<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1996
REGISTRATION NO. 333-14039
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JP FOODSERVICE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
5141
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
52-1634568
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
------------------------
9830 PATUXENT WOODS DRIVE
COLUMBIA, MARYLAND 21046
(410) 312-7100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LEWIS HAY, III
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
JP FOODSERVICE, INC.
9830 PATUXENT WOODS DRIVE
COLUMBIA, MARYLAND 21046
(410) 312-7100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
RICHARD J. PARRINO, ESQ.
SHAW, PITTMAN, POTTS & TROWBRIDGE
2300 N STREET, N.W.
WASHINGTON, D.C. 20037
(202) 663-8000
JOHN C. COATES IV, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
(212) 403-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
Note: The amount of shares registered includes shares that (i) are to be
offered and sold by the Company in the United States and Canada; (ii) are to be
offered and sold outside the United States and Canada but that may be resold
from time to time in the United States during this distribution; and (iii) may
be purchased and resold by the U.S. Underwriters, as defined in the prospectus
included herein, pursuant to an over-allotment option.
------------------------
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 8(a) OF THE SECURITIES ACT OF 1933.
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<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with a United States and Canadian offering (the "U.S.
Prospectus") and one to be used in connection with a concurrent international
offering (the "International Prospectus"). The U.S. Prospectus and the
International Prospectus will be identical in all respects except for the front
and back cover pages of the International Prospectus, which are included herein
after the final page of the U.S. Prospectus.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 1996
PROSPECTUS
5,700,000 SHARES
[JP FOODSERVICE LOGO]
COMMON STOCK
------------------
Of the 5,700,000 shares of Common Stock of JP Foodservice, Inc. (the
"Company" or "JP Foodservice") offered hereby, 4,560,000 shares are being
offered in the United States and Canada (the "U.S. Offering") by the U.S.
Underwriters (as defined herein) and 1,140,000 shares are being offered in a
concurrent international offering (the "International Offering" and, together
with the "U.S. Offering," the "Offering") outside of the United States and
Canada by the Managers (as defined herein). All of the 5,700,000 shares of
Common Stock offered hereby are being sold by certain stockholders of the
Company (collectively, the "Selling Stockholders"). See "Selling Stockholders."
The Company will not receive any of the proceeds from the sale of the shares by
the Selling Stockholders. The Common Stock is quoted on the Nasdaq National
Market under the symbol "JPFS." On November 19, 1996, the last reported sale
price of the Common Stock, as reported on the Nasdaq National Market, was
$23.4375 per share. See "Price Range of Common Stock and Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS
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<S> <C> <C> <C>
Per Share $ $ $
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Total(2) $ $ $
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</TABLE>
(1) For information regarding indemnification of the U.S. Underwriters and
the Managers, see "Underwriting."
(2) Certain of the Selling Stockholders have granted to the U.S. Underwriters
a 30-day option to purchase up to 709,028 additional shares of Common
Stock solely to cover over-allotments, if any. See "Underwriting." If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Selling Stockholders will be
$ , $ and $ , respectively.
------------------
The shares of Common Stock offered hereby are being offered by the several
U.S. Underwriters named herein, subject to prior sale, when, as and if accepted
by them and subject to certain conditions. It is expected that certificates for
the shares of Common Stock offered hereby will be available for delivery on or
about , 1996, at the offices of Smith Barney Inc., 333
West 34th Street, New York, New York 10001.
------------------
SMITH BARNEY INC.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
RODMAN & RENSHAW, INC.
, 1996
<PAGE> 4
[THE GRAPHICS ON THE INSIDE FRONT COVER PAGE ARE DISPLAYED ON
A THREE-PAGE FOLD-OUT AND CONSIST OF THE FOLLOWING: (i) A MAP
ON THE FIRST PAGE SHOWING NEVADA AND STATES OF THE
MID-ATLANTIC, MIDWESTERN AND NORTHEASTERN REGIONS OF THE
UNITED STATES, WITH THE COMPANY'S CURRENT DISTRIBUTION SERVICE
AREA WITHIN THOSE STATES INDICATED BY SHADING AND THE
COMPANY'S EXISTING BRANCHES AND RECENTLY ACQUIRED BRANCHES
SEPARATELY IDENTIFIED; AND (ii) FIVE COLOR PHOTOGRAPHS ON THE
SECOND AND THIRD PAGES DEPICTING, RESPECTIVELY, (a) A
SELECTION OF THE COMPANY'S FOOD PRODUCTS, (b) THE COMPANY'S
CUSTOMIZED TECHNOLOGY AND A SELECTION OF THE COMPANY'S
PUBLICATIONS, (c) THE COMPANY'S DELIVERY VEHICLES, (d) THE
INTERIOR OF A DISTRIBUTION FACILITY AND (e) THE DELIVERY OF
PRODUCTS TO A CUSTOMER.]
IN CONNECTION WITH THE OFFERING, THE U.S. UNDERWRITERS AND THE MANAGERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THE OFFERING, CERTAIN U.S. UNDERWRITERS, MANAGERS AND SELLING
GROUP MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN TRANSACTIONS
(INCLUDING PASSIVE MARKET MAKING) FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF
OTHERS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE IN ACCORDANCE WITH RULES 10b-6, 10b-6A AND 10b-7 UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE> 5
[TEXT ACCOMPANYING GRAPHICS ON GATEFOLD.]
CURRENTLY WITH TWELVE BRANCHES in the Mid-Atlantic, Midwestern and Northeastern
regions of the United States and in Las Vegas, Nevada, JP Foodservice, Inc.(R)
ranks as the nation's fifth largest broadline distributor of food and related
products to restaurants and other institutional foodservice establishments. The
recent acquisitions of Valley Industries, Inc., Arrow Paper and Supply Co., Inc.
and Squeri Food Service, Inc. have extended JP Foodservice's distribution
network into the Western region of the U.S. and increased the Company's presence
in the Northeastern and Midwestern regions of the U.S., respectively. The
Company markets and distributes over 30,000 national, private and signature
brand items to over 34,000 foodservice customers, including restaurants, hotels,
healthcare facilities, cafeterias and schools. JP Foodservice provides customers
with a single source of supply to satisfy substantially all of their foodservice
needs and offers a comprehensive range of products, including canned and dry
food products, fresh meats, poultry, seafood, frozen foods, fresh produce,
<PAGE> 6
dairy and other refrigerated foods, paper products, cleaning supplies, light
restaurant equipment and other supplies. The Company's product line is one of
the largest in the industry, with national brand products accounting for
approximately 85% of net sales in fiscal 1996. The Company's private label
brands offer its customers a wide range of quality-assured, value-priced
products and its exclusive line of signature products are comparable in quality
and price to national brand items. The Company believes it has one of the best
records in the industry in providing customers with accurate and timely delivery
of product orders. This superior customer service, coupled with the full array
of value-added services offered by the Company, enables the Company to compete
effectively against other foodservice distributors.
<PAGE> 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company (File
No. 0-24954) with the Securities and Exchange Commission (the "Commission") are
incorporated herein by reference: (a) the Company's Annual Report on Form 10-K
for the fiscal year ended June 29, 1996; (b) the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 28, 1996; (c) the Company's
Current Reports on Form 8-K filed for reportable events dated June 28, 1996,
July 17, 1996, August 5, 1996, August 30, 1996, September 3, 1996, October 22,
1996 and November 13, 1996; (d) the Company's Proxy Statement for the Annual
Meeting of Stockholders held on November 15, 1996; (e) the description of the
Company's Common Stock which is contained in its Registration Statement on Form
8-A filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on October 14, 1994, including any amendments or reports filed for the
purpose of updating such description; and (f) the description of the preferred
share purchase rights attached to the Company's Common Stock which is contained
in its Registration Statement on Form 8-A filed under the Exchange Act on
February 22, 1996, including any amendments or reports filed for the purpose of
updating such description.
All reports and other documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the effective date of the Registration Statement of which this Prospectus
constitutes a part and prior to the termination of the Offering shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents. Any statement contained in a document
incorporated by reference herein shall be deemed modified or superseded for
purposes of this Prospectus to the extent that a statement contained or
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered a copy of any or all of such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written or oral requests for copies should be
directed to Corporate Secretary, JP Foodservice, Inc., at the Company's
principal executive offices located at 9830 Patuxent Woods Drive, Columbia,
Maryland 21046, telephone number (410) 312-7100.
3
<PAGE> 8
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and the
Consolidated Financial Statements and notes thereto appearing elsewhere in this
Prospectus. Unless indicated herein or unless the context otherwise requires,
references in this Prospectus to the "Company" or "JP Foodservice" for fiscal
1996 or earlier fiscal years do not refer to subsidiaries of JP Foodservice,
Inc. acquired in fiscal 1997. The Company's fiscal year is a 52-week or 53-week
period ending on the Saturday closest to June 30.
THE COMPANY
JP Foodservice is a leading broadline distributor of food and related
products to restaurants and other institutional foodservice establishments in
the Mid-Atlantic, Midwestern and Northeastern regions of the United States and
in Las Vegas, Nevada. The Company ranks as the nation's fifth largest broadline
distributor based on pro forma 1995 calendar year net sales, including the
results of its acquisitions of Valley Industries, Inc. and its affiliates (the
"Valley Acquisition"), Arrow Paper and Supply Co., Inc. and its affiliate (the
"Arrow Acquisition") and Squeri Food Service, Inc. and its affiliate (the
"Squeri Acquisition") (collectively, the "Acquisitions"), which were completed
in the first two quarters of fiscal 1997. JP Foodservice believes that it is one
of the three leading broadline distributors in each of its principal geographic
service areas, which it defines as the areas within a 150-mile radius of each of
its 12 full-service distribution centers. The Company markets and distributes
over 30,000 national, private and signature brand items to over 34,000
foodservice customers, including restaurants, hotels, healthcare facilities,
cafeterias and schools. This diverse customer base encompasses both independent
(or "street") and multi-unit (or "chain") businesses, including Old Country
Buffet, Perkins Family Restaurants, Subway, Compass Group, Ruby Tuesday,
Pizzeria Uno and other foodservice establishments. The Company also is a
foodservice supplier to the United States Congress, Fenway Park and other
prominent institutions. The Company's comprehensive product line includes canned
and dry food products, fresh meats, poultry, seafood, frozen foods, fresh
produce, dairy and other refrigerated products, paper products, cleaning
supplies, light restaurant equipment and other supplies. This broad product line
provides the Company's customers with a single source to satisfy substantially
all of their foodservice needs.
COMPETITIVE STRENGTHS
JP Foodservice believes that its primary competitive strengths are the
following:
- Leading Market Position. The Company's large-scale operations provide it
with significant name recognition and operating efficiencies. In
addition, the scope of its distribution network gives the Company the
ability to offer its growing chain customers a consistent array of
products and services across a broad geographic area encompassing
approximately one-half of the U.S. population. The size and diverse
nature of its customer base reduces the Company's dependence on any
individual customer or chain account to sustain growth or profitability.
- Diverse High-Quality Product Line. The Company's product line is one of
the largest in the industry. Compared to its principal competitors, the
Company devotes a larger portion of its product line to national brand
products, which accounted for approximately 85% of net sales in fiscal
1996. The Company also offers its customers an expanding line of
quality-assured, value-priced products under its JP(TM), JP Power(TM) and
Harvest Value(TM) private brands. In recent years, the Company has
introduced an exclusive line of signature products, which are comparable
in quality to national brand items and priced competitively with such
items. Signature products are currently marketed under the Roseli(TM),
Hilltop Hearth(TM), Cattlemen's Choice(TM), Patuxent Farms(TM), el
Pasado(TM) and Rituals(TM) brands. In fiscal 1997, the Company plans to
continue development and expansion of a full line of Oriental-style
products under its Beijing Chef (TM) signature brand and to introduce a
full line of seafood products under its Harbor Banks(TM) signature brand.
The Company, unlike certain of its competitors, utilizes centralized
purchasing, which promotes a consistently high level of quality for its
proprietary brand products throughout the Company's distribution network.
4
<PAGE> 9
- Superior Customer Service. The Company believes it has one of the best
records in the industry in providing customers with accurate and timely
delivery of product orders. The Company has achieved its superior
customer service by (i) employing a decentralized operating strategy that
enables the Company to be more responsive to customer needs, (ii)
utilizing proprietary information systems for managing inventory,
processing orders and scheduling deliveries and (iii) providing an array
of value-added services designed to assist its customers in managing
their foodservice operations more efficiently and profitably. The
Company's value-added services include advice and assistance on product
selection, menu planning and recipes, nutritional information, inventory
analysis, product costing and marketing strategies, and in-service
training of customer personnel.
- Low Cost Structure. Management believes that the Company's overall cost
structure is lower than that of many of its principal competitors. The
Company's modern, large-scale distribution centers enable it to realize
cost savings in branch overhead, warehouse operations and transportation
services. The Company has centralized only those functions that benefit
from significant economies of scale or require consistent application of
management controls, such as purchasing, finance and accounting,
advertising and promotion, and information systems. The Company's
information systems allow it to reduce administrative costs and improve
responsiveness to operational requirements at the branch level.
- Proprietary Information Systems. The Company has made a significant
investment in sophisticated and integrated information systems, which it
believes are among the most advanced in the industry. The ordering,
shipment, storage and delivery of the Company's products are managed
through a centralized information system that allows all of the Company's
distribution facilities and its corporate headquarters to access
information on a "real time" basis regarding the Company's inventory,
product availability, customers, sales, financial reports, truck routing
and other significant operating areas. In coordination with this system,
the Company employs, at both the corporate and branch levels, a strategic
information system that allows it to analyze systematically the
profitability of customer accounts, sales territories and product groups.
BUSINESS STRATEGY
The Company's business strategy is to achieve internal growth and increased
profitability by increasing sales penetration of its existing accounts,
attracting new high-growth customers, expanding street account sales by
increasing the size of its commission sales force, increasing sales of its
proprietary signature and private brand products, and targeting rapidly growing
specialized markets, such as healthcare service providers.
JP Foodservice supplements internal expansion with a program of strategic
acquisitions to take advantage of growth opportunities from ongoing
consolidation in the fragmented foodservice distribution industry. The Company
seeks to increase penetration of its existing markets through "fold-in"
acquisitions of small, privately-owned distributors within its current markets
and to expand into new markets through acquisitions of larger-sized
distributors. The Company believes it can enhance the sales and profitability of
acquired businesses by eliminating redundant overhead expenses, reducing
purchasing costs, adding the Company's proprietary brands to the product lines
of the acquired businesses, and integrating such businesses into the Company's
marketing programs, centralized purchasing operations and information systems.
The Company's ability to compete for acquisition opportunities with other
foodservice businesses is enhanced by its financial resources, which include
access to the public capital markets.
RECENT ACQUISITIONS
During calendar year 1995, the Company completed two fold-in acquisitions
of businesses with combined annual net sales of approximately $50 million in the
Company's Pennsylvania market. In the first quarter of fiscal 1997, the Company
extended the scope of its distribution network into the Western region of the
United States through its acquisition of Valley Industries, Inc. and its
affiliates (collectively, "Valley Foods"), a broadline distributor located in
Las Vegas, Nevada with a leading market share of the Las Vegas foodservice
market. The Company believes that Las Vegas is one of the country's fastest
growing foodservice markets. Valley Foods achieved net sales of $121.5 million
in its most recent fiscal year, which ended January 31, 1996, and recently
entered into prime vendor relationships with two large hotel-casinos. Valley
Foods serves a broad base of institutional foodservice customers, including
casinos, hotels, chain restaurants, schools, cafeterias and
5
<PAGE> 10
hospitals. Valley Foods distributes over 4,000 foodservice products from its
large, newly expanded distribution center in downtown Las Vegas.
Also in the first quarter of fiscal 1997, pursuant to the Company's
strategy to increase penetration in its existing markets, the Company acquired
Arrow Paper and Supply Co., Inc. and its affiliate (collectively, "Arrow"), a
broadline distributor located in Connecticut serving the New England, New York,
New Jersey and Pennsylvania markets. Arrow achieved net sales of $74.6 million
in its most recent fiscal year, which ended December 29, 1995, and in November
1995 was awarded a contract from the State of Connecticut that is expected to
generate $18 million in annual sales.
In the second quarter of fiscal 1997, the Company acquired Squeri Food
Service, Inc. and its affiliate (collectively, "Squeri"), a broadline
distributor located in Ohio serving the Greater Cincinnati, Dayton, Columbus,
Indianapolis, Louisville and Lexington markets. The Squeri Acquisition fills a
gap in the Company's distribution network in the Midwestern region of the United
States and is expected to provide cost savings through distribution
efficiencies. Squeri achieved net sales of $85.1 million in its most recent
fiscal year, which ended December 31, 1995.
HISTORY
Portions of the Company's business date back to the formation of Monarch
Foods in 1853. In 1946, Monarch Foods was acquired by Consolidated Foods
Corporation (now named Sara Lee Corporation) and in 1967 was merged with Pearce,
Young, Angel ("PYA"), a Southeast institutional foodservice distributor. JP
Foodservice began operations in July 1989 following a management-led leveraged
acquisition (the "1989 Acquisition") of certain operations of PYA/Monarch, Inc.,
a wholly owned subsidiary of Sara Lee Corporation. In November 1994, the Company
completed its initial public offering of Common Stock as part of a
recapitalization (the "Recapitalization") which reduced the Company's
indebtedness and related interest expense and improved its operating and
financial flexibility. In August 1996, the Company consummated a public offering
of its Common Stock (the "August Offering") to raise funds primarily for
application in connection with the Acquisitions. The shares offered hereby by
Sara Lee Foodservice Holdings, Inc. and the Sara Lee Foundation (collectively,
the "Sara Lee Selling Stockholders") were acquired in the 1989 Acquisition and
the Recapitalization.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered:
U.S. Offering........................... 4,560,000 shares
International Offering.................. 1,140,000 shares
5,700,000 shares(1)
Common Stock outstanding..................... 22,212,252 shares(2)
Nasdaq National Market symbol................ JPFS
</TABLE>
- ---------------
(1) Assumes no exercise of the over-allotment option granted to the U.S.
Underwriters to purchase up to 709,028 additional shares of Common Stock
solely to cover over-allotments, if any. See "Selling Stockholders."
(2) Does not include (i) 729,662 shares subject to stock options granted by the
Company under its stock option plans as of September 28, 1996 or (ii)
168,421 shares subject to options granted by the Company under employment
agreements entered into in connection with the Squeri Acquisition.
