any corporation in which an ML Entity or any of its Affiliates
owns less than a majority of the securities entitled generally to vote for the
election of directors shall not be considered an Affiliate of such ML Entity or
such Affiliate unless such ML Entity or such Affiliate otherwise controls such
corporation.
(c) "Beneficial ownership" and "beneficially own" shall have the
meanings set forth in Rule 13d-3 under the Exchange Act.
(d) "Continuing Director" and "Continuing Director Quorum" shall have
the meanings set forth in Article Thirteenth of the Restated Certificate of
Incorporation of RSI, as amended from time to time; provided, however, that no
ML Director shall constitute a Continuing Director or be counted in determining
the presence of a Continuing Director Quorum.
(e) "Control" shall mean, with respect to a Person or a Group, (i)
beneficial ownership by such Person or Group of securities entitling it to
exercise in the aggregate more than 50 percent of the votes in any election of
directors or other governing body of the entity in question; or (ii) possession
by such Person or Group of the power, directly or indirectly, (x) to elect a
majority of the board of directors (or equivalent governing body) of the entity
in question or (y) in case of a non-corporate entity, to manage or govern the
business, operations or investments of any such non-corporate entity.
(f) "Group" shall have the meaning comprehended by Section 13(d)(3) of
the Exchange Act; provided that, solely for purposes of Section 3.1(a)(iv) of
this Agreement, the ML Entities shall not by themselves constitute a "Group."
(g) "Person" shall have the meaning set forth in Section 3(a)(9) of
the Exchange Act.
(h) "ML Representative" means any natural person who has been chosen
in writing, with notice thereof to RSI, by the ML Entities holding beneficial
ownership of Voting Securities representing in the aggregate a majority of the
Total Voting Power held by the ML Entities, __________________ being hereby
designated as the initial ML Representative.
(i) "Schedule 13D Filer" means any Person or Group which, based on its
direct or indirect beneficial ownership of any Voting Securities, is, or after
the acquisition of such
2
<PAGE>
beneficial ownership would be, required to file a statement on Schedule 13D with
the SEC in accordance with Rule 13d-1 under the Exchange Act, but shall not
include any Schedule 13G Filer.
(j) "Schedule 13G Filer" means any Person or Group which, based on its
direct or indirect beneficial ownership of any Voting Securities, is, or after
the acquisition of such beneficial ownership would be, required to file a
statement on Schedule 13D with the SEC in accordance with Rule 13d-1 under the
Exchange Act, but which in lieu of such filing may instead file a short-form
statement on Schedule 13G in accordance with such Rule.
(k) "Standstill Percentage" means 36.4% of the Total Voting Power;
provided that in the event that the percentage of the Total Voting Power
represented by the shares of Voting Securities beneficially owned by the ML
Entities and their Affiliates from time to time is less than 36.4%, then the
Standstill Percentage shall be automatically reduced to the percentage of Total
Voting Power represented by shares of Voting Securities beneficially owned by
the ML Entities and their Affiliates from time to time; provided further, that
(x) following any such reduction in the Standstill Percentage, the Standstill
Percentage shall not thereafter be subject to any increase (other than as
provided for in the following clause (y)), and (y) if the percentage of Total
Voting Power represented by shares of Voting Securities beneficially owned by
the ML Entities and their Affiliates is increased as a result of any RSI Action
(as defined in Section 3.1(a)(i) of this Agreement), the Standstill Percentage
shall be automatically increased to reflect such RSI Action.
(l) "Total Voting Power" means, at any time, the aggregate number of
votes which may be cast by holders of outstanding Voting Securities.
(m) "Transfer" means sell, transfer, assign, pledge, hypothecate, give
away or in any manner dispose of any Voting Securities.
(n) "Voting Securities" means the RSI Common Shares and any other
securities (including voting preferred stock) issued by RSI which are entitled
to vote generally for the election of directors of RSI, whether currently
outstanding or hereafter issued (other than securities having such powers only
upon the occurrence of a contingency).
ARTICLE II
BOARD REPRESENTATION
--------------------
2.1 Initial Board Representation. At the Effective Time, RSI will (a)
take such action as may be necessary to increase the
3
<PAGE>
size of the Board of Directors of RSI (the "Board of Directors") to 12, and (b)
use its best efforts to fill four of the vacancies thereby created in the three
classes of directors with directors designated by the ML Representative (each, a
"ML Director" and, collectively, the "ML Directors") in accordance with Article
Thirteenth of RSI's Restated Certificate of Incorporation. Of the four initial
ML directors, one shall be appointed to Class A (current term expiring in 1996),
one shall be appointed to Class B (current term expiring in 1998) and two shall
be appointed to Class C (current terms expiring in 1997). The ML Entities
acknowledge that any designees of ML Directors who are not employees of either
an ML Entity which is controlled by Merrill Lynch & Co., Inc. or an Affiliate of
an ML Entity which is controlled by Merrill Lynch & Co., Inc. must be reasonably
acceptable to the Continuing Directors of RSI.
2.2 Continuing Board Representation. Until such time as the ML Entities
no longer beneficially own Voting Securities representing in the aggregate at
least 10% of the Total Voting Power, RSI covenants and agrees as follows:
(a) except as contemplated by this Agreement or as otherwise agreed to
by a majority of the ML Directors, RSI will not take or recommend to its
stockholders any action which would (i) cause the Board of Directors to consist
of any number of directors other than twelve directors divided into three
classes of four directors each or (ii) result in any amendment to the By-Laws of
RSI or the By-Laws or Regulations of any Subsidiary (as defined in Section
2.3(b) hereof) in effect on the date hereof that would impose any qualifications
to the eligibility of directors of RSI or any Subsidiary to serve on any
committee of the Board of Directors, any Subsidiary Board or any committee of
any Subsidiary Board, except as may be required by applicable law;
(b) so long as the ML Entities beneficially own Voting Securities
representing in the aggregate at least 34% of the Total Voting Power, RSI will
use its best efforts to cause the Nominating Committee of the Board of Directors
(the "Nominating Committee") (or if the Nominating Committee makes no such
recommendation, the Board of Directors) to recommend for election in the
applicable year in which the respective class term expires, one ML Director in
Class A, one ML Director in Class B and two ML Directors in Class C, in each
case as designated by the ML Representative; provided, that if despite such best
efforts, any such ML Director is not elected by the stockholders of RSI, RSI
shall have no further obligations under this Section 2.2(b) for the applicable
year;
(c) in the event that the ML Entities beneficially own Voting
Securities representing in the aggregate less than 34%, but at least 27%, of the
Total Voting Power, RSI will use its best efforts to cause the Nominating
Committee (or if the Nominating Committee makes no such recommendation, the
Board of
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Directors) to recommend for election in the applicable year in which the
respective class term expires, one ML Director in Class A, one ML Director in
Class B and one ML Director in Class C, in each case as designated by the ML
Representative; provided, that if despite such best efforts, any such ML
Director is not elected by the stockholders of RSI, RSI shall have no further
obligations under this Section 2.2(c) for the applicable year;
(d) in the event that the ML Entities beneficially own Voting
Securities representing in the aggregate less than 27%, but at least 16%, of the
Total Voting Power, RSI will use its best efforts to cause the Nominating
Committee (or if the Nominating Committee makes no such recommendation, the
Board of Directors) to recommend for election in the applicable year in which
the respective class term expires, one ML Director in Class A and one ML
Director in Class B or Class C, in each case as designated by the ML
Representative; provided, that if despite such best efforts, any such ML
Director is not elected by the stockholders of RSI, RSI shall have no further
obligations under this Section 2.2(d) for the applicable year; and
(e) in the event that the ML Entities beneficially own Voting
Securities representing in the aggregate less than 16%, but at least 10%, of the
Total Voting Power, RSI will use its best efforts to cause the Nominating
Committee (or if the Nominating Committee makes no such recommendation, the
Board of Directors) to recommend for election in the applicable year in which
the respective class term expires, one ML Director in Class A; provided, that if
despite such best efforts, such ML Director is not elected by the stockholders
of RSI, RSI shall have no further obligations under this Section 2.2(e) for the
applicable year.
2.3 Committee Representation; Subsidiary Board Representation. (a)
Until such time as the ML Entities no longer beneficially own Voting Securities
representing in the aggregate at least 16% of the Total Voting Power, to the
extent that, and for so long as, any of the ML Directors is qualified under the
then-current rules and regulations of the New York Stock Exchange ("NYSE
Rules"), the rules and regulations under the Internal Revenue Code of 1986, as
amended, relating to the qualification of employee stock benefit plans, the
rules and regulations under Section 16(b) of the Exchange Act, including Rule
16b-3 thereunder or any successor rule, and RSI's Bylaws, RSI shall use its best
efforts to cause the Board of Directors to designate one of the ML Directors to
serve on each of the committees of the Board of Directors to the same extent,
and on the same basis, as the other members of the Board of Directors; provided,
however, that subject to the foregoing director qualification requirements, in
the event that, and for so long as, the ML Entities own Voting Securities
representing in the aggregate at least 10% of the Total Voting Power, RSI shall
use its best efforts to cause the Board of Directors to designate one of the ML
Directors to serve on the Nominating Committee and the
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Management Development Compensation and Stock Option Committee of the Board of
Directors to the same extent, and on the same basis, as the other members of the
Board of Directors.
(b) Until such time as the ML Entities no longer beneficially own
Voting Securities representing in the aggregate at least 10% of the Total Voting
Power, to the extent that (I) any Continuing Director who is not an officer or
employee of RSI ("Outside Director") is also a director of any wholly-owned
subsidiary of RSI ("Subsidiary"), and (II) the ML Directors are qualified under
the Bylaws or Regulations of the relevant Subsidiary, RSI shall cause to be
included (i) on the board of directors of such Subsidiary a number of ML
Directors equal to the product of (x) the number of Continuing Directors on the
board of directors of such Subsidiary (a "Subsidiary Board"), multiplied by (y)
a quotient, the numerator of which shall be the total number of ML Directors
which RSI is required to use its best efforts to cause the Nominating Committee
to recommend for election pursuant to Section 2.2(b), 2.2(c), 2.2(d) or 2.2(e),
as the case may be, and the denominator of which shall be twelve, provided that
if the product calculated above is less than 1, then to the extent that any
Outside Director is also a director of any such Subsidiary, one ML Director
designated by the ML Representative shall be entitled to sit on such Subsidiary
Board so long as the ML Entities beneficially own Voting Securities representing
at least 10% of the Total Voting Power; and (ii) on each committee of each
Subsidiary Board, if an ML Director is entitled to sit on any Subsidiary Board,
one ML Director designated by the ML Representative, subject to the rules and
regulations described in Section 2.3(a) and qualification under the Bylaws or
Regulations of the relevant Subsidiary.
2.4 Removal of Directors; Vacancies. The ML Representative shall have the
right, with cause, to request the removal from the Board of Directors of any ML
Director. Any such removal shall be subject to the applicable provisions of the
Restated Certificate of Incorporation and By-Laws of RSI (including, without
limitation, any stockholder vote requirement), as well as applicable statutory
provisions; provided that RSI will use its best efforts to cause the Continuing
Directors to vote, subject to Section 2.6, in favor of such requested removal.
