<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
JP FOODSERVICE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
JP FOODSERVICE, INC.
9830 PATUXENT WOODS DRIVE
COLUMBIA, MARYLAND 21046
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 15, 1996
---------------------
To our stockholders:
Notice is hereby given that the 1996 annual meeting of stockholders of JP
Foodservice, Inc. will be held at the Company's headquarters, located at 9830
Patuxent Woods Drive, Columbia, Maryland 21046, on Friday, November 15, 1996, at
10:00 a.m., local time, for the following purposes:
1. to elect three directors of the Company for terms expiring at the
1999 annual meeting of stockholders;
2. to consider and vote upon a proposal to amend the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock from 45,000,000 shares to 75,000,000
shares;
3. to consider and vote upon a proposal to amend the Company's Stock
Option Plan for Outside Directors to increase the number of shares of the
Company's Common Stock issuable under the Plan from 40,000 shares to
100,000 shares; and
4. to transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on October 4, 1996
will be entitled to notice of, and to vote at, the annual meeting or any
adjournment or postponement thereof.
By Order of the Board of Directors,
David M. Abramson
Secretary
Dated: October 18, 1996
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID
ENVELOPE PROVIDED.
<PAGE> 3
JP FOODSERVICE, INC.
9830 PATUXENT WOODS DRIVE
COLUMBIA, MARYLAND 21046
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 15, 1996
---------------------
PROXY STATEMENT
---------------------
GENERAL INFORMATION
PROXY SOLICITATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of JP Foodservice, Inc. for use at the 1996
annual meeting of stockholders to be held at the Company's headquarters located
at 9830 Patuxent Woods Drive, Columbia, Maryland 21046, on Friday, November 15,
1996, at 10:00 a.m., local time. The purpose of the annual meeting and the
matters to be acted upon are set forth in the accompanying notice of annual
meeting.
The Company is mailing its annual report for the fiscal year ended June 29,
1996 together with this proxy statement and the enclosed proxy to stockholders
entitled to vote at the annual meeting. The annual report does not form any part
of the material for the solicitation of proxies.
The Company will pay the cost of all proxy solicitation. In addition to the
solicitation of proxies by use of the mails, officers and other employees of the
Company and its subsidiaries may solicit proxies by personal interview,
telephone and telegram. None of these individuals will receive compensation for
such services, which will be performed in addition to their regular duties. The
Company also has made arrangements with brokerage firms, banks, nominees and
other fiduciaries to forward proxy solicitation material for shares held of
record by them to the beneficial owners of such shares. The Company will
reimburse such persons for their reasonable out-of-pocket expenses in forwarding
such material. Shareholder Communications Corporation will assist in the
distribution of proxy solicitation material, collection of proxies and the
solicitation of proxies by personal interview, telephone and telegram for a fee
estimated at $3,500, plus reimbursement of out-of-pocket expenses.
This proxy statement and the enclosed proxy are first being mailed to the
Company's stockholders on or about October 18, 1996.
VOTING AND REVOCABILITY OF PROXIES
A proxy for use at the annual meeting and a return envelope are enclosed.
Shares of Common Stock represented by a properly executed proxy, if such proxy
is received in time and not revoked, will be voted at the annual meeting in
accordance with the instructions indicated in such proxy. If no instructions are
indicated, such shares will be voted "FOR" the election of the three director
nominees named in the proxy, "FOR" the proposal to amend the Company's Restated
Certificate of Incorporation to increase the total number of authorized shares
of the Company's Common Stock from 45,000,000 shares to 75,000,000 shares, and
"FOR" the proposal to increase the number of shares of Common Stock authorized
for issuance under the Company's Stock Option Plan for Outside Directors from
40,000 shares to 100,000 shares. Discretionary authority is provided in the
proxy as to any matters not specifically referred to therein. Management is not
aware of any other matters which are likely to be brought before the annual
meeting. However, if any such matters properly come before the annual meeting,
the persons named in the proxy are fully authorized to vote thereon in
accordance with their judgment and discretion.
<PAGE> 4
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the annual meeting by (1) giving written notice of revocation to the
Secretary of the Company, (2) properly submitting to the Company a duly executed
proxy bearing a later date or (3) voting in person at the annual meeting. All
written notices of revocation or other communications with respect to revocation
of proxies should be addressed as follows: JP Foodservice, Inc., 9830 Patuxent
Woods Drive, Columbia, Maryland 21046, Attention: Corporate Secretary.
VOTING PROCEDURE
All holders of record of the Common Stock, par value $0.01 per share, of
the Company at the close of business on October 4, 1996 will be eligible to vote
at the annual meeting. Each holder of Common Stock is entitled to one vote at
the annual meeting for each share held by such stockholder. As of October 4,
1996, there were 22,210,088 shares of Common Stock outstanding.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock entitled to vote will constitute a quorum for the
transaction of business. Votes cast in person or by proxy, abstentions and
broker non-votes (as hereinafter defined) will be tabulated by the inspectors of
election and will be considered in the determination of whether a quorum is
present at the annual meeting. The inspectors of election will treat shares
represented by executed proxies which abstain as shares that are present and
entitled to vote for purposes of determining the approval of such matter. If,
with respect to any shares, a broker or other nominee submits a proxy indicating
that instructions have not been received from the beneficial owners or the
persons entitled to vote and that such broker or other nominee does not have
discretionary authority to vote such shares (a "broker non-vote") on Proposal 1
or Proposal 3, those shares will not be treated as present and entitled to vote
for purposes of determining the approval of Proposal 1 or Proposal 3.
SECURITY OWNERSHIP
The information set forth below regarding beneficial ownership of the
Common Stock has been presented in accordance with rules of the Securities and
Exchange Commission and is not necessarily indicative of beneficial ownership
for any other purpose. Under such rules, beneficial ownership of Common Stock
includes any shares as to which a person has the sole or shared voting power or
investment power and also any shares which a person has the right to acquire
within 60 days through the exercise of any stock option or other right.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 4, 1996, information based
upon the Company's records and filings with the Securities and Exchange
Commission regarding each person known to the Company to be the beneficial owner
of more than 5% of the Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
- ----------------------------------------------------------------- ----------------------- --------
<S> <C> <C>
Sara Lee Corporation............................................. 5,138,210 23.1%
Three First National Plaza
Chicago, Illinois 60602
T. Rowe Price Associates, Inc.(2)................................ 1,668,300 7.5
100 E. Pratt Street
Baltimore, Maryland 21202
Janus Capital Corporation(3)..................................... 1,291,100 5.8
Thomas H. Bailey
100 Filmore Street, Suite 300
Denver, Colorado 80206
</TABLE>
- ---------------
(1) Except as indicated, each person has sole voting power and investment power
with respect to the shares shown.
2
<PAGE> 5
(2) Shares shown are reported on a Schedule 13G dated June 30, 1996 filed with
the Securities and Exchange Commission. Voting power with respect to all
but 202,900 shares is exercised by other persons.
(3) Shares shown are reported on a Schedule 13G dated February 13, 1996 filed
with the Securities and Exchange Commission. Janus Capital Corporation and
Mr. Bailey share voting power with respect to 1,291,100 shares, and
disclaim any beneficial interest in such shares. Janus Venture Fund shares
voting power with respect to 928,550 of the 1,291,100 shares reported by
Janus Capital Corporation and Mr. Bailey.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of October 4, 1996, information
regarding the beneficial ownership of the Common Stock by each director and each
nominee to the Board of Directors, each executive officer of the Company named
in the Summary Compensation Table under "Executive Compensation," and all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- ------------------------------------------------------------------ ----------------- --------
<S> <C> <C>
David M. Abramson(2)(3)........................................... 6,625 *%
Michael J. Drabb(3)............................................... 4,250 *
Eric E. Glass(3).................................................. 1,650 *
Lewis Hay, III(3)(4).............................................. 94,026 *
Mark P. Kaiser(3)................................................. 53,603 *
Paul I. Latta..................................................... 2,250 *
George T. Megas(3)................................................ 17,309 *
George A. Midwood(3)(5)........................................... 7,826 *
James L. Miller(3)(6)............................................. 239,991 1.1
Jeffrey D. Serkes................................................. -- --
Dean R. Silverman................................................. 1,250 *
All directors and executive officers as a group (10 persons)...... 428,780 1.9
</TABLE>
- ---------------
* Represents holdings of less than 1%.
(1) The shares shown as beneficially owned include shares credited to
participant accounts in the Company's 401(k) retirement savings plan, which
are voted by the plan's trustees, as follows: Mr. Hay, 481; Mr. Kaiser,
459; Mr. Megas, 417; and Mr. Miller, 10,830.
(2) Includes 2,000 shares held by a family trust for the benefit of Mr.
Abramson's minor children, of which Mr. Abramson acts as the trustee and
with respect to which he exercises voting power and investment power, and
375 shares credited to Mr. Abramson's account in the profit sharing plan
and trust of Mr. Abramson's former law firm, which are voted by such plan's
trustees.
(3) Includes shares which may be acquired within 60 days pursuant to
outstanding options by the persons listed, as follows: Mr. Abramson,
4,250; Mr. Drabb, 4,250; Mr. Glass, 1,250; Mr. Hay, 23,739; Mr. Kaiser,
21,925; Mr. Latta, 1,250; Mr. Megas, 7,364; Mr. Midwood, 4,250; Mr.