6
<PAGE> 11
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents, for the periods and at the dates indicated,
summary consolidated financial data of the Company on a restated historical
basis. The selected historical consolidated financial data (which include the
financial data of the entities acquired in the Acquisitions) have been derived
from the restated consolidated financial statements of the Company. Such data
should be read in conjunction with the Consolidated Financial Statements of the
Company and notes thereto included elsewhere in this Prospectus.
The Valley Acquisition and the Squeri Acquisition are being accounted for
under the pooling of interests method of accounting. Accordingly, the financial
position and results of operations for the Company for historical periods, as
set forth below, have been restated to reflect the combined operations of the
Company, Valley Foods and Squeri. The Arrow Acquisition is being accounted for
under the purchase method of accounting. Accordingly, the financial data for
Arrow are reflected in the Company's historical results only subsequent to the
consummation date.
The pro forma information set forth below gives effect to the Arrow
Acquisition and the August Offering. See "Unaudited Pro Forma Condensed
Financial Statements."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------- THREE MONTHS ENDED
JUNE 29, 1996 SEPTEMBER 28, 1996
-------------------------- --------------------------
JULY 2, 1994 JULY 1, 1995 ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
------------ ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $1,178,826 $1,288,315 $1,449,303 $1,523,893 $ 414,362 $ 432,049
Gross profit........................ 199,718 218,821 250,506 264,839 70,731 73,675
Amortization of intangible assets... 2,265 2,263 2,338 3,090 597 723
Stock compensation charge........... -- 709 -- -- -- --
Income from operations.............. 33,758 38,050 45,252 48,608 12,467 13,433
Nonrecurring charge................. -- -- 1,517 1,517 5,300 5,300
Interest expense.................... 32,255 22,074 15,187 13,251 3,654 3,191
Income (loss) before income taxes
and extraordinary charge.......... 1,281 16,285 28,511 33,943 3,513 4,942
Income (loss) before extraordinary
charge............................ (298) 8,927 16,913 20,331 2,054 2,953
Net income (loss)................... (298) 4,337 16,913 20,331 2,054 2,953
Preference dividends................ (504) (40) -- -- -- --
Net income (loss) applicable to
common stockholders............... (802) 4,297 16,913 20,331 2,054 2,953
PER SHARE DATA:
Net income (loss) per common share
before extraordinary charge....... $ (0.17) $ 0.68(2) $ 0.90(3) $ 0.93(3) $ 0.10(4) $ 0.13(4)
Net income (loss) per common
share............................. (0.17) 0.33(2) 0.90(3) 0.93(3) 0.10(4) 0.13(4)
Weighted average number of shares of
common stock outstanding.......... 4,633,371 13,103,798 18,808,738 21,957,715 20,639,681 22,200,786
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
------------------------
ACTUAL PRO FORMA(5)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................................... $180,199 $180,199
Total assets...................................................................................... 553,815 553,815
Long-term debt, excluding current maturities...................................................... 208,475 209,075
Stockholders' equity.............................................................................. 197,213 196,613
</TABLE>
- ---------------
(1) The pro forma Statement of Operations Data give effect to the consummation
of the Arrow Acquisition and the August Offering as of the beginning of the
periods presented. See "Unaudited Pro Forma Condensed Financial Statements."
(2) Reflects a reduction in net income of $709 resulting from a one-time
non-cash stock compensation charge equal to $0.05 per common share.
(3) Reflects a reduction in net income of $933 resulting from the nonrecurring
charge relating to the termination of merger discussions (see Note 4 to the
Company's Consolidated Financial Statements) equal to $0.05 per common share
actual and $0.04 per common share pro forma.
(4) Reflects transaction costs related to the Valley Acquisition. In accordance
with pooling of interests accounting, all such transaction costs must be
expensed in the period in which the Valley Acquisition was consummated. Of
the $5.3 million in transaction costs, approximately $4.0 million were paid
by the stockholders of Valley Foods through a reduction of the acquisition
purchase price. On an after-tax basis, these costs amounted to $0.16 per
common share actual and $0.15 per common share pro forma. Excluding this
nonrecurring charge, net income would have been $5.3 million or $0.26 per
common share actual and $6.2 million or $0.28 per common share pro forma.
Transaction costs of approximately $2 million related to the Squeri
Acquisition will be charged to expense in the second quarter of fiscal 1997.
(5) The pro forma Balance Sheet Data assume that the Offering was consummated on
September 28, 1996. See "Unaudited Pro Forma Condensed Financial
Statements."
7
<PAGE> 12
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following risk factors
relating to the Company and the Common Stock before making an investment in the
Common Stock offered hereby.
LOW MARGIN BUSINESS; ECONOMIC SENSITIVITY
The foodservice distribution industry is characterized by relatively high
inventory turnover with relatively low profit margins. A significant portion of
the Company's sales are made at prices that are based on product cost plus a
percentage markup. As a result, the Company's profit levels may be negatively
affected during periods of food price deflation, even though the Company's gross
profit percentage may remain relatively constant. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Results of
Operations."
The foodservice industry is sensitive to national and regional economic
conditions, and the demand for foodservice products supplied by the Company has
been adversely affected in past years by economic downturns. The Company's
operating results also are particularly sensitive to, and may be adversely
affected by, difficulties with the collectability of accounts receivable,
inventory control, competitive price pressures, severe weather conditions and
unexpected increases in fuel or other transportation-related costs. Although
these factors generally have not had a material adverse impact on the Company's
past operations, there can be no assurance that one or more of such factors will
not adversely affect future operating results.
ACQUISITION STRATEGY
The Company's business strategy emphasizes supplementing internal expansion
with acquisitions. See "Business -- Business Strategy -- Strategic
Acquisitions." There can be no assurance that the Company will successfully
identify suitable acquisition candidates, complete acquisitions, integrate
acquired operations into its existing operations or expand into new markets.
Further, there can be no assurance that acquisitions will not have an adverse
effect upon the Company's operating results, particularly in quarters
immediately following the consummation of such transactions, while the
operations of the acquired businesses are being integrated into the Company's
operations. Once integrated, acquired operations may not achieve levels of net
sales or profitability comparable to those achieved by the Company's existing
operations, or otherwise perform as expected. In addition, earnings may be
adversely affected by transaction-related expenses in the quarter in which an
acquisition is consummated. Management may determine that it is necessary or
desirable to obtain financing for such acquisitions through bank borrowings or
the issuance of debt or equity securities. Debt financing of any such
acquisition could increase the leverage of the Company. Equity financing of any
such acquisition may dilute the ownership of the Company's stockholders. There
can be no assurance that the Company will be able to obtain financing on
acceptable terms.
COMPETITION
The Company operates in highly competitive markets, and its future success
will depend in large part on its ability to provide superior service and
high-quality products at competitive prices. The Company encounters competition
from a variety of sources, including specialty and system foodservice
distributors and other broadline distributors. Some of the Company's competitors
have substantially greater financial and other resources than the Company. See
"Business -- Competition."
LABOR RELATIONS
Including the Acquisitions, approximately 1,100 employees, representing
approximately 32% of the Company's full-time employees and approximately 65% of
the employees employed in the Company's warehouse and distribution operations,
are members of 12 different local unions associated with the International
Brotherhood of Teamsters. In the spring of 1993, Squeri was involved in a labor
action with a local union. The expense relating to this action was not material.
The Company has not experienced any other
8
<PAGE> 13
labor disputes or work stoppages and believes that its relations with its
employees are satisfactory. A work stoppage, however, could have a material
adverse effect on the Company. See "Business -- Employees."
DEPENDENCE ON SENIOR MANAGEMENT
The Company's success is largely dependent on the skills, experience and
efforts of its senior management. The loss of the services of one or more of the
Company's senior management could have a material adverse effect on the
Company's business and development. To date, the Company generally has been
successful in retaining the services of its senior management. See "Management."
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
The Company's Certificate of Incorporation and By-Laws contain provisions
that may have the effect of discouraging certain transactions involving an
actual or threatened change of control of the Company. These provisions include
a requirement that the Board of Directors be divided into three classes with
approximately one-third of the Board to be elected each year. The classification
of directors has the effect of making it more difficult for stockholders to
change the composition of the Board. In addition, the Board of Directors of the
Company has the authority to issue up to 5,000,000 shares of preferred stock in
one or more series and to fix the powers, preferences and rights of any such
series without stockholder approval. The ability to issue preferred stock could
have the effect of discouraging unsolicited acquisition proposals or making it
more difficult for a third party to gain control of the Company, or otherwise
could adversely affect the market price of the Common Stock. In February 1996,
the Company adopted a shareholder rights plan under which preferred share
purchase rights, which are attached to the Common Stock, generally will be
triggered upon the acquisition (or certain actions that would result in the
acquisition) of 10% or more of the Common Stock by any person or group or the
acquisition (or certain actions that would result in the acquisition) of
additional Common Stock by any person or group owning 10% or more of the Common
Stock on February 19, 1996. Institutional investors eligible to report their
ownership of the Common Stock on Schedule 13G under the Exchange Act may acquire
up to 15% of the Common Stock without triggering such rights.
VOLATILITY OF MARKET PRICE FOR COMMON STOCK
From time to time after the Offering, there may be significant volatility
in the market price for the Common Stock. Quarterly operating results of the
Company or other distributors of food and related goods, changes in general
conditions in the economy, the financial markets or the food distribution or
foodservice industries, announcement of proposed acquisitions and failure to
complete announced acquisitions, unusual weather conditions or other
developments affecting the Company or its competitors could cause the market
price of the Common Stock to fluctuate substantially. In addition, in recent
years the stock market has experienced extreme price and volume fluctuations.
This volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to their operating performance.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Future sales of substantial amounts of Common Stock in the public market
could adversely affect the market price of the Common Stock. As of the date of
this Prospectus, there are 22,212,252 outstanding shares of Common Stock. All of
the 5,700,000 shares offered in the Offering will be freely transferable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), except that any shares held by an "affiliate" of the
Company (as that term is defined under Rule 144 of the Securities Act) will be
subject to the resale limitations of Rule 144. Of the Company's outstanding
shares, other than the shares offered hereby, 4,071,210 are "restricted
securities" within the meaning of Rule 144 or are otherwise subject to
restrictions on sale under the Securities Act. Such restricted shares may not be
sold except in compliance with the registration requirements of the Securities
Act or pursuant to an exemption from registration, such as the exemption
provided by Rule 144 or Rule 145 under the Securities Act.
The Company, certain of its executive officers and directors and the
Selling Stockholders (with respect to unsold shares of Common Stock) have agreed
that, for a period of 90 days after the date of this Prospectus
9
<PAGE> 14
(the "lock-up period"), they will not, without the prior consent of Smith Barney
Inc., offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or any securities convertible into, or exercisable or exchangeable for,
Common Stock (subject, in the case of the Company, to an exception for the grant
of options and issuance of shares pursuant to the Company's stock plans). Such
consent permitting shares to be sold before the expiration of the lock-up period
may be granted without prior notice to the other stockholders of the Company or
to any public market in which the Common Stock trades. Upon the expiration of
the lock-up period, 2,917,358 shares of Common Stock will be eligible for sale
in the public market pursuant to Rule 144 or Rule 145. The remaining restricted
shares of Common Stock will become eligible for sale pursuant to Rule 144 or
Rule 145 at various times thereafter. See "Shares Eligible for Future Sale."
The Company has granted certain registration rights with respect to the
shares of Common Stock beneficially owned by the Sara Lee Selling Stockholders
and the shares issued in connection with the Squeri Acquisition. If the U.S.
Underwriters' over-allotment option is not exercised in full, the Sara Lee
Selling Stockholders will be entitled to require the Company to use its best
efforts to register under the Securities Act the unsold shares covered by such
option. Beginning on June 1, 1997, the Company will be obligated to use its best
efforts to register up to 1,079,875 shares issued to the former Squeri
stockholders. In addition, in connection with any such registration or if the
Company otherwise proposes to register any shares of Common Stock under the
Securities Act in the future, the Sara Lee Selling Stockholders, certain
management stockholders and the former stockholders of Valley Foods, Arrow and
Squeri are entitled to require the Company, subject to certain conditions, to
include all or a portion of their shares in such registration. The registration
rights described herein are subject to certain notice requirements, timing
restrictions and volume limitations which may be imposed by the underwriters of
an offering. The Company is required to bear the expenses of all such
registrations, except for underwriting discounts and commissions. Following
completion of the Offering (assuming no exercise of the U.S. Underwriters'
over-allotment option), 4,071,210 shares of Common Stock, or 18.3% of the total
number of shares of Common Stock outstanding, will be entitled to the
benefits of such registration rights.
DIVIDEND POLICY
The Company does not anticipate declaring or paying cash dividends on the
Common Stock in the foreseeable future. The Company's ability to pay cash
dividends is limited by the terms of the Company's senior notes and the
Company's existing credit facility, consisting of a $110 million revolving
credit loan (the "Bank Facility"). See "Price Range of Common Stock and Dividend
Policy."
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act and is
subject to the safe-harbor created by such sections. Such forward-looking
statements include those concerning the Company's business strategy, operations,
economic performance, financial condition and liquidity and capital resources.
Such statements are subject to various risks and uncertainties. The Company's
actual results may differ materially from the results discussed in such
forward-looking statements because of a number of factors, including those
identified under this "Risk Factors" section and elsewhere in this Prospectus.
See the inside front cover pages of this Prospectus, "Prospectus Summary,"
"Unaudited Pro Forma Condensed Financial Statements," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."
The forward-looking statements are made as of the date of this Prospectus, and
the Company assumes no obligation to update the forward-looking statements or to
update the reasons why actual results could differ from those projected in the
forward-looking statements.
10
<PAGE> 15
USE OF PROCEEDS
All of the shares offered hereby are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
such shares. The Company will pay certain expenses relating to the Offering,
estimated to be approximately $600,000.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock began trading on the Nasdaq National Market on
November 16, 1994 under the symbol "JPFS." The following table sets forth the
range of high and low closing sale prices for the Common Stock as reported on
the Nasdaq National Market for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
-------------------------------------------------------------- ----- -----
<S> <C> <C>
1995
Second quarter (from November 16, 1994)..................... $11 1/2 $ 9 1/4
Third quarter............................................... 13 1/8 9 1/4
Fourth quarter.............................................. 14 3/8 10 7/8
1996
First quarter............................................... $17 3/4 $12 3/4
Second quarter.............................................. 19 1/2 15 1/4
Third quarter............................................... 22 1/4 18 1/4
Fourth quarter.............................................. 25 18 1/2
1997
First quarter............................................... $24 3/4 $20 3/4
Second quarter (through November 19, 1996).................. 24 1/4 21
</TABLE>
On November 19, 1996, the last reported sale price of the Common Stock as
reported on the Nasdaq National Market was $23.4375 per share. There were
approximately 190 holders of record of the Common Stock on such date.
The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate declaring or paying any cash dividends on its
Common Stock in the foreseeable future. The current policy of the Company's
Board of Directors is to retain all earnings to support operations and to
finance the expansion of the Company's business. The agreement under which the
Company's senior notes were issued and the agreement for the Bank Facility
contain provisions limiting the Company's ability to pay cash dividends on the
Common Stock. See Note 10 to the Company's Consolidated Financial Statements.
11
<PAGE> 16
CAPITALIZATION
The following table sets forth, as of September 28, 1996, (i) the restated
actual capitalization of the Company and (ii) the pro forma capitalization of
the Company after giving effect to the Offering. This table should be read in
conjunction with "Unaudited Pro Forma Condensed Financial Statements."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 28,
1996
---------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current portion of obligations under capital leases................ $ 6,065 $ 6,065
Current maturities of long-term debt............................... 3,221 3,221
-------- ---------
Total short-term debt......................................... $ 9,286 $ 9,286
======== ========
Long-term debt:
Bank Facility...................................................... $ 45,533 $ 46,133
Trade accounts receivable securitization........................... 50,000 50,000
Senior notes....................................................... 85,000 85,000
Mortgage notes..................................................... 2,497 2,497
Related party indebtedness......................................... 359 359
Offset Notes(1).................................................... 4,108 4,108
Obligations under capital leases................................... 20,978 20,978
-------- ---------
Total long-term debt.......................................... 208,475 209,075
-------- ---------
Stockholders' equity(2):
Preferred Stock, $.01 par value, 5,000,000 shares authorized; no
shares issued and outstanding
Common Stock, $.01 par value, 45,000,000 shares authorized;
22,210,088 shares issued and outstanding, actual and pro forma.... 222 222
Additional paid-in capital......................................... 259,966 259,366
Accumulated deficit................................................ (18,032) (18,032)
Distribution in excess of net book value of continuing
stockholder's interest............................................ (44,943) (44,943)
-------- ---------
Total stockholders' equity.................................... 197,213 196,613
-------- ---------
Total capitalization.......................................... $405,688 $ 405,688
======== ========
</TABLE>
- ---------------
(1) See Note 10 to the Company's Consolidated Financial Statements.
(2) Does not include (i) 729,662 shares of Common Stock subject to stock options
granted by the Company under its stock option plans as of September 28, 1996
or (ii) 168,421 shares subject to options granted by the Company under
employment agreements entered into in connection with the Squeri
Acquisition.
12
<PAGE> 17
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements give
effect to (i) the business combination between the Company and Valley Foods
accounted for as a pooling of interests, (ii) the business combination between
the Company and Arrow accounted for as a purchase, (iii) the business
combination between the Company and Squeri accounted for as a pooling of
interests and (iv) the August Offering. The Company's historical financial
statements have been restated for all periods presented to include the financial
position and results of Valley Foods and Squeri. See "Prospectus
Summary -- Recent Acquisitions." The unaudited pro forma condensed statements of
operations for the fiscal year ended June 29, 1996 combine the restated
historical condensed consolidated statements of operations of (i) the Company
for the fiscal year ended June 29, 1996 and (ii) Arrow for the fiscal year ended
December 29, 1995. The unaudited pro forma condensed consolidated statements of
operations for the three-month period ended September 28, 1996 combine the
restated historical condensed consolidated statements of the Company (which
include results for Arrow subsequent to the consummation date) with the results
of Arrow for the period from June 30, 1996 to August 31, 1996 (date of
consummation). The unaudited pro forma condensed statements of operations assume
that the Arrow Acquisition and the August Offering occurred at the beginning of
the periods presented. The unaudited pro forma condensed balance sheets reflect
the restated historical condensed consolidated balance sheet of the Company as
of September 28, 1996 and give effect to the Offering.
The pro forma net income per share is based on the weighted average number
of shares of Common Stock of the Company and Common Stock of the Company issued
to former stockholders of Valley Foods and Squeri for the respective periods,
based on the respective ownership percentages of the Company, Valley Foods and
Squeri in the combined entity after the Valley Acquisition and the Squeri
Acquisition, as well as the number of shares issued in connection with the Arrow
Acquisition and the August Offering (assuming that such shares are issued as of
the beginning of the respective periods presented).