In the event that any ML Director for any reason ceases to serve as a member of
the Board of Directors during his or her term of office and at such time the ML
Representative would have the right to a designation hereunder if an election
for the resulting vacancy were to be held, (a) the director to fill such vacancy
("ML Director Vacancy") shall be designated by the ML Representative and, if not
an employee of an ML Entity which is controlled by Merrill Lynch & Co., Inc. or
an Affiliate of an ML Entity which is controlled by Merrill Lynch & Co, Inc.,
shall be reasonably acceptable to the Continuing Directors of RSI, and (b) such
ML Director Vacancy shall be filled in accordance with Article Thirteenth of
RSI's Restated Certificate of Incorporation. In the event that, and for so long
as, any ML Director is a member
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of the Nominating Committee of the Board of Directors, the ML Entities shall
cause the ML Directors to take such action as may be necessary and to vote in
accordance with the recommendation of the Continuing Directors to fill any
vacancies in the Board of Directors (other than an ML Director Vacancy).
2.5 Resignation. In the event that the percentage of Total Voting Power
represented by the Voting Securities beneficially owned in the aggregate by the
ML Entities at any time decreases below the minimum percentage thresholds
specified in Sections 2.2(b), (c), (d) or (e) or Sections 2.3(a) or (b), the ML
Entities shall cause such number of ML Directors to resign as is necessary to
adjust the number of remaining ML Directors to the number (if any) to which the
ML Entities would have been entitled under such Sections if the nominations to
the Board of Directors or Subsidiary Board or the selections for committees of
the Board of Directors or Subsidiary Board were made at such time; provided that
in the event of any such decrease below any such minimum percentage threshold,
any subsequent increase in the percentage of the Total Voting Power represented
in the aggregate by the Voting Securities beneficially owned by the ML Entities
above such minimum percentage threshold shall not entitle the ML Entities to
have any additional ML Directors named or elected to the Board of Directors or
any committee thereof or any Subsidiary Board or any committee thereof.
2.6 Charter and Bylaws; Fiduciary Duties. The obligations of RSI set
forth in this Article II are subject to compliance with the provisions of
Article Thirteenth of RSI's Restated Certificate of Incorporation and RSI's
Bylaws, and the fiduciary duties of the Board of Directors and the Nominating
Committee to RSI's stockholders. Nothing contained in this Article II shall
require RSI to violate any such provisions or to require any director of RSI to
breach any such fiduciary duty.
2.7 No Voting Trust. This Agreement does not create or constitute, and
shall not be construed as creating or constituting, a voting trust agreement
under the Delaware General Corporation Law or any other applicable corporation
law.
2.8 Notification of Nominations. The rights of the ML Entities, ML
Directors and ML Representative and the obligations of RSI under this Article II
shall be subject to compliance with Article III, Section 3a of RSI's Bylaws.
2.9 No Duty to Designate; Reduction of Board Representation. Nothing
contained in this Article II shall be construed as requiring the ML Entities to
designate any ML Directors or, once designated and elected, to require any ML
Director to continue to serve in office if such ML Director elects to resign.
Until such time as the ML Entities no longer beneficially own Voting Securities
representing in the aggregate at least 10% of the Total Voting Power, in the
event of any vacancy created by the resignation or removal of an ML Director
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or the failure of the ML Representative to designate an ML Director, other than
a vacancy created by the resignation or removal of an ML Director pursuant to
Section 2.5 hereof, upon the written request of the ML Representative, RSI shall
take such action as may be necessary to reduce the size of the Board of
Directors to a number equal to (x) 12 (or such lesser number as exists following
one or more previous reductions of the size of the Board pursuant to this
Section 2.9) minus (y) the number of such vacancies, and thereafter,
notwithstanding any other provisions of this Article II, the ML Entities shall
have no right to designate any ML Directors to the extent of such reduction.
2.10 Effect of Change in Control. Notwithstanding anything to the
contrary contained in this Agreement, the rights under this Article II are for
the benefit of, and shall only extend to, those ML Entities which are controlled
by Merrill Lynch & Co., Inc. In the event of any transaction, including any
Transfer of any securities or partnership interests, resulting in Merrill Lynch
& Co., Inc. no longer controlling such ML Entity, such ML Entity shall no longer
have any rights under this Article II and shall not be deemed to be an ML Entity
for purposes of this Article II, but shall remain bound by the other provisions
of this Agreement.
ARTICLE III
STANDSTILL RESTRICTIONS; VOTING MATTERS
---------------------------------------
3.1 Standstill Restrictions. (a) During the term of this Agreement, each
of the ML Entities covenants and agrees that without the prior affirmative vote
of a majority of the Continuing Directors at a meeting at which a Continuing
Director Quorum is present, the ML Entities shall not, and shall not permit any
of their respective Affiliates to, directly or indirectly:
(i) acquire, propose to acquire (or publicly announce or
otherwise disclose an intention to propose to acquire) or offer to acquire,
by purchase or otherwise, any Voting Securities, if the effect of such
acquisition would be to increase the outstanding number of shares of Voting
Securities then beneficially owned by the ML Entities and their Affiliates,
in the aggregate, to an amount representing Total Voting Power in excess of
the Standstill Percentage; provided that this Section 3.1(a)(i) shall not
be applicable, and no ML Entity shall be obligated to dispose of Voting
Securities, if the aggregate percentage of the Total Voting Power
represented by Voting Securities beneficially owned by the ML Entities is
increased as a result of corporate action taken solely by RSI and not
caused by any action taken by any ML Entity or any Affiliate of any ML
Entity ("RSI Action");
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(ii) propose (or publicly announce or otherwise disclose an intention
to propose), solicit, offer, seek to effect, negotiate with or provide any
confidential information relating to RSI or its business to any other
Person with respect to, any tender or exchange offer, merger,
consolidation, share exchange, business combination, restructuring,
recapitalization or similar transaction involving RSI; provided, that
nothing set forth in this Section 3.1(a)(ii) shall prohibit ML Entities
from soliciting, offering, seeking to effect and negotiating with any
Person with respect to Transfers of Voting Securities otherwise permitted
by Article IV of this Agreement; provided further, that in so doing the ML
Entities shall not (x) issue any press release or otherwise make any public
statements (other than statements made in response to any request by any
Person for confirmation by any ML Entity or any Affiliate of an ML Entity
of information contained in any statement on Schedule 13D under the
Exchange Act) with respect to such action other than in accordance with
Section 9.14 hereof (provided that the ML Entities may, and may permit
their Affiliates to, make any statement required by applicable law,
including without limitation, the amendment of any statement on Schedule
13D under the Exchange Act), or (y) provide any confidential information
relating to RSI or its business to any such Person.
(iii) make, or in any way participate in, any "solicitation" of
"proxies" to vote (as such terms are defined in Rule 14a-1 under the
Exchange Act), solicit any consent with respect to the voting of any Voting
Securities or become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the Exchange Act) with
respect to RSI;
(iv) except to the extent contemplated by the Registration Rights
Agreement, form, participate in or join any Person or Group with respect to
any Voting Securities (except an arrangement solely among any or all of the
ML Entities), or otherwise act in concert with any third Person (other than
an ML Entity) for the purpose of (x) acquiring any Voting Securities or (y)
holding or disposing of Voting Securities for any purpose otherwise
prohibited by this Section 3.1(a);
(v) deposit any Voting Securities into a voting trust or subject
any Voting Securities to any arrangement or agreement with respect to the
voting thereof (except for this Agreement and except for any such
arrangement solely among any or all of the ML Entities);
(vi) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals with respect to RSI as
described in Rule 14a-8
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under the Exchange Act, or induce or attempt to induce any other Person to
initiate any stockholder proposal;
(vii) except as specifically provided for in Article II hereof
or as contemplated by Section 3.1(e), seek election to or seek to place a
representative on the Board of Directors, or seek the removal of any member
of the Board of Directors (other than an ML Director);
(viii) call or seek to have called any meeting of the
stockholders of RSI for any purpose otherwise prohibited by this Section
3.1(a);
(ix) take any other action to seek to control RSI;
(x) demand, request or propose to amend, waive or terminate the
provisions of this Section 3.1(a); or
(xi) agree to do any of the foregoing, or advise, assist,
encourage or persuade any third party to take any action with respect to
any of the foregoing.
(b) Each of the ML Entities agrees that it will notify RSI promptly if
any inquiries or proposals are received by, any information is exchanged with
respect to, or any negotiations or discussions are initiated or continued with,
any ML Entity or, to the knowledge of any officer of Merrill Lynch Capital
Partners, Inc. or ML IBK Positions, Inc., any of their respective Affiliates,
regarding any matter described in Section 3.1(a) hereof; provided, however, that
the foregoing obligation is subject to any confidentiality policies of any such
Affiliate of any ML Entity. The ML Entities and RSI shall mutually agree upon
an appropriate response to be made to any such proposals received by any ML
Entity, or, to the knowledge of any such officer, any Affiliate of such ML
Entity or any such officer.
(c) Notwithstanding the provisions of Section 3.1(a), Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and its Affiliates (other
than the ML Entities) may effect or recommend transactions, either as principal
or as agent on behalf of third parties, in the ordinary course of Merrill
Lynch's business or the business of such Affiliates, in, relating to or
involving Voting Securities, including, without limitation, transactions in
which Merrill Lynch or such Affiliates are acting as an investment banking
organization providing advisory services, an investment advisor, an investment
company, a broker or dealer in securities, as an underwriter or placement agent
of securities, a market maker, a specialist, an arbitrageur or a block
positioner; provided, however, that (i) in no event shall Merrill Lynch and its
Affiliates (other than the ML Entities) acquire beneficial ownership of Voting
Securities representing Total Voting Power in excess of the Additional
Percentage; and (ii) for purposes of this Section 3.1(c), transactions in the
ordinary course of Merrill Lynch's or its Affiliates' business
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shall in no event be deemed to include any activities or transactions which have
the purpose or effect of seeking to control or influence the management,
policies or affairs of RSI, including, without limitation, through advising any
Person with respect to any unsolicited bid for control of, or any other offer
for securities of or any business combination involving, RSI; provided, however,
that this Section 3.1(c)(ii) shall not prohibit or restrict Merrill Lynch from
performing such obligations as may be required by law or the rules or other
requirements of any regulatory authority.
(d) The ML Entities shall not be deemed to have breached Section
3.1(a)(i) of this Agreement if (i) the ML Entities or their Affiliates
inadvertently and in good faith acquire Voting Securities so as to cause the
Total Voting Power represented by the Voting Securities beneficially owned by
the ML Entities and their Affiliates to exceed the Standstill Percentage, and
(ii) the ML Entities as soon as practicable divest a sufficient number of shares
of Voting Securities beneficially owned by the ML Entities and their Affiliates
so as to result in the Total Voting Power represented by the Voting Securities
beneficially owned by the ML Entities and their Affiliates to be equal to or
less than the Standstill Percentage.
(e) Nothing contained in this Article III shall be deemed to restrict
the manner in which the ML Directors may participate in deliberations or
discussions of the Board of Directors or individual consultations with the
Chairman of the Board or any other members of the Board of Directors, so long as
such actions do not otherwise violate any provision of Section 3.1(a).