Miller, 55,951; Mr. Silverman, 1,250; and all directors and executive
officers as a group, 125,479.
(4) Includes 381 shares held by Mr. Hay's wife as a custodian for their minor
children. Mr. Hay disclaims any beneficial interest in such shares.
(5) Mr. Midwood's term as a director will expire at the 1996 annual meeting.
(6) Includes 1,195 shares owned by members of Mr. Miller's family. Mr. Miller
disclaims any beneficial interest in such shares.
3
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL 1)
NOMINEES FOR ELECTION AS DIRECTORS
The Restated Certificate of Incorporation and the Amended and Restated
By-Laws of the Company provide that the Board of Directors is to be divided into
three classes of directors, with the classes to be as nearly equal in number as
possible. In accordance with the By-Laws, the membership of the Board of
Directors currently is fixed at nine directors, with three directors to serve
until this annual meeting, three directors to serve until the 1997 annual
meeting of stockholders and three directors to serve until the 1998 annual
meeting of stockholders. Upon the expiration of the term of office of each class
as set forth above, the nominees for such class will be elected for a term of
three years to succeed the directors whose terms of office expire.
Three nominees are named in this proxy statement. If elected, the directors
will serve a three-year term to expire at the 1999 annual meeting of
stockholders and until their successors are elected and qualified or until their
earlier resignation or removal. The Board of Directors has nominated two
incumbent directors, Lewis Hay, III and Mark P. Kaiser, and Jeffrey D. Serkes
for election to the Board. Mr. Hay has served as a director since 1991 and Mr.
Kaiser has served as a director since September 3, 1996.
Approval of the nominees requires the affirmative vote of a plurality of
the votes cast at the annual meeting. In the event that any nominee should
become unable or unwilling to serve as a director, it is the intention of the
persons named in the proxy to vote for the election of such substitute nominee
for the office of director as the Board of Directors may recommend. It is not
anticipated that any nominee will be unable or unwilling to serve as a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE ELECTION OF THE NOMINEES TO SERVE AS DIRECTORS.
Biographical information concerning each of the nominees and directors
continuing in office is presented on the following pages.
NOMINEES FOR ELECTION FOR THREE-YEAR TERMS
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ------------------------------------------------------------------------------- --- --------
<S> <C> <C>
Lewis Hay, III................................................................. 41 1991
Mark P. Kaiser................................................................. 39 1996
Jeffrey D. Serkes.............................................................. 38 --
</TABLE>
Lewis Hay, III joined the Company in 1991 as Senior Vice President and
Chief Financial Officer. Before joining the Company, Mr. Hay was a Vice
President and partner of Mercer Management Consulting (formerly Strategic
Planning Associates), where he led the strategy consulting practice in the
firm's Washington, D.C. office. Mr. Hay joined Mercer Management Consulting in
1982 and, beginning in 1986, participated in a number of consulting projects for
PYA/Monarch, Inc., a wholly owned subsidiary of Sara Lee Corporation
("PYA/Monarch"), including the management-led leveraged acquisition of certain
operations of PYA/Monarch in connection with the formation of the Company. Mr.
Hay also serves as a member of the Council on Finance for the Graduate School of
Industrial Administration of Carnegie Mellon University.
Mark P. Kaiser has served as the Senior Vice President-Sales, Marketing and
Procurement of the Company since 1993. Mr. Kaiser served as the Company's Vice
President-Sales and Marketing from 1989 to 1991 and as Executive Vice
President-Sales, Marketing and Procurement of the Company from 1991 to 1993. Mr.
Kaiser previously held a number of positions at PYA/Monarch, including Vice
President-Sales from 1985 to 1989.
4
<PAGE> 7
Jeffrey D. Serkes has served as Vice President and Treasurer of
International Business Machines Corporation ("IBM") since January 1995 and as
Assistant Treasurer of IBM from August 1994 to December 1994. From 1987 to
August 1994, Mr. Serkes held a number of positions with RJR Nabisco, Inc.,
including Vice President and Deputy Treasurer and Vice President and Assistant
Treasurer, Corporate Finance. Mr. Serkes serves as a director of IBM Credit
Corporation.
DIRECTORS WHOSE TERMS EXPIRE IN 1997
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ------------------------------------------------------------------------------- --- --------
<S> <C> <C>
James L. Miller................................................................ 47 1989
David M. Abramson.............................................................. 43 1994
Dean R. Silverman.............................................................. 45 1996
</TABLE>
James L. Miller has served as Chairman of the Board of Directors and as
President and Chief Executive Officer of the Company since July 1989. From 1986
to 1989, Mr. Miller served as Executive Vice President and Chief Operating
Officer of the Northern Division of PYA/Monarch. From 1983 to 1985, Mr. Miller
served as Vice President and General Manager of PYA/Monarch's Northeast
Division. Before joining PYA/Monarch, from 1972 to 1983, Mr. Miller was employed
by SYSCO Corp., where he held the positions of Vice President of Operations,
Vice President of Sales, Vice President and General Manager.
David M. Abramson has served as Senior Vice President and General Counsel
of the Company since July 1, 1996 and as Secretary of the Company effective
September 2, 1996. Mr. Abramson was the President and Managing Principal of the
law firm of Levan, Schimel, Belman & Abramson, P.A. from 1992 to 1996.
Previously, Mr. Abramson was a Vice President and Principal of that firm. Mr.
Abramson serves as a director of Monocacy Bancshares, Inc., which is the parent
corporation of Taneytown Bank & Trust Company in Taneytown, Maryland.
Dean R. Silverman has served as a director of the Company since September
3, 1996. Mr. Silverman is the President of Dean & Company, a strategic
management consulting company located in Vienna, Virginia, a position he has
held since 1993. Prior to 1993, Mr. Silverman was Executive Vice President and a
partner of Mercer Management Consulting.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ----------------------------------------------------------------------------- --- --------
<S> <C> <C>
Michael J. Drabb............................................................. 62 1994
Eric E. Glass................................................................ 56 1996
Paul I. Latta................................................................ 53 1996
</TABLE>
Michael J. Drabb has served as Executive Vice President of O'Brien Asset
Management, Inc., an institutional asset management firm, since August 1993.
From April 1992 to July 1993, Mr. Drabb was retired. Mr. Drabb served as an
Executive Vice President and a member of the cabinet of The Mutual Life
Insurance Company of New York ("MONY") from 1989 to 1992 and was employed by
MONY from 1961 until his retirement in 1992. Mr. Drabb also serves as a director
of the New York Life Fund, Inc., the New York Life MFA Series Fund, Inc., the
MONY Series Fund, Inc. and United States Leather, Inc.
Eric E. Glass has served as a director of the Company since February 19,
1996. Mr. Glass has served as the Chairman of the Board for The Taney
Corporation, a manufacturer of wooden stairway components and stairways, since
1995. Previously, from 1962 to 1995, Mr. Glass served as President of The Taney
Corporation. Mr. Glass also serves as a director of the Gettysburg Hospital in
Gettysburg, Pennsylvania and Vice Chairman of the Board and Chairman of the
Executive Committee of Monocacy Bancshares, Inc., which is the parent
corporation of Taneytown Bank & Trust Company in Taneytown, Maryland.
5
<PAGE> 8
Paul I. Latta has served as a director of the Company since September 3,
1996. Mr. Latta has served most recently as Senior Vice President of The Rouse
Company, a real estate development and management company, where he is
responsible for all retail properties. Mr. Latta previously held a number of
positions with The Rouse Company, where he has been employed since 1968.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held eight meetings during the Company's 1996 fiscal
year. During fiscal year 1996, each director attended at least 75% of the
aggregate of the total number of meetings of the Board held during the period he
served as a director and the total number of meetings held by each committee of
the Board on which he served (during the period for which he served).
The Company's Board of Directors currently has three standing committees,
the Audit Committee, the Compensation Committee and the Nominating Committee.
The Audit Committee, which met eight times during fiscal year 1996,
currently consists of Mr. Drabb and Mr. Midwood. The Committee is responsible
for recommending to the full Board the selection of the Company's independent
auditors, reviewing the scope of the audit plan and the results of each audit
with management and the independent auditors, reviewing the adequacy of the
Company's system of internal accounting controls in consultation with the
independent auditors, reviewing generally the activities and recommendations of
the independent auditors, and exercising oversight with respect to the Company's
code of conduct and other policies and procedures regarding adherence with legal
requirements.
The Compensation Committee, which held four meetings during fiscal year
1996, currently consists of Mr. Drabb and Mr. Glass (commencing June 11, 1996).
During fiscal year 1996, the Compensation Committee consisted of Mr. Drabb, Mr.
Abramson (until June 10, 1996) and Ann E. Ziegler, Executive Director-Corporate
Development of Sara Lee Corporation ("Sara Lee") (until June 27, 1996). The
Committee is responsible for establishing the compensation and benefits of the
executive officers of the Company and its subsidiaries, monitoring compensation
arrangements for management employees for consistency with corporate objectives
and stockholders' interests, and administering certain of the Company's benefit
plans.
