<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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):
/X/ $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:
- - - --------------------------------------------------------------------------------
/ / 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 approve an amendment
to 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 increase the number of shares of the Company's common stock
authorized for issuance under the Company's Stock Option Plan
for Outside Directors 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 Baltimore branch,
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.
<PAGE> 4
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.
A stockholder who has given a proxy may revoke it at any time prior to
its exercise at the annual meeting by either (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 22,201,538 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 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 or are withheld from a particular matter 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 on a particular
matter, those shares will not be treated as present and entitled to vote for
purposes of determining the approval of such matter.
2
<PAGE> 5
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
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
-------------------------- ------------ --------
<S> <C> <C>
Sara Lee Corporation(2) . . . . . . . . . . . . 5,138,210 23.1%
Three First National Plaza
Chicago, Illinois 60602
T. Rowe Price Associates, Inc.(3) . . . . . . . 1,668,300 7.5
100 E. Pratt Street
Baltimore, Maryland 21202
Janus Capital Corporation . . . . . . . . . . . 1,291,100 5.8
Thomas H. Bailey
100 Filmore Street, Suite 300
Denver, Colorado 80206(4)
</TABLE>
------------------------------
(1) Except as indicated, each person has sole voting power and
investment power with respect to the shares shown.
(2) Shares are held of record by Sara Lee Corporation's wholly
owned subsidiary, Sara Lee Foodservice Holdings, Inc., which
may be deemed to be the beneficial owner of such shares.
(3) 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
<PAGE> 6
(4) 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
NAME OF OF BENEFICIAL PERCENT
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 . . . . . . . . . . . . . . . . . 1,250 *
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 (11 persons) . . . . . . . . . . . . 427,780 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 Levan, Schimel, Belman & Abramson,
P.A. 401(k) Profit Sharing Plan & Trust, which are voted by
such plan's trustees.
(3) Includes shares which may be acquired within 60 days pursuant
to outstanding options by the person or 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
<PAGE> 7
(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.
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 directors in 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 either 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 either 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.
5
<PAGE> 8
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.
Jeffrey D. Serkes has served as Vice President and Treasurer of
International Business Machines Corporation ("IBM") since January 1995, and
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.
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, Mr. Miller was employed
6
<PAGE> 9
by SYSCO Corp., from 1972 to 1983, 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 has served as the President of Dean &
Company, a strategic management consulting company located in Vienna, Virginia,
since 1993. Prior to 1993, Mr. Silverman was Executive Vice President and
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 a director of the Company since 1994.
Mr. 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.
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, where he is responsible for all retail properties. Mr. Latta
previously held a number of positions with The Rouse Company, where he has
worked since 1968.
7
<PAGE> 10
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
8
<PAGE> 11
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 Outside Directors.
The 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.
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 its
subsidiary PYA/Monarch, Inc., it 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. In September 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.
9
<PAGE> 12
CHARTER AMENDMENT
(PROPOSAL 2)
The Company's Restated Certificate of Incorporation presently
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 of 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,
22,201,538 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, 19,726,058 shares of Common Stock. If
the Charter Proposal is approved, such number will increase to 49,726,058
shares.
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 seeking 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 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 management.
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.
10
<PAGE> 13
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 entitled to
vote thereon.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE IN FAVOR OF 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"). 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 substantial motivation to
enhance stockholder value by aligning their interests with 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 proposed the adoption, subject to stockholder approval, of the
Director Plan Amendment to increase the number of shares of Common Stock
reserved for issuance under the Director Plan from 40,000 shares to 100,000
shares.
11
<PAGE> 14
The full text of 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 the number of shares of Common
Stock which may be issued upon the exercise of options by 60,000 shares. 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 or 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, there were 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.
12
<PAGE> 15
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 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 Outside Directors 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 death or disability,
all outstanding Options granted to such Outside Director will vest and the
Outside Director (or such Outside Director estate, in the event of death) may
exercise the Outside Director outstanding Options at any time (1) during the
two-year period
13
<PAGE> 16
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 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 outstanding Options are still
exercisable, the Outside Director outstanding Options may be exercised by such
Outside Director legatees or distributees or the personal representative of
such Outside Director 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 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 lifetime only by the
Outside Director or such Outside Director 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.
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" means (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
14
<PAGE> 17
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 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.
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 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.
15
<PAGE> 18
Approval of the Director Plan Amendment will require the affirmative
vote of a majority of the voting shares of the Company's Common Stock
represented and entitled to vote at the annual meeting. THE COMPANY'S BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF
THE DIRECTOR PLAN AMENDMENT.
16
<PAGE> 19
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Chief
Executive Officer of the Company and each of the four other most highly
compensated executive officers for fiscal year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- ---------------------------------------------------
AWARDS PAYOUT
------------------------ -------------------------
Securities
Restricted Underlying
Name and Fiscal Other Annual Stock Options/ LTIP All Other
Principal 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 and 1995 192,559 154,589 - - 29,054 - 4,976
Chief Financial Officer 1994 184,679 178,371 - - - - 7,517
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 for fiscal
years 1996, 1995 and 1994, respectively, include (i) for Mr. Miller, $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, $12,451,
$12,415 and $13,213 relating to the personal use of a Company-owned automobile
and $11,470, $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 $237 in
premiums paid by the Company for group term life insurance.
17
<PAGE> 20
STOCK OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth information concerning all stock
options granted during fiscal year 1996 to the executive officers named in the
Summary Compensation Table. As of the date of this proxy statement, the
Company has not granted any stock appreciation rights ("SARs").
OPTION/SAR GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------------- VALUE OF ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (4)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED(#)(1) FISCAL YEAR 1996 ($/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.
18
<PAGE> 21
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT 6/29/96 6/29/96(1)
------------------------------ -------------------------------
SHARES ACQUIRED VALUE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ON 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 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.
19
<PAGE> 22
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 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 (i) a lump-sum
payment in an amount equal to three times the executive's annual base salary
and highest annual bonus (as defined) and (ii) welfare and fringe benefits for
three years substantially equivalent to those provided prior to termination.
If the foregoing payment is deemed 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.
20
<PAGE> 23
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 1996. This report, as
well as the Performance Graph on page 24, 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.
21
<PAGE> 24
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.
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 optimum 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 Rotelle, Inc. in fiscal 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, and 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,
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 stock 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 page 20 of this proxy
statement, during fiscal year 1996, the Compensation Committee approved
employment agreements with certain executives that
22
<PAGE> 25
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 Code. Section 162(m) of the
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 1996 in excess of the limits imposed under
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%.
23
<PAGE> 26
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 the 1995 recapitalization of the Company, 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.
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 26, 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.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Dollars
---------
November 1994 June 1995 June 1996
---------------------------------------------
<S> <C> <C> <C>
JP Foodservice, Inc. $100 $127 $227
Peer Group $100 $111 $130
S&P 500 Index $100 $117 $144
</TABLE>
24
<PAGE> 27
INDEPENDENT ACCOUNTANTS
Price Waterhouse has acted as the Company's independent accountants
since the Company's 1989 fiscal year. Representatives of Price Waterhouse 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.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 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 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
25
<PAGE> 28
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.
26
<PAGE> 29
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
<PAGE> 30
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 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.
- 2 -
<PAGE> 31
(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.
- 3 -
<PAGE> 32
(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 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)
- 4 -
<PAGE> 33
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.
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
- 5 -
<PAGE> 34
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.
- 6 -
<PAGE> 35
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> 36
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 Plan for Outside Directors of JP Foodservice, Inc.
to increase the number of shares of Common Stock authorized for issuance from
40,000 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.)