3.2 Voting. Until such time as the ML Entities no longer beneficially own
Voting Securities representing in the aggregate at least 10% of the Total Voting
Power, the ML Entities will take all such action as may be required so that all
Voting Securities owned by the ML Entities and their Affiliates, as a group, are
(i) voted (in person or by proxy) for RSI's nominees to the Board of Directors,
in accordance with the recommendation of the Nominating Committee (or, if the
Nominating Committee makes no such recommendation, the Board of Directors),
provided that if the ML Representative has requested representation on the
Nominating Committee, RSI shall have performed its obligations described in the
proviso to Section 2.3(a) hereof, provided further that if the ML Entities have
a reasonable, good faith objection to any one (and only one) such nominee for
election to the Board of Directors at any annual meeting of RSI stockholders
(other than any nominee who was a member of the Board of Directors as of the
date of the Merger Agreement), based on such nominee's personal qualifications
to serve as a member of the Board of Directors ("Objectionable Nominee"), the ML
Entities may abstain from, or vote against, the election of such Objectionable
Nominee at such meeting, but only if (x) the board of directors of the general
partner of such ML Entity determines in good faith
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that such action is required to fulfill its fiduciary duties to the limited
partners of such ML Entity under applicable law based upon the advice of outside
counsel (who may be such general partner's regularly engaged outside counsel)
and (y) at least two Business Days in advance of the date of mailing of the
proxy statement for such annual meeting of RSI stockholders, one or more ML
Directors objects to the proposed nomination of the Objectionable Nominee in
writing to RSI or orally during a meeting of the Board of Directors or the
Nominating Committee, and (ii) on all other matters to be voted on by holders of
Voting Securities, actually voted (in person or by proxy) by the ML Entities.
Each of the ML Entities shall be present, in person or by proxy, at all duly
held meetings of stockholders of RSI so that all Voting Securities held by the
ML Entities may be counted for the purposes of determining the presence of a
quorum at such meetings.
ARTICLE IV
TRANSFERS; RIGHT OF FIRST REFUSAL
---------------------------------
4.1 Transfers of Voting Securities. None of the ML Entities shall,
directly or indirectly, Transfer any Voting Securities except:
(a) to RSI;
(b) pursuant to a merger or consolidation of RSI or pursuant to a plan
of liquidation of RSI, which has been approved by the affirmative vote of a
majority of the members of the Board of Directors then in office; provided that
at the time of such approval the number of ML Directors then serving on the
Board of Directors shall not exceed the number contemplated by Article II
hereof;
(c) provided that the rights of the ML Entities under this Agreement
shall not transfer to the transferee of such securities, pursuant to a bona fide
public offering registered under the Securities Act of 1933, as amended (the
"Securities Act"), in which the ML Entities shall use commercially reasonable
efforts to (i) effect as wide a distribution of such Voting Securities as is
reasonably practicable, and (ii) prevent any Person or Group from acquiring
pursuant to such offering beneficial ownership of Voting Securities or
securities convertible into Voting Securities representing in the aggregate 5%
or more of the Total Voting Power;
(d) provided that the rights of the ML Entities under this Agreement
shall not transfer to the transferee of such securities, pursuant to Rule 144
under the Securities Act;
(e) provided that the rights of the ML Entities under this Agreement
shall not transfer to the transferee of such
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securities, pursuant to a pro rata distribution (including any such distribution
pursuant to any liquidation or dissolution of any ML Entity) by any ML Entity to
its partners or stockholders if no successor or distributee, as the case may be,
and no Person that controls such successor or distributee, acquires from any ML
Entity beneficial ownership of Voting Securities representing more than 3% of
the Total Voting Power in such distribution (in each case other than any
distributee which is an Affiliate of an ML Entity provided that such Affiliate
shall thereafter promptly distribute all such Voting Securities to its own
partners or stockholders and such partners or stockholders do not thereby
acquire from such Affiliate beneficial ownership of Voting Securities
representing more than 3% of the Total Voting Power in such distribution).
(f) provided that the rights of the ML Entities under this Agreement
shall not transfer to the transferee of such securities, (i) Transfers of Voting
Securities to any Person or Group which is a Schedule 13D Filer and which, after
giving effect to such Transfer, would beneficially own Voting Securities
representing in the aggregate less than 5% of the Total Voting Power, and (ii)
Transfers to any Person or Group which is a Schedule 13G Filer of Voting
Securities representing in the aggregate less than 10% of the Total Voting
Power;
(g) provided that (i) the rights of the ML Entities under this
Agreement shall not transfer to the transferee of such securities, and (ii) the
Transfer is made on or after January 1, 2000 in connection with the required
dissolution of any ML Entity, Transfers of Voting Securities to any Person or
Group (A) which, after giving effect to such Transfer would beneficially own
Voting Securities representing in the aggregate less than the greater of (x) 15%
of the Total Voting Power or (y) such other percentage of the Total Voting Power
as would make such Person or Group an "Acquiring Person" under RSI's
shareholders' rights plan or (B) approved by the prior affirmative vote of a
majority of the Continuing Directors at a meeting at which a Continuing Director
Quorum is present;
(h) pursuant to a tender offer or exchange offer that the Board of
Directors, by action taken by the affirmative vote of a majority of the members
of the Board of Directors then in office, has determined not to oppose; or
(i) in accordance with the provisions of Section 4.2.
4.2 Right of First Refusal. Except as otherwise permitted by Section 4.1,
if any ML Entity or ML Entities (each a "Selling ML Entity" and, collectively,
the "Selling ML Entities") shall receive an offer from, or have entered into any
agreement or understanding with, a third party or parties to purchase or
otherwise acquire Voting Securities from such Selling ML Entity, such Selling ML
Entity shall have the right, provided that the rights of such Selling ML Entity
under this Agreement shall not
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transfer to such third party or parties, to Transfer the amount of Voting
Securities which are the subject of such offer by, or agreement or understanding
with, such third party or parties if, prior to such Transfer, RSI shall have
been given the opportunity, in the following manner, to purchase such Voting
Securities:
(a) The Selling ML Entities shall give notice (the "Transfer Notice")
to RSI in writing of such proposed Transfer specifying the amount of Voting
Securities proposed to be sold or transferred, the proposed price therefor (the
"Transfer Consideration"), the identity of the offeror and the other material
terms upon which such Transfer is proposed to be made.
(b) RSI shall have the right, exercisable by written notice given by
RSI to the Selling ML Entities within 15 Business Days after receipt of the
Transfer Notice, to purchase from such Selling ML Entities all, but not less
than all, the Voting Securities specified in such Transfer Notice for cash in an
amount equivalent to the Transfer Consideration.
(c) If the Transfer Consideration specified in the Transfer Notice
includes any property other than cash, such Transfer Consideration shall be
deemed to be the amount of any cash included in the Transfer Consideration plus
the value (as jointly determined by a nationally recognized investment banking
firm selected by each party) of such other property included in such Transfer
Consideration. For this purpose, the parties shall use their reasonable best
efforts to cause any determination of the value of any such other property
included in the Transfer Consideration to be made within ten Business Days after
the date of delivery of the Transfer Notice. If the firms selected by RSI and
the Selling ML Entities are unable to agree upon the value of any such other
property within such ten Business Day period, such firms shall promptly select a
third nationally recognized investment banking firm whose determination shall be
conclusive.
(d) If RSI exercises its right of first refusal hereunder, the closing
of the purchase of the Voting Securities with respect to which such right has
been exercised shall take place within 60 days after RSI gives notice of such
exercise, which period of time shall be extended as necessary (but in no event
for a period of time longer than 60 days after the end of such 60 day period) in
order to comply with applicable securities and other laws and regulations or any
listing agreement to which RSI is a party. Upon exercise of its right of first
refusal, RSI shall be legally obligated to consummate the purchase contemplated
thereby, shall use its reasonable best efforts to secure all approvals required
in connection therewith, and shall be liable in damages to the Selling ML
Entities if for any reason, including the failure to obtain any requisite
approvals, the purchase is not consummated; provided, however, that if RSI does
not obtain any required approval of its stockholders with respect to such
purchase, (i) RSI shall have no liability to the
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Selling ML Entities with respect to the failure of such purchase to be
consummated and (ii) the Voting Securities with respect to which such right was
exercised shall not thereafter be subject to the right of first refusal under
this Section 4.2 unless to the extent that RSI specifies a designee to purchase
Voting Securities pursuant to Section 4.2(f) hereof and such designee
consummates its purchase of Voting Securities within the time remaining in the
time period during which RSI was to have consummated its purchase of such Voting
Securities.
(e) If RSI does not exercise its right of first refusal hereunder
within the time specified for such exercise, the Selling ML Entities shall be
free, during the period of 60 days following the expiration of such time for
exercise (which period of time may be extended as necessary (but in no event for
a period of time longer than 60 days after the end of such 60 day period) in
order to comply with applicable securities and other laws and regulations), to
Transfer the Voting Securities specified in the Transfer Notice to the offeror
specified in the Transfer Notice on the terms described in the Transfer Notice
and at a price not less than the Transfer Consideration. If the Selling ML
Entities fail to Transfer the Voting Securities specified in the Transfer Notice
in such manner within such period, the Voting Securities specified in the
Transfer Notice shall again be subject to the terms of Sections 4.1 and 4.2
hereof.
(f) If RSI elects to exercise any of its rights under this Section
4.2, RSI may specify, prior to closing such purchase, another Person as its
designee to purchase the Voting Securities to which such notice of intention to
exercise such rights relates. If RSI designates another Person as the purchaser
pursuant to this Section 4.2, RSI shall be legally obligated, in accordance with
Section 4.2(d) above, to complete such purchase if its designee fails to do so.
ARTICLE V
Legends and Stop Transfer Orders
--------------------------------
5.1 Legend. All certificates evidencing Voting Securities beneficially
owned by any of the ML Entities shall bear the following legend:
"The securities represented by this certificate are subject to the
restrictions on disposition and to the other provisions of a Standstill
Agreement dated as of ___________, 1996 among Rykoff-Sexton, Inc., Merrill
Lynch Capital Partners, Inc., Merrill Lynch Capital Appreciation
Partnership No. B-XVIII, L.P., Merrill Lynch KECALP L.P. 1994, ML Offshore
LBO Partnership No. B-XVIII, ML IBK Positions, Inc., MLCP Associates L.P.
No. II, MLCP Associates L.P. No. IV, Merrill Lynch KECALP L.P. 1991,
15
<PAGE>
Merrill Lynch Capital Appreciation Partnership No. XIII, L.P., ML Offshore
LBO Partnership No. XIII, ML Employees LBO Partnership No. I, L.P., Merrill
Lynch KECALP L.P. 1987, Merchant Banking L.P. No. II. Copies of such
Agreement are on file at the respective offices of such parties."
5.2 Stop Transfer Orders. The ML Entities each hereby consent to the
entry of stop transfer orders with the transfer agents of any such Voting
Securities against the transfer of such legended certificates representing such
Voting Securities except in compliance with this Agreement.
5.3 Removal or Modification of Legend. RSI agrees that upon any Transfer
of the securities represented by such certificates made in compliance with the
provisions of this Agreement, it will, upon the presentation to its transfer
agent of the certificates containing such legend, remove such legend from the
certificates being sold or registered.
ARTICLE VI
Representations and Warranties
------------------------------
6.1 Representations and Warranties of the ML Entities. Each of the ML
Entities severally and not jointly represent and warrant to RSI as follows:
(a) Merrill Lynch Capital Partners, Inc. and ML IBK Positions, Inc.
are each corporations duly organized, validly existing and in good standing
under the laws of the State of Delaware. Merrill Lynch Capital Appreciation
Partnership No. B-XVIII, L.P., MLCP Associates L.P. No. II, MLCP Associates L.P.
No. IV, Merrill Lynch KECALP L.P. 1991, Merrill Lynch KECALP L.P. 1994, Merrill
Lynch Capital Appreciation Partnership No. XIII, L.P., ML Employees LBO
Partnership No. I, L.P., Merrill Lynch KECALP L.P. 1987 and Merchant Banking
L.P. No. II are each limited partnerships, duly organized, validly existing and
in good standing under the laws of the State of Delaware. ML Offshore LBO
Partnership No. B-XVIII and ML Offshore LBO Partnership No. XIII are each
limited partnerships, duly organized, validly existing and in good standing
under the laws of the Cayman Islands.