The Nominating Committee of the Board of Directors, which did not meet
during fiscal year 1996, currently consists of Mr. Glass, Mr. Hay and Mr.
Silverman. The Committee is responsible for recommending to the full Board
potential candidates for membership on the Board. The Company's Restated
Certificate of Incorporation provides that any stockholder wishing to nominate
persons for election as directors at an annual meeting must deliver to the
Secretary of the Company at the Company's principal office in Columbia, Maryland
a written notice of the stockholder's intention to make such a nomination. The
stockholder is required to furnish the notice not later than 90 days prior to
the date that is one year from the date of the most recent preceding meeting of
stockholders. The notice must include the following information: (1) the name
and address of record of the stockholder who intends to make the nomination, (2)
a representation that the stockholder is a holder of record of Common Stock and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice, (3) the name, age, business and residential
addresses and principal occupation or employment of each nominee, (4) a
description of all arrangements or understandings between the stockholder and
each proposed 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, (5) such other information regarding each proposed nominee as would
be required to be included in a proxy statement filed pursuant to the rules and
regulations of the Securities and Exchange Commission and (6) the written
consent of each proposed nominee to serve as a director of the Company if so
elected.
Directors who are not also employees of the Company receive an annual fee
of $12,000, plus $1,000 for each Board meeting attended in person, $750 for each
Board meeting attended by conference telephone, $750 for each committee meeting
attended in person ($300 if attended in person on the date of a Board meeting),
and $300 for each committee meeting attended by conference telephone. In
addition, such directors receive an annual grant of options for 1,000 shares of
Common Stock under the Company's Stock Option Plan for
6
<PAGE> 9
Outside Directors. Such plan also provides that each such director will receive
options to purchase 5,000 shares of Common Stock upon his initial election or
appointment to the Board.
The Company paid fees of $364,400 in fiscal year 1996 to the three members
of a Special Committee of the Board appointed to consider and evaluate a
proposed combination of the Company and PYA/Monarch. Of this amount, $144,800
was paid to Mr. Abramson (Chairman of the Special Committee), $109,800 was paid
to Mr. Drabb and $109,800 was paid to Mr. Midwood.
BOARD MEMBERSHIP AGREEMENT
Under a Board Membership Agreement between the Company and Sara Lee, Sara
Lee has the right to designate for nomination as directors (the "Sara Lee
Directors") (1) three directors, if the percentage of the Company's outstanding
voting securities then beneficially owned by Sara Lee is 25% or more, (2) two
directors, if the percentage of outstanding voting securities then owned is at
least 15% but less than 25%, (3) one director, if the percentage of outstanding
voting securities then owned is at least 8% but less than 15%, and (4) no
directors, if the percentage of outstanding voting securities then owned is less
than 8%. The Board Membership Agreement provides that, if the percentage of
outstanding voting securities beneficially owned by Sara Lee decreases below the
percentage corresponding to the number of Sara Lee Directors then in office,
upon the request of the Chairman of the Board, Sara Lee will use its best
efforts to secure the resignation of that number of Sara Lee Directors required
to reduce the number of Sara Lee Directors to the number corresponding to the
percentage of voting securities then beneficially owned by Sara Lee. In
determining Sara Lee's ownership of the Company's outstanding voting securities
for purposes of the Board Membership Agreement, voting securities held by the
Sara Lee Foundation will be deemed to be beneficially owned by Sara Lee. Sara
Lee also has the right, under the Board Membership Agreement, to nominate one
member of the Nominating Committee and one member of the Compensation Committee
for so long as it beneficially owns 15% or more of the Company's outstanding
voting securities.
Prior to June 27, 1996, Sara Lee designated three members of the Board of
Directors, one member of the Nominating Committee and one member of the
Compensation Committee pursuant to the Board Membership Agreement. Sara Lee
advised the Company in late June 1996 that, in view of Sara Lee's active
continuing involvement in the foodservice distribution industry through
PYA/Monarch, its wholly owned subsidiary, Sara Lee had determined that continued
service by its designees on the Company's Board of Directors might raise the
possibility of a conflict of interest. Effective June 27, 1996, Sara Lee's
designees resigned from the Company's Board of Directors. Effective September 3,
1996, the Board of Directors appointed Mark P. Kaiser to serve as a director
until this annual meeting, Dean R. Silverman to serve as a director until the
1997 annual meeting of stockholders and Paul I. Latta to serve as a director
until the 1998 annual meeting of stockholders.
CHARTER AMENDMENT
(PROPOSAL 2)
The Company's Restated Certificate of Incorporation currently authorizes
the issuance of a total of 45,000,000 shares of Common Stock, par value $.01 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share, for a
total authorized capital stock of 50,000,000 shares. The stockholders are asked
to consider and vote upon a proposal (the "Charter Proposal") to amend the
Restated Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 45,000,000 shares to 75,000,000 shares. If the
Charter Proposal is approved, the number of authorized shares of Preferred Stock
would remain at 5,000,000 and the total authorized capital stock of the Company
would increase to 80,000,000 shares.
Of the presently authorized 45,000,000 shares of Common Stock, 22,210,088
shares were issued and outstanding as of October 4, 1996, and an additional
3,072,404 shares were reserved for issuance under the Company's benefit plans.
If the Charter Proposal is not approved, the Company would have available for
future issuance, not including 3,072,404 shares reserved for issuance under the
benefit plans, 19,717,508 shares of Common Stock. If the Charter Proposal is
approved, such number will increase to 49,717,508 shares.
7
<PAGE> 10
Although there are no present plans or commitments to issue the proposed
additional authorized shares of Common Stock, such shares would be available for
issuance without further action by stockholders except as required by law or
regulation. The Board of Directors believes that the authorization of such
shares is desirable so that there will be sufficient shares available for
issuance for purposes that the Board of Directors may hereafter determine to be
in the best interests of the Company and its stockholders. Such purposes could
include additional offers of shares for cash and acquisitions of foodservice
businesses, as well as the declaration of stock splits and stock dividends and
other general corporate purposes. In the first half of fiscal year 1997, the
Company completed acquisitions of three foodservice businesses, the
consideration for which consisted entirely or partially of Common Stock, and
completed a public offering of additional shares of Common Stock for cash. In
many situations, prompt action may be required which would not permit the
Company to seek stockholder approval to authorize additional shares for the
specific transaction on a timely basis. The Board of Directors believes it
should have the flexibility to act promptly in the best interests of the Company
and its stockholders. The terms of any future issuance of shares of the
Company's Common Stock will be dependent largely on market and financial
conditions and other factors existing at the time of issuance.
The proposed increase in authorized shares of Common Stock of the Company
is designed to provide flexibility to the Company's Board of Directors. However,
these additional shares, if issued, could be used to create impediments to, or
otherwise discourage, persons attempting to gain control of the Company, and
would have a dilutive effect on stockholders.
If the Charter Proposal is approved, Article IV of the Restated Certificate
of Incorporation of the Company would read in its entirety as follows:
ARTICLE IV
CAPITAL STOCK
The Corporation shall have the authority to issue a total of
eighty million (80,000,000) shares of capital stock, each with a par
value of $0.01, consisting of seventy-five million (75,000,000) shares
of Common Stock and five million (5,000,000) shares of Preferred
Stock.
Approval of the Charter Proposal will require the affirmative vote of a
majority of the outstanding shares of the Company's Common Stock.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE CHARTER PROPOSAL.
AMENDMENT OF STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
(PROPOSAL 3)
The stockholders are asked to consider and vote upon an amendment (the
"Director Plan Amendment") to the Company's Stock Option Plan for Outside
Directors (the "Director Plan") to increase the number of shares of Common Stock
authorized for issuance under the Director Plan to 100,000 shares. The Director
Plan was originally adopted by the Company's stockholders on November 15, 1994.
The Director Plan initially authorized for issuance 40,000 shares of Common
Stock. At October 4, 1996, there were approximately 7,000 shares of Common Stock
available for issuance under the Director Plan.
The Board of Directors has reviewed the Company's equity-based compensation
plans and has concluded that the number of shares remaining available for grant
under the Director Plan is not sufficient for the continued operation of the
Director Plan. The Board of Directors believes that an important element of
director compensation is equity-based incentive compensation. Such compensation
advances the interest of the Company by encouraging, and providing for, the
acquisition of equity interests in the Company by outside directors, thereby
providing outside directors with a substantial motivation to enhance stockholder
value by aligning their interests with those of the stockholders. In order to
provide the Company with the ability to continue utilizing equity-based
incentive compensation under the Director Plan, the Board of Directors has
proposed the adoption, subject to stockholder approval, of the Director Plan
Amendment to increase the
8
<PAGE> 11
number of shares of Common Stock authorized for issuance under the Director Plan
from 40,000 shares to 100,000 shares.
The full text of the Director Plan, as proposed to be amended by the
Director Plan Amendment, is attached as Exhibit A to this proxy statement. If
approved by the stockholders at the annual meeting, the Director Plan Amendment
will become effective immediately.
SUMMARY OF THE DIRECTOR PLAN AMENDMENT
The Director Plan Amendment increases by 60,000 shares the number of shares
of Common Stock which may be issued upon the exercise of options. As amended,
the Director Plan will continue to provide for appropriate adjustment in the
number of shares in the event of a stock dividend, merger or similar
transaction.