The unaudited pro forma condensed financial statements should be read in
conjunction with the Company's restated historical Consolidated Financial
Statements and the notes thereto included elsewhere in this Prospectus. The pro
forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the Arrow Acquisition and the August Offering had been
consummated as presented in the accompanying unaudited pro forma condensed
financial statements, nor is it necessarily indicative of future operating
results.
13
<PAGE> 18
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 29, 1996
------------------------------------------------------------
RESTATED
JP FOODSERVICE(a) ARROW ADJUSTMENTS(b) PRO FORMA
----------------- ------- -------------- ----------
<S> <C> <C> <C> <C>
Net sales................................................... $ 1,449,303 $74,590 $ -- $1,523,893
Cost of sales............................................... 1,198,797 60,257 -- 1,259,054
----------------- ------- -------------- ----------
Gross profit................................................ 250,506 14,333 -- 264,839
Operating expenses.......................................... 202,916 12,756 (2,531)(c) 213,141
Amortization of intangible assets........................... 2,338 -- 752(d) 3,090
----------------- ------- -------------- ----------
Income from operations...................................... 45,252 1,577 1,779 48,608
----------------- ------- -------------- ----------
Other (income) expenses
Interest expense........................................ 15,187 1,055 (2,991)(e) 13,251
Nonrecurring charges.................................... 1,517 -- -- 1,517
Other (income) expense.................................. 37 (140) -- (103)
----------------- ------- -------------- ----------
Total other expenses........................................ 16,741 915 (2,991) 14,665
----------------- ------- -------------- ----------
Income before income taxes.................................. 28,511 662 4,770 33,943
Provision for income taxes.................................. (11,598) (9) (2,005)(f) (13,612)
----------------- ------- -------------- ----------
Net income.................................................. $ 16,913 $ 653 $ 2,765 $ 20,331
================ ======== ============== ==========
Net income per common share................................. $ 0.90(g) $ 0.93(g)
================ ==========
Weighted average number of common shares outstanding........ 18,808,738 21,957,715
================ ==========
</TABLE>
- ---------------
(a) Represents the restated historical results of the Company, Valley Foods and
Squeri. These combined results have been restated in accordance with
pooling of interests accounting.
(b) These adjustments do not include improvements to gross profit expected to be
achieved through improved purchasing leverage and cost savings from
distribution and other economies.
(c) Represents a reduction in officer compensation for Valley Foods, Arrow and
Squeri of $400, $1,531 and $600, respectively, based on employment
agreements entered into in connection with the consummation of the
Acquisitions.
(d) Represents amortization of goodwill related to the Arrow Acquisition.
(e) Represents a reduction of interest expense on debt repaid from proceeds of
the August Offering consisting of $1,313 for Valley Foods, $535 for Squeri,
$1,055 for Arrow and $88 for the Company ($1,349 reduction in
pre-Acquisitions debt of the Company at an average interest rate of
approximately 6.50%).
(f) Represents (i) an increase in tax expense of $246 to reflect all operations
of Arrow as a C corporation for federal income tax purposes and (ii) an
increase in tax expense of $1,759 relating to the adjustments described in
notes (c), (d) and (e).
(g) Reflects a reduction in net income of $933 resulting from the nonrecurring
charge relating to the termination of merger discussions (see Note 4 to the
Company's Consolidated Financial Statements) equal to $0.05 per common share
actual and $0.04 per common share pro forma. Excluding this nonrecurring
charge, net income would have been $17,846 or $0.95 per common share actual
and $21,264 or $0.97 per common share pro forma.
14
<PAGE> 19
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 28, 1996
-----------------------------------------------------------------
ARROW
RESTATED THROUGH
JP FOODSERVICE(a) AUGUST 31(b) ADJUSTMENTS(c) PRO FORMA
----------------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
Net sales............................................... $ 414,362 $ 17,687 $ -- $ 432,049
Cost of sales........................................... 343,631 14,743 -- 358,374
----------------- ------------ ------- ----------
Gross profit............................................ 70,731 2,944 -- 73,675
Operating expenses...................................... 57,667 2,267 (415)(d) 59,519
Amortization of intangible assets....................... 597 -- 126(e) 723
----------------- ------------ ------- ----------
Income from operations.................................. 12,467 677 289 13,433
----------------- ------------ ------- ----------
Other (income) expenses
Interest expense.................................... 3,654 248 (711)(f) 3,191
Nonrecurring charges................................ 5,300 -- -- 5,300
Other expenses...................................... -- -- -- --
----------------- ------------ ------- ----------
Total other expenses.................................... 8,954 248 (711) 8,491
----------------- ------------ ------- ----------
Income before income taxes.............................. 3,513 429 1,000 4,942
Provision for income taxes.............................. (1,459) (164)(g) (366)(g) (1,989)
----------------- ------------ ------- ----------
Net income.............................................. $ 2,054 $ 265 $ 634 $ 2,953
================ ============ ============== ==========
Net income per common share............................. $ 0.10(h) $ 0.13(h)
================ ==========
Weighted average number of common shares outstanding.... 20,639,681 22,200,786
================ ==========
</TABLE>
- ---------------
(a) Represents the restated historical results of the Company, Valley Foods and
Squeri. These combined results have been restated in accordance with
pooling of interests accounting. These amounts also include results for
Arrow subsequent to the consummation date.
(b) Represents results of Arrow for the period prior to the consummation date.
(c) These adjustments do not include improvements to gross profit expected to
be achieved through improved purchasing leverage and cost savings from
distribution and other economies.
(d) Represents a reduction in officer compensation for Arrow and Squeri of $265
and $150, respectively, based on employment agreements entered into in
connection with the consummation of the Arrow Acquisition and the Squeri
Acquisition.
(e) Represents additional amortization of goodwill related to the Arrow
Acquisition, assuming the Arrow Acquisition occurred on June 30, 1996.
(f) Represents a reduction of interest expense on debt repaid from proceeds of
the August Offering consisting of $443 for Valley Foods, $20 for Squeri and
$248 for Arrow.
(g) Represents (i) an increase in tax expense of $164 to reflect all operations
of Arrow as a C corporation for federal income tax purposes and (ii) an
increase in tax expense of $366 relating to the adjustments described in
notes (d), (e) and (f).
(h) Reflects a reduction in net income of $3,260 resulting from transaction
costs related to the Valley Acquisition, which in accordance with pooling of
interests accounting must be expensed in the period in which the Valley
Acquisition was consummated. These costs were equal to $0.16 per common
share actual and $0.15 per common share pro forma. Excluding this
nonrecurring charge, net income would have been $5.3 million or $0.26 per
common share actual and $6.2 million or $0.28 per common share pro forma.
15
<PAGE> 20
UNAUDITED PRO FORMA CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
------------------------------------------
RESTATED JP
FOODSERVICE(a) ADJUSTMENTS PRO FORMA
-------------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................... $ 9,486 -- $ 9,486
Receivables, net of allowance..................... 184,476 -- 184,476
Inventories....................................... 105,899 -- 105,899
Current deferred tax asset........................ 1,650 -- 1,650
Other current assets.............................. 14,510 -- 14,510
-------------- ---------
Total current assets......................... 316,021 -- 316,021
-------------- ---------
Property and equipment, net............................ 129,034 -- 129,034
Goodwill and other intangible assets, net.............. 108,760 -- 108,760
-------------- ---------
Total assets................................. $553,815 -- $ 553,815
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of senior debt................. $ 216 -- $ 216
Current obligations under capital leases.......... 6,065 -- 6,065
Current maturities of subordinated debt........... 3,005 -- 3,005
Accounts payable
Trade........................................ 97,913 -- 97,913
Related parties.............................. 3,120 -- 3,120
Accrued expenses.................................. 25,503 -- 25,503
-------------- ---------
Total current liabilities.................... 135,822 -- 135,822
-------------- ---------
Noncurrent liabilities
Senior debt....................................... 183,030 $ 600(b) 183,630
Subordinated debt with related parties............ 4,467 -- 4,467
Obligations under capital leases.................. 20,978 -- 20,978
Noncurrent deferred tax liability................. 12,305 -- 12,305
-------------- ----------- ---------
Total noncurrent liabilities................. 220,780 600 221,380
-------------- ----------- ---------
Total liabilities............................ 356,602 600 357,202
-------------- ----------- ---------
Stockholders' equity
Common stock and additional paid-in capital....... 260,188 (600)(b) 259,588
Retained earnings (accumulated deficit)........... (18,032) -- (18,032)
Distribution in excess of book value of continuing
stockholder's interest.......................... (44,943) (44,943)
-------------- ----------- ---------
Total stockholders' equity................... 197,213 (600) 196,613
-------------- ----------- ---------
Total liabilities and stockholders' equity............. $553,815 $-- $ 553,815
=========== ========= ========
</TABLE>
- ---------------
(a) Represents the restated historical results of the Company to include Valley
Foods and Squeri in accordance with pooling of interests accounting.
(b) Reflects $600 of debt incurred related to fees associated with the Offering.
16
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents, for the periods and at the dates indicated,
selected statement of operations data and balance sheet data of the Company on a
consolidated basis. The selected historical consolidated financial data for each
of the three fiscal years in the period ended June 29, 1996 presented below are
derived from the consolidated financial statements of the Company, which have
been audited by Price Waterhouse LLP, independent accountants. Such data should
be read in conjunction with the Consolidated Financial Statements of the Company
and related notes included elsewhere in this Prospectus.
The Valley Acquisition and Squeri Acquisition are being accounted for under
the pooling of interests method of accounting. Accordingly, the financial
position and results of operations for the Company for historical periods, as
set forth below, have been restated to reflect the combined operations of the
Company, Valley Foods and Squeri. The Arrow Acquisition is being accounted for
under the purchase method of accounting. Accordingly, the financial data for
Arrow have been reflected in the Company's historical results only subsequent to
the consummation date.
The selected unaudited pro forma consolidated financial data presented below
are based on the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus, adjusted to give effect to the Arrow Acquisition
and the August Offering. See "Unaudited Pro Forma Condensed Financial
Statements."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------- THREE MONTHS ENDED
JUNE 29, 1996 SEPTEMBER 28, 1996
---------------------------- -------------------------
JULY 2, 1994 JULY 1, 1995 ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
------------ ------------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $1,178,826 $1,288,315 $ 1,449,303 $1,523,893 $ 414,362 $ 432,049
Cost of sales........................ 979,108 1,069,494 1,198,797 1,259,054 343,631 358,374
---------- ---------- ---------- -------- --------
Gross profit......................... 199,718 218,821 250,506 264,839 70,731 73,675
Operating expenses................... 163,695 177,799 202,916 213,141 57,667 59,519
Amortization of intangible assets.... 2,265 2,263 2,338 3,090 597 723
Stock compensation charge............ -- 709 -- -- -- --
---------- ---------- ---------- -------- --------
Income from operations............... 33,758 38,050 45,252 48,608 12,467 13,433
Interest expense..................... 32,255 22,074 15,187 13,251 3,654 3,191
Nonrecurring charges................. -- -- 1,517 1,517 5,300 5,300
Other (income) expense............... 222 (309) 37 (103) -- --
---------- ---------- ---------- -------- --------
Income before income taxes and
extraordinary charge............... 1,281 16,285 28,511 33,943 3,513 4,942
Provision for income taxes........... (1,579) (7,358) (11,598) (13,612) (1,459) (1,989)
---------- ---------- ---------- -------- --------
Income (loss) before extraordinary
charge............................. (298) 8,927 16,913 20,331 2,054 2,953
Extraordinary charge................. -- (4,590) -- -- -- --
---------- ---------- ---------- -------- --------
Net income (loss).................... (298) 4,337 16,913 20,331 2,054 2,953
Preference dividends................. (504) (40) -- -- -- --
---------- ---------- ---------- -------- --------
Net income (loss) applicable to
common stockholders................ $ (802) $ 4,297 $ 16,913 $ 20,331 $ 2,054 $ 2,953
========== ========== ========== ======== ========
PER SHARE DATA:
Net income (loss) per common share:
Before extraordinary charge...... $ (0.17) $ 0.68(2) $ 0.90(3) $ 0.93(3) $ 0.10(4) $ 0.13(4)
Extraordinary charge............. -- (0.35) -- -- -- --
---------- ---------- ---------- -------- --------
Net income (loss) per common share... $ (0.17) $ 0.33(2) $ 0.90(3) $ 0.93(3) $ 0.10(4) $ 0.13(4)
========== ========== ========== ======== ========
Weighted average number of shares of
common stock outstanding........... 4,633,371 13,103,798 18,808,738 21,957,715 20,639,681 22,200,786
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 28, 1996
ACTUAL PRO FORMA(5)
-------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................................... $ 180,199 $ 180,199
Total assets......................................................................................... 553,815 553,815
Long-term debt, excluding current maturities......................................................... 208,475 209,075
Stockholders' equity (deficit)....................................................................... 197,213 196,613
</TABLE>
- ---------------
(1) The pro forma Statement of Operations Data give effect to the consummation
of the Arrow Acquisition and the August Offering as of the beginning of the
periods presented. See "Unaudited Pro Forma Condensed Financial Statements."
(2) Reflects a reduction in net income of $709 resulting from a one-time
non-cash stock compensation charge equal to $0.05 per common share.
(3) Reflects a reduction in net income of $933 resulting from the nonrecurring
charge relating to the termination of merger discussions (see Note 4 to the
Company's Consolidated Financial Statements) equal to $0.05 per common share
actual and $0.04 per common share pro forma.
(4) Reflects transaction costs related to the Valley Acquisition. In accordance
with pooling of interests accounting, all such transaction costs must be
expensed in the period in which the Valley Acquisition was consummated. Of
the $5.3 million in transaction costs, approximately $4.0 million were paid
by the stockholders of Valley Foods through a reduction of the acquisition
purchase price. On an after-tax basis, these costs amounted to $0.16 per
common share actual and $0.15 per common share pro forma. Excluding this
nonrecurring charge, net income would have been $5.3 million or $0.26 per
common share actual and $6.2 million or $0.28 per common share pro forma.
Transaction costs of approximately $2 million related to the Squeri
Acquisition will be charged to expense in the second quarter of fiscal 1997.
(5) The pro forma Balance Sheet Data assume that the Offering was consummated on
September 28, 1996. See "Unaudited Pro Forma Condensed Financial
Statements."
17
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Overview. The Company's net sales have increased as a result of internal
expansion through continued growth in street account and chain account sales and
through acquisitions. The Company has increased its street account sales through
growth of its street sales force, improved sales productivity and the
implementation of new street sales promotion programs. The Company's chain
account sales have increased as a result of the continued growth in sales to
existing accounts and the development of relationships with new accounts. The
Company has supplemented internal growth with acquisitions completed in the
fourth quarter of fiscal 1995 and the second quarter of fiscal 1996 and with the
Acquisitions completed in the first two quarters of fiscal 1997. The Company's
gross profit margin has improved in part as a result of an increase in sales of
private and signature brand products as a percentage of the Company's net sales.
Fiscal Year. The Company's fiscal year ends on the Saturday closest to
June 30. Consequently, the Company occasionally will have a 53-week fiscal year.
Fiscal 1996, 1995 and 1994 each consisted of 52 weeks.
RESULTS OF OPERATIONS
The following table sets forth, for the last three fiscal years, certain
income and expense items expressed as a percentage of net sales.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------
JULY 2, 1994 JULY 1, 1995 JUNE 29, 1996
------------ ------------ -------------
<S> <C> <C> <C>
Net sales......................................... 100.00% 100.00% 100.00%
Cost of sales..................................... 83.06 83.01 82.72
------ ------ ------
Gross profit...................................... 16.94 16.99 17.28
Operating expenses................................ 13.89 13.80 14.00
Amortization of intangible assets................. 0.19 0.18 0.16
Stock compensation charge......................... -- 0.06 --
------ ------ ------
Income from operations............................ 2.86 2.95 3.12
Interest expense.................................. 2.74 1.71 1.05
Other (income) expense............................ 0.02 (0.02) --
Nonrecurring charges.............................. -- -- 0.10
------ ------ ------
Income (loss) before taxes and extraordinary
charge.......................................... 0.10 1.26 1.97
Income taxes...................................... (0.13) (0.57) (0.80)
------ ------ ------
Income (loss) before extraordinary charge......... (0.03) 0.69 1.17
Extraordinary charge on early extinguishment of
debt............................................ -- 0.35 --
------ ------ ------
Net income (loss)................................. (0.03)% 0.34% 1.17%
====== ====== ======
</TABLE>
The principal components of expenses include cost of sales, which
represents the amount paid to manufacturers and growers for products sold, and
operating expenses, which include selling (primarily labor-related) expenses,
warehousing, transportation and other distribution costs, and administrative
expenses. Because distribution and administrative expenses are relatively fixed
in the short term, unexpected changes in the Company's net sales, such as those
resulting from adverse weather, can have a significant short-term impact on
operating income.
The Company sells a significant proportion of its products at prices based
on product cost plus a percentage markup. Periods of inflation in food prices
result in higher product costs, which are reflected in higher sales prices and
higher gross profits. The Company's operating results were positively affected
by estimated food price inflation of less than 0.5%, 0.5% and 0.7% in fiscal
1996, 1995 and 1994, respectively.
18
<PAGE> 23
Gross margins generally are lower for chain accounts than for street
accounts. However, because there are typically no commission sales costs related
to chain account sales and because chain accounts usually have larger deliveries
to individual locations, sales and delivery costs generally are lower for chain
accounts than for street accounts.
Gross margins are generally higher for private label products than for
national brand products of comparable quality. However, the Company incurs
additional advertising and other marketing costs in promoting its private label
products.
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales. Net sales increased 12.5% to $1.449 billion in fiscal 1996 from
$1.288 billion in fiscal 1995. The net sales increase was 12.1% before
restatement of the historical financial statements for the Valley Acquisition
and the Squeri Acquisition. Higher chain account and street sales both
contributed to the Company's sales growth in fiscal 1996. Sales generated by
foodservice businesses acquired by the Company in the last quarter of fiscal
1995 and the second quarter of fiscal 1996 accounted for 2.0% of this increase.
An increase of 15.9% in chain account sales prior to the Acquisitions reflected
the continued growth in sales to the Company's larger customers and, to a lesser
extent, the development of new chain account relationships, including the new
prime supplier relationship announced with Pizzeria Uno, which commenced in
January 1996. As a percentage of net sales, chain account sales increased to
46.7% in fiscal 1996 from 45.2% in fiscal 1995. Street sales prior to the
Acquisitions increased 9.1% over fiscal 1995 primarily as a result of improved
sales force productivity and the implementation of new street sales promotion
programs. Fiscal 1996 net sales were adversely affected by severe winter weather
conditions in a majority of the Company's markets.