(b) Each of the ML Entities are the beneficial and record owners of
RSI Common Shares in the respective amounts set forth in Schedule I attached
hereto (the "ML Entities Shares"), free and clear of all security interests,
liens, claims, proxies, charges, encumbrances and options of any nature
whatsoever, and there are no outstanding options, warrants or rights to purchase
or acquire, or agreements relating to, any of the ML Entities Shares.
16
<PAGE>
(c) Except for the ML Entities Shares and _______ shares of Voting
Securities owned by ________________,* neither any of the ML Entities, nor any
of their Affiliates, owns beneficially or of record, directly or indirectly, any
Voting Securities or any options, warrants or rights of any nature (including
conversion and exchange rights) to acquire beneficial ownership of any Voting
Securities.
(d) Each of the ML Entities has full legal right, power and authority
to enter into and perform this Agreement. This Agreement has been duly
authorized, executed and delivered by each of the ML Entities. This Agreement
constitutes a legally valid and binding agreement of each of the ML Entities,
enforceable in accordance with its terms, except that such enforceability may be
subject to bankruptcy, insolvency, receivership, reorganization, moratorium or
other similar laws relating to creditors' rights now or hereafter in effect and
by general equitable principles.
(e) The execution and delivery of this Agreement by the ML Entities
does not conflict with or constitute a violation of or default under the
respective certificates of incorporation, partnership agreements or certificates
of partnership (or comparable documents) of any of the ML Entities or any
statute, law, regulation, order or decree applicable to any of the ML Entities,
or any contract, commitments, agreement, arrangement or restriction of any kind
to which any of the ML Entities are a party or by which any of the ML Entities
are bound, other than such violations as would not prevent or materially delay
the performance by such ML Entity of its obligations hereunder or otherwise
subject RSI to any claim or liability.
(f) Schedule II hereto sets forth a true, accurate and complete list
of the percentage ownership interests of each partner or securityholder (without
naming them) in each ML Entity listed thereon. Schedule III hereto sets forth,
with respect to each ML Entity listed thereon, the latest dissolution date for
such ML Entity under the terms of its partnership agreement.
6.2 Representations and Warranties of RSI. RSI hereby represents and
warrants to the ML Entities as follows:
(a) RSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) RSI has full legal right, power and authority to enter into and
perform this Agreement and the execution and delivery of this Agreement by RSI
have been duly authorized by all necessary corporate action on behalf of RSI.
This Agreement constitutes a legally valid and binding agreement of RSI,
- -----------------
* Share ownership as of Closing Date.
17
<PAGE>
enforceable in accordance with its terms, except that such enforceability may be
subject to bankruptcy, insolvency, receivership, reorganization, moratorium or
other similar laws relating to creditors' rights now or hereafter in effect, and
by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by RSI of the transactions contemplated hereby conflicts with or
constitutes a violation of or default under the Restated Certificate of
Incorporation or By-laws of RSI, any statute, law, regulation, order or decree
applicable to RSI, or any contract, commitment, agreement, arrangement or
restriction of any kind to which RSI is a party or by which RSI is bound, other
than such violations as would not prevent or materially delay the performance by
RSI of its obligations hereunder or otherwise subject any ML Entity to any claim
or liability.
ARTICLE VII
Further Assurances
------------------
Each party shall execute and deliver such additional instruments and other
documents and shall take such further actions as may be necessary or appropriate
to effectuate, carry out and comply with all of their obligations under this
Agreement. If reasonably requested by RSI, each ML Entity agrees to execute a
letter to RSI confirming that the beneficial ownership of Voting Securities by
the ML Entities and their Affiliates does not represent in the aggregate Total
Voting Power in excess of the Standstill Percentage as of the date of such
letter.
ARTICLE VIII
Termination
-----------
Unless earlier terminated by written agreement of the parties hereto, this
Agreement shall terminate on the earlier of (i) the tenth anniversary of the
Effective Date and (ii) the date on which the ML Entities and their Affiliates
beneficially own Voting Securities representing in the aggregate less than 10%
of the Total Voting Power; provided, that if, prior to the tenth anniversary of
the Effective Date, (x) the ML Entities shall beneficially own Voting Securities
representing in the aggregate 10% or more of the Total Voting Power, or (y) the
ML Entities and their Affiliates shall beneficially own Voting Securities
representing in the aggregate 5% or more of the Total Voting Power which causes
them to be a Schedule 13D Filer, this Agreement shall automatically be
reinstated. Any termination of this Agreement as provided herein shall be
without prejudice to the rights of any party arising out of the breach by any
other
18
<PAGE>
party of any provisions of this Agreement which occurred prior to the
termination.
ARTICLE IX
Miscellaneous
-------------
9.1 Notices, Etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party when delivered personally
(by courier service or otherwise), when delivered by telecopy and confirmed by
return telecopy, or seven days after being mailed by first-class mail, postage
prepaid in each case to the applicable addresses set forth below:
If to RSI:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive
Officer
Telecopy: (708) 971-6588
with a copy to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601-1692
Telecopy: (312) 782-8585
If to the ML Entities:
Merrill Lynch Capital Partners, Inc.
225 Liberty Street
New York, New York 10080-6123
Attn: James V. Caruso
Telecopy: (212) 236-7364
with a copy to:
Marcia L. Tu, Esq.
Merrill Lynch & Co.
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281-1323
Telecopy: (212) 449-3207
19
<PAGE>
with a copy to:
Bonnie Greaves, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 848-7179
or to such other address as such party shall have designated by notice so given
to each other party.
9.2 Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated except by an instrument
in writing signed by the holders of a majority in number of the ML Entities
Shares and by RSI following approval thereof by a majority of the Continuing
Directors.
9.3 Successors and Assigns. Except as otherwise provided herein,
including, without limitation, Section 2.10, this Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the parties and
their respective Affiliates and their respective successors and assigns,
including without limitation in the case of any corporate party hereto any
corporate successor by merger or otherwise. Except as otherwise provided
herein, this Agreement shall not be assignable.
9.4 Entire Agreement. This Agreement embodies the entire agreement and
understanding among the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter. There are no representations, warranties or covenants by the parties
hereto relating to such subject matter other than those expressly set forth in
this Agreement, the Merger Agreement and the ML Agreement.
9.5 Specific Performance. The parties acknowledge that money damages are
not an adequate remedy for violations of this Agreement and that any party may,
in its sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any violation hereof and,
to the extent permitted by applicable law, each party waives any objection to
the imposition of such relief.
9.6 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
9.7 No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or
20
<PAGE>
otherwise available in respect hereof at law or in equity, or to insist upon
compliance by any other party hereto with its obligations hereunder, and any
custom or practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
9.8 No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of and shall not be enforceable by any Person who or which is
not a party hereto.
9.9 Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
venue therein); provided, however, that such consent to jurisdiction is solely
for the purpose referred to in this Section 9.9 and shall not be deemed to be a
general submission to the jurisdiction of said court or in the State of Delaware
other than for such purposes. Each party hereto hereby waives any right to a
trial by jury in connection with any such action, suit or proceeding.
9.10 Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the law of the State
of Delaware.
9.11 Name, Captions. The name assigned to this Agreement and the section
captions used herein are for convenience of reference only and shall not affect
the interpretation or construction hereof.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
9.13 Expenses. Each of the parties hereto shall bear their own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, except that in the event of a dispute concerning the terms or
enforcement of this Agreement, the prevailing party in any such dispute shall be
entitled to reimbursement of reasonable legal fees and disbursements from the
other party or parties to such dispute.
9.14 Press Releases. The initial press release relating to this Agreement
shall be a joint press release and, thereafter, RSI and the ML Representative
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement, and neither RSI nor
21
<PAGE>
any ML Entity shall issue any such press release or make any such public
statement without the consent (which shall not be unreasonably withheld) of the
other (the ML Representative acting on behalf of the ML Entities for such
purpose), except to the extent required by applicable law or the rules and
requirements of the New York Stock Exchange, in which case the issuing party
shall use its reasonably best efforts to consult with the other party (the ML
Representative in case of the ML Entities) before issuing any such release or
making any such public statement.
22
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
RYKOFF-SEXTON, INC.
By: _________________________________
Name: Mark Van Stekelenburg
Title: Chairman, President and
Chief Executive Officer
MERRILL LYNCH CAPITAL PARTNERS, INC.
By: _________________________________
Name and Title:
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. B-XVIII, L.P.
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as General
Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: _________________________________
Name and Title:
MERRILL LYNCH KECALP L.P. 1994
By: KECALP Inc., as General Partner
By: _________________________________
Name and Title:
23
<PAGE>
ML OFFSHORE LBO PARTNERSHIP
NO. B-XVIII
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as Investment
General Partner
By: Merrill Lynch Capital
Partners, Inc., as
General Partner
By: ________________________________
Name and Title:
ML IBK POSITIONS, INC.
By: ________________________________
Name and Title:
MLCP ASSOCIATES L.P. NO. II
By: Merrill Lynch Capital
Partners, Inc., as
General Partner
By: ________________________________
Name and Title:
MLCP ASSOCIATES L.P. NO. IV
By: Merrill Lynch Capital
Partners, Inc., as
General Partner
By: ________________________________
Name and Title:
MERRILL LYNCH KECALP L.P. 1991
By: KECALP Inc., as General
Partner
By: ________________________________
Name and Title:
24
<PAGE>
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. XIII, L.P.
By: Merrill Lynch LBO Partners
No. IV, L.P., as
General Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: ________________________________
Name and Title:
ML OFFSHORE LBO PARTNERSHIP NO. XIII
By: Merrill Lynch LBO Partners
No. IV, L.P., as Investment
General Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: ________________________________
Name and Title:
ML EMPLOYEES LBO PARTNERSHIP NO. I, L.P.
By: ML Employees LBO Managers,
Inc., as General Partner
By: ________________________________
Name and Title:
MERRILL LYNCH KECALP L.P. 1987
By: KECALP Inc., as General Partner
By: ________________________________
Name and Title:
25
<PAGE>
MERCHANT BANKING L.P. NO. II
By: Merrill Lynch MBP Inc., as
General Partner
By: ________________________________
Name and Title:
26
<PAGE>
SCHEDULE I
SHARE OWNERSHIP
Name of Stockholder RSI Common Shares
------------------- -----------------
MERRILL LYNCH CAPITAL
APPRECIATION PARTNERSHIP
NO. B-XVIII, L.P. 7,552,369.5000
MERRILL LYNCH KECALP L.P.
1994 117,647.0000
ML OFFSHORE LBO PARTNERSHIP
NO. B-XVIII 3,799,808.0000
ML IBK POSITIONS, INC. 2,496,102.7370
MLCP ASSOCIATES L.P. NO. II 90,572.5000
MLCP ASSOCIATES L.P. NO. IV 23,529.0000
MERRILL LYNCH KECALP L.P.
1991 328,947.0000
MERRILL LYNCH CAPITAL
APPRECIATION PARTNERSHIP
NO. XIII, L.P. 2,807,941.6552
ML OFFSHORE LBO PARTNERSHIP
NO. XIII 71,387.8790
ML EMPLOYEES LBO
PARTNERSHIP NO. I, L.P. 69,802.2183
MERRILL LYNCH KECALP L.P.
1987 52,748.5393
MERCHANT BANKING L.P.