SUMMARY OF MATERIAL PROVISIONS OF THE DIRECTOR PLAN
The following is a summary of the material provisions of the Director Plan,
as proposed to be amended:
Shares. The Director Plan will be amended to authorize 60,000 additional
shares of Common Stock, which is less than one-half of one percent of the Common
Stock outstanding as of October 4, 1996. These shares are in addition to the
40,000 shares of Common Stock currently authorized for issuance or subject to
issuance upon exercise of outstanding awards under the Director Plan.
Eligibility and Option Grants. No director of the Company who is an
employee of the Company is eligible to participate in the Director Plan. Each
other director of the Company is an "Outside Director" eligible to participate
in the Director Plan. As of October 4, 1996, the Company had five Outside
Directors, each of whom has received option grants in accordance with the
Director Plan. A total of 33,000 shares of Common Stock currently are subject to
options granted under the Director Plan.
Each Outside Director receives an option grant to purchase 5,000 shares of
Common Stock upon election to the Board of Directors. In addition, each eligible
Outside Director who has received an initial grant under the Director Plan
receives an option grant to purchase 1,000 shares of Common Stock on each
anniversary of the initial grant. If shares subject to an option under the
Director Plan cease to be subject to such option, or if shares under the
Director Plan are forfeited, or otherwise terminate without a payment being made
to the Outside Director in the form of Common Stock, such shares will again be
available for option grants pursuant to the terms of the Director Plan.
Neither the options nor anything contained in the Director Plan confers
upon any Outside Director any right to continue as a director of the Company.
Further, the Director Plan does not limit in any way the ability of the Board of
Directors or the stockholders of the Company to terminate service of any Outside
Director on the Board at any time.
Administration. The Director Plan is administered by the Board of
Directors. However, the Board of Directors has no discretion to determine which
Outside Directors will receive options, to set the number of shares subject to
option awards or to set the exercise price for an option.
Option Price. The option price for each option granted under the Director
Plan is determined as of the date of grant. The purchase price of each share of
Common Stock covered by an option (the "Option Price") is equal to the Fair
Market Value (as hereinafter defined) of one share of Common Stock on the date
the option is granted (the "Option Grant Date"). In no event will the Option
Price be less than the par value of the Common Stock.
For options granted in conjunction with the Company's initial public
offering of Common Stock, the Fair Market Value was $11.00 per share of Common
Stock. The Common Stock currently is quoted on the National Market of the
National Association of Securities Dealers Automated Quotation System
("Nasdaq"). For as long as the Common Stock is quoted on the Nasdaq National
Market, the Fair Market Value will be the closing price of the Common Stock as
reported by the Nasdaq National Market on the Option Grant Date. If there is no
closing price reported on the Option Grant Date, the Fair Market Value will be
deemed equal to the closing price as reported by the Nasdaq National Market for
the last preceding date on
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<PAGE> 12
which sales of Common Stock were reported. In the event the Common Stock is
listed in the future on an established stock exchange or exchanges, the Fair
Market Value will be the closing price of the Common Stock on the exchange that
trades the largest volume of Common Stock on the Option Grant Date.
An Outside Director may pay the Option Price (1) in cash, (2) by the
surrender of shares of Common Stock owned by the Outside Director exercising the
option and having a fair market value on the date of exercise equal to the
aggregate Option Price or (3) any combination thereof. Shares of Common Stock
that are surrendered in payment of the Option Price will be valued at their Fair
Market Value on the date of exercise.
Vesting. Options are exercisable only to the extent they are vested.
Except as discussed below, one-fourth of each option granted vests on the Option
Grant Date and an additional one-fourth of such option vests on each of the
first, second and third anniversary of the Option Grant Date, provided that the
optionee is an Outside Director on such date.
Term and Limitations on Exercise. Options may be exercised during their
term by an Outside Director, in whole or in part, by giving timely written
notice to the Company, but only with respect to whole shares of Common Stock.
The term of any option granted under the Director Plan will be ten years from
the Option Grant Date. No option may be exercised after the expiration of its
term.
If an Outside Director ceases to be an Outside Director after attaining age
65 or as a result of such Outside Director's death or disability, all
outstanding options granted to such Outside Director will vest and the Outside
Director (or such Outside Director's estate, in the event of death) may exercise
the Outside Director's outstanding options at any time (1) during the two-year
period beginning on the date on which the Outside Director ceases to be an
Outside Director or, if earlier, (2) until the date on which such outstanding
options expire according to their terms.
If an Outside Director ceases to act as such for any reason other than the
reasons described in the preceding paragraph, the Outside Director may exercise
such Outside Director's outstanding options to the extent vested at any time (1)
during the three-month period beginning on the date on which the Outside
Director ceases to act as such or, if earlier, (2) until the date on which such
outstanding options expire according to their terms.
If an Outside Director dies after ceasing to act as such, but within the
time period during which the Outside Director's outstanding options are still
exercisable, the Outside Director's outstanding options may be exercised by such
Outside Director's legatees or distributees or the personal representative of
such Outside Director's estate. Such outstanding vested options may be exercised
at any time (1) during the two-year period beginning on the date on which the
Outside Director ceases to act as such or, if earlier, (2) until the date on
which such outstanding options expire according to their terms.
Notwithstanding the foregoing, in the event of a Change of Control (as
hereinafter defined), each option that has been outstanding for at least six
months after the Option Grant Date will vest and will be fully exercisable.
An option granted under the Director Plan is not exercisable more than ten
years from the Option Grant Date, and no option may be granted under the
Director Plan on or after November 4, 2004.
Non-Transferability of Options. Options, by their terms, are not
transferable by an Outside Director during such Outside Director's lifetime, and
may not be assigned, exchanged, pledged, transferred or otherwise encumbered or
disposed of except pursuant to a qualified domestic relations order, by will or
by the applicable laws of descent and distribution. Under the Director Plan,
options are exercisable during the Outside Director's lifetime only by the
Outside Director or such Outside Director's guardian or legal representative.
Corporate Changes; Change of Control. Appropriate adjustments will be made
to the Option Price and the number of shares subject to options under the
Director Plan if there are any changes in the Common Stock by reason of stock
dividends, stock splits, reverse stock splits, recapitalizations, mergers or
consolidations.
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<PAGE> 13
In the event of a Change of Control, all options that have been outstanding
under the Director Plan for at least six months will automatically become 100%
vested and exercisable. Under the Director Plan, a "Change of Control" will
occur if (1) a person or group (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any corporation owned by the stockholders of the Company in substantially the
same proportions as their ownership of voting stock of the Company) is or
becomes (other than solely by reason of a repurchase of Common Stock by the
Company) the beneficial owner of voting stock of the Company representing 50% or
more of the combined voting power of the Company's then-outstanding voting
stock; (2) the Company consolidates with or merges with or into another
corporation or partnership or conveys, transfers or leases, in any transaction
or series of transaction, all or substantially all of its assets to any
corporation or partnership, or any corporation or partnership merges with or
into the Company, in any event pursuant to a transaction in which the
outstanding voting stock of the Company is reclassified or changed into or
exchanged for cash, securities or other property (other than any transaction
where the voting stock of the Company is changed into or exchanged for voting
stock of the surviving corporation, and no person or group who did not
beneficially own more than 50% of the total outstanding voting stock of the
Company immediately prior to such transaction beneficially owns, immediately
after such transaction, more than 50% of the total outstanding voting stock of
the surviving corporation) or the Company is liquidated or dissolved or adopts a
plan of liquidation or dissolution; or (3) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board
(together with any new directors whose election by the Board or whose nomination
for election by the stockholders of the Company was approved by a vote of
66 2/3% of the directors then in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board then in office.
Amendments. The Director Plan may be amended by the Board of Directors,
except that the Board may not, without the approval of the Company's
stockholders, (1) extend the term of the Director Plan, (2) materially modify
the eligibility requirements to receive options under the Director Plan, (3)
increase the number of shares of Common Stock which may be issued pursuant to
the exercise of options granted under the Director Plan, (4) change the minimum
purchase price or (5) materially increase the benefits accruing to optionees
under the Director Plan.
Federal Income Tax Aspects. With respect to the options granted pursuant
to the Director Plan: (1) no income is realized by the Outside Director at the
time the option is granted; (2) generally upon exercise of the option, the
Outside Director realizes ordinary income in an amount equal to the difference
between the option price paid for the shares and the fair market value of the
shares on the date of exercise, and the Company will be entitled to a tax
deduction of the same amount; and (3) at disposition, any appreciation (or
depreciation) after date of exercise is treated as either short-term or
long-term capital gain or loss, depending upon the length of time that the
Outside Director has held the shares.
It is not possible to determine the dollar value of benefits to which any
individuals would be entitled during fiscal year 1997 pursuant to the Director
Plan. Because only Outside Directors will be entitled to receive options under
the Director Plan, no executive officers named in the Summary Compensation
Table, or other executive officers, officers or employees, will be entitled to
receive options under the Director Plan. The group of Outside Directors, which
during fiscal year 1997 will consist of five persons (assuming the election of
all nominees at the 1996 annual meeting), would receive options covering an
aggregate of 17,000 shares of Company Common Stock in fiscal year 1997.