Gross Profit. Gross profit margin increased to 17.3% in fiscal 1996 from
17.0% in fiscal 1995. The increase was primarily attributable to increased sales
of the Company's private and signature brand products, which, before giving
effect to the Acquisitions, increased to 24.0% of street sales at the end of
fiscal 1996 from 18.0% at the end of fiscal 1995. The increase in sales of
private label products more than offset the effects of the shift in customer mix
to a higher percentage of sales to chain accounts.
Operating Expenses. Operating expenses increased 14.1% to $202.9 million
in fiscal 1996 from $177.8 million in fiscal 1995 primarily as a result of the
increases in net sales. As a percentage of net sales, operating expenses
increased to 14.0% in fiscal 1996 from 13.8% in fiscal 1995. The increase in
operating expenses, as a percentage of net sales, resulted primarily from
increased costs incurred in connection with the promotion of private label and
signature brand products and costs associated with the adverse winter weather
conditions in a majority of the Company's markets in the third quarter of fiscal
1996.
Income from Operations. As a result of the increase in net sales and gross
profit margin and the absence of any charge corresponding to the one-time stock
compensation charge of $0.7 million recorded in fiscal 1995, income from
operations increased 18.9% to $45.3 million in fiscal 1996 from $38.1 million in
fiscal 1995. Operating margin increased to 3.1% in fiscal 1996 from 3.0% in
fiscal 1995.
Interest Expense. Interest expense decreased 31.2% to $15.2 million in
fiscal 1996 from $22.1 million in fiscal 1995. The decrease was primarily
attributable to the repayment or refinancing of substantially all of the
Company's indebtedness in connection with the Recapitalization, which was
consummated in the second quarter of fiscal 1995.
Nonrecurring Charge. On February 19, 1996, the Company terminated
discussions with Sara Lee Corporation regarding a proposed combination of the
Company and Sara Lee Corporation's wholly-owned subsidiary, PYA Monarch, Inc. As
a result of the termination of these discussions, which began with a proposal
submitted by Sara Lee Corporation in November 1995, the Company wrote off the
costs incurred related to the proposed transaction (primarily legal and advisory
fees) of approximately $1.5 million.
Income Taxes. The provision for income tax for fiscal 1996 increased $4.2
million over the provision for fiscal 1995. The increase in the provision was
attributable to the Company's greater pretax profit level in fiscal 1996. The
Company's effective tax rate (before extraordinary charge) of 40.7% for fiscal
1996 decreased from
19
<PAGE> 24
the effective rate of 45.2% for fiscal 1995 primarily because of the effect on
fiscal 1995 operating results of the non-deductible stock compensation charge of
$0.7 million.
Extraordinary Charge. The Company incurred no extraordinary charge in
fiscal 1996. In fiscal 1995, in connection with the Recapitalization, the
Company incurred a $4.6 million extraordinary charge (net of tax benefits of
$3.1 million) for the write-off of deferred financing costs relating to existing
indebtedness, as well as other fees and expenses related to the early
extinguishment of debt.
FISCAL 1995 COMPARED TO FISCAL 1994
Net Sales. Net sales increased 9.3% to $1.288 billion in fiscal 1995 from
$1.179 billion in fiscal 1994. The net sales increase was 7.7% before
restatement of the historical financial statements for the Valley Acquisition
and the Squeri Acquisition. Higher chain account and street sales both
contributed to the Company's sales growth in fiscal 1995. An increase of 9.3% in
chain account sales prior to the Acquisitions reflected the continued growth in
sales to the Company's larger customers and, to a lesser extent, the development
of new chain account relationships. As a percentage of net sales, chain account
sales increased to 45.2% in fiscal 1995 from 44.0% in fiscal 1994. Street sales
prior to the Acquisitions increased 6.5% over fiscal 1994 primarily as a result
of improved sales force productivity, the implementation of new street sales
promotion programs and an increase in the commission sales force. As part of the
Company's strategy to increase its street sales, the Company expanded its street
sales force 12% in fiscal 1995, with 75% of that increase occurring in the
fourth fiscal quarter. The rate of increase in street sales over the prior year
accelerated during fiscal 1995, from 3.8% in the first fiscal quarter to 7.9% in
the fourth fiscal quarter. Fiscal 1995 net sales also benefited from the general
absence of the severe weather conditions that adversely affected fiscal 1994
sales in certain of the Company's markets.
Gross Profit. Gross profit margin increased to 17.0% in fiscal 1995 from
16.9% in fiscal 1994. The increase was primarily attributable to increased sales
of private label products. The increase in sales of private label products more
than offset the effects of the shift in customer mix to a higher percentage of
sales to chain accounts.
Operating Expenses. Operating expenses increased 8.6% to $177.8 million in
fiscal 1995 from $163.7 million in fiscal 1994 primarily as a result of the
increases in net sales. As a percentage of net sales, operating expenses
decreased to 13.8% in fiscal 1995 from 13.9% in fiscal 1994. Increases in costs
incurred in connection with the Company's investment in street sales promotion
programs and in the expansion of its street sales force were more than offset by
the costs savings resulting from a higher percentage of sales to chain accounts.
Stock Compensation Charge. The Company incurred a one-time non-cash stock
compensation charge of $0.7 million relating to common stock offered to certain
management investors in the first quarter of fiscal 1995.
Income from Operations. As a result of the increases in net sales and
gross profit margin, income from operations increased 12.7% to $38.1 million in
fiscal 1995 from $33.8 million in fiscal 1994. Operating margin increased to
3.0% in fiscal 1995 from 2.9% in fiscal 1994.
Interest Expense. Interest expense decreased 31.6% to $22.1 million in
fiscal 1995 from $32.3 million in fiscal 1994. The decrease was primarily
attributable to the reduction in the Company's aggregate indebtedness and annual
interest rate on borrowings effected in the Recapitalization, which was
consummated in the second quarter of fiscal 1995.
Extraordinary Charge. In connection with the Recapitalization, the Company
incurred a $4.6 million extraordinary charge (net of tax benefits of $3.1
million) in the second quarter of fiscal 1995 for the write-off of deferred
financing costs relating to existing indebtedness as well as other fees and
expenses related to the early extinguishment of debt.
Income Taxes. The Company recorded an income tax provision of $7.4 million
in fiscal 1995, compared to an income tax provision of $1.6 million in fiscal
1994. The increase was due to the increase in taxable income.
20
<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations and growth primarily
with cash flow from operations, borrowings under its credit facilities,
operating and capital leases and normal trade credit terms. The Company finances
its investment in inventory principally with trade accounts payable.
The Company's cash flow from operations was $10.5 million, $13.5 million
and $39.7 million in fiscal 1996, fiscal 1995 and fiscal 1994, respectively. The
significant cash flows in fiscal 1994 were related to a one-time improvement in
the Company's working capital management compared to the prior fiscal year.
The Company's working capital requirement generally averages between 9% and
10% of annual sales. The Company's working capital balance at June 29, 1996 was
$120.9 million.
As of June 29, 1996, the Company's restated long-term indebtedness,
including current portion, was $183.5 million, with an overall weighted average
interest rate of 8.2% (excluding deferred financing costs and costs of interest
rate swaps and interest cap arrangements). This amount included $5.3 million of
indebtedness outstanding under revolving lines of credit extended to Valley
Foods and Squeri as of June 29, 1996. As of the same date, $1 million of
borrowings and $12.1 million of letters of credit were outstanding under the
Company's Bank Facility and an additional $96.9 million remained available to
finance the Company's working capital requirements.
During the fourth quarter of fiscal 1996, the Company strengthened its
liquidity position by applying $49.4 million in proceeds from the securitization
of trade receivables to reduce its outstanding borrowings under the Bank
Facility by the same amount. The effective interest rate on proceeds of the
securitization program is currently equivalent to LIBOR plus 30 basis points.
The application of such proceeds has enabled the Company to reduce the interest
rate on borrowings under the Bank Facility from LIBOR plus 87.5 basis points to
LIBOR plus 50 basis points.
The Company completed the sale of 3,000,000 shares of Common Stock in the
August Offering and generated $65.7 million in net proceeds. The net proceeds of
the August Offering were used to repay indebtedness assumed or discharged by the
Company in connection with the Valley Acquisition (approximately $24 million)
and the Arrow Acquisition (approximately $18 million) and to fund the cash
portion of the Arrow Acquisition (approximately $27.9 million). In September
1996, the Company received additional net proceeds of $1.6 million in the August
Offering from the sale of shares to cover over-allotments. The net proceeds not
applied to the foregoing uses were used for working capital and other general
corporate purposes.
The Company made capital expenditures of $20 million in fiscal 1996 and $9
million in fiscal 1995, primarily for new trucks and trailers and the expansion
of the Company's distribution centers. The expenditures for new trucks and
trailers were primarily funded from capital leases. The Company currently
expects to make capital expenditures of approximately $27 million in fiscal
1997, including approximately $8 million to upgrade and expand its existing
facilities.
The Company believes that the combination of cash flow generated by its
operations, additional capital leasing activity, borrowings under the Bank
Facility and the net proceeds of the August Offering are sufficient to enable it
to finance its growth and meet its projected capital expenditures and other
short-term and long-term liquidity requirements. Management may determine that
it is necessary or desirable to obtain financing for acquisitions through
additional bank borrowings or the issuance of new debt or equity securities.
QUARTERLY RESULTS AND SEASONALITY
Historically, the Company's operating results have reflected seasonal
variations. The Company experiences lower net sales and income from operations
during its third quarter, which includes the winter months.
21
<PAGE> 26
The following table sets forth certain summary information with respect to the
Company's operations for the most recent nine fiscal quarters.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 1, 1995
--------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................. $ 321,802 $ 316,203 $ 305,038 $ 345,272
Income from operations.................... 8,936 9,470 7,405 12,239
Operating margin.......................... 2.8% 3.0% 2.4% 3.5%
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 29, 1996
--------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................. $ 356,323 $ 353,525 $ 349,717 $ 389,738
Income from operations.................... 10,045 10,456 9,225 15,526
Operating margin.......................... 2.8% 3.0% 2.6% 4.0%
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDING JUNE 28, 1997
--------------------------------------------------------
1ST QUARTER
-----------
<S> <C>
Net sales................................. $ 414,362
Income from operations.................... 12,467
Operating margin.......................... 3.0%
</TABLE>
22
<PAGE> 27
BUSINESS
JP Foodservice is a leading broadline distributor of food and related
products to restaurants and other institutional foodservice establishments in
the Mid-Atlantic, Midwestern and Northeastern regions of the United States and
in Las Vegas, Nevada. The Company ranks as the nation's fifth largest broadline
distributor based on pro forma 1995 calendar year net sales, including the
results of the Acquisitions, which were completed in the first two quarters of
fiscal 1997. The Company believes that it is one of the three leading broadline
distributors in each of its principal geographic service areas, which it defines
as the areas within a 150-mile radius of each of its 12 full-service
distribution centers. The Company markets and distributes over 30,000 national,
private and signature brand items to over 34,000 foodservice customers,
including restaurants, hotels, healthcare facilities, cafeterias, and schools.
This diverse customer base encompasses both independent (or "street") and
multi-unit (or "chain") businesses.
FOODSERVICE DISTRIBUTION INDUSTRY
Companies in the U.S. foodservice distribution industry purchase, store,
market and transport food products, paper products and other supplies and
food-related items to establishments that prepare and serve meals to be eaten
away from home. Net sales for the industry were approximately $129 billion in
1995. For the three-year period ended 1995, foodservice distribution sales
increased at a compounded annual rate of 2.4%, which was comparable to the rate
of increase in the U.S. gross national product during the same period.
Foodservice distribution companies generally are classified as "broadline,"
"specialty" or "system" distributors. Broadline distributors offer a
comprehensive range of food and related products from a single source of supply
and provide foodservice establishments with the cost savings associated with
large, full-service deliveries. Specialty distributors generally are small,
family-owned enterprises that supply only one or two product categories. System
distributors typically supply a narrow range of products to a limited number of
multi-unit businesses operating in a broad geographical area.
The foodservice distribution industry is extremely fragmented, with over
3,000 companies in operation in 1995. Nevertheless, over the last 20 years, the
industry has experienced substantial consolidation as larger distributors have
acquired small and regional distributors and have used their superior
competitive position to grow at the expense of smaller distributors.
Consolidation in turn has permitted large foodservice distributors to benefit
from various economies of scale produced by large, low-cost distribution
facilities, increased net purchasing power and the elimination of redundant
management and other overhead expenses. Larger distributors also have been able
to take advantage of more sophisticated management techniques and the
development of management information systems specifically designed to enhance
customer service and increase operating efficiency. The following table
illustrates the impact of these trends on the percentage of total net sales in
the industry generated by the largest broadline distributors during the periods
indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET SALES
YEAR ENDED DECEMBER
31
-------------------
1985 1995
---- ----
<S> <C> <C>
Ten largest broadline distributors............................... 9.8% 21.2%
Fifty largest broadline distributors............................. 19.7 25.8
</TABLE>
Management anticipates further consolidation in the industry as smaller
specialty distributors confront increasingly difficult competitive challenges
from broadline companies that have access to the significant capital investment
needed to construct and equip large, efficient distribution centers, maintain a
modern fleet of delivery vehicles and develop the sophisticated information
systems required for cost-efficient operations. The Company believes that large,
well-capitalized broadline distributors generally will benefit from continuing
industry consolidation as well as from certain forecasted demographic and
economic trends. These trends include an increasing number of two wage-earner
families who eat meals away from home, the increasing availability of convenient
take-out meals and restaurant home delivery services and the increasing
affluence of the "baby boomer" segment of the population. In addition,
forecasted expansion of many chain restaurants is
23
<PAGE> 28
anticipated to generate additional sales volume for broadline distributors that
can satisfy the product and delivery requirements of this customer segment.
COMPETITIVE STRENGTHS
JP Foodservice believes that its primary competitive strengths are the
following:
Leading Market Position. The Company derives significant benefits from its
position as one of the three leading broadline distributors in each of its
principal geographic service areas. The Company's large-scale operations provide
it with significant name recognition and operating efficiencies. In addition,
the scope of its distribution network gives the Company the ability to offer its
growing chain customers a consistent array of products and services across a
broad geographic area encompassing approximately one-half of the U.S.
population. The size and diverse nature of the customer base reduces the
Company's dependence on any individual customer or chain account to sustain
growth or profitability.
Diverse High-Quality Product Line. The Company's product line is one of
the largest in the industry and enables the Company to provide a single source
of supply to its customers. To satisfy the needs of its diverse customer base,
the Company continually updates its product mix. Compared to its principal
competitors, the Company devotes a larger portion of its product line to
national brand products, which accounted for approximately 85% of net sales in
fiscal 1996. In addition to national brands, the Company provides its customers
with an expanding line of quality-assured, value-priced products under its
JP(TM), JP Power(TM) and Harvest Value(TM) private brands. The Company also
offers an exclusive line of signature products, which are comparable in quality
to national brand items and priced competitively with such items. Signature
products are marketed under the Roseli(TM), Hilltop Hearth(TM), Cattlemen's
Choice(TM), Patuxent Farms(TM), el Pasado(TM) and Rituals(TM) brands. The
Company, unlike certain of its competitors, utilizes centralized purchasing,
which promotes a consistently high level of quality for its proprietary brand
products throughout the Company's distribution network.
Superior Customer Service. The Company's focus on customer service ensures
accurate fulfillment of customer orders and on-time product delivery. During
fiscal 1996, the Company maintained an order fill rate that exceeded 98.4%,
excluding substituted products, and 99%, including substituted products, which
the Company believes is one of the highest order fill rates in the industry. The
Company's ability to maintain these rates is attributable to its sophisticated
inventory management system, professional centralized purchasing staff,
proprietary order fulfillment system and inbound freight management techniques.
The Company has achieved its superior customer service by employing a
decentralized operating strategy, utilizing proprietary information systems and
providing an array of value-added services. The Company's decentralized
operating strategy allows each of the Company's 12 distribution centers to
function as autonomous divisions. This approach, which permits the personnel of
each branch to control the branch's sales, marketing and distribution functions,
enables the Company to be more responsive to customer needs.
The Company's sophisticated information systems contribute significantly to
its ability to maintain high service levels. The information systems have the
flexibility to accommodate a range of customer requirements, and include
features that provide a variety of order entry alternatives for customers,
produce special price lists for key accounts and create customized reports and
data bases for customer use.
The Company offers its customers a broad range of value-added services to
assist them in managing their foodservice operations more efficiently and
profitably, including advice and assistance on product selection, menu planning
and recipes, nutritional information, inventory analysis, product costing and
marketing strategies, and in-service training of customer personnel.
Low Cost Structure. Management believes that the Company's overall cost
structure is lower than that of many of its principal competitors. The Company's
modern, large-scale distribution centers enable it to realize cost savings in
branch overhead, warehouse operations and transportation services. The Company
has centralized only those functions that benefit from significant economies of
scale or require consistent application of management controls, such as
purchasing, finance and accounting, advertising and promotion,
24
<PAGE> 29
and information systems. The Company's information systems allow it to reduce
administrative costs and improve responsiveness to operational requirements at
the branch level.
Proprietary Information Systems. The Company has made a significant
investment in its proprietary information systems, which it believes are among
the most advanced in the industry, and continually upgrades those systems in an
effort to achieve additional cost reductions and operating efficiencies. The
ordering, shipment, storage and delivery of the Company's products are managed
through a centralized information system that allows all of the Company's
distribution facilities and its corporate headquarters to obtain information on
a "real time" basis regarding the Company's inventory, product availability,
customers, sales, financial reports, truck routing and other significant
operating areas. The Company's facilities utilize common information systems
that permit them to access and consolidate invoices, inventory data, customer
records and financial information, thereby ensuring consistency of product,
sales and financial information. In coordination with its integrated information
systems, the Company employs, at both the corporate and branch levels, a
proprietary strategic information system that allows it to analyze
systematically the profitability of customer accounts, sales territories and
product groups. Although the Company intends to integrate the entities acquired
in the Acquisitions into its information system, these entities currently are
operating under their own information systems.
BUSINESS STRATEGY
The Company's business strategy is to target customers and product segments
that allow for internal growth and provide favorable profitability levels and to
take advantage through strategic acquisitions of growth opportunities resulting
from the industry's continuing consolidation.