NO. II 52,748.5393
TOTAL 17,463,604.5681
I-1
<PAGE>
SCHEDULE II
PERCENTAGE OWNERSHIPS
MERRILL LYNCH CAPITAL APPRECIATION PARTNERSHIP NO. XIII, L.P.
DISTRIBUTION OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
<CAPTION>
EXCHANGE
US FOODSERVICE
SHARES
% OF US FOR 1.457
TOTAL US FOODSERVICE FOODSERVICE SHARES OF
CAPITAL % OF DISTRIBUTION SHARES REVERSE STOCK RYKOFF-SEXTON
# COMMITMENT OWNERSHIP OF SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- ----- ------------ --------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1. $ 90,000,000 25.42% 706,745* 3.16% 279,869 407,769
2. 30,000,000 8.47% 235,582* 1.05% 93,290 135,924
3. 29,500,000 8.33% 231,655* 1.04% 91,735 133,658
4. 25,000,000 7.06% 196,318 0.88% 77,742 113,270
5. 25,000,000 7.06% 196,318 0.88% 77,742 113,270
6. 19,000,000 5.37% 149,202 0.67% 59,084 86,085
7. 15,000,000 4.24% 117,791 0.53% 46,645 67,962
8. 10,000,000 2.82% 78,527 0.35% 31,097 45,308
9. 10,000,000 2.82% 78,527 0.35% 31,097 45,308
10. 10,000,000 2.82% 78,527 0.35% 31,097 45,308
11. 10,000,000 2.82% 78,527 0.35% 31,097 45,308
12. 6,000,000 1.69% 47,116 0.21% 18,658 27,185
13. 5,000,000 1.41% 39,264 0.18% 15,549 22,655
14. 5,000,000 1.41% 39,264 0.18% 15,549 22,655
15. 5,000,000 1.41% 39,264 0.18% 15,549 22,655
16. 5,000,000 1.41% 39,264 0.18% 15,549 22,655
17. 5,000,000 1.41% 39,264 0.18% 15,549 22,655
18. 5,000,000 1.41% 39,264 0.18% 15,549 22,655
19. 4,000,000 1.13% 31,411 0.14% 12,439 18,124
20. 4,000,000 1.13% 31,411 0.14% 12,439 18,124
21. 4,000,000 1.13% 31,411 0.14% 12,439 18,124
23. 3,000,000 0.85% 23,558 0.11% 9,329 13,592
24. 3,000,000 0.85% 23,558 0.11% 9,329 13,592
25. 3,000,000 0.85% 23,558 0.11% 9,329 13,592
26. 3,000,000 0.85% 23,558 0.11% 9,329 13,592
27. 2,500,000 0.71% 19,632 0.09% 7,774 11,327
28. 2,500,000 0.71% 19,632 0.09% 7,774 11,327
29. 2,500,000 0.71% 19,632 0.09% 7,774 11,327
30. 2,000,000 0.56% 15,705 0.07% 6,219 9,061
31. 2,000,000 0.56% 15,705 0.07% 6,219 9,061
32. 2,000,000 0.56% 15,705 0.07% 6,219 9,061
33. 2,000,000 0.56% 15,705 0.07% 6,219 9,061
34. 2,000,000 0.56% 15,705 0.07% 6,219 9,061
------------ ------- --------- ----- ---------- ----------
$354,000,000 100.00% 2,779,863 12.45% $1,100,826 $1,603,903
------------ ======= --------- ------ ---------- ----------
3,575,758 28,079 0.13% 11,119 16,201
------------ --------- ------ ---------- ----------
$357,575,758 2,807,942 12.57% 1,111,945 1,620,104
============ ========= ====== ========== ==========
</TABLE>
- ----------------------
* Represents over 1% of O/S Stock (3 investors).
II-1
<PAGE>
PERCENTAGE OWNERSHIPS
MERRILL LYNCH CAPITAL APPRECIATION PARTNERSHIP NO. B-XVIII, L.P.
DISTRIBUTION OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
<CAPTION>
EXCHANGE
US FOODSERVICE
SHARES
CAPITAL % OF US FOR 1.457
ACCOUNT US FOODSERVICE FOODSERVICE SHARES OF
BALANCE AT % OF DISTRIBUTION SHARES REVERSE STOCK RYKOFF-SEXTON
# JAN. 1, 1995 OWNERSHIP OF SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- ----- ------------ ---------- ------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1. $ 2,267,896 4.50% 336,522* 1.51% 133,262 194,163
2. 3,469,299 6.89% 514,792* 2.31% 203,856 297,016
3. 1,120,249 2.22% 166,228 0.74% 65,826 95,908
4. 2,655,143 5.27% 393,983* 1.76% 156,017 227,317
5. 2,601,973 5.16% 386,093* 1.73% 152,893 222,765
6. 2,857,970 5.67% 424,079* 1.90% 167,935 244,681
7. 2,601,974 5.16% 386,094* 1.73% 152,893 222,765
8. 2,036,418 4.04% 302,174* 1.35% 119,661 174,346
9. 1,642,568 3.26% 243,732* 1.09% 96,518 140,627
10. 3,917,840 7.78% 581,348* 2.60% 230,214 335,422
11. 2,381,643 4.73% 353,400* 1.58% 139,946 203,901
12. 1,896,530 3.76% 281,416* 1.26% 111,441 162,370
13. 2,168,310 4.30% 321,744* 1.44% 127,411 185,638
14. 1,295,989 2.57% 192,305 0.86% 76,153 110,955
15. 2,083,124 4.13% 309,104* 1.38% 122,405 178,344
16. 1,036,791 2.06% 153,844 0.69% 60,922 88,763
17. 619,206 1.23% 91,881 0.41% 36,385 53,013
18. 518,396 1.03% 76,922 0.34% 30,461 44,382
19. 952,658 1.89% 141,360 0.63% 55,979 81,561
20. 412,805 0.82% 61,254 0.27% 24,257 35,342
21. 758,611 1.51% 112,566 0.50% 44,576 64,947
22. 471,962 0.94% 70,032 0.31% 27,733 40,407
23. 758,611 1.51% 112,566 0.50% 44,576 64,947
24. 952,658 1.89% 141,360 0.63% 55,979 81,561
25. 518,396 1.03% 76,922 0.34% 30,461 44,382
26. 867,325 1.72% 128,698 0.58% 50,964 74,255
27. 758,611 1.51% 112,566 0.50% 44,576 64,947
28. 412,805 0.82% 61,254 0.27% 24,257 35,342
29. 518,396 1.03% 76,922 0.34% 30,461 44,382
30. 518,396 1.03% 76,922 0.34% 30,461 44,382
31. 518,396 1.03% 76,922 0.34% 30,461 44,382
32. 833,248 1.65% 123,641 0.55% 48,962 71,338
33. 606,890 1.20% 90,053 0.40% 35,661 51,958
34. 311,037 0.62% 46,153 0.21% 18,277 26,630
35. 259,197 0.51% 38,461 0.17% 15,231 22,192
36. 226,789 0.45% 33,652 0.15% 13,326 19,416
37. 259,197 0.51% 38,461 0.17% 15,231 22,192
38. 259,197 0.51% 38,461 0.17% 15,231 22,192
39. 433,660 0.86% 64,349 0.29% 25,482 37,127
40. 259,197 0.51% 38,461 0.17% 15,231 22,192
41. 207,358 0.41% 30,769 0.14% 12,185 17,754
42. 207,358 0.41% 30,769 0.14% 12,185 17,754
43. 207,358 0.41% 30,769 0.14% 12,185 17,754
44. 124,471 0.25% 18,470 0.08% 7,314 10,656
45. 239,418 0.48% 35,526 0.16% 14,068 20,497
46. 155,518 0.31% 23,077 0.10% 9,138 13,314
47. 129,599 0.26% 19,231 0.09% 7,615 11,095
48. 77,760 0.15% 11,538 0.05% 4,569 6,657
----------- ------- --------- ------ --------- ---------
50,388,201 100.00% 7,476,846 33.48% 2,960,831 4,313,931
----------- ======= --------- ====== --------- ---------
508,971 75,524 0.34% 29,908 43,576
----------- --------- ------ --------- ---------
$50,897,172 7,552,370 33.82% 2,990,739 4,357,507
=========== ========= ====== ========= =========
</TABLE>
- ----------------------
* Represents over 1% of O/S Stock (13 Investors).
II-2
<PAGE>
PERCENTAGE OWNERSHIPS
DISTRIBUTION TO ML OFFSHORE LBO PARTNERSHIP NO. B-XVIII
DISTRIBUTION OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
<CAPTION>
EXCHANGE
US
FOODSERVICE
% OF US SHARES
US FOODSERVICE FOR 1.457
FOODSERVICE REVERSE SHARES OF
CAPITAL ORIGINAL DISTRIBUTION SHARES STOCK SPLIT RYKOFF-SEXTON
PARTNERS CONTRIBUTION PERCENTAGE OF SHARES OUTSTANDING OF .396 COMMON STOCK
- --------------------- ------------ ---------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Merrill Lynch Capital
Appreciation Company
Limited II $17,120,179 71.82% 2,728,888 12.22% 1,080,640 1,574,492
Merrill Lynch Capital
Appreciation Limited
Partnership II
(Special LP) 6,480,221 27.18% 1,032,921 4.63% 409,037 595,967
Merrill Lynch Capital
Partners, Inc. 0 0.00% 0 0.00% 0 0
Investment General
Partner 238,290 1.00% 37,983 0.17% 15,041 21,915
Administrative
General Partner 100 0.00% 16 0.00% 6 9
----------- ------- --------- ------ ---------- ---------
Total $23,838,790 100.00% 3,799,808 17.02% 1,504,724 2,192,383
=========== ======= ========= ====== ========== =========
</TABLE>
II-3
<PAGE>
PERCENTAGE OWNERSHIPS
SECOND TIER DISTRIBUTION TO SHAREHOLDERS OF MERRILL LYNCH
CAPITAL APPRECIATION COMPANY LIMITED II FROM ML OFFSHORE LBO
PARTNERSHIP NO. B-XVIII AS A RESULT OF THE DISTRIBUTION
OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
<CAPTION>
EXCHANGE
US FOODSERVICE
SHARES
% OF FOR 1.457
US FOODSERVICE US FOODSERVICE SHARES OF
% OF DISTRIBUTION SHARES REVERSE STOCK RYKOFF-SEXTON
# SHARES TOTAL SHARES OF SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- --- ------ ------------ ------------ -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1. 7,513 43.85% 1,196,645* 5.36% 473,872 690,432
2. 5,009 29.24% 797,871* 3.57% 315,936 460,319
3. 1,373 8.01% 218,687 0.98% 86,600 126,176
4. 501 2.92% 79,798 0.36% 31,600 46,041
5. 1,036 6.05% 165,011 0.74% 65,344 95,206
6. 440 2.57% 70,082 0.31% 27,752 40,435
7. 402 2.35% 64,029 0.29% 25,355 36,942
8. 176 1.03% 28,033 0.13% 11,101 16,174
9. 201 1.17% 32,015 0.14% 12,678 18,472
10. 240 1.40% 38,226 0.17% 15,138 22,056
11. 198 1.16% 31,537 0.14% 12,489 18,196
12. 44 0.26% 7,008 0.03% 2,775 4,043
------ ------- --------- ------ --------- ---------
17,133 100.00% 2,728,888 12.22% 1,080,640 1,574,492
====== ======= ========= ====== ========= =========
</TABLE>
- ------------------------------
* Represents over 1% of O/S Stock (2 Investors).