Approval of the Director Plan Amendment will require the affirmative vote
of a majority of the shares of the Company's Common Stock present and entitled
to vote at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE DIRECTOR PLAN AMENDMENT.
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<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Chief Executive
Officer of the Company and to each of the other most highly compensated
executive officers for fiscal year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------------------
AWARDS PAYOUT
----------------------- ------------------------------
ANNUAL COMPENSATION SECURITIES
----------------------------------------------- RESTRICTED UNDERLYING
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARD(S) SARS(#) PAYOUTS($) COMPENSATION($)(2)
- ------------------------ ------ --------- -------- ------------------ ---------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James L. Miller......... 1996 $ 266,245 $352,914 $ 45,433 -- 30,895 -- $3,473
Chairman of the 1995 233,337 220,383 47,210 -- 68,489 -- 5,086
Board, President and 1994 223,787 254,287 48,600 -- -- -- 4,499
Chief Executive
Officer
Lewis Hay, III.......... 1996 202,498 221,768 -- -- 13,118 -- 3,655
Senior Vice President 1995 192,559 154,589 -- -- 29,054 -- 4,976
and 1994 184,679 178,371 -- -- -- 7,517
Chief Financial
Officer
Mark P. Kaiser.......... 1996 155,192 131,913 -- -- 13,118 -- 2,736
Senior Vice President- 1995 125,192 75,115 27,457 -- 26,333 -- 3,433
Sales, Marketing and 1994 107,403 45,110 25,084 -- -- -- 2,496
Procurement
George T. Megas......... 1996 104,364 63,000 -- -- 4,184 -- 2,599
Vice President-Finance 1995 100,589 60,353 -- -- 8,956 -- 3,336
1994 95,230 39,997 -- -- -- -- 4,503
</TABLE>
- ---------------
(1) The amounts shown in the "Other Annual Compensation" column include (i) for
Mr. Miller, for fiscal years 1996, 1995 and 1994, respectively, $21,774,
$22,699 and $24,075 relating to the personal use of a Company-owned
automobile and $20,059, $20,911 and $20,925 representing reimbursement of
federal and state taxes in connection with such use, and (ii) for Mr.
Kaiser, for fiscal years 1995 and 1994, respectively, $12,415 and $13,213
relating to the personal use of a Company-owned automobile and $11,442 and
$8,271 representing reimbursement of federal and state taxes in connection
with such use.
(2) The amounts shown in the "All Other Compensation" column for fiscal years
1996, 1995 and 1994, respectively, consist of the following: (i) for Mr.
Miller, $2,782, $4,410 and $3,938 in Company matching contributions to the
Company's 401(k) retirement savings plan, a defined contribution plan (the
"401(k) Plan"), and $691, $676 and $561 in premiums paid by the Company for
group term life insurance; (ii) for Mr. Hay, $3,082, $4,418 and $7,075 in
Company matching contributions to the 401(k) Plan and $573, $558 and $442
in premiums paid by the Company for group term life insurance; (iii) for
Mr. Kaiser, $2,341, $3,044 and $2,170 in Company matching contributions to
the 401(k) Plan and $395, $389 and $326 in premiums paid by the Company for
group term life insurance; and (iv) for Mr. Megas, $2,296, $3,042 and
$4,266 in Company matching contributions to the 401(k) Plan and $303, $294
and $237 in premiums paid by the Company for group term life insurance.
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<PAGE> 15
STOCK OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth information concerning all stock options
granted during fiscal year 1996 to the executive officers named in the Summary
Compensation Table. As of the date of this proxy statement, the Company has not
granted any stock appreciation rights ("SARs").
OPTION/SAR GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE OF ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(4)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR 1996 ($/SHARE)(2) DATE(3) 5% 10%
- ---------------------- ------------ ---------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James L. Miller....... 30,895 19.45% $14.00 8/31/2005 $276,873 $701,651
Lewis Hay, III........ 13,118 8.26 14.00 8/31/2005 117,560 297,921
Mark P. Kaiser........ 13,118 8.26 14.00 8/31/2005 117,560 297,921
George T. Megas....... 4,184 2.63 14.00 8/31/2005 37,496 95,022
</TABLE>
- ---------------
(1) One-third of each option vests on each of the first, second and third
anniversary of the option grant date. Upon a change in control of the
Company, all previously unvested options will vest and become immediately
exercisable.
(2) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date, or in a combination of cash and
shares.
(3) The term of each option may not exceed ten years.
(4) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual assumed appreciation rates of 5% and 10%,
as set by the Securities and Exchange Commission, and therefore is not
intended to represent either historical appreciation or anticipated future
appreciation of the Common Stock.
STOCK OPTION EXERCISES IN FISCAL YEAR 1996
The following table sets forth information concerning all stock options
exercised during fiscal year 1996 and unexercised stock options held at the end
of that fiscal year by the executive officers named in the Summary Compensation
Table.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996 AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS/SARS AT
OPTIONS/SARS AT 6/29/96 6/29/96(1)
SHARES ----------------------------- ---------------------------
ACQUIRED ON VALUE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME EXERCISE (#) REALIZED ($) (# OF SHARES) (# OF SHARES) ($ VALUE) ($ VALUE)
- ------------------------- ------------ ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James L. Miller.......... -- -- 22,827 76,557 319,578 971,389
Lewis Hay, III........... -- -- 9,683 32,489 135,562 412,213
Mark P. Kaiser........... -- -- 8,776 30,675 122,864 386,817
George T. Megas.......... -- -- 2,985 10,155 41,790 128,572
</TABLE>
- ---------------
(1) Value based on the closing price of a common share of $25.00 on June 28,
1996, as reported on the Nasdaq National Market, minus the exercise price.
EXECUTIVE EMPLOYMENT CONTRACTS
The Company has entered into an employment agreement with James L. Miller,
dated July 3, 1989 and amended as of June 27, 1995, pursuant to which Mr. Miller
is employed by the Company as the Chairman of
13
<PAGE> 16
the Board, President and Chief Executive Officer. The agreement provides for
successive one-year renewals unless the Company gives written notice at least
one year in advance of its intention not to renew. The employment agreement
provides that the Company will pay Mr. Miller a base salary of $170,000 per
annum, subject to such increases as the Board may determine on an annual basis.
The agreement also provides that Mr. Miller has the right to participate in the
Company's annual bonus program, under which he may earn a percentage of his
annual base salary for such year based on the achievement by the Company of
certain financial and operating targets set by the Compensation Committee. If
the Company's performance meets these targets, Mr. Miller's annual bonus will be
100% of his annual base salary. If the Company's performance is higher or lower
than such targets, Mr. Miller's bonus will be a higher or lower percentage of
his base salary.
The Company has entered into an employment agreement with Lewis Hay, III,
dated August 9, 1991 and amended as of June 27, 1995, pursuant to which Mr. Hay
is employed by the Company as Senior Vice President and Chief Financial Officer.
The agreement provides for successive one-year renewals unless the Company gives
written notice at least 360 days in advance of its intention not to renew. The
employment agreement provides that the Company will pay Mr. Hay a base salary of
$170,000 per annum, subject to such increases as the Board may determine on an
annual basis. Mr. Hay's employment agreement also provides that Mr. Hay has the
right to participate in the Company's annual bonus program, under which he may
earn a percentage of his annual base salary for such year based on the
achievement by the Company of certain financial and operating targets set by the
Compensation Committee. If the Company's performance meets the targets, Mr.
Hay's annual bonus will be 85% of his annual base salary. If the Company's
performance is higher or lower than such targets, Mr. Hay's bonus will be a
higher or lower percentage of his base salary.
The Company's employment agreements with Mr. Miller and Mr. Hay, as well as
the Company's severance agreements dated as of September 27, 1995 with Mark P.
Kaiser and George T. Megas, provide for the payment of certain severance
benefits to each such officer if the officer's employment is terminated by the
Company without cause or if the officer terminates his employment for cause. In
the latter case, "cause," as defined, includes a material reduction in the
executive's duties, certain relocations of the executive's office, a reduction
in the executive's base salary, and notification to the executive that his
employment agreement will not be renewed. Upon such a termination, the executive
will be entitled to receive (1) a lump-sum payment in an amount equal to three
times (for Messrs. Miller and Hay) or two times (for Messrs. Kaiser and Megas)
the executive's base salary and bonus for the preceding fiscal year (reduced, in
certain circumstances, by any amount attributable to the acceleration of the
vesting of outstanding stock options) and (2) welfare and similar benefits for
three years substantially equivalent to those provided prior to termination. If
the payment is deemed to result from a change in control (as defined) of the
Company and the amount payable to either officer under these agreements exceeds
certain threshold amounts, federal excise tax could be imposed on the officer
and the Company could lose a tax deduction for a portion of the payment. If the
amount payable would result in such effects, the amount payable will be reduced
by the amount the payment exceeds the threshold.