Increased Sales to Existing Customers. The Company seeks to be the primary
broadline distributor to each of its customers, and believes that there is a
significant opportunity to increase sales penetration of its existing accounts.
The typical foodservice customer uses one broadline distributor for the majority
of its foodservice needs, but also relies on one or two additional broadline
distributors and a number of specialty and system distributors. Increased sales
to existing customers generally are more profitable than sales to new customers,
because they often do not require significant additional delivery expenses,
sales calls or other additional administrative services.
The Company's strategy also emphasizes supporting the growth of its
existing chain accounts. Many of the Company's current chain customers,
primarily restaurants, are experiencing more rapid sales growth than other types
of foodservice businesses. Because of the proven concepts of these chains and
the operating economies accruing to their large-scale operations, the Company
believes that the future growth prospects for these chains are significant.
Targeting of New Accounts. The fragmented nature of the industry favors
expansion of the Company's operations through an increase in market share. The
Company will continue to pursue its long-term strategy of increasing street
account sales as a percentage of net sales by attempting to expand sales to
street customers at a faster rate than sales to chain customers. To achieve
street account sales growth, the Company currently plans to continue to increase
the number of commission sales people that service such accounts. Management
believes that increased street account sales will contribute to the stability of
the Company's customer base by diversifying sales over a larger number of
customers. As independent operators, street customers are more likely than chain
customers to utilize the full range of value-added services offered by the
Company. Street account sales increased 6.5% in fiscal 1995 and 9.1% in fiscal
1996.
The Company also plans to target new chain customers which it believes
represent attractive growth opportunities. The Company intends to focus on those
accounts that are located primarily within the Company's current distribution
network and that can benefit from the Company's existing product line and
service capabilities.
Increased Sales of Proprietary Products. Private and signature brand items
enable the Company to offer its customers attractive product alternatives to
comparable national brands across a wide range of prices. The Company
historically has sold a significantly lower proportion of proprietary private
and signature brand
25
<PAGE> 30
products than its primary competitors, whose proprietary brand sales have
accounted for 30% to over 60% of their sales volume. Sales of the Company's
proprietary brands accounted for approximately 15% of net sales in fiscal 1996,
compared to approximately 12% in fiscal 1995. Although it intends to continue to
emphasize sales of national brand products, the Company plans to expand sales of
its newly developed private and signature brand product lines through national
and local advertising, representation at national and Company-sponsored food
shows and training of its sales force regarding the attributes of these
products.
Sales of private and signature brand items are supported by the Company's
centralized purchasing operations, which enable the Company to provide
consistent product quality and pricing to its entire customer base. Because the
sale of proprietary brands does not entail payment of the price premiums
associated with national brands and their associated higher overhead costs, the
Company believes sales of its proprietary brands will enhance both its
profitability and the profitability of its customers. The Company also believes
that because its signature brands are available exclusively through the Company,
sales of these products promote increased customer loyalty.
Focus on Specialized Markets. JP Foodservice has directed its product and
service development efforts to satisfy the needs of specialized markets believed
to have strong growth potential. Through its integrated service program called
DirectCare: Meals, Menus and More(R), the Company provides over 700 nursing
homes and hospitals with special nutritional plans, inventory analysis, a
variety of marketing services and in-service training of institutional
personnel. Sales to healthcare institutions under this program amounted to $62
million in fiscal 1996, compared to $30 million in fiscal 1994. In addition, the
Company has responded to the increasing popularity of foodservice specialities
by marketing a variety of Italian-style products under its Roseli(TM) signature
brand, which the Company introduced in fiscal 1994, as well as a full line of
Mexican products under its el Pasado(TM) signature brand and a complete line of
gourmet and foodservice coffees and related products under its Rituals(TM)
signature brand, both of which the Company introduced in fiscal 1996. In the
first half of fiscal 1997, the Company plans to continue development and
expansion of a full line of Oriental-style products under its Beijing Chef (TM)
signature brand and to introduce a full line of seafood products under its
Harbor Banks(TM) signature brand.
Strategic Acquisitions. The Company supplements internal growth with a
program of strategic acquisitions to increase its market presence in its
existing operating areas and to expand its operations into new markets. The
Company expects that the continued presence of many small, privately-owned
distributors within the Company's existing markets will provide it with
opportunities to effect "fold-in" acquisitions of these concerns by integrating
their customer base and sales force into the Company's current operations. The
Company also will consider acquiring larger-sized distributors as a means of
expanding into new geographic markets. The Company believes that it can reduce
the operating expenses and purchasing costs and enhance the sales and profit
margins of an acquired business by providing the acquired business with access
to its centralized purchasing programs, information systems, broad product line
and value-added services. The Company further believes that its decentralized
operating strategy and the flexibility of its centralized, mainframe-based
computer system will facilitate the integration of acquired operations. The
Company's ability to compete for acquisition opportunities with other
foodservice businesses is enhanced by its financial resources, which include
access to the public capital markets.
Pursuant to its acquisition strategy, the Company recently consummated two
"fold-in" acquisitions. In the fourth quarter of fiscal 1995, the Company
acquired Tri River Foods, Inc., a foodservice distribution company specializing
in custom-cut meat products, frozen seafood and other complementary canned, dry
and frozen food products. The acquired company, which conducted operations
primarily within a 50-mile radius of Pittsburgh, had net sales of approximately
$15 million. In the second quarter of fiscal 1996, the Company purchased certain
assets of Rotelle, Inc., a foodservice distribution company operating in
Pennsylvania with annual net sales of approximately $35 million.
In the first quarter of fiscal 1997, the Company acquired Valley Foods, a
broadline distributor with a leading market share of the Las Vegas, Nevada
foodservice market. The Company believes that Las Vegas is one of the country's
fastest growing foodservice markets and that the Valley Acquisition will provide
a basis for the Company to expand its operations into the Western region of the
United States.
26
<PAGE> 31
Also in the first quarter of fiscal 1997, the Company acquired Arrow, a
broadline distributor based in Norwich, Connecticut. The Arrow Acquisition
increases the Company's presence in the New England marketplace and positions
the Company for further expansion into the southern Connecticut, Westchester
County and New York City markets.
In the second quarter of fiscal 1997, the Company acquired Squeri, a
broadline distributor serving the Greater Cincinnati, Dayton, Columbus,
Indianapolis, Louisville and Lexington markets. The Squeri Acquisition fills a
gap in the Company's existing distribution network in the Midwestern region of
the United States and is expected to provide cost savings through distribution
efficiencies in its Midwestern distribution network.
See "Prospectus Summary -- Recent Acquisitions" and "Unaudited Pro Forma
Condensed Financial Statements."
The Company has adopted a policy pursuant to which it generally does not
announce proposed acquisitions until it enters into definitive agreements with
respect to such acquisitions.
PRODUCTS AND SERVICES
Products
The Company's extensive selection of food and related products enables it
to provide a single source of supply to a diverse base of customers whose
product needs vary significantly. The Company's product line of over 30,000
items encompasses a broad selection of canned and dry food products, fresh
meats, poultry, seafood, frozen foods, fresh produce, dairy and other
refrigerated products and related goods and supplies. Many of the Company's
product offerings feature "center of the plate" or entree selections. The
Company also distributes a wide variety of nonfood products and equipment,
including paper products, disposable napkins, plates, cups and cleaning
supplies. In most locations, the Company also offers coffee and beverage
equipment, supplies and service and, to a limited extent, tableware (such as
china and silverware), glassware and light restaurant equipment and supplies.
The following table sets forth the product categories of the items sold by
the Company and the percentage of the Company's net sales generated by each
product category during the periods indicated.
[CAPTION]
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
FISCAL YEAR ENDED
---------------------------------------------
JULY 2, 1994 JULY 1, 1995 JUNE 29, 1996
------------ ------------ -------------
<S> <C> <C> <C>
Canned and dry products................................... 27% 27% 26%
Meats..................................................... 20 20 20
Other frozen foods........................................ 18 18 18
Poultry................................................... 9 9 10
Seafood................................................... 8 8 8
Dairy products............................................ 7 8 9
Perishable food products.................................. 4 4 3
Paper products............................................ 4 4 4
Equipment and supplies.................................... 2 1 1
Janitorial supplies....................................... 1 1 1
--- --- ---
Total net sales........................................... 100% 100% 100%
========= ========= ==========
</TABLE>
National Brands. In fiscal 1996, the Company supplied more than 26,000
national brand items, which accounted for approximately 85% of the Company's net
sales in that period. National brand products represent a greater proportion of
the Company's product line than the product lines of the Company's principal
competitors. Management believes that national brands are attractive to chain
accounts and other customers seeking consistent product quality throughout their
operations. The Company's national brand strategy has promoted closer
relationships with many national suppliers, who provide important sales and
marketing support to the Company.
27
<PAGE> 32
Private Brands. The Company offers its customers an expanding line of
products under its JP(TM), JP Power(TM) and Harvest Value(TM) private brands.
The Company currently offers over 1,900 private brand products, including frozen
and canned goods, fruits, vegetables and meats, through its JP Gold(TM) (highest
quality), JP Blue(TM), JP Red(TM) and Harvest Value(TM) private labels and
approximately 70 cleaning products under its JP Power(TM) brand. The multi-tier
quality system has been developed to meet the specific requirements of different
market segments.
Signature Brands. The Company offers its customers an exclusive and
expanding line of signature products which are comparable in quality to national
brand items and priced competitively with such items. The Company markets these
products under the names Roseli(TM) (Italian-style products), Hilltop Hearth(TM)
(bread and bakery products), Cattlemen's Choice(TM) (meats), Patuxent Farms(TM)
(processed meats), el Pasado(TM) (Mexican products), Rituals(TM) (gourmet
coffee) brands, and, beginning in the first half of fiscal 1997, Beijing
Chef (TM) (Oriental-style products) and Harbor Banks(TM) (seafood products). The
Company currently offers more than 1,100 signature brand items.
Services
To strengthen its customer relationships and increase account penetration,
JP Foodservice offers an array of value-added services that, in their scope and
quality, differentiate it from other foodservice distributors. The Company
offers the following types of services:
- Management Support and Assistance. The Company's highly trained sales
force assists customers in managing their foodservice operations more
efficiently and profitably by providing advice and assistance on product
selection, menu planning and recipes, nutritional information, inventory
analysis and product costing and marketing strategies. The Company also
provides in-service training of customer personnel.
- Specialized Market Services. The Company offers services and programs
tailored to specialized markets. For example, through its integrated
service program, called DirectCare: Meals, Menus and More(R), the Company
provides healthcare service providers with special nutritional plans,
customized software packages (JP directAdvantage(TM)), a variety of
marketing services and in-service training of institutional personnel. In
order to be eligible to participate in this program, healthcare
institutions must maintain a specified minimum volume of purchases from
the Company.
- Customized Technology. The Company offers its customers a proprietary
hand-held computer system, the JP Connection(TM), which automates many
restaurant management functions, including the management and reordering
of product inventory. The system automatically re-orders products
directly through the Company's mainframe computer. The Company also is
upgrading the electronic order entry system utilized by its sales
personnel by equipping them with laptop computers which it believes
enables the sales force to present product and menu ideas, take orders
and prepare presentations more efficiently. Through this upgrade, the
Company will be providing its customers with an enhanced personal
computer-based order entry system.
- Publications. The Company promotes active customer use of its other
services and its products through the distribution of professionally
printed publications, including its biweekly newsletter, JP FoodNews(TM).
The Company's publications highlight selected products, including
proprietary private and signature brand items, present menu suggestions,
provide nutritional information and include recipes using the Company's
products. Customers also may participate, at no cost, in the Company's
recipe program, To Your Taste(R), in which the Company furnishes
participants every two weeks with recipe cards that describe new menu
concepts.
CUSTOMERS
The Company's customer base of over 34,000 accounts encompasses a wide
variety of foodservice establishments. The Company's chain customers include Old
Country Buffett, Perkins Family Restaurants, Subway, Compass Group, Ruby
Tuesday, Pizzeria Uno and other foodservice establishments. The Company
28
<PAGE> 33
also is a foodservice supplier to the United States Congress, Fenway Park and
other prominent institutions. The following table sets forth the segments of the
Company's customer base by type of institution for fiscal 1996.
<TABLE>
<CAPTION>
PERCENTAGE
TYPE OF CUSTOMER OF NET SALES
------------------------------------------------------------------------- ------------
<S> <C>
Restaurants.............................................................. 70%
Limited menu establishments.............................................. 11
Hotels................................................................... 2
Healthcare institutions.................................................. 5
Schools and colleges..................................................... 3
Other.................................................................... 9
---
100%
=========
</TABLE>
Street Customers. The Company's street customers are independent
restaurants, hotels, schools and other foodservice businesses. Street customers
are serviced directly by commission sales personnel who personally call on
customers, place orders, coordinate product delivery and provide the value-added
services offered to these customers. Street accounts represented approximately
53% of the Company's net sales in fiscal 1996.
Chain Customers. The majority of the Company's chain customers consist of
franchises or corporate-owned units of national or regional family dining and
other restaurant "concepts" and, to a lesser extent, hotels and other regional
institutional operators. Many of the Company's current chain account customers,
primarily restaurants, are experiencing more rapid sales growth than other types
of foodservice businesses. The Company has developed strong working
relationships with its chain accounts, which have enabled these accounts, in
conjunction with the Company, to develop distribution programs tailored to
precise delivery and product specifications. These distribution programs have
created operating and cost efficiencies for both the chain customers and the
Company.
Chain customers generally are serviced by salaried sales and service
representatives who coordinate the procurement and delivery of all products
throughout the system from a central location. Gross profit margins generally
are lower for chain customers than for street customers. However, because there
are typically no commission sales costs related to chain account sales and
because chain customers usually have larger deliveries to individual locations,
sales and delivery costs generally are lower for chain accounts than for street
accounts. Chain accounts represented approximately 47% of the Company's net
sales in fiscal 1996.
No single customer accounted for 10% or more of the Company's net sales in
fiscal 1996. Consistent with industry practice, the Company has no long-term
contract with any customer that may not be canceled by either party at its
option.
SALES AND MARKETING
The Company's principal marketing activities at June 29, 1996 were
conducted by approximately 480 street sales, 50 chain sales and 100 customer
service representatives. As part of its strategy to increase street account
sales, the Company currently plans to continue to increase its commission sales
force, which grew an average of 7% in fiscal 1995 and fiscal 1996. The Company's
sales and service representatives are responsible for soliciting and processing
orders, servicing customers by telephone, reviewing account balances and
assisting with new product information. In addition, the Company's sales
representatives advise customers on menu selection, methods of preparing and
serving food and other operating issues. The Company provides an extensive
in-house training program for its entry-level sales and service representatives,
which includes seminars, on-the-job training and direct one-on-one supervision
by experienced sales personnel.
The Company's commission program is designed to reward account
profitability and promote sales growth. The Company systematically measures the
profitability of each account and product segment and modifies its incentive
program accordingly.
29
<PAGE> 34
Including the Acquisitions, the Company maintains sales offices at each of
its 12 full-service distribution centers and at three additional locations in
Pennsylvania, Illinois and South Dakota. The Company employs sales and marketing
staff at both the corporate and branch levels to solicit and manage
relationships with multiunit chain accounts.
The Company supplements its market presence with advertising campaigns in
national and regional trade publications, which typically focus on the Company's
services and its ability to service targeted industry segments. The Company
supports this effort with a variety of promotional services and programs,
including its biweekly newspaper, JP FoodNews(R), and its recipe program, To
Your Taste(R).
DISTRIBUTION
JP Foodservice distributes its products out of its 12 full-service
distribution centers located in Massachusetts, Connecticut, Pennsylvania,
Maryland, Minnesota, Indiana, Illinois, Iowa, Nevada and Ohio. The Company
extends this geographic coverage through remote distribution locations
including, among others, facilities in Ohio, Maryland, Michigan, Vermont and New
Jersey. The Company's customers generally are located within 150 miles of one of
the Company's distribution centers, although the Company's distribution network
and reciprocal arrangements with other distributors enable the Company to serve
customers outside of its principal market areas. Services to both street and
chain customers are supported by the same distribution facilities and equipment.
The 12 full-service distribution centers have a total of approximately 1.8
million square feet of warehouse space. Each distribution center operates from a
warehouse complex that contains dry, refrigerated and frozen storage areas, as
well as office space for sales, marketing and distribution personnel.
Products are delivered to the Company's distribution centers by
manufacturers, common carriers and the Company's own fleet of trucks. The
Company employs a management information system which, together with its
centralized purchasing operations, enables it to lower its inbound
transportation costs by making optimal use of its own fleet of trucks or by
consolidating deliveries into full truckloads. Orders from multiple suppliers or
to multiple distribution centers are consolidated into single truckloads for
efficient use of available vehicle capacity and return-trip hauls.
Orders typically are entered electronically by the commission sales force
with the appropriate distribution center through a hand-held computer device or
laptop computer. These devices facilitate order entry through the use of
pre-coded price lists which automatically price orders, apply pricing controls
and allow the sales representative to review the gross profit of each order at
the time of sale. Customers also have the option to place orders by telephone to
service representatives at each of the branches. Certain large customers place
orders through a direct connection to the Company's mainframe computer by means
of a computer terminal, personal computer or touchtone telephone, or through the
Company's proprietary restaurant inventory and management system, the JP
Connection(TM).
Under all forms of order placement, the salesperson or customer is notified
immediately about product availability, which facilitates instant product
substitution, if necessary. Products are reserved automatically at the time of
order, thereby ensuring complete fulfillment of orders upon delivery. Customers'
orders are assembled in the warehouse, sorted and shrink-wrapped to ensure order
completeness. The products are staged according to the required delivery
sequence.
Products are delivered door-to-door, typically on the day following
placement of the order. The Company delivers its products through its fleet of
tractor-trailer and straight trucks, each of which is equipped with separate
temperature-controlled compartments. In dispatching trucks, the Company employs
a computerized routing system designed to optimize delivery efficiency and
minimize drive time, wait time and excess mileage. The majority of the Company's
fleet utilizes onboard computer systems that monitor vehicle speeds, fuel
efficiency, idle time and other vital statistical information. The Company
collects and analyzes such data in an effort continually to monitor and improve
transportation efficiency and reduce costs.
In certain geographic markets, the Company utilizes its remote
redistribution facilities to achieve a higher level of customer service.
Products are transported in large tractor-trailers or double trailers to the
30
<PAGE> 35
redistribution facility, where the loads are then transferred to smaller
equipment for delivery in the normal fashion.
SUPPLIERS
At June 29, 1996, JP Foodservice employed approximately 20 purchasing
agents with expertise in specific product lines to purchase products for the
Company from over 2,000 suppliers located throughout the United States and
overseas. Substantially all types of products distributed by the Company are
available from a variety of suppliers, and the Company is not dependent on any
single source of supply.