II-4
<PAGE>
PERCENTAGE OWNERSHIPS
SECOND TIER DISTRIBUTION TO PARTNERS OF MERRILL LYNCH
CAPITAL APPRECIATION LIMITED PARTNERSHIP II (SPECIAL LP)
FROM ML OFFSHORE LBO PARTNERSHIP NO. B-XVIII
AS A RESULT OF THE DISTRIBUTION OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
<CAPTION>
EXCHANGE
US FOODSERVICE
CAPITAL SHARES
ACCOUNT FOR % OF % OF FOR 1.457
B-XVIII TOTAL US FOODSERVICE US FOODSERVICE SHARES OF
INVESTMENT CAPITAL DISTRIBUTION SHARES REVERSE STOCK RYKOFF-SEXTON
# @ 1/1/95 ACCOUNT OF SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- - ------------- ------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1. $2,039,980.00 31.43% 324,678* 1.45% 128,571 187,328
2. 917,990.00 14.14% 146,105 0.65% 57,858 84,299
3. 506,995.00 7.81% 80,692 0.36% 31,954 46,557
4. 917,990.00 14.14% 146,105 0.65% 57,858 84,299
5. 463,995.00 7.15% 73,848 0.33% 29,244 42,609
6. 407,996.00 6.29% 64,936 0.29% 25,715 37,467
7. 1,003,990.00 15.47% 159,792 0.72% 63,278 92,196
8. 0.00 0.00% 0 0.00% 0 0
9. 230,998.00 3.56% 36,765 0.16% 14,559 21,212
------------- ------ --------- ----- ------- -------
$6,489,934.00 100.00% 1,032,921 4.63% 409,037 595,967
============= ====== ========= ===== ======= =======
</TABLE>
- ------------------------------
* Represents over 1% of O/S Stock (1 Investor).
II-5
<PAGE>
SCHEDULE III
DISSOLUTION DATES
Latest
Name of Stockholder Dissolution Date
------------------- -----------------
MERRILL LYNCH CAPITAL APPRECIATION December 31, 2003
PARTNERSHIP NO. B-XVIII, L.P.
MERRILL LYNCH KECALP L.P. 1994 December 31, 2034
ML OFFSHORE LBO PARTNERSHIP NO. B-XVIII December 31, 2003
ML IBK POSITIONS, INC. None.
MLCP ASSOCIATES L.P. NO. II December 31, 2002
MLCP ASSOCIATES L.P. NO. IV December 31, 2006
MERRILL LYNCH KECALP L.P. 1991 December 31, 2033
MERRILL LYNCH CAPITAL APPRECIATION December 31, 2000
PARTNERSHIP NO. XIII, L.P.
ML OFFSHORE LBO PARTNERSHIP NO. XIII December 31, 2000
ML EMPLOYEES LBO PARTNERSHIP NO. I, L.P. December 31, 2004
MERRILL LYNCH KECALP L.P. 1987 December 31, 2029
MERCHANT BANKING L.P. NO. II December 31, 2000
III-1
<PAGE>
Exhibit 10.48
TAX AGREEMENT
-------------
This Tax Agreement (the "Agreement"), dated as of _____________, 1996
[Effective Time], by and among Rykoff-Sexton, Inc., a Delaware corporation
("RSI"), and each other Person listed on the signature pages hereof (each a
"Shareholder" and, collectively, the "Shareholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, RSI, USF Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of RSI ("Merger Sub"), and US Foodservice Inc., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated February 2, 1996 (the "Merger Agreement", capitalized terms used
but not defined herein having the same meanings ascribed to such terms in the
Merger Agreement), pursuant to which the Company shall merge with and into
Merger Sub;
WHEREAS, it is the intention of the parties to the Merger Agreement that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, each Shareholder is the beneficial and record owner of the number
of shares of Class A Common Stock or Class B Common Stock set forth opposite its
respective name on Schedule I to this Agreement, all of which will be converted
into a number of RSI Common Shares in the Merger pursuant to Section 4.1 of the
Merger Agreement; and
WHEREAS, pursuant to Section 8.2(h) of the Merger Agreement, it is a
condition to the respective obligations of RSI and Merger Sub to consummate the
transactions contemplated by the Merger Agreement that RSI and the Shareholders
enter into this Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
Section 1. Covenants of the Shareholders and RSI. (a) During the two-year
period commencing on the date hereof, each Shareholder agrees that such
Shareholder shall not, other than incident or pursuant to an Extraordinary
Transaction, (i) sell, exchange, distribute or otherwise dispose of in any
manner, or
<PAGE>
enter into one or more transactions whereby such Shareholder gives up
substantially all of the benefits and burdens of ownership in (all such actions
hereinafter collectively referred to as a "Transfer"), or (ii) enter into one or
more contracts or other agreements to Transfer, or that would by its or their
terms require a Transfer of, a number of RSI Common Shares received by such
Shareholder in the Merger that exceeds in the aggregate (x) the number of RSI
Common Shares received by such Shareholder in the Merger multiplied by (y) the
Permitted Sales Factor. For purposes of this Agreement, the "Permitted Sales
Factor" shall be a number equal to 1.00 minus the Continuity Factor, and the
"Continuity Factor" shall be a fraction, the numerator of which shall be the
aggregate number of RSI Common Shares that must continue to be owned by the
stockholders of the Company to satisfy the "continuity of interest" requirement
of Treas. Reg. (S) 1.368-1(b) (the "Continuity Shares Number"), and the
denominator of which shall be the aggregate number of RSI Common Shares issued
in the Merger and held by the Shareholders at the Effective Time. For purposes
of computing the Continuity Factor, the "Continuity Shares Number" shall be
determined by applying the formula set forth on Schedule II attached hereto.
(b) For purposes of this Agreement, an Extraordinary Transaction means a
merger, consolidation or other business combination, tender or exchange offer,
share exchange, restructuring, recapitalization or other similar transaction
involving RSI so long as any such transaction is not arranged as part of an
overall plan to which such Shareholder is a party and pursuant to which the
Merger is also being consummated.
(c) As soon as practicable following the Effective Time, RSI and Merrill
Lynch Capital Partners, Inc., a Delaware corporation ("MLCP"), shall mutually
determine the Continuity Factor and thereafter RSI shall deliver to each
Shareholder a notice setting forth the total number of RSI Common Shares that
such Shareholder must hold during the two-year period commencing on the date
hereof in order to comply with the covenant of such Shareholder set forth in
Section 1(a) above (with respect to each Shareholder, the "Restricted Shares
Number"), and setting forth in reasonable detail the calculation thereof.
(d) Certificates evidencing the RSI Common Shares received by each
Shareholder in the Merger shall bear the following legend, in addition to any
other legend that may be required by the Merger Agreement, the ML Agreement, the
Standstill Agreement or any other agreement contemplated by any such Agreements:
"The shares of common stock represented by this certificate are subject to
a Tax Agreement dated as of _______________, 1996, with Rykoff-Sexton, Inc.
that imposes, among other things, certain restrictions on the transfer of
such shares. Copies of the Tax
-2-
<PAGE>
Agreement are on file at the principal office of Rykoff-Sexton, Inc."
(e) In the case of any Shareholder not subject to aggregation
treatment under Section 7 hereof, the legend referred to in Section 1(d) hereof
shall be placed only on certificates evidencing a number of RSI Common Shares
received by such Shareholder in the Merger equal to the Restricted Shares Number
determined with respect to such Shareholder.
(f) Each Shareholder hereby consents to the entry of stop transfer
orders with RSI's transfer agents with respect to RSI Common Shares prohibiting
the Transfer of any certificates representing RSI Common Shares that bear the
legend referred to in Section 1(d) hereof, except for Transfers that are made in
compliance with the provisions of this Agreement.
(g) In the case of a Transfer of any certificates representing RSI
Common Shares and bearing the legend referred to in Section 1(d) hereof that is
made in compliance with the provisions of this Agreement, RSI shall instruct its
transfer agents with respect to RSI Common Shares to permit such Transfer upon
the presentation to any such transfer agent of the legended certificates
together with a certificate in the form of Exhibit A attached hereto, and RSI
shall remove such legend from the certificates being Transferred.
(h) RSI agrees that upon expiration of the two-year period provided
for in Section 1(a) hereof, RSI shall, upon the presentation to any of its
transfer agents of any certificates representing RSI Common Shares and
containing the legend referred to in Section 1(d) hereof, remove such legend
from the certificates.
Section 2. Tax Representations of the Shareholders. Each Shareholder
hereby represents and warrants to RSI that, as of the date hereof, such
Shareholder has no plan or intention to Transfer a number of RSI Common Shares
received by such Shareholder in the Merger that would exceed in the aggregate
(x) the number of RSI Common Shares received by such Shareholder in the Merger
multiplied by (y) the Permitted Sales Factor.
Section 3. Waiver of Claims. In the case solely of a Shareholder
that has not breached the covenant contained in Section 1(a) hereof or any of
its representations and warranties set forth in Section 6 hereof, RSI and each
other Shareholder (collectively the "Releasors") hereby waive and release any
and all claims, rights, causes of action, suits, whether known or unknown, that
as of the date hereof could have been, or in the future might be asserted by or
on behalf of any Releasor or any of its respective associates, affiliates,
parents, subsidiaries, present or former officers, directors, employees,
attorneys, financial advisors or other advisors or agents, heirs, executors,
-3-
<PAGE>
personal representatives, estates, administrators, and successors and assigns
against such Shareholder under this Agreement or otherwise resulting from or
relating to the failure of the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code.
Section 4. Reliance. Each Shareholder understands and agrees that the
representations and warranties made by the Shareholder in Section 2 hereof will
be relied upon by Morgan, Lewis & Bockius LLP, Shearman & Sterling, and Jones,
Day, Reavis & Pogue, respectively, in connection with their opinions to be
delivered pursuant to Section 8.1(h) and Section 8.1(i) of the Merger Agreement
with respect to the treatment of the Merger for federal income tax purposes as a
tax-free reorganization within the meaning of Section 368(a) of the Code.
Section 5. Representations and Warranties of RSI. RSI represents and
warrants to each of the Shareholders as follows: This Agreement has been
approved by the Board of Directors of RSI, and has been duly executed and
delivered by a duly authorized officer of RSI. This Agreement constitutes a
valid and binding agreement of RSI, enforceable against RSI in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application which
may affect the enforcement of creditors' rights generally and by general
equitable principles. The execution and delivery of this Agreement by RSI does
not conflict with or constitute a violation of or default under the Restated
Certificate of Incorporation or By-laws of RSI, any statute, law, rule,
regulation, order or decree applicable to RSI, or any contract, commitment,
agreement, arrangement or restriction of any kind to which RSI is a party or by
which RSI is bound, other than such violations as would not prevent or
materially delay the performance by RSI of its obligations hereunder or
otherwise subject any Shareholder to any claim or liability.
Section 6. Representations and Warranties of the Shareholder. Each
Shareholder represents and warrants to RSI as follows: This Agreement has been
duly authorized, executed and delivered by such Shareholder. This Agreement
constitutes the valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application which may affect the enforcement of
creditors' rights generally and by general equitable principles. Immediately
prior to the Effective Time, such Shareholder is the record and beneficial
owner, under U.S. federal income tax principles, of the number of shares of
Class A Common Stock or Class B Common Stock set forth opposite its respective
name on Schedule I to this Agreement, in each case free and clear of all claims,
liens, pledges, security interests, restrictions or encumbrances of any
-4-
<PAGE>
nature whatsoever, with no restrictions on voting rights and other incidents of
record and beneficial ownership incident thereto, other than the Stockholders
Agreement. The execution and delivery of this Agreement by such Shareholder
does not conflict with or constitute a violation of or default under the
certificate of incorporation, by-laws, partnership agreement or certificate of
partnership (or other comparable documents) of such Shareholder, any provisions
of any statute, law, rule, regulation, order or decree applicable to such
Shareholder, or any contract, commitment, agreement, arrangement or restriction
of any kind to which such Shareholder is a party or by which such Shareholder is
bound, other than such violations as would not prevent or materially delay the
performance by such Shareholder of its obligations hereunder or subject RSI to
any claim or liability.