The Company has entered into employment agreements with Messrs. Miller,
Hay, Kaiser and Megas, dated as of January 4, 1996, which will supersede the
foregoing employment and severance agreements at such time, if any, as there is
a change of control (as defined) of the Company. Each agreement provides for a
three-year employment term. Each executive will be entitled to receive a base
salary at least equal to twelve times the highest monthly base salary paid or
payable to the executive during the twelve months immediately preceding
commencement of the employment term. In addition, each executive will be
eligible to receive annual cash and non-cash bonuses in an amount at least equal
to the bonuses for which such executive previously was eligible. Each agreement
provides for payment of severance benefits to the executive if, among other
things, the executive terminates his employment for good reason. "Good reason"
is defined to include termination by the executive for any reason within six
months after commencement of the employment term and, subsequent to such
six-month period, termination for specified reasons, including a material
reduction in the executive's duties, certain relocations of the executive's
office and failure of the Company to comply with requirements of the agreement
relating to the executive's compensation. Upon such a termination, the executive
will be entitled to receive (1) a lump-sum payment in an amount equal to three
times the executive's annual base salary and highest annual bonus (as defined)
and (2) welfare and fringe benefits for three years substantially equivalent to
those provided prior to termination. If the foregoing payment is deemed
14
<PAGE> 17
to result from a change in control of the Company and the amount payable to the
executive under the agreement exceeds certain threshold amounts, federal excise
tax could be imposed on the executive and the Company could lose a tax deduction
for a portion of the payment. The agreement provides (subject to certain
limitations) that, in the event a federal excise tax is imposed, the Company
will pay the executive a "gross-up" payment in an amount such that, after
payment by the executive of such excise tax and any other taxes imposed upon the
foregoing payments, the executive retains an amount of the gross-up payment
equal to such excise tax.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS OF JP FOODSERVICE, INC. ON EXECUTIVE COMPENSATION
In accordance with the rules of the Securities and Exchange Commission, the
Compensation Committee of the Board of Directors of JP Foodservice, Inc. offers
this report regarding its executive compensation policy and compensation program
for the Chief Executive Officer and other executive officers of the Company in
effect for fiscal year 1996. This report, as well as the Performance Graph on
page 18, are not soliciting materials, are not deemed filed with the Securities
and Exchange Commission and are not incorporated by reference in any filing of
the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether made before or
after the date of this proxy statement and irrespective of any general
incorporation language in any such filing.
COMPENSATION POLICY
The Company's primary objective is to promote growth in stockholder value
over time. To accomplish this objective, the Company has adopted a comprehensive
business strategy. The overall goal of the Compensation Committee is to develop
compensation policies and practices which support the attainment of the
Company's strategic business objectives. The Compensation Committee uses the
services of independent executive compensation consultants in developing and
evaluating compensation plans in order to achieve these objectives. During
fiscal year 1996, the Company's share price increased by over 78% and the
Company achieved substantial increases in earnings per share and return on
equity.
The Compensation Committee annually examines executive compensation levels
for the Chief Executive Officer and other executive officers against the
compensation of executives employed by companies in the peer group index shown
on the performance graph in this proxy statement and certain other foodservice
distribution companies. This review also compares the Company's short-term and
long-term results with the performance of comparable companies.
The Company's executive compensation program includes a base salary, annual
cash bonuses and long-term incentive compensation in the form of stock options.
Overall, these programs are intended to link executive compensation to the
Company's performance. Fixed base salaries generally are set at or below the
competitive median, with total potential cash compensation (including bonuses)
targeted at the competitive median. The Compensation Committee believes that a
substantial portion of cash compensation should be tied to performance-based
objectives. To encourage equity ownership by the Company's executives and to
link executive compensation with increases in stockholder value, the
Compensation Committee intends to provide that a significant portion of total
executive compensation will be provided in the form of periodic stock option
awards.
Base Salary. In conjunction with its annual review of base salaries, the
Compensation Committee approved salary increases in fiscal year 1996 of 19.1%
for the Chief Executive Officer and 6.7% for the Chief Financial Officer. The
salary increases were determined based on the Committee's analysis of the
Company's performance, individual performance and cost-of-living increases.
Annual Cash Bonuses. The Company pays annual cash bonuses to its executive
officers based upon the achievement of corporate financial and other objectives
established by the Compensation Committee for the fiscal year. Executive
officers have the opportunity to earn cash bonuses equal to a varying percentage
of their base salary, depending upon the attainment of those goals.
15
<PAGE> 18
For fiscal year 1996, the bonus objectives of the Chief Executive Officer
and Chief Financial Officer were based on earnings per share (weighted 60%) and
certain financial and sales objectives (weighted 40%). Applying the bonus
formulas specified for fiscal year 1996, the Compensation Committee approved
annual bonuses equal to 126% of base salary for the Chief Executive Officer and
107% of base salary for the Chief Financial Officer. For fiscal year 1996, the
Company exceeded the earnings per share and met or exceeded the financial and
sales objectives established by the Committee, other than one sales objective as
to which the performance was satisfactory. In addition to generally exceeding
optimal targeted results on the financial and sales objectives, the Committee
determined that the Chief Executive Officer and Chief Financial Officer had
enhanced stockholder value in fiscal year 1996 through their key roles in
discussions relating to a proposed merger with PYA/Monarch, Inc. and the
negotiation of the Company's acquisitions of Valley Industries, Inc. and certain
assets of Rotelle, Inc. in fiscal year 1996. Finally, the Committee noted that
the value of the Company's stock increased significantly during fiscal year
1996.
Long-Term Incentives. Based upon fiscal year 1996 performance, in fiscal
year 1997 the Compensation Committee approved the grant of stock options for
27,537 shares to the Chief Executive Officer and for a total of 54,583 shares to
the executive officers in the aggregate (including the Chief Executive Officer).
Based upon fiscal year 1996 performance, in fiscal year 1997 the Compensation
Committee awarded stock options for 145,000 shares to other members of
management.
In determining the amount and terms of stock options, the Compensation
Committee considers each executive's current performance and anticipated future
contributions to the Company's performance, as well as the amount and terms of
the options previously granted to the executive by the Company. The grant of
stock options to the Chief Executive Officer was based on the Committee's
assessment of both his past contributions and his anticipated role in increasing
stockholder value.
Option grants generally are considered only in years when the Company
achieve certain earnings per share and return on stockholders' equity targets.
The Company exceeded its earnings per share and return on equity objectives for
fiscal year 1996, justifying a grant of stock options for fiscal year 1996.
All stock options granted to executive officers in fiscal year 1996 were
nonqualified stock option with an exercise price that was equal to the fair
market value of the Common Stock on the date of grant. The options increase in
value only to the extent of appreciation in the Company's Common Stock, thereby
providing a clear link to enhancement of stockholder value. The stock options
vest in increments over a three-year period to emphasize the long-term incentive
provided by such options. Although the Compensation Committee is authorized to
grant incentive stock options, stock appreciation rights and restricted stock,
the Compensation Committee generally has determined to grant only nonqualified
stock options.
Change of Control Benefits. As discussed on pages 14-15 of this proxy
statement, during fiscal year 1996, the Compensation Committee approved
employment agreements with certain executives that would apply in the event of a
change of control of the Company. In developing these agreements, the
Compensation Committee relied upon a report by an independent consulting firm
regarding peer compensation practices. The Compensation Committee believes that
the agreements approved are consistent with competitive practices and will help
to ensure that executives will be motivated to enhance stockholder value.
Potential Effect of Section 162(m) of the Internal Revenue Code. Section
162(m) of the Internal Revenue Code generally sets a limit of $1 million on the
amount of compensation paid to executive employees (other than enumerated
categories of compensation, including performance-based compensation) that may
be deducted by a publicly-held company. The Committee's policy is to seek to
qualify executive compensation for deductibility to the extent that such policy
is consistent with the Company's overall objectives and executive compensation
policy. Compensation attributable to stock options granted under the Company's
stock incentive plans currently is excluded from the $1 million limit as
"qualified performance-based compensation" under the transition rules contained
in applicable Treasury regulations. None of the Company's executive officers
received compensation in fiscal year 1996 in excess of the limits imposed under
16
<PAGE> 19
Section 162(m). The Compensation Committee intends to continue to qualify
compensation attributable to stock options as "qualified performance-based
compensation" within the meaning of Section 162(m).
COMPENSATION COMMITTEE:
Michael J. Drabb
Eric E. Glass
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ann E. Ziegler, Executive Director-Corporate Development of Sara Lee,
served on the Compensation Committee during fiscal year 1996. The following is a
description of certain transactions between the Company and Sara Lee and its
affiliates, including PYA/Monarch, during fiscal year 1996 and (with respect to
transactions that continued during fiscal year 1996) prior periods.
The Company regularly purchases products from Sara Lee and various Sara Lee
affiliates for resale to its customers. Purchases from Sara Lee and such
affiliates totaled $64.7 million in fiscal year 1996. The Company believes it
purchases such products at prices not more favorable than the prices charged to
unrelated distributors of Sara Lee products.
On March 10, 1989, the Company loaned to PYA/Monarch $110 million in
exchange for a note which is due in installments through December 31, 1998 and
which has accrued interest at varying annual rates in different periods. On
April 19, 1989, the Company assumed a promissory note payable to PYA/Monarch in
the amount of $112 million which is due in installments through May 31, 1998 and
which accrues interest at an annual rate of 11.0%. Under a Note Offset Agreement
between the parties, maturities of principal and accrued interest are settled by
offsetting amounts due under the respective notes. In connection with a
recapitalization of the Company in fiscal year 1995, and in consideration for
the Company's payment of $1.7 million to PYA/Monarch, the annual interest rate
on the $110 million note was increased to 10.80% from 10.35%, effective July 2,
1994. The net obligation accrued by the Company under the Note Offset Agreement
at June 29, 1996 was $4.1 million.