The management of all purchasing operations from the Company's corporate
headquarters in Columbia, Maryland results in lower costs through increased
purchasing leverage with suppliers and greater ordering efficiency. To maximize
the benefits of its centralized purchasing function, the Company attempts to
concentrate purchases with selected suppliers. Through this strategy, the
Company is able to buy high-quality products on advantageous terms. The Company
cooperates closely with these suppliers to promote new and existing products.
The suppliers assist in training the Company's sales force and customers
regarding new products, new trends in the industry and new menu ideas, and
collaborate with the Company in advertising and promoting these products both
through printed advertisements and through annual branch-sponsored food shows
and national trade shows.
Through its centralized purchasing department, the Company is able to
monitor the quality of the products offered by various suppliers and ensure
consistency of product quality across its distribution network. The
concentration of purchasing power at the corporate level often provides the
Company's buyers with early access to new product concepts which, if attractive,
can be quickly introduced to the Company's customers.
The Company maintains a comprehensive quality control and assurance program
that at June 29, 1996 actively involved over 60 employees in daily quality
control activities. The program is managed by members of the central purchasing
department, including product group managers who each manage specific segments
of the product line and product line managers who purchase products for the nine
branches, and is supported at each branch by the merchandising manager, the
branch buyer and an inventory control specialist. The quality control process
includes the selection of suppliers and the policing of quality standards
through product sampling at both the Company's corporate offices and branch
locations and through visits to growing fields, manufacturing facilities and
storage operations.
The Company requires all of its suppliers and manufacturers to maintain
specified levels of product liability insurance and to name the Company as an
additional insured on the applicable insurance policies.
COMPETITION
The foodservice distribution industry is extremely fragmented, with over
3,000 companies in operation in 1995. In recent years, the foodservice
distribution industry has been characterized by significant consolidation and
the emergence of larger competitors. The Company competes in each of its markets
with at least one other large national distribution company, generally SYSCO
Corp. or Alliant (formerly Kraft) Foodservice, Inc., as well as with numerous
regional and local distributors.
The Company believes that, although price is an important consideration,
distributors in the foodservice industry compete principally on the basis of
service, product quality and customer relations. The Company attributes its
ability to compete effectively against smaller regional and local distributors
in part to its wider product selection, the cost advantages resulting from its
size and centralized purchasing operations and its ability to offer broad and
consistent market coverage. The Company competes effectively against other
broadline distributors primarily by providing its customers with accurate and
timely fulfillment of orders and an array of value-added services.
The Company typically competes against other foodservice distribution
companies for potential acquisitions. The Company believes that its financial
resources and its ability to offer owners of acquisition targets an interest in
the combined business through ownership of JP Foodservice Common Stock provide
the Company with an advantage over many of its competitors.
31
<PAGE> 36
REGULATION
The Company's operations are subject to regulation by state and local
health departments, the U.S. Department of Agriculture and the Food and Drug
Administration, which generally impose standards for product quality and
sanitation. The Company's facilities generally are inspected at least annually
by state or federal authorities.
The Company's relationship with its fresh food suppliers with respect to
the grading and commercial acceptance of produce shipments is governed by the
Federal Produce and Agricultural Commodities Act, which specifies standards for
sale, shipment, inspection and rejection of agricultural products. The Company
also is subject to regulation by state authorities for the accuracy of its
weighing and measuring devices.
Federal, state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, generally are not directly
applicable to the Company. Certain of the Company's distribution facilities have
underground and above-ground storage tanks for diesel fuel and other petroleum
products, which are subject to laws regulating such storage tanks. Such laws
have not had a material adverse effect on the capital expenditures, earnings or
competitive position of the Company.
Certain hazardous substances have been released on the site of the
Company's Boston branch. The Massachusetts Department of Environmental
Protection has advised the Company that such agency has entered into an
administrative consent decree with three parties responsible under Massachusetts
law to clean up hazardous substances in areas contiguous to the site. The agency
also advised the Company in 1990 that, as the current owner of the site, the
Company also may be deemed to be a responsible party under Massachusetts law for
hazardous substances on the site. The Company has not been the subject of any
action or proceeding seeking to require it to remove hazardous substances from
the site or to make payment in respect of the cleanup of the site or related
costs. In June 1996, the Massachusetts Department of Environmental Protection
advised the Company that, based on the information currently available to it,
the agency is not requiring the Company to remove hazardous substances from the
site. The Company has been indemnified against any losses it may incur in
connection with hazardous substances on the site, and does not believe
resolution of this matter will have a material adverse effect on its financial
condition or operating results.
INTELLECTUAL PROPERTY
JP Foodservice has proprietary rights to a number of trademarks used in its
business, including trademarks used in connection with the marketing of its
private and signature brand products, its proprietary restaurant inventory and
management system and a variety of customized service programs. A number of
these trademarks are registered with the U.S. Patent and Trademark Office, each
for an initial period of 20 years, which is renewable for as long as the Company
continues to use the trademarks. The Company considers its trademarks to be of
material importance to its business plans.
FACILITIES AND EQUIPMENT
JP Foodservice occupies its corporate headquarters in Columbia, Maryland,
which consists of 30,800 square feet of office space, pursuant to a lease which
expires on December 31, 2003.
The Company owns all of its 12 full-service distribution centers, which
contain a total of 1.8 million square feet of warehouse space. The centers
contain dry, refrigerated and frozen storage areas and office space
32
<PAGE> 37
for the sales and administrative operations of the branch. The following chart
provides information on the approximate size of each of the Company's 12
full-service distribution centers.
<TABLE>
<CAPTION>
AREA IN
LOCATION SQUARE FEET
------------------------------------------------------------------------- -----------
<S> <C>
Las Vegas, Nevada........................................................ 210,000
Norwich, Connecticut..................................................... 200,000
Baltimore, Maryland...................................................... 187,000
Altoona, Pennsylvania.................................................... 164,000
Minneapolis, Minnesota................................................... 160,000
Allentown, Pennsylvania.................................................. 155,000
Boston, Massachusetts.................................................... 149,000
Streator, Illinois....................................................... 146,000
Hartford, Connecticut.................................................... 141,000
Des Moines, Iowa......................................................... 131,000
Fort Wayne, Indiana...................................................... 111,000
Cincinnati, Ohio......................................................... 87,000
-----------
Total............................................................... 1,841,000
=========
</TABLE>
Equipment and machinery owned by the Company and used in its operations
consist principally of electronic data processing equipment and product handling
equipment. The Company also operates a fleet of vehicles, which consisted of
over 570 tractor-trailer combinations and straight trucks at the end of fiscal
1996, for long hauls and local deliveries. At June 29, 1996, the Company owned
approximately 5% of these vehicles and leased the remainder. See Note 11 to the
Company's Consolidated Financial Statements.
The Company outsources its data center operations pursuant to a five-year
contract which expires on December 31, 1997 and which may be extended by the
Company. As the Company's business needs warrant, it can either increase or
decrease the amount of computer capacity it purchases upon short notice to the
vendor. Management believes that this arrangement provides the Company with more
reliable and flexible service at a lower cost than the Company could achieve by
operating its own data center.
The Company regularly evaluates the capacity of its various facilities and
equipment and makes capital investments to expand capacity where necessary. In
fiscal 1995 and fiscal 1996, the Company spent a total of $29.1 million on
capital expenditures, primarily for new trucks and trailers and expansion of its
distribution centers in Streator, Illinois and Boston, Massachusetts. The
Company undertakes expansion or replacement of its facilities as and when needed
to accommodate the Company's growth. The Company recently completed a 45,000
square foot expansion of its Allentown, Pennsylvania distribution center. The
Company also is planning a 20,000 square foot expansion of the Fort Wayne,
Indiana facility and an expansion of the Cincinnati, Ohio facility. Facility
expansion costs are expected to total approximately $8 million in fiscal 1997.
EMPLOYEES
JP Foodservice has approximately 3,500 full-time employees, of whom
approximately 120 were employed in corporate management and administration and
approximately 2,100 of whom were hourly employees. Approximately 1,100 of the
Company's employees were covered by collective bargaining contracts with 12
different local unions which are associated with the International Brotherhood
of Teamsters. Six collective bargaining contracts, which cover approximately 350
employees, will expire during fiscal 1997. Other than a temporary action
involving Squeri in the spring of 1993, the Company has not experienced any
labor disputes or work stoppages. The Company believes that its relationships
with its employees are satisfactory.
LITIGATION
From time to time, the Company is involved in litigation and proceedings
arising out of the ordinary course of its business. There are no pending
material legal proceedings to which the Company is a party or to which the
property of the Company is subject.
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<PAGE> 38
MANAGEMENT
The following table sets forth certain information regarding the executive
officers and directors of the Company as of the date of this Prospectus.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- ---------------------------------------------------------
<S> <C> <C>
James L. Miller........ 47 Chairman of the Board of Directors, President and Chief
Executive Officer
Lewis Hay, III......... 41 Director, Senior Vice President and Chief Financial
Officer
David M. Abramson...... 43 Director, Senior Vice President and General Counsel
Mark P. Kaiser......... 39 Director, Senior Vice President-Sales, Marketing and
Procurement
George T. Megas........ 43 Vice President-Finance, Assistant Secretary and Assistant
Treasurer
Michael J. Drabb....... 62 Director
Eric E. Glass.......... 56 Director
Paul I. Latta.......... 53 Director
Jeffrey D. Serkes...... 37 Director
Dean R. Silverman...... 45 Director
</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, Inc. ("PYA/Monarch"), a
subsidiary of Sara Lee Corporation. 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 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.
Lewis Hay, III joined the Company in 1991 as Senior Vice President and
Chief Financial Officer, and has served as a director since that date. Before
joining the Company, Mr. Hay was a Vice President and partner of Mercer
Management Consulting (formerly Strategic Planning Associates, Inc.), a
management consulting firm, where he led the strategy consulting practice in the
firm's Washington, D.C. office. Mr. Hay joined the firm in 1982 and, beginning
in 1986, participated in a number of consulting projects for PYA/Monarch,
including the transaction resulting in the formation of the Company in 1989.
David M. Abramson has served as Senior Vice President and General Counsel
of the Company since July 1, 1996 and as a director of the Company since August
1994. 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.
Mark P. Kaiser has served as the Senior Vice President-Sales, Marketing and
Procurement of the Company since 1993 and as a director of the Company since
September 1996. 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.
George T. Megas joined the Company in 1991 as Vice President-Finance,
Assistant Secretary and Assistant Treasurer and is responsible for the
accounting, treasury and finance functions. Mr. Megas, a Certified Public
Accountant, previously served as the Corporate Controller for Strategic Planning
Associates, Inc., a management consulting firm, from 1979 to 1990, when it was
acquired by Mercer Management Consulting, and served as a Controller for certain
regions of Mercer Management Consulting until 1991.
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
34
<PAGE> 39
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 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 1996.
Mr. Latta has served most recently as Senior Vice President of The Rouse
Company, a real estate development and management company, where he is
responsible for all retail properties. Mr. Latta previously held a number of
positions with The Rouse Company, where he has been employed since 1968.
Jeffrey D. Serkes has served as a director of the Company since November
15, 1996. Mr. Serkes has served as Vice President and Treasurer of International
Business Machines Corporation ("IBM") since January 1995 and as Assistant
Treasurer of IBM from August 1994 to December 1994. From 1987 to August 1994,
Mr. Serkes held a number of positions with RJR Nabisco, Inc., including Vice
President and Deputy Treasurer and Vice President and Assistant Treasurer,
Corporate Finance. Mr. Serkes serves as a director of IBM Credit Corporation.
Dean R. Silverman has served as a director of the Company since September
1996. Mr. Silverman has served as the President of Dean & Company, a strategic
management consulting company, since 1993. Prior to 1993, Mr. Silverman was an
Executive Vice President and partner of Mercer Management Consulting.
35
<PAGE> 40
SELLING STOCKHOLDERS
The Selling Stockholders, which are Sara Lee Foodservice Holdings, Inc.,
the Sara Lee Foundation and the former stockholders of Valley Foods and a
transferee of such stockholders, are offering shares of Common Stock pursuant to
the exercise of registration rights. See "Prospectus Summary -- Recent
Acquisitions" and "-- History" and "Shares Eligible for Future Sale." The
Selling Stockholders, other than Sara Lee Foodservice Holdings, Inc., have
granted the U.S. Underwriters an option, exercisable within 30 days from the
date of this Prospectus, to purchase up to an aggregate of 709,028 shares of
Common Stock to cover over-allotments, if any. See "Underwriting."
The following table sets forth certain information, as of October 1, 1996
and as adjusted to reflect the sale of Common Stock offered hereby, regarding
the ownership of the Common Stock by the Selling Stockholders.
<TABLE>
<CAPTION>
OWNERSHIP OWNERSHIP
PRIOR TO OFFERING NUMBER AFTER OFFERING
-------------------- OF SHARES --------------------
NAME OF NUMBER OFFERED NUMBER
SELLING STOCKHOLDER OF SHARES PERCENT HEREBY OF SHARES PERCENT
- --------------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Sara Lee Foodservice Holdings, Inc.(1)....... 5,138,210 23.1% 5,138,210 0 0%
Sara Lee Foundation(2)....................... 1,000,000 4.5 323,788 676,212 3.0
Duane H. Zobrist............................. 317,749 1.4 32,344 285,405 1.3
Richard D. Zobrist........................... 317,749 1.4 32,344 285,405 1.3
Church of Jesus Christ of Latter Day
Saints(2).................................. 35,000 0.2 30,759 4,241 *
Lloyd K. Benson.............................. 317,749 1.4 27,949 289,800 1.3
Gerry R. Zobrist............................. 317,749 1.4 23,555 294,194 1.3
E. Mark Zobrist.............................. 312,749(3) 1.4 67,496 245,253 1.1
R. Phillip Zobrist........................... 317,749 1.4 23,555 294,194 1.3
</TABLE>
- ---------------
* Represents holdings of less than 1%.
(1) Shares are held of record by Sara Lee Foodservice Holdings, Inc., a wholly
owned subsidiary of Sara Lee Corporation, which may be deemed to be the
beneficial owner of such shares.
(2) If the U.S. Underwriters' over-allotment option is exercised in full with
respect to shares owned by such Selling Stockholder, the Selling Stockholder
will not own any shares of Common Stock.
(3) Up to 70,000 of such shares (0.3% of shares outstanding) may be transferred
to, and sold in the Offering by, the Mark and Linda Zobrist Charitable
Remainder Annuity Trust. Of such shares, 8,481 shares may be sold to cover
over-allotments, if any.
The Company and Sara Lee Corporation and its affiliates engage in
transactions in the ordinary course of their respective businesses. See Note 8
to the Company's Consolidated Financial Statements. Sara Lee Corporation
designated certain members of the Company's Board of Directors prior to June 27,
1996 pursuant to a board membership agreement with the Company.
36
<PAGE> 41
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, there are 22,212,252 outstanding shares
of Common Stock. All of the 5,700,000 shares offered in the Offering will be
freely transferable without restriction or further registration under the
Securities Act, except that any shares held by an "affiliate" of the Company (as
that term is defined under Rule 144 of the Securities Act) will be subject to
the resale limitations of Rule 144. Of the Company's outstanding shares other
than the shares offered hereby, 4,071,210 are "restricted securities" within the
meaning of Rule 144 or are otherwise subject to restrictions on sale under the
Securities Act. Such restricted shares may not be sold except in compliance with
the registration requirements of the Securities Act or pursuant to an exemption
from registration, such as the exemption provided by Rule 144 or Rule 145 under
the Securities Act.
In general, Rule 144 provides that any person (or persons whose shares are
aggregated), including an affiliate, who has beneficially owned shares for at
least a two-year period (as computed under Rule 144) is entitled to sell within
any three-month period the number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of the Common Stock (approximately 222,122
shares as of the date of this Prospectus) and (ii) the average weekly reported
trading volume of the then outstanding shares of Common Stock during the four
calendar weeks immediately preceding the date on which the notice of sale is
filed with the Securities and Exchange Commission. Sales under Rule 144 also are
subject to certain provisions relating to the manner and notice of sale and the
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed an affiliate of the
Company at any time during the 90 days immediately preceding a sale, and who has
beneficially owned shares for at least a three-year period (as computed under
Rule 144), would be entitled to sell such shares under Rule 144(k) without
regard to the volume limitation and other conditions described above. Shares of
Common Stock held by the former stockholders of Valley Foods and not sold in the
Offering are eligible for sale under Rule 145, which requires compliance with
the volume limitation, manner of sale and public information provisions of Rule
144. Rule 144A under the Securities Act permits the immediate sale by the
current holders of restricted securities of all or a portion of those securities
to certain qualified institutional buyers, as defined in Rule 144A, subject to
certain conditions. The foregoing summary of Rule 144, Rule 145 and Rule 144A is
not intended to be a complete description of such rules.
The Company, certain of its executive officers and directors and the
Selling Stockholders (with respect to unsold shares of Common Stock) have agreed
that, for a period of 90 days after the date of this Prospectus, they will not,
without the prior consent of Smith Barney Inc., offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, Common Stock (subject, in the case of
the Company, to an exception for the grant of options and issuance of shares
pursuant to the Company's stock plans). With the consent of Smith Barney Inc.,
such shares may be sold before the expiration of the lock-up period without
prior notice to the other stockholders of the Company or to any public market in
which the Common Stock trades. Upon the expiration of the lock-up period,
2,917,358 shares will be eligible for sale in the public market pursuant to Rule
144 or Rule 145.
The Company has granted certain registration rights with respect to the
shares of Common Stock beneficially owned by the Sara Lee Selling Stockholders
and the shares issued in connection with the Squeri Acquisition. If the U.S.
Underwriters' over-allotment option is not exercised in full, the Sara Lee
Selling Stockholders will be entitled to require the Company to use its best
efforts to register under the Securities Act the unsold shares covered by such
option. Beginning on June 1, 1997, the Company will be obligated to use its best
efforts to register up to 1,079,875 shares issued to the former Squeri
stockholders. In addition, in connection with any such registration or if the
Company otherwise proposes to register any shares of Common Stock under the
Securities Act in the future, the Sara Lee Selling Stockholders, certain
management stockholders and the former stockholders of Valley Foods, Arrow and
Squeri are entitled to require the Company, subject to certain conditions, to
include all or a portion of their shares in such registration. The registration
rights described herein are subject to certain notice requirements, timing
restrictions and volume limitations which may be imposed by the underwriters of
an offering. The Company is required to bear the expenses of all such
registrations, except for underwriting discounts and commissions. Following
completion of the Offering (assuming no exercise of the U.S. Underwriters'
over-allotment option), 4,071,210 shares of
37
<PAGE> 42
Common Stock, or 18.3% of the total number of shares of Common Stock
outstanding, will be entitled to the benefits of such registration rights.