Section 7. Aggregation of Shareholders. For purposes of Sections 1
and 2 hereof, the RSI Common Shares held by any Shareholder of which MLCP or an
Affiliate of MLCP is a general partner, or which is controlled by MLCP or an
Affiliate of MLCP, shall be aggregated, and such Shareholders shall be regarded
as a single Shareholder.
Section 8. Distribution by Equitable Deal Flow Fund, L.P. If the
Equitable Deal Flow Fund, L.P. ("Equitable L.P.") becomes required by the terms
of its partnership agreement to distribute to its partners a number of RSI
Common Shares received by it in the Merger in a Transfer that would otherwise be
in violation of Section 1(a) hereof, Equitable L.P. shall be permitted to effect
such distribution provided that (i) the shares of RSI Common Stock so
distributed to its partners are distributed in accordance with the partners'
respective interests in Equitable L.P., (ii) each of such partners shall have
executed and delivered to RSI in advance of such distribution a document
evidencing such partner's agreement to be bound by and to comply with all of the
terms and provisions of Section 1 hereof, which document shall be satisfactory
in form and substance to RSI in its reasonable discretion, and (iii) at the
written request of each such partner, which request shall specify the total
number of RSI Common Shares to be distributed to such partner and such partner's
pro rata share of the Restricted Shares Number determined with respect to
Equitable L.P., RSI shall cause two stock certificates to be issued to each such
partner representing such RSI Common Shares to be so distributed to such
partner, one of which shall evidence a number of RSI Common Shares equal to such
partner's pro rata share of the Restricted Shares Number determined with respect
to Equitable L.P. and which shall bear the legend referred to in Section 1(d)
hereof, and one of which shall evidence the balance of the RSI Common Shares to
be distributed to such partner and which shall not bear the legend referred to
in Section 1(d) hereof.
-5-
<PAGE>
Section 9. Miscellaneous.
(a) Notices, Etc. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement shall be
in writing and shall be deemed to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or seven days after being mailed by
first-class mail, postage prepaid in each case to the applicable addresses set
forth below:
If to a Shareholder that is one of the ML Entities:
Merrill Lynch Capital Partners, Inc.
225 Liberty Street
New York, NY 10080-6123
Attn: James V. Caruso
Telecopy: (212) 236-7364
with a copy to:
Marcia L. Tu, Esq.
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281-1323
Telecopy: (212) 449-3207
with a copy to:
Bonnie Greaves, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
If to RSI:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive Officer
Telecopy: (708) 971-6588
with a copy to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, IL 60601-1692
Telecopy: (312) 782-8585
-6-
<PAGE>
and if to a Shareholder that is not one of the ML Entities, to the address set
forth below the name of such Shareholder on the signature pages to this
Agreement, or to such other address as any such party shall have designated by
notice so given to each other party.
(b) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated except by an
instrument in writing signed by each of the parties hereto.
(c) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties and their
respective successors and assigns, including without limitation in the case of
any corporate party hereto any corporate successor by merger or otherwise.
Except with the prior written consent of the other parties hereto, no party may
assign any of its rights or obligations hereunder.
(d) Entire Agreement. This Agreement constitutes the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. There are no representations, warranties or covenants by the
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement.
(e) Severability. If any term of this Agreement or the application
thereof to any party or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such term to
the other parties or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by applicable law, provided that in
such event the parties shall negotiate in good faith in an attempt to agree to
another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
(f) Specific Performance. The parties acknowledge that money damages
are not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
(g) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not
-7-
<PAGE>
alternative, and the exercise or beginning of the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(h) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(i) No Third Party Beneficiaries. Except as provided in Section 4
hereof, this Agreement is not intended to be for the benefit of and shall not be
enforceable by any person or entity who or which is not a party hereto.
(j) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding shall be brought only in such court
(and waives any objection based on forum non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph (j) and shall not be deemed
to be a general submission to the jurisdiction of said Court or in the State of
Delaware other than for such purposes. Each party hereto hereby waives any
right to a trial by jury in connection with any such action, suit or proceeding.
(k) Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the law of the State
of Delaware.
(l) Name, Captions. The name assigned to this Agreement and the
section captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof.
(m) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
(n) Expenses. Each of the parties hereto shall bear its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, except that in the event of a dispute concerning the terms or
enforcement of this Agreement, the prevailing party in any such dispute shall be
entitled to
-8-
<PAGE>
reimbursement of reasonable legal fees and disbursements from the other party or
parties to such dispute.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
RYKOFF-SEXTON, INC.
By:
--------------------------------
Name: Mark Van Stekelenburg
Title: President and Chief
Executive Officer
[SHAREHOLDERS]
By:
--------------------------------
Name:
Title:
Address:
By:
--------------------------------
Name:
Title:
Address:
By:
--------------------------------
Name:
Title:
Address:
-9-
<PAGE>
SCHEDULE I
----------
SHARE OWNERSHIP
Class A Class B
Name of Stockholder Common Stock Common Stock
- ------------------- ------------ ------------
<PAGE>
SCHEDULE II
-----------
CONTINUITY SHARES NUMBER =
.40[(A x E) + (B x E) + (C x E) + (D x E) + F]
----------------------------------------------
Y
Where A = the total number of Shares converted into RSI Common Shares
in the Merger (excluding fractional RSI Common Shares) and
held by Shareholders* at the Effective Time;
B = the total number of Shares converted into RSI Common Shares
in the Merger (excluding fractional RSI Common Shares) and
held by persons that were stockholders of the Company
immediately prior to the Merger that are not Shareholders at
the Effective Time;
C = the total number of Dissenting Shares;
D = the total number of Shares that would be issued upon the
deemed exercise of all Options granted by the Company under
the US Foodservice Inc. 1992 Stock Option Plan (Effective
September 4, 1992; As Amended September 23, 1993) that have
an adjusted exercise price of either $.02 per share or $2.00
per share and that have not been exercised as of the
Effective Time (the "Deemed Exercised Options");
E = the fair market value of a Share at the Effective Time
determined as follows:
E = Y x the Exchange Ratio; and
- --------------------
* At the option of MLCP, certain stockholders owning fewer than 25,000
shares of Class A Common Stock immediately prior to the
Effective Time may be asked to make only the representations
and warranties contained in Section 2 of this Agreement
pursuant to an instrument in the form of Exhibit B attached
to this Agreement.
<PAGE>
F = the total amount paid as consideration to redeem the
Preferred Stock pursuant to the Preferred Stock Redemption
Agreements (other than the Preferred Stock Redemption
Agreement between RSI and Bankamerica Capital Corporation)
and the total cash consideration paid in lieu of fractional
RSI Common Shares;
Y = the fair market value of an RSI Common Share at the
Effective Time, which shall be deemed to be equal to the
mean between the high and low trading prices on the NYSE of
one RSI Common Share on the Closing Date, as reported in the
New York Stock Exchange Composite Tape.
-ii-
<PAGE>
EXHIBIT A
---------
TO: [RSI Transfer Agent]
Please refer to the Tax Agreement, dated ___________, 1996, among
Rykoff-Sexton, Inc., a Delaware corporation, and each other person listed on the
signature pages thereof (the "Agreement"), that imposes, among things, certain
restrictions on the transfer of RSI Common Shares received by the undersigned in
the merger of US Foodservice Inc. with and into USF Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of RSI. The undersigned
hereby certifies that the RSI Common Shares represented by the certificate
attached hereto are being transferred in compliance with the provisions of the
Agreement.
Dated:
------------------------
[NAME OF TRANSFERRING SHAREHOLDER]
By:
-------------------------------
[Authorized Signature]
<PAGE>
EXHIBIT B
---------
[Effective Time], 1996
----------------------
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532-5201
Re: Agreement and Plan of Merger among Rykoff-Sexton,
Inc., USF Acquisition Corporation and US
Foodservice, Inc. Dated February 2, 1996
-------------------------------------------------
Dear Sirs:
This letter is furnished to you in connection with the planned merger
(the "Merger") of US Foodservice Inc., a Delaware corporation (the "Company"),
with and into USF Acquisition Corporation, a Delaware corporation ("Merger Sub")
and a wholly owned subsidiary of Rykoff-Sexton, Inc. ("RSI"), pursuant to an
Agreement and Plan of Merger, dated February 2, 1996, among RSI, Merger Sub and
the Company (the "Merger Agreement").
The following representations are provided to you for your benefit to
induce you to consummate the Merger. The undersigned understands and agrees
that such representations will be relied upon by Morgan, Lewis & Bockius LLP,
Shearman & Sterling, and Jones, Day, Reavis & Pogue, respectively, in connection
with their opinions to be delivered pursuant to Sections 8.1(h) and 8.1(i) of
the Merger Agreement with respect to the treatment of the Merger for federal
income tax purposes as a tax-free reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended. Capitalized terms used
but not defined herein shall have the same meanings given to such terms in the
Merger Agreement.
1. The undersigned is the record and beneficial owner, under U.S.
federal income tax principles, of ______ shares of Class A Common
Stock, all of which will be converted into a number of RSI Common
Shares in the Merger pursuant to Section 4.1 of the Merger
Agreement.
2. The undersigned has no plan or intention to sell, exchange,
distribute or otherwise dispose of in
<PAGE>
any manner, or enter into one or more transactions whereby such
Shareholder gives up substantially all of the benefits and
burdens of ownership in, a number of RSI Common Shares received
by the undersigned in the Merger that would exceed in the
aggregate (x) the number of RSI Common Shares received by the
undersigned in the Merger multiplied by (y) the Permitted Sales
Factor. For purposes of this representation, the "Permitted
Sales Factor" shall be a number equal to 1.00 minus the
Continuity Factor, and the "Continuity Factor" shall be a
fraction, the numerator of which shall be the aggregate number of
RSI Common Shares that must continue to be owned by the
stockholders of the Company to satisfy the "continuity of
interest" requirement of Treas. Reg. (S) 1.368-1(b) (the
"Continuity Shares Number"), and the denominator of which shall
be the aggregate number of RSI Common Shares issued in the Merger
and held by the Shareholders at the Effective Time. For purposes
of computing the Continuity Factor, the "Continuity Shares
Number" shall be determined by applying the formula set forth on
Schedule I** attached hereto.