17
<PAGE> 20
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph and table show the cumulative total stockholder return
on the Company's Common Stock compared to the Standard & Poor's 500 Stock Index
and a self-constructed peer group index for the periods between November 16,
1994 (the date the Company's Common Stock began trading on the Nasdaq National
Market) and June 28, 1996 (the last trading day in fiscal year 1996). The peer
group index is composed of SYSCO Corp., Rykoff-Sexton, Inc. and Performance Food
Group Company, all of which are public companies in the broadline foodservice
distribution industry. The total stockholder return on each company included in
the peer group index has been weighted according to such company's
capitalization as of the beginning of each period. The graph assumes $100 was
invested on November 16, 1994 in (1) the Company's Common Stock, (2) the
Standard & Poor's 500 Stock Index and (3) the foodservice distribution industry
peer group index, and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) JP Foodservice, Inc. Peer Group S&P 500 Index
<S> <C> <C> <C>
November 1994 100 100 100
June 1995 127 111 117
June 1996 227 130 144
</TABLE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has acted as the Company's independent accountants
since the Company's 1989 fiscal year. Representatives of Price Waterhouse LLP
are expected to be present at the annual meeting and will be afforded the
opportunity to make a statement if they so desire and to respond to appropriate
questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file with the Securities and Exchange
Commission and the Nasdaq Stock Market initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. In addition, under Section 16(a), trusts for which a reporting person
is a trustee and a beneficiary (or for which a member of his immediate family is
a beneficiary) may have a separate reporting obligation with regard to ownership
of the Common Stock and other equity securities of the Company. Such reporting
persons are required by rules of the
18
<PAGE> 21
Securities and Exchange Commission to furnish the Company with copies of all
Section 16(a) reports they file. Based solely upon a review of Section 16(a)
reports to be furnished to the Company for fiscal year 1996 or written
representations that no other reports were required, the Company believes that
the foregoing reporting persons complied with all filing requirements for fiscal
year 1996.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Pursuant to rules of the Securities and Exchange Commission, in order for
stockholder proposals to be presented at the 1997 annual meeting of
stockholders, such proposals must be received by the Secretary of the Company at
the Company's principal office in Columbia, Maryland no later than June 19,
1997. In addition, the Company's Restated Certificate of Incorporation requires
that notice of proposals by stockholders to be brought before any annual meeting
must be delivered to the Company not less than 90 days prior to the date of the
meeting if such meeting is to be held on or after the anniversary of the
previous year's annual meeting (or not less than 60 days, if the meeting is to
be held on a day which is within 30 days preceding the anniversary of the
previous year's annual meeting, or, with respect to any other annual meeting, on
or before the 15th day following the date of public disclosure of the meeting
date). The notice must set forth, as to each matter the stockholder proposes to
bring before the annual meeting, (1) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (2) the name, age and business and residential
addresses, as they appear on the Company's records, of the stockholder proposing
such business, (3) the class and number of shares of the Company which are
beneficially owned by the stockholder and (4) any material interest of the
stockholder in such business. The submission by a stockholder of a proposal for
inclusion in the proxy statement is subject to regulation by the Securities and
Exchange Commission.
By Order of the Board of Directors,
David M. Abramson
Secretary
Dated: October 18, 1996
STOCKHOLDERS ARE REMINDED TO SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
19
<PAGE> 22
EXHIBIT A
JP FOODSERVICE, INC.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
1. Purpose. The purpose of the JP Foodservice, Inc. Stock Option Plan for
Outside Directors is to promote the long-term growth of JP Foodservice, Inc.
(the "Corporation") by rewarding directors of the Corporation for outstanding
long-term performance and to attract, motivate and retain highly qualified and
capable outside directors (the "Directors"). All stock options ("Options")
granted under the Plan are non-statutory options that do not qualify as
incentive stock options intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986 or any successor provisions. The Plan conforms to
the provisions of Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of
1934 (the "Exchange Act"), as presently in effect.
2. Eligibility and Grant of Options. Subject to approval of the Plan by
the shareholders of the Corporation:
(a) No director of the Corporation who is an employee of the
Corporation or who is a nominee or officer of Sara Lee Corporation or any
affiliate of Sara Lee Corporation is eligible to participate in this Plan.
Each other director of the Corporation is eligible to participate in the
Plan.
(b) Each eligible Director shall receive an Option to purchase 5,000
shares of the voting common stock, $0.01 par value, of the Corporation
("Common Stock"), on the date and at the time of the initial closing of the
Corporation's initial public offering of Common Stock or, if later, on the
date and at the time of such person's initial appointment or election to
the position of Director.
(c) Each eligible Director who has received an initial grant shall
receive an annual grant of an Option to purchase 1,000 shares of Common
Stock on each anniversary of the initial grant of an Option to such
Director.
The option price for each Option shall be determined as of the date of grant,
pursuant to Section 4. The Corporation shall effect the grant of Options under
the Plan by the execution and delivery of written option agreements between the
Corporation and the Directors receiving the Options ("Optionees"). No Option,
nor anything contained in this Plan, shall confer upon any Optionee any right to
continue as a Director of the Corporation nor limit in any way the ability of
the Board of Directors or the shareholders of the Corporation to terminate such
Optionee's service as a Director at any time.
3. Stock. The Corporation has reserved an aggregate of 100,000 shares of
Common Stock for issuance pursuant to the exercise of Options granted under the
Plan. The aggregate number of shares of Common Stock reserved (i) is subject to
future adjustments as provided in Section 8 and (ii) shall be reduced by the
issuance of shares upon the exercise of Options, but shall not be reduced if
Options, for any reason, expire or terminate unexercised. The Corporation shall
not be required to issue or deliver any certificate for shares of its Common
Stock purchased upon the exercise of any part of an Option before (i) the
admission of such shares to listing on any stock exchange on which the Common
Stock may then be listed or the approval of such shares for quotation on any
automated quotation system on which the Common Stock may then be quoted, (ii)
receipt of any required representations by the Optionee or completion of any
required registration or other qualification of such shares under any state or
federal law or regulation that the Corporation's counsel shall determine is
necessary or advisable, and (iii) receipt of advice by the Corporation's counsel
that all applicable legal requirements have been satisfied.
4. Price. Except as provided below, the purchase price of each share of
Common Stock covered by an Option (the "Option Price") shall be equal to the
fair market value, as hereinafter defined, of one share of Common Stock on the
date the Option is granted (the "Option Grant Date"). If the Option is granted
in connection with the Corporation's initial public offering, the fair market
value shall be the initial offering price to the public. If the Common Stock is
quoted on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), its fair market value shall be the closing price reported by
NASDAQ on
A-1
<PAGE> 23
the Option Grant Date, provided that if there should be no closing price
reported on such date, the fair market value shall be deemed equal to the
closing price as reported by NASDAQ for the last preceding date on which sales
of Common Stock were reported. In the event the Common Stock is listed upon an
established stock exchange or exchanges, the fair market value shall be the
closing price of the Common Stock on the exchange that trades the largest volume
of Common Stock on the Option Grant Date. In no event shall the Option Price be
less than the par value of the Common Stock.
Payment of the Option Price may be made (i) in cash, (ii) by the surrender
of shares of Common Stock owned by the Director exercising the Option and having
a fair market value on the date of exercise equal to the aggregate Option Price,
or (iii) any combination thereof. Shares of Common Stock surrendered in payment
of the Option Price shall be valued at the fair market value thereof, as defined
above, on the date of exercise.
5. Term and Limitations on Exercise. Options may be exercised, in whole or
in part, but only with respect to whole shares of Common Stock, as set forth
below, by giving timely written notice to the Corporation.
(a) The term of any Option shall be ten years from the Option Grant
Date. No Option may be exercised after the expiration of its term or after
the date set forth in subsection (c), (d), or (e) below, if earlier.
(b) Options are exercisable only to the extent they are vested.
One-fourth of each Option granted shall vest on the Option Grant Date and
an additional one-fourth of such Option shall vest on each of the first,
second, and third anniversary of the Option Grant Date provided that the
Optionee is a Director on such date. No Options shall be exercisable unless
and until the shareholders of the Corporation approve the Plan. No Option
may be exercised during the first six months after the Option Grant Date,
unless the Optionee dies or becomes disabled (as determined under Title II
of the Social Security Act, 42 U.S.C. Sections 301 et seq.) before the
expiration of the six-month period.
(c) If an Optionee ceases to be a Director after the Optionee attains
age sixty-five or on account of the Optionee's death or disability, all
outstanding Options granted to such Optionee shall vest and the Optionee
(or the Optionee's legatees or distributees or the personal representative
of the Optionee's estate, in the event of the Optionee's death) may
exercise the Optionee's outstanding Options at any time until the first to
occur of (x) the date that is two years after the date on which the
Optionee ceases to be a Director or (y) the date on which such outstanding
Options expire according to their terms.