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or the availability of shares for future sale will have
on the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market prices of the Common Stock
and the Company's ability to raise capital in the future through the sale of
additional securities.
38
<PAGE> 43
UNDERWRITING
Under the terms and subject to the conditions stated in the U.S.
Underwriting Agreement dated the date hereof, each of the underwriters of the
United States and Canadian offering of Common Stock named below (the "U.S.
Underwriters"), for whom Smith Barney Inc., Goldman, Sachs & Co., Morgan Stanley
& Co. Incorporated, The Robinson-Humphrey Company, Inc. and Rodman & Renshaw,
Inc. are acting as the representatives (the "Representatives"), has severally
agreed to purchase, and the Selling Stockholders have agreed to sell to each
U.S. Underwriter, the number of shares of Common Stock set forth opposite the
name of such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITER OF SHARES
- ----------------------------------------- ---------
<S> <C>
Smith Barney Inc. .......................
Goldman, Sachs & Co. ....................
Morgan Stanley & Co. Incorporated........
The Robinson-Humphrey Company, Inc. .....
Rodman & Renshaw, Inc. ..................
<CAPTION>
NUMBER
U.S. UNDERWRITER OF SHARES
- ----------------------------------------- ---------
<S> <C>
---------
4,560,000
=========
</TABLE>
Under the terms and subject to the conditions contained in the
International Underwriting Agreement dated the date hereof, each of the managers
of the concurrent International Offering of Common Stock named below (the
"Managers"), for whom Smith Barney Inc., Goldman Sachs International, Morgan
Stanley & Co. International and The Robinson-Humphrey Company, Inc. are acting
as lead managers (the "Lead Managers"), has severally agreed to purchase, and
the Selling Stockholders have agreed to sell to each Manager, the number of
shares of Common Stock set forth opposite the name of such Manager below:
<TABLE>
<CAPTION>
NUMBER
MANAGER OF SHARES
- ------------------------------------------------------------------------------------------------- ---------
<S> <C>
Smith Barney Inc. ...............................................................................
Goldman Sachs International......................................................................
Morgan Stanley & Co. International...............................................................
The Robinson-Humphrey Company, Inc. .............................................................
---------
1,140,000
=========
</TABLE>
Each of the U.S. Underwriting Agreement and the International Underwriting
Agreement provides that the obligations of the several U.S. Underwriters and the
several Managers to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The U.S. Underwriters and the Managers are obligated to take and pay for all
shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.
The U.S. Underwriters and the Managers (collectively, the "Underwriters")
initially propose to offer part of the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus and part of the shares to certain dealers at a price which represents
a concession not in excess of $ per share below the public offering price.
The U.S. Underwriters and the Managers may allow, and such dealers may reallow,
a concession not in excess of $ per share to the other U.S. Underwriters or
Managers, respectively, or to certain other dealers. After the Offering, the
public offering price and such concessions may be changed by the U.S.
Underwriters and the Managers.
The Selling Stockholders, other than Sara Lee Foodservice Holdings, Inc.,
have granted to the U.S. Underwriters an option, exercisable for 30 days from
the date of this Prospectus, to purchase up to an aggregated 709,028 additional
shares of Common Stock at the public offering price set forth on the cover page
of this Prospectus less underwriting discounts and commissions. The U.S.
Underwriters may exercise such option to purchase additional shares solely for
the purpose of covering over-allotments, if any, in connection
39
<PAGE> 44
with the sale of the shares offered hereby. To the extent such option is
exercised, each U.S. Underwriter will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares set forth opposite such U.S. Underwriter's name
in the preceding U.S. Underwriters' table bears to the total number of shares in
such table.
The Company, certain of its officers and directors and the Selling
Stockholders (with respect to unsold shares of Common Stock) have agreed that,
for a period of 90 days after the date of this Prospectus, they will not,
without the prior written consent of Smith Barney Inc., offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock (subject, in
the case of the Company, to an exception for the grant of options and issuance
of shares pursuant to the Company's stock plans). With the consent of Smith
Barney Inc., such shares may be sold before the expiration of the lock-up period
without prior notice to the other stockholders of the Company or to any public
market in which the Common Stock trades.
The U.S. Underwriters and the Managers have entered into an Agreement
Between U.S. Underwriters and Managers pursuant to which each U.S. Underwriter
has agreed that, as part of the distribution of the 4,560,000 shares offered in
the U.S. Offering (together with 709,028 shares which may be offered to cover
over-allotments), (i) it is not purchasing any such shares for the account of
anyone other than a U.S. or Canadian Person (each as defined) and (ii) it has
not offered or sold, and will not, offer, sell, resell or deliver, directly or
indirectly, any of such shares or distribute any prospectus relating to the U.S.
Offering outside the United States or Canada or to anyone other than a U.S. or
Canadian Person. In addition, each Manager has agreed that, as part of the
distribution of the 1,140,000 shares offered in the International Offering, (i)
it is not purchasing any such shares for the account of any U.S. or Canadian
Person and (ii) it has not offered or sold, and will not offer, sell, resell or
deliver, directly or indirectly, any of such shares or distribute any prospectus
relating to the International Offering in the United States or Canada or to any
U.S. or Canadian Person. Each Manager also has agreed that it will offer to sell
shares only in compliance with all relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the U.S. Underwriting Agreement, the
International Underwriting Agreement and the Agreement Between U.S. Underwriters
and Managers, including (i) certain purchases and sales between the U.S.
Underwriters and the Managers, (ii) certain offers, sales, resales, deliveries
or distributions to or through investment advisers or other persons exercising
investment discretion, (iii) purchases, offers or sales by a U.S. Underwriter
who is also acting as a Manager or by a Manager who is also acting as a U.S.
Underwriter and (iv) other transactions specifically approved by the
Representatives and the Lead Managers. As used herein, "U.S. or Canadian Person"
means any resident or national of the United States or Canada, any corporation,
partnership or other entity created or organized in or under the laws of the
United States or Canada, or any estate or trust the income of which is subject
to United States or Canadian income taxation regardless of the source of its
income (other than the foreign branch of any U.S. or Canadian Person), and
includes any United States or Canadian branch or person other than a U.S. or
Canadian Person.
Any offer of shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the relevant province of Canada in
which such offer is made.
Each Manager agrees that (i) it will not offer or sell any shares to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which will not involve an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995
("the Regulations"), (ii) it will comply with all applicable provisions of the
Financial Services Act 1986 and the Regulations with respect to anything done by
it in relation to the shares in, from or otherwise involving the United Kingdom
and (iii) it will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the offer of the shares if that
person is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on.
40
<PAGE> 45
No action has been or will be taken in any jurisdiction by the Company or
the Managers that would permit an offering to the general public of the shares
offered hereby in any jurisdiction other than the United States.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
Pursuant to the Agreement Between U.S. Underwriters and Managers, sales may
be made between the U.S. Underwriters and the Managers of such number of shares
as may be mutually agreed. The price of any shares so sold shall be the public
offering price as then in effect for shares being sold by the U.S. Underwriters
and the Managers, less all or any part of the selling concession, unless
otherwise determined by mutual agreement. To the extent that there are sales
between the U.S. Underwriters and the Managers pursuant to the Agreement Between
U.S. Underwriters and Managers, the number of shares initially available for
sale by the U.S. Underwriters and by the Managers may be more or less than the
number of shares appearing on the front cover page of this Prospectus.
In connection with the Offering, the U.S. Underwriters, the Managers and
certain selling group members may engage in transactions (including passive
market making) for their own accounts or the accounts of others in the Common
Stock on the Nasdaq National Market immediately prior to the commencement of the
sale of the shares in the Offering, in accordance with Rules 10b-6A, 10b-6 and
10b-7 under the Exchange Act. Such transactions may stabilize the market price
of the Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time. Rule 10b-6A permits, upon
satisfaction of certain conditions, persons participating in a distribution that
are Nasdaq market makers in the security being distributed to engage in limited
market making "passive market making" transactions during the period when Rule
10b-6 would otherwise prohibit such activity. Distribution participants may not
effect transactions in, or display bids for, the Common Stock at a price that
exceeds the highest bid for the Common Stock displayed on the Nasdaq National
Market by a market maker that is not participating in the distribution of the
Common Stock, may not have net daily purchases of the Common Stock that exceed
30% of average daily trading volume for the two full consecutive calendar months
immediately preceding the filing date of the registration statement of which
this Prospectus is a part, and must identify their bids as bids made by a
passive market maker.
Certain directors and executive officers of the Company may purchase shares
from the U.S. Underwriters in the Offering.
The Company, the Selling Stockholders, the U.S. Underwriters and the
Managers have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
Certain of the Representatives and the Lead Managers have provided and
continue to provide the Company with additional investment banking services.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Shaw, Pittman, Potts & Trowbridge, Washington, D.C., a partnership
including professional corporations. Certain legal matters will be passed upon
for the Underwriters by Wachtell, Lipton, Rosen & Katz. Wachtell, Lipton, Rosen
& Katz has provided and continues to perform services for the Company.
EXPERTS
The historical consolidated financial statements of the Company as of July
1, 1995 and June 29, 1996 and for each of the three fiscal years in the period
ended June 29, 1996 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
41
<PAGE> 46
The combined financial statements of Valley Industries, Inc. and
Subsidiaries and Z Leasing Company (A General Partnership) as of January 31,
1994, 1995 and 1996 and for each of the years in the three-year period ended
January 31, 1996, appearing in the Company's Current Report on Form 8-K filed
for a reportable event dated June 28, 1996, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, and upon the
authority of such firm as experts in accounting and auditing.
The combined financial statements of Arrow Paper and Supply Co., Inc. and
Affiliate as of December 29, 1995, appearing in the Company's Current Report on
Form 8-K filed for a reportable event dated July 17, 1996, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of Blum Shapiro and Company, P.C., independent public
accountants, and upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act, omits certain of the
information set forth in the Registration Statement in accordance with the rules
and regulations of the Commission. Reference is hereby made to the Registration
Statement and to the exhibits thereto for further information with respect to
the Company and the securities offered hereby. Copies of the Registration
Statement and the exhibits thereto are on file at the offices of the Commission
and may be obtained upon payment of the prescribed fee or may be examined
without charge at the public reference facilities of the Commission described
below.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facility maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the
following regional offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants such as the Company which file electronically with the
Commission. The Common Stock is quoted for trading on The Nasdaq Stock Market
and reports, proxy statements and other information concerning the Company may
be inspected at the offices of the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
Statements contained in the Prospectus as to any contracts, agreements or
other documents filed as an exhibit to or incorporated by reference in the
Registration Statement are qualified in all respects by the copy of such
contract, agreement or other document filed as an exhibit to the Registration
Statement.
The Company's principal executive offices are located at 9830 Patuxent
Woods Drive, Columbia, Maryland 21046 and the Company's telephone number is
(410) 312-7100.
42
<PAGE> 47
JP FOODSERVICE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
--------
<S> <C>
Report of Independent Accountants................................................... F-2
Consolidated Balance Sheets as of July 1, 1995 and June 29, 1996.................... F-3
Consolidated Statements of Operations of the Company for the fiscal years ended
July 2, 1994, July 1, 1995 and June 29, 1996...................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the fiscal years ended
July 2, 1994, July 1, 1995 and June 29, 1996...................................... F-5
Consolidated Statements of Cash Flows for the fiscal years ended July 2, 1994, July
1, 1995 and June 29, 1996......................................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>
F-1
<PAGE> 48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of JP Foodservice, Inc.
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, of stockholders' equity and of cash flows present fairly in all
material respects, the financial position of JP Foodservice, Inc. and its
subsidiaries at July 1, 1995 and June 29, 1996, and the results of their
operations and their cash flows for each of the fiscal years ended July 2, 1994,
July 1, 1995 and June 29, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Valley Industries, Inc., which statements reflect total assets of $24,208,000
and $27,176,000 at January 31, 1995 and January 31, 1996, respectively, and
total revenues of $84,496,000, $105,406,000 and $121,504,000 for the years ended
January 31, 1994, 1995 and 1996, respectively. Those statements were audited by
other auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for Valley
Industries, Inc., is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
August 2, 1996, except as to Note 16,
which is as of September 10, 1996
and except as to the pooling of interests with
Valley Industries, Inc. and with
Squeri Food Service, Inc.
which is as of November 14, 1996
F-2
<PAGE> 49
JP FOODSERVICE, INC.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents....................................... $ 15,690 $ 12,224
Receivables..................................................... 139,835 154,405
Inventories..................................................... 77,577 84,138
Current deferred tax asset...................................... 299 480
Other current assets............................................ 8,729 9,076
------------ -------------
Total current assets....................................... 242,130 260,323
Property and equipment............................................... 95,118 104,258
Goodwill and other noncurrent assets................................. 77,964 83,698
------------ -------------
Total assets............................................... $415,212 $ 448,279
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of senior debt............................... $ 719 $ 895
Current maturities of subordinated debt......................... 2,322 3,622
Revolving bank line of credit................................... 3,200 5,300
Current obligations under capital leases........................ 4,395 5,072
Accounts payable................................................ 108,805 110,230
Accrued expenses................................................ 13,363 14,338
------------ -------------
Total current liabilities.................................. 132,804 139,457
------------ -------------
Noncurrent liabilities
Senior debt..................................................... 140,963 145,040
Subordinated debt with related parties.......................... 6,147 5,958
Obligations under capital leases................................ 13,056 17,649
Noncurrent deferred tax liability............................... 12,137 12,026
------------ -------------
172,303 180,673
------------ -------------
Total liabilities.......................................... 305,107 320,130
------------ -------------
Commitments and contingent liabilities (Notes 10, 11 and 15)
Stockholders' equity
Preferred stock, 5,000,000 shares authorized, none issued
Common stock
Voting, $.01 par value, 45,000,000 shares authorized,
18,756,673 and 18,880,962 issued and outstanding......... 188 189
Paid-in-capital................................................. 188,791 190,636
Accumulated deficit............................................. (33,931) (17,733)
Distribution in excess of net book value of continuing
stockholder's interest........................................ (44,943) (44,943)
------------ -------------
Total stockholders' equity................................. 110,105 128,149
------------ -------------
Total liabilities and stockholders' equity........................... $415,212 $ 448,279
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 50
JP FOODSERVICE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------
JULY 2, 1994 JULY 1, 1995 JUNE 29, 1996
------------ ------------ -------------
<S> <C> <C> <C>
Net sales................................................ $ 1,178,826 $ 1,288,315 $ 1,449,303
Cost of sales............................................ 979,108 1,069,494 1,198,797
------------ ------------ -------------
Gross profit............................................. 199,718 218,821 250,506
Operating expenses....................................... 163,695 177,799 202,916
Amortization of intangible assets........................ 2,265 2,263 2,338
Stock compensation charge................................ 709
------------ ------------ -------------
Income from operations................................... 33,758 38,050 45,252
------------ ------------ -------------
Interest expense
Borrowings.......................................... 16,275 15,556 14,860
Borrowings-related parties.......................... 14,851 5,879 68
Amortization of loan acquisition costs.............. 1,129 639 259
------------ ------------ -------------
32,255 22,074 15,187
Nonrecurring charges..................................... 1,517
Other expenses........................................... 222 (309) 37
------------ ------------ -------------
Other costs and expenses................................. 32,477 21,765 16,741
------------ ------------ -------------
Income (loss) before income taxes and extraordinary
charge................................................. 1,281 16,285 28,511
Provision for income taxes............................... (1,579) (7,358) (11,598)
------------ ------------ -------------
Income (loss) before extraordinary charge................ (298) 8,927 16,913
Extraordinary charge on early extinguishment of debt (net
of $3,059 of taxes).................................... (4,590)
------------ ------------ -------------
Net income (loss)........................................ (298) 4,337 16,913
Preference dividends..................................... (504) (40)
------------ ------------ -------------
Net income (loss) applicable to common stockholders...... $ (802) $ 4,297 $ 16,913
========= ========= ==========
Net income (loss) per common share
Before extraordinary charge......................... $ (0.17) $ 0.68 $ 0.90
Extraordinary charge................................ (0.35)
------------ ------------ -------------
Net income (loss) per common share....................... $ (0.17) $ 0.33 $ 0.90
========= ========= ==========
Weighted average common shares outstanding
(giving retroactive effect to a 3.936-for-one stock
split effective as of October 20, 1994)................ 4,633,371 13,103,798 18,808,738
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 51
JP FOODSERVICE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
JULY 3, 1993 THROUGH JUNE 29, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------
PREFERRED CLASS A CLASS C CLASS B CLASS E PAID-IN
STOCK VOTING VOTING VOTING NONVOTING NONVOTING CAPITAL
--------- ------ ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance July 3, 1993........................... $ 8,465 $ 29 $12 $ 27 $ 11,178
Net loss.......................................
Exchange agreement............................. (8,582) (4) $ 8 (27) $ 16 46,898
Net (purchases) of common stock for cash.......
Dividends and distributions to stockholders of
acquired companies...........................
Preference dividends
Preferred stock............................ 117
Yield support..............................
--------- ------ ------- ------- --------- --------- ---------
Balance July 2, 1994........................... 29 8 8 16 58,076
--------- ------ ------- ------- --------- --------- ---------
Net income.....................................
Dividends and distributions to stockholders of
acquired companies...........................
Preference dividends
Preferred stock............................ 40
Initial public offering........................ (40) 110 (8) (8) (16) 81,094
Debt conversion................................ 47 47,221
Stock issued in connection with business
acquisition.................................. 2 2,098
Employee stock purchase........................ 302
--------- ------ ------- ------- --------- --------- ---------
Balance July 1, 1995........................... 188 188,791
--------- ------ ------- ------- --------- --------- ---------
Net income.....................................
Dividends and distributions to stockholders of
acquired companies...........................