Very truly yours,
------------------------------
(Print Name of Stockholder)
By:
---------------------------
(Authorized Signature)
- ----------------
** Schedule I to Exhibit B will be identical to Schedule II to the Agreement.
-ii-
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
April 1, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated June 9, 1995
incorporated by reference in Rykoff-Sexton, Inc.'s Form 10-K for the year ended
April 29, 1996 and to all references to our Firm included in this registration
statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 1, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated November 29, 1995
included in Rykoff-Sexton, Inc.'s Form 8-K dated November 1, 1995 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
April 1, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated June 7, 1994
included in Rykoff-Sexton, Inc.'s Form 8-K dated February 21, 1995 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Baltimore, Maryland
April 1, 1996
<PAGE>
Exhibit 24.1
RYKOFF-SEXTON, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
The undersigned director and/or officer of Rykoff-Sexton, Inc., a
Delaware corporation (the "Company"), hereby constitutes and appoints Mark Van
Stekelenburg, Richard J. Martin and Robert J. Harter, Jr. and each of them, with
full power of substitution and resubstitution, as attorneys-in-fact or attorney-
in-fact of the undersigned, for him and in his name, place and stead, to sign
and file with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933 one or more Registration Statement(s) on Form S-4
relating to the registration of the Common Stock, $0.01 par value per share (the
"Common Stock"), of the Company and certain other securities of the Company as
such attorney-in-fact may deem appropriate, with any and all amendments,
supplements and exhibits thereto, including pre-effective and post-effective
amendments or supplements; to sign and file any and all applications or other
documents to be filed with the Commission and any and all documents required to
be filed with any state securities regulating board or commission pertaining to
such Common Stock and other securities registered pursuant to the Registration
Statement(s) on Form S-4, with any and all amendments, supplements and exhibits
thereto; and to sign and file any application(s) required by the New York Stock
Exchange (the "NYSE") for listing of the Common Stock on the NYSE with any and
all amendments, supplements and exhibits thereto, in each case with full power
and authority to do and perform any and all acts and things whatsoever required,
necessary or desirable to be done in the premises, hereby ratifying and
approving the act of said attorneys and any of them and any such substitute.
EXECUTED as of February 1, 1996.
/s/ Mark Van Stekelenburg
- ----------------------------------
Name: Mark Van Stekelenburg
Title: Chairman, President and CEO
<PAGE>
Exhibit 24.2
RYKOFF-SEXTON, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
The undersigned director of Rykoff-Sexton, Inc., a Delaware
corporation (the "Company"), hereby constitutes and appoints Mark Van
Stekelenburg, Richard J. Martin and Robert J. Harter, Jr. and each of them, with
full power of substitution and resubstitution, as attorneys-in-fact or attorney-
in-fact of the undersigned, for him and in his name, place and stead, to sign
and file with the Securities and Exchange Commission under the Securities Act of
1933 one or more Registration Statement(s) on Form S-4 relating to the
registration of the Common Stock, $0.01 par value per share of the Company and
certain other securities of the Company as such attorney-in-fact may deem
appropriate, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements, with full
power and authority to do and perform any and all acts and things whatsoever
required, necessary or desirable to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such substitute.
EXECUTED as of January 31, 1996.
-----------
/s/ Mark Van Stekelenburg
- ----------------------------------
Name: Mark Van Stekelenburg
Title:
<PAGE>
Exhibit 24.3
RYKOFF-SEXTON, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), hereby
constitutes and appoints Mark Van Stekelenburg, Richard J. Martin and Robert J.
Harter, Jr. and each of them, with full power of substitution and
resubstitution, as attorneys-in-fact or attorney-in-fact for the Company, for it
and in its name, place and stead, to sign and file with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 one or
more Registration Statement(s) on Form S-4 relating to the registration of the
Common Stock, $0.01 par value per share (the "Common Stock"), of the Company and
certain other securities of the Company as such attorney-in-fact may deem
appropriate, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements; to sign
and file any and all applications or other documents to be filed with the
Commission and any and all documents required to be filed with any state
securities regulating board or commission pertaining to such Common Stock and
other securities registered pursuant to the Registration Statement(s) on Form S-
4, with any and all amendments, supplements and exhibits thereto; and to sign
and file any application(s) required by the New York Stock Exchange ("NYSE") for
listing of the Common Stock on the NYSE with any and all amendments, supplements
and exhibits thereto, in each case with full power and authority to do and
perform any and all acts and things whatsoever required, necessary or desirable
to be done in the premises, hereby ratifying and approving the act of said
attorneys and any of them and any such substitute.
EXECUTED as of January 31, 1996.
RYKOFF-SEXTON, INC.
/s/ James I. Maslon
- ---------------------------------
Name: James I. Maslon
Title:
<PAGE>
Exhibit 24.4
RYKOFF-SEXTON, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), hereby
constitutes and appoints Mark Van Stekelenburg, Richard J. Martin and Robert J.
Harter, Jr. and each of them, with full power of substitution and
resubstitution, as attorneys-in-fact or attorney-in-fact for the Company, for it
and in its name, place and stead, to sign and file with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 one or
more Registration Statement(s) on Form S-4 relating to the registration of the
Common Stock, $0.01 par value per share (the "Common Stock"), of the Company and
certain other securities of the Company as such attorney-in-fact may deem
appropriate, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements; to sign
and file any and all applications or other documents to be filed with the
Commission and any and all documents required to be filed with any state
securities regulating board or commission pertaining to such Common Stock and
other securities registered pursuant to the Registration Statement(s) on Form S-
4, with any and all amendments, supplements and exhibits thereto; and to sign
and file any application(s) required by the New York Stock Exchange ("NYSE") for
listing of the Common Stock on the NYSE with any and all amendments, supplements
and exhibits thereto, in each case with full power and authority to do and
perform any and all acts and things whatsoever required, necessary or desirable
to be done in the premises, hereby ratifying and approving the act of said
attorneys and any of them and any such substitute.
EXECUTED as of January 31, 1996.
RYKOFF-SEXTON, INC.
/s/ James P. Miscoll
- ---------------------------------
Name: James P. Miscoll
Title:
<PAGE>
Exhibit 24.5
RYKOFF-SEXTON, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), hereby
constitutes and appoints Mark Van Stekelenburg, Richard J. Martin and Robert J.
Harter, Jr. and each of them, with full power of substitution and
resubstitution, as attorneys-in-fact or attorney-in-fact for the Company, for it
and in its name, place and stead, to sign and file with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 one or
more Registration Statement(s) on Form S-4 relating to the registration of the
Common Stock, $0.01 par value per share (the "Common Stock"), of the Company and
certain other securities of the Company as such attorney-in-fact may deem
appropriate, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements; to sign
and file any and all applications or other documents to be filed with the
Commission and any and all documents required to be filed with any state
securities regulating board or commission pertaining to such Common Stock and
other securities registered pursuant to the Registration Statement(s) on Form S-
4, with any and all amendments, supplements and exhibits thereto; and to sign
and file any application(s) required by the New York Stock Exchange ("NYSE") for
listing of the Common Stock on the NYSE with any and all amendments, supplements
and exhibits thereto, in each case with full power and authority to do and
perform any and all acts and things whatsoever required, necessary or desirable
to be done in the premises, hereby ratifying and approving the act of said
attorneys and any of them and any such substitute.
EXECUTED as of January 31, 1996.
RYKOFF-SEXTON, INC.
/s/ Neil I. Sell
- ---------------------------------
Name: Neil I. Sell
Title:
<PAGE>
Exhibit 24.6
RYKOFF-SEXTON, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), hereby
constitutes and appoints Mark Van Stekelenburg, Richard J. Martin and Robert J.
Harter, Jr. and each of them, with full power of substitution and
resubstitution, as attorneys-in-fact or attorney-in-fact for the Company, for it
and in its name, place and stead, to sign and file with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 one or
more Registration Statement(s) on Form S-4 relating to the registration of the
Common Stock, $0.01 par value per share (the "Common Stock"), of the Company and
certain other securities of the Company as such attorney-in-fact may deem
appropriate, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements; to sign
and file any and all applications or other documents to be filed with the
Commission and any and all documents required to be filed with any state
securities regulating board or commission pertaining to such Common Stock and
other securities registered pursuant to the Registration Statement(s) on Form S-
4, with any and all amendments, supplements and exhibits thereto; and to sign
and file any application(s) required by the New York Stock Exchange ("NYSE") for
listing of the Common Stock on the NYSE with any and all amendments, supplements
and exhibits thereto, in each case with full power and authority to do and
perform any and all acts and things whatsoever required, necessary or desirable
to be done in the premises, hereby ratifying and approving the act of said
attorneys and any of them and any such substitute.
EXECUTED as of January 31, 1996.
RYKOFF-SEXTON, INC.
/s/ Bernard Sweet
- ---------------------------------
Name: Bernard Sweet
Title:
<PAGE>
Exhibit 24.7
RYKOFF-SEXTON, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), hereby
constitutes and appoints Mark Van Stekelenburg, Richard J. Martin and Robert J.
Harter, Jr. and each of them, with full power of substitution and
resubstitution, as attorneys-in-fact or attorney-in-fact for the Company, for it
and in its name, place and stead, to sign and file with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 one or
more Registration Statement(s) on Form S-4 relating to the registration of the
Common Stock, $0.01 par value per share (the "Common Stock"), of the Company and
certain other securities of the Company as such attorney-in-fact may deem
appropriate, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements; to sign
and file any and all applications or other documents to be filed with the
Commission and any and all documents required to be filed with any state
securities regulating board or commission pertaining to such Common Stock and
other securities registered pursuant to the Registration Statement(s) on Form S-
4, with any and all amendments, supplements and exhibits thereto; and to sign
and file any application(s) required by the New York Stock Exchange ("NYSE") for
listing of the Common Stock on the NYSE with any and all amendments, supplements
and exhibits thereto, in each case with full power and authority to do and
perform any and all acts and things whatsoever required, necessary or desirable
to be done in the premises, hereby ratifying and approving the act of said
attorneys and any of them and any such substitute.
EXECUTED as of January 31, 1996.
RYKOFF-SEXTON, INC.
/s/ Jan W. Jeurgens
- ---------------------------------
Name: Jan W. Jeurgens
Title:
<PAGE>
Exhibit 24.8
RYKOFF-SEXTON, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
Rykoff-Sexton, Inc., a Delaware corporation (the "Company"), hereby
constitutes and appoints Mark Van Stekelenburg, Richard J. Martin and Robert J.
Harter, Jr. and each of them, with full power of substitution and
resubstitution, as attorneys-in-fact or attorney-in-fact for the Company, for it
and in its name, place and stead, to sign and file with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 one or
more Registration Statement(s) on Form S-4 relating to the registration of the
Common Stock, $0.01 par value per share (the "Common Stock"), of the Company and
certain other securities of the Company as such attorney-in-fact may deem
appropriate, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements; to sign
and file any and all applications or other documents to be filed with the
Commission and any and all documents required to be filed with any state
securities regulating board or commission pertaining to such Common Stock and
other securities registered pursuant to the Registration Statement(s) on Form S-
4, with any and all amendments, supplements and exhibits thereto; and to sign
and file any application(s) required by the New York Stock Exchange ("NYSE") for
listing of the Common Stock on the NYSE with any and all amendments, supplements
and exhibits thereto, in each case with full power and authority to do and
perform any and all acts and things whatsoever required, necessary or desirable
to be done in the premises, hereby ratifying and approving the act of said
attorneys and any of them and any such substitute.
EXECUTED as of January 31, 1996.
RYKOFF-SEXTON, INC.
/s/ Richard J. Martin
- ---------------------------------
Name: Richard J. Martin
Title:
<PAGE>
Exhibit 99.1
CONSENT OF FRANK H. BEVEVINO
I hereby consent to the references to, and information with respect to, me in
my capacity as a proposed member of the Board of Directors of the Registrant
wherever such references and information appear in the Registration Statement,
including the Prospectus constituting a part thereof, and all amendments
thereof.
/s/ Frank H. Bevevino
---------------------
FRANK H. BEVEVINO
Wilkes-Barre, Pennsylvania
April 1, 1996