(d) If an Optionee ceases to be a Director for any reason other than
described in subsection (c) above, the Optionee may exercise the Optionee's
outstanding Options to the extent vested at any time (subject to the
limitations of subsection (b) above) until the first to occur of (x) the
date that is three months after the date on which the Optionee ceases to be
a Director or (y) the date on which such outstanding Options expire
according to their terms.
(e) If an Optionee dies after the Optionee ceases to be a Director,
but within the time period during which the Optionee's outstanding Options
are still exercisable, the Director's outstanding Options may be exercised
by the Optionee's legatees or distributees or the personal representative
of the Optionee's estate. Such outstanding Options may be exercised at any
time (subject to the limitations of subsection (b) above) until the first
to occur of (x) the date that is two years after the date on which the
Optionee ceases to be a Director or (y) the date on which such outstanding
Options expire according to their terms.
(f) Notwithstanding the foregoing, in the event of a Change in Control
(as defined below) of the Corporation, each Option that has been
outstanding for at least six months after the Option Grant Date shall vest
and the Option shall be fully exercisable.
(g) Definition of Change of Control. A "Change of Control" shall occur
when:
(i) a "person" or "group" (which terms, when used in this Section
5, shall have the meaning they have when used in Section 13(d) of the
Exchange Act) (other than any Sara Lee Entity (as
A-2
<PAGE> 24
defined below) prior to the closing of the initial public offering of
Common Stock, the Corporation, any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, or any
corporation, owned, directly or indirectly, by the shareholders of the
Corporation in substantially the same proportions as their ownership of
Voting Stock (as defined below) of the Corporation) is or becomes (other
than solely by reason of a repurchase of Voting Stock by the
Corporation), the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 50% or more of the total
outstanding Voting Stock of the Corporation; or
(ii) the Corporation consolidates with or merges with or into
another corporation or partnership or conveys, transfers or leases, in
any transaction or series of transactions, all or substantially all of
its assets to any corporation or partnership, or any corporation or
partnership consolidates with or merges with or into the Corporation, in
any event pursuant to a transaction in which the outstanding Voting
Stock of the Corporation is reclassified or changed into or exchanged
for cash, securities or other property, other than any such transaction
where (A) the outstanding Voting Stock of the Corporation is changed
into or exchanged for voting stock of the surviving corporation and (B)
no "person" or "group" who did not beneficially own 50% or more of the
total outstanding Voting Stock of the Corporation immediately prior to
such transaction beneficially owns, immediately after such transaction,
50% or more of the total outstanding voting stock of the surviving
corporation, or the Corporation is liquidated or dissolved or adopts a
plan of liquidation or dissolution; or
(iii) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Board (together with any
new directors whose election by the Board or whose nomination for
election by the stockholders of the Corporation was approved by a vote
of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board then in office.
The term "Sara Lee Entity" means (i) Sara Lee Corporation, a
Maryland corporation ("Sara Lee"), (ii) PYA/Monarch, Inc., a Delaware
corporation, (iii) the Sara Lee Foundation, and (iv) any domestic or
foreign corporation or entity of which Sara Lee owns, directly or
indirectly, at least 50% of the total combined voting power of such
corporation or other entity. The term "Voting Stock" means all capital
stock of the Corporation which by its terms is entitled under ordinary
circumstances to vote in the election of directors.
(h) Notwithstanding anything herein to the contrary, Options shall be
granted and exercised in such a manner as to conform to the provisions of
Rule 16b-3, or any replacement rule adopted pursuant to the provisions of
the Exchange Act, as the same now exists or may, from time to time, be
amended.
(i) The exercise of any Option and delivery of the Option shares shall
be contingent upon the receipt by the Corporation of the Option Price in
cash or shares of Common Stock as provided in Section 4.
6. Non-Transferability of Options. Options, by their terms, shall not be
transferable by the Optionee during the Optionee's lifetime and may not be
assigned, exchanged, pledged, transferred, or otherwise encumbered or disposed
of except pursuant to a qualified domestic relations order, by will or by the
applicable laws of descent and distribution. Options shall be exercisable during
the Optionee's lifetime only by the Optionee or the Optionee's guardian or legal
representative.
7. Tax Withholding. To the extent required by applicable federal, state,
local, or foreign law, an Optionee shall make arrangements acceptable to the
Corporation for the satisfaction of any withholding tax obligations that arise
by reason of the exercise of an Option or any sale of the shares of Common Stock
acquired upon exercise of an Option. The Corporation shall not be required to
issue shares until such obligations are satisfied. The Corporation may permit
such obligations to be satisfied by having the Corporation withhold a portion of
the shares of Common Stock that otherwise would be issued to the Optionee upon
exercise of the Option.
A-3
<PAGE> 25
8. Effect of Stock Dividends and Other Changes. Appropriate adjustments
shall be made to the Option Price and the number of shares subject to Options if
there are any changes in the Common Stock by reason of stock dividends, stock
splits, reverse stock splits, recapitalizations, mergers, or consolidations.
9. Administration of the Plan. The Board of Directors shall be responsible
for the proper implementation of the Plan, but the Board of Directors shall not
exercise any discretion with respect to the administration of the Plan. As
required by Rule 16b-3, a person who does not meet the requirements of a
"disinterested person" under Rule 16b-3 may not be given discretion concerning
the administration of the Plan.
10. Expiration and Termination of the Plan. Options may be granted under
the Plan at any time until the Plan is terminated by the Board of Directors or
until such earlier date on which termination of the Plan shall be required by
applicable law. If not sooner terminated, the Plan shall terminate automatically
on November 4, 2004, which is ten years from the date on which the Plan was
originally approved by the Board of Directors. Options granted under the Plan
prior to its termination shall remain outstanding following the Plan's
termination and shall be exercisable in accordance with their terms.
11. Amendments. The Board of Directors may from time to time make such
changes in and additions to the Plan as it may deem proper; provided that, if
and to the extent required by Rule 16b-3, no change shall be made that increases
the total number of shares reserved for issuance pursuant to Options granted
under the Plan (except pursuant to Section 8), expands the class of persons
eligible to receive Options, or materially increases the benefits accruing to
Optionees under the Plan, unless such change is authorized by the shareholders.
In addition, if and to the extent required by Rule 16b-3, the provisions of the
Plan may not be amended more frequently than once every six months unless
otherwise required by law and permitted by Rule 16b-3. The termination of the
Plan or any change or addition to the Plan shall not, without the consent of any
Optionee who is adversely affected thereby, alter any Options previously granted
to the Optionee pursuant to the Plan.
12. Governing Law. The Plan and each Option granted under the Plan shall
be governed by, and construed in accordance with, the laws of the State of
Delaware.
13. Effective Date. The Plan shall be effective on the date and at the
time of the initial closing of the Corporation's initial public offering of
Common Stock, subject to the approval of the Plan on or before such date by a
majority of the voting shares represented and entitled to vote. The amendment to
the Plan to increase the number of shares available for issuance under the Plan
from 40,000 to 100,000 shares shall be effective on the date and at the time
such amendment is approved by a majority of the voting shares represented and
entitled to vote.
A-4
<PAGE> 26
JP FOODSERVICE, INC.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
JP FOODSERVICE, INC. FOR THE ANNUAL MEETING ON
NOVEMBER 15, 1996 AT 10:00 AM
JP FOODSERVICE, INC.
9830 PATUXENT WOODS DRIVE, COLUMBIA, MD 21046
The undersigned appoints David M. Abramson and George T. Megas, and
each of them, with full power of substitution in each, the proxies of the
undersigned, to represent the undersigned and vote all shares of JP
Foodservice, Inc. Common Stock which the undersigned may be entitled to vote at
the Annual Meeting of Stockholders to be held on November 15, 1996, and at any
adjournment or postponement thereof, as indicated on the reverse side. The
undersigned further authorizes such proxies to vote in their discretion upon
such other matters as may properly come before the Annual Meeting or any
adjournment or postponement thereof. Receipt of Notice of Annual Meeting and
Proxy Statement is hereby acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
JP FOODSERVICE, INC.
P.O. BOX 11069
NEW YORK, N.Y. 10203-0069
(Continued, and to be signed and dated on reverse side.)
<PAGE> 27
1. Election of FOR all nominees / / WITHHOLD AUTHORITY to / / *EXCEPTIONS / /
Directors listed below vote for all nominees
listed below.
Nominees: Lewis Hay, III, Jeffrey D. Serkes and Mark P. Kaiser
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions
--------------------------------------------------------------------
2. Amendment to the Restated Certificate of Incorporation of JP Foodservice,
Inc. to increase the number of authorized shares of Common Stock from
45,000,000 shares to 75,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. Amendment to the Stock Option Plan for Outside Directors of JP Foodservice,
Inc. to increase the number of shares of Common Stock authorized for issuance
from 40,000 shares to 100,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting or any adjournment or
postponement thereof.
Change of Address and / /
or Comments Mark Here
The signature on this Proxy should correspond
exactly with stockholder's name as printed
to the left. In the case of joint tenancies,
co-executors or co-trustees, both should sign.
Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian should
give their full title.
Dated: , 1996.
----------------------------
----------------------------------------------
Signature
----------------------------------------------
Signature
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE
INK. / X /
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.)