Stock options exercised........................ 247
Company 401(k) contribution.................... 1 1,260
Employee stock purchases....................... 338
--------- ------ ------- ------- --------- --------- ---------
Balance June 29, 1996.......................... $ $189 $ $ $ $ $ 190,636
======= ===== ====== ====== ======== ======== ========
<CAPTION>
DISTRIBUTION IN
EXCESS OF
NET BOOK
ACCUMULATED TREASURY VALUE OF CONTINUING
DEFICIT STOCK STOCKHOLDER'S INTEREST TOTAL
----------- -------- ---------------------- --------
<S> <C> <C> <C> <C>
Balance July 3, 1993........................... $ (36,384) $ (470) $(44,943) $ (62,086)
Net loss....................................... (298) (298)
Exchange agreement............................. 527 38,836
Net (purchases) of common stock for cash....... (57) (57)
Dividends and distributions to stockholders of
acquired companies........................... (263) (263)
Preference dividends
Preferred stock............................ (199) (82)
Yield support.............................. (305) (305)
----------- -------- -------- --------
Balance July 2, 1994........................... (37,449) (44,943) (24,255)
----------- -------- -------- --------
Net income..................................... 4,337 4,337
Dividends and distributions to stockholders of
acquired companies........................... (779) (779)
Preference dividends
Preferred stock............................ (40)
Initial public offering........................ 81,132
Debt conversion................................ 47,268
Stock issued in connection with business
acquisition.................................. 2,100
Employee stock purchase........................ 302
----------- -------- -------- --------
Balance July 1, 1995........................... (33,931) (44,943) 110,105
----------- -------- -------- --------
Net income..................................... 16,913 16,913
Dividends and distributions to stockholders of
acquired companies........................... (715) (715)
Stock options exercised........................ 247
Company 401(k) contribution.................... 1,261
Employee stock purchases....................... 338
----------- -------- -------- --------
Balance June 29, 1996.......................... $ (17,733) $ $(44,943) $ 128,149
========== ======= =========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 52
JP FOODSERVICE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------
JULY 2, 1994 JULY 1, 1995 JUNE 29, 1996
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)........................................ $ (298) $ 4,337 $ 16,913
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation of property and equipment.............. 9,056 9,671 10,486
Amortization of intangible assets................... 3,394 2,902 2,599
Gain on disposal of property and equipment.......... (1,128) (558) (185)
Increase (decrease) in deferred taxes payable....... 4,335 (744) (111)
Yield support interest payable in senior
subordinated notes................................ 406
Preferred stock liquidation expense................. 182
Write-off of loan acquisition costs................. 3,065
Stock compensation.................................. 709
PIK note interest payable in additional notes....... 9,516 1,284
Changes in assets and liabilities
(Increase) decrease in receivables, net............. (12,435) (23,921) (14,570)
(Increase) decrease in inventories............. 6,562 (2,493) (6,561)
(Increase) decrease in other current assets.... (2,326) (1,613) (347)
(Increase) decrease in current portion of
deferred
taxes........................................ (3,729) 2,439 (181)
Increase (decrease) in accounts payable........ 24,915 17,296 1,425
Increase (decrease) in accrued expenses........ 431 355 975
Increase in PYA/Monarch accrued interest,
net.......................................... 1,005 602 67
------------ ------------ -------------
Net cash provided by operating activities.................... 39,704 13,513 10,510
------------ ------------ -------------
Cash flows from investing activities
Additions to property and equipment...................... (3,108) (4,889) (9,664)
Cost of business acquisition, net of cash acquired....... (434) (2,725)
Net advances to affiliates............................... 50 (48) (108)
Proceeds from sales of property and equipment............ 1,244 570 402
------------ ------------ -------------
Net cash used in investing activities........................ (1,814) (4,801) (12,095)
------------ ------------ -------------
Cash flows from financing activities
Proceeds from issuance of long term debt................. 9,721 450
Net borrowings under line of credit agreement............ 2,449 251 2,100
Dividends/distributions to stockholders of acquired
businesses............................................ (263) (779) (715)
Net proceeds from initial public offering................ 79,927
Long-term debt (repayments) borrowings and capital lease
obligations........................................... (7,130) (81,223) 388
Payment of loan acquisition costs........................ (1,690)
Proceeds from employee benefit plan stock purchases...... 302 1,846
Payment of recapitalization costs........................ (1,430) (1,432)
Reduction of senior debt................................. (37,900)
Purchases of treasury stock.............................. (57)
Redemption of preferred stock............................ (643)
Issuance of note receivable.............................. (5,500)
------------ ------------ -------------
Net cash used in financing activities........................ (34,610) (4,837) (1,881)
------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents......... 3,280 3,875 (3,466)
Cash and cash equivalents
Beginning of period...................................... 8,535 11,815 15,690
------------ ------------ -------------
End of period............................................ $ 11,815 $ 15,690 $ 12,224
=========== =========== ============
Supplemental disclosure of cash paid during the year for:
Interest................................................. $ 19,746 $ 18,014 $ 13,861
=========== =========== ============
Income taxes............................................. $ 791 $ 1,592 $ 10,198
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 53
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 1 -- BUSINESS
JP Foodservice, Inc. ("JPF") and its consolidated subsidiaries (the
"Company") were formed on July 3, 1989, following a management-led leveraged
acquisition of certain operations of PYA/Monarch, Inc. ("PYA/Monarch"), a
wholly-owned subsidiary of Sara Lee Corporation ("Sara Lee"). The Company
operates as a broadline distributor of fresh, frozen and packaged foods, paper
products, equipment and ancillary products to foodservice businesses, with
distribution centers in the Mid-Atlantic, Midwest, Northeast and Western United
States. The Company's operations are considered to be in one predominant
business segment. The Company's principal customers are restaurants, hotels,
healthcare facilities, cafeterias and schools encompassing both independent and
multi-unit businesses. Sales to the Company's single largest customer
constituted approximately 6.1%, 7.0% and 7.2% of net sales in fiscal 1994, 1995
and 1996 respectively.
NOTE 2 -- BASIS OF PRESENTATION AND ACQUISITIONS
Merger with Valley
On August 30, 1996, the Company completed a merger with Valley Industries,
Inc. (together with its affiliates, "Valley"), a broadline distributor located
in Las Vegas, Nevada, for a purchase price of approximately $40.7 million (net
of indebtedness assumed). Under the terms of the merger, the Company exchanged
1,936,494 common shares for all of Valley's common shares and ownership
interests.
Merger with Squeri
On September 30, 1996, the Company completed a merger with Squeri Food
Service, Inc. (together with its affiliate, "Squeri"), a broadline distributor
located in Cincinnati, Ohio, for a purchase price of $24.8 million (net of
indebtedness assumed or discharged). The Company exchanged 1,079,875 common
shares for all of Squeri's common shares and ownership interests.
Basis of Presentation
The "Company" as used in these consolidated financial statements refers to
JPF and its consolidated subsidiaries, including Valley and Squeri. The mergers
were accounted for as poolings of interests. These consolidated financial
statements for the years ended July 2, 1994, July 1, 1995 and June 29, 1996 have
been restated to include the accounts and operations of Valley and Squeri for
all periods prior to each of the representative mergers.
Prior to the mergers, Valley used a fiscal year ending on January 31, and
Squeri used a fiscal year ending December 31. The fiscal 1994, 1995 and 1996
restated financial statements of the Company combine the July 2, 1994, July 1,
1995 and June 29, 1996 financial statements of JPF with the January 31, 1994,
1995 and 1996 financial statements of Valley, respectively, and the December 31,
1993, 1994 and 1995 financial statements of Squeri, respectively.
The fiscal years of Valley and Squeri have been conformed with the
Company's as of June 30, 1996. Accordingly, retained earnings activity for the
period February 1, 1996 to June 29, 1996, for Valley and the period January 1,
1996 to June 29, 1996, for Squeri will be reflected as adjustments to retained
earnings as of June 30, 1996.
F-7
<PAGE> 54
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 2 -- BASIS OF PRESENTATION AND ACQUISITIONS -- (CONTINUED)
Separate results of the operations of Valley and Squeri (the "Combining
Companies") and JPF are summarized below (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues
JPF............................................... $1,029.0 $1,108.3 $1,242.7
The Combining Companies........................... 149.8 180.0 206.6
-------- -------- --------
Combined..................................... $1,178.8 $1,288.3 $1,449.3
======= ======= =======
Net income (loss)
JPF............................................... $ (1.8) $ 2.0 $ 14.1
The Combining Companies........................... 1.5 2.3 2.8
-------- -------- --------
Combined..................................... $ (0.3) $ 4.3 $ 16.9
======= ======= =======
</TABLE>
For all periods prior to the respective mergers, to the date of the
acquisitions, portions of Valley and Squeri were taxed as S-Corporations and,
therefore, federal and state taxes were assessed to the shareholders. For
purposes of the Company's consolidated financial statements, income taxes have
been provided on Valley's and Squeri's earnings, at rates which would have been
applicable, had such earnings been taxed to it. Distributions to S-Corporation
shareholders have been adjusted for the effects of corporate, federal and state
taxes payable on an annualized basis.
In connection with the merger with Valley, approximately $5.3 million of
merger costs and expenses ($3.3 million net of income taxes) were incurred and
will be charged to expense in the Company's first quarter of fiscal 1997. In
connection with the merger of Squeri, approximately $2.0 million of merger costs
and expenses ($1.2 million net of income taxes) were incurred and will be
charged to expense in the Company's second quarter of fiscal 1997.
Other Acquisitions
Effective November 24, 1995, the Company purchased for cash certain assets
of the foodservice business of Rotelle, Inc. for $6.1 million. The excess of
purchase price over the fair value of net assets acquired of approximately $2.6
million will be amortized using the straight-line method over 40 years.
Unaudited fiscal 1995 sales of this business approximated $37 million.
NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation
The consolidated financial statements include the accounts of JPF and its
wholly-owned subsidiaries. Significant intercompany transactions have been
eliminated in consolidation.
B. Cash Equivalents
For purposes of financial statement disclosure, cash equivalents consist of
all highly liquid instruments with original maturities of three months or less.
The cost of these investments is equivalent to fair market value.
C. Revenue and Receivables
Revenue is recognized when product is shipped to the customer. Allowances
are provided for estimated uncollectible receivables based on historical
experience and review of specific accounts.
F-8
<PAGE> 55
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Allowances and credits received from suppliers in connection with the
Company's buying and merchandising activities are recognized as earned.
D. Inventories
Inventories, consisting principally of fresh, frozen and packaged foods,
are valued at the lower of cost or market, with cost (net of applicable purchase
rebates) being determined under the first-in, first-out (FIFO) method.
E. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
The cost of property and equipment transferred during the original
capitalization of the Company was based on fair market value at the date of
transfer. Major renewals and betterments are capitalized, and ordinary repairs
and maintenance are charged against operations in the period in which the costs
are incurred. Related costs and accumulated depreciation are eliminated from the
accounts upon disposition of an asset and the resulting gain or loss is
reflected in the statement of operations.
Depreciation is computed using the straight-line method over estimated
useful lives from date of acquisition as follows:
<TABLE>
<S> <C>
Buildings and improvements............................................. 25-40 years
Machinery and equipment................................................ 5-15 years
Leasehold improvements................................................. Life of lease
Delivery vehicles...................................................... 7-10 years
</TABLE>
F. Goodwill and Other Noncurrent Assets
Goodwill and other intangible assets are amortized over the periods
expected to be benefited but not exceeding 40 years, using the straight-line
method.
Legal and bank fees associated with the acquisition of loans are
capitalized and amortized using the effective interest method over the term of
the related debt. Such costs are written off upon refinancing or restructuring
of the related debt. (See Note 13).
G. Recoverability of Long-Lived Assets
The recoverability of goodwill and other long-lived assets is assessed
annually and whenever adverse events or changes in circumstances or business
climate indicate that undiscounted cash flows previously anticipated warrant a
reassessment.
H. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes".
FAS 109 prescribes an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, FAS 109 generally considers all
expected future events other than changes in the tax law or rates.
F-9
<PAGE> 56
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
I. Statement of Cash Flows
Cash equivalents include interest bearing investments with an original
maturity of less than 90 days. Noncash financing activities for fiscal 1994,
1995 and 1996 include the following:
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Capital lease obligations for additions to the Company's
transportation fleet..................................... $6,489 $4,410 $10,179
Note received in connection with sale of property and
equipment................................................ 350
Noncash dividends on:
Accretion of mandatorily redeemable preferred stock... 82 40
Preferred stock (9% on outstanding shares)............ 117
Yield support (20% compounded rate on $5,000 of
equity)............................................. 305
------ ------ -------
$6,993 $4,800 $10,179
====== ====== =======
</TABLE>
J. Net Income (Loss) Per Common Share
Net income (loss) per common share is based on the weighted average number
of shares outstanding, after giving retroactive effect to a 3.936-for-one stock
split approved by the Board of Directors of the Company on September 13, 1994
and effective on October 20, 1994. Shares used in such calculation for all years
also include shares issued to management on October 20, 1994. Net income (loss)
per common share has been adjusted for the preference dividends for
computational purposes for the applicable periods.
K. Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
L. Reclassifications
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform to the current year's presentation.
NOTE 4 -- NONRECURRING CHARGES
On February 19, 1996, the Company terminated discussions with Sara Lee
regarding the proposed combination of the Company and PYA Monarch. As a result
of the termination of these discussions, which began with a proposal submitted
by Sara Lee in November 1995, the Company wrote off the costs incurred related
to the transaction (primarily legal and advisory fees) of approximately $1.5
million. The after-tax impact of this non-recurring charge was $0.9 million
($.05 per share). Excluding this charge, net income would have been $17.8
million for the year, and net income per share would have been $0.95 for the
year.
F-10
<PAGE> 57
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 5 -- RECEIVABLES
Receivables are composed of the following:
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
<S> <C> <C>
Customer accounts and notes.................................. $102,368 $ 109,838
Less allowance for doubtful accounts......................... (2,587) (2,447)
------------ -------------
Net customer................................................. 99,781 107,391
------------ -------------
From suppliers............................................... 29,758 39,838
From related parties......................................... 4,201 1,566
Less allowance for doubtful accounts......................... (273) (100)
------------ -------------
Net supplier................................................. 33,686 41,304
------------ -------------
Tax refunds.................................................. 862
Other........................................................ 5,506 5,710
------------ -------------
Total other.................................................. 6,368 5,710
------------ -------------
$139,835 $ 154,405
========= ==========
</TABLE>
NOTE 6 -- PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
<S> <C> <C>
Land......................................................... $ 11,224 $ 11,251
Buildings.................................................... 56,874 64,498
Machinery and equipment...................................... 36,803 39,800
Leasehold improvements....................................... 7,457 6,321
Vehicles held under capital leases (Note 11)................. 34,880 45,495
------------ -------------
147,238 167,365
Accumulated depreciation..................................... (52,120) (63,107)
------------ -------------
$ 95,118 $ 104,258
========= ==========
</TABLE>
F-11
<PAGE> 58
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 7 -- GOODWILL AND OTHER NONCURRENT ASSETS
Goodwill and other noncurrent assets are composed of the following:
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
<S> <C> <C>
Goodwill..................................................... 83,143 85,916
Accumulated amortization..................................... (12,340) (14,456)
------------ -------------
70,803 71,460
------------ -------------
Loan acquisition costs....................................... 1,690 1,703
Accumulated amortization..................................... (158) (419)
------------ -------------
1,532 1,284
------------ -------------
Other intangible assets...................................... 5,697 5,700
Accumulated amortization..................................... (1,342) (1,564)
------------ -------------
4,355 4,136
------------ -------------
Other........................................................ 482 527
Receivables from related parties............................. 792 6,291
------------ -------------
$ 77,964 $ 83,698
========= ==========
</TABLE>
NOTE 8 -- RELATED PARTY TRANSACTIONS
The Company regularly purchases products from Sara Lee and its affiliates
for resale to customers. Related party payables from such transactions are
$5,060 and $2,666 at July 1, 1995 and June 29, 1996, respectively. The Company
believes that such purchases are at prices not more favorable than those charged
to unrelated distributors of Sara Lee products. Total purchases from Sara Lee
and its affiliates aggregated $69,820, $72,590 and $64,774 in fiscal 1994, 1995
and 1996, respectively.
NOTE 9 -- ACCRUED EXPENSES
The components of accrued expenses are as follows:
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
<S> <C> <C>
Compensation................................................. $ 4,307 $ 4,362
Benefits/taxes............................................... 2,569 2,781
Interest..................................................... 1,903 1,887
Operating expenses........................................... 4,584 5,308
------------ -------------
$ 13,363 $14,338
========= ==========
</TABLE>
NOTE 10 -- DEBT
The Company's Valley subsidiary has a line of credit arrangement with a
commercial bank, expiring June 30, 1996 permitting borrowings up to a maximum of
$6 million. The interest rate is prime plus 1.0% and collateral on the line of
credit consists of accounts receivable, inventories and equipment. This line of
credit was not renewed after fiscal year-end 1996. Borrowings under this line
were $2.7 million and $4.7 million at fiscal year-end 1995 and 1996,
respectively. Upon expiration of this line of credit, outstanding amounts were
refinanced under a line of credit arrangement permitting borrowings up to a
maximum of $10 million. The interest rate is based on the bank's "reference
rate" plus .25% and/or the LIBOR rate plus 2%. There were no borrowings on this
line of credit at fiscal year-end 1996.
F-12
<PAGE> 59
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 10 -- DEBT -- (CONTINUED)
The Company's Squeri subsidiary has a $3 million bank line of credit
bearing interest at the prime rate and collateralized by accounts receivable and
inventories. The line of credit expired on July 30, 1996 and a new line of
credit was issued under substantially the same terms which expires July 30,
1997. Borrowings under this line were $0.5 million and $0.6 million at fiscal
year-end 1995 and 1996, respectively.
Long-term debt is composed of the following:
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
<S> <C> <C>
Revolving credit loan........................................ $ 45,000 $ 1,000
Trade accounts receivable securitization..................... 49,378
Senior notes................................................. 85,000 85,000
Note payable to bank secured by real estate.................. 7,046 6,900
Note to bank secured by land and building.................... 2,708 2,634
Note payable to financing company secured by vehicles........ 1,176 798
Other notes payable.......................................... 752 225
------------ -------------
Total senior notes...................................... 141,682 145,935
Less current portion of senior debt..................... (719) (895)
------------ -------------
Noncurrent senior debt.................................. 140,963 145,040
------------ -------------
Promissory note payable to PYA/Monarch....................... 4,000 4,067
Notes payable to shareholders, officers and related
parties.................................................... 4,469 5,513
------------ -------------
Total subordinated debt................................. 8,469 9,580
Less current portion of subordinated debt............... (2,322) (3,622)
------------ -------------
Noncurrent subordinated debt............................ 6,147 5,958
------------ -------------
Total long-term debt.................................... $147,110 $ 150,998
========= ==========
</TABLE>
Under the revolving credit loan arrangement, the Company is entitled to
borrow up to $110 million with interest payable quarterly at the bank's prime
rate or, at the option of the Company, the London Interbank Offered Rate
("LIBOR"), plus .50% per annum. Borrowings are limited to 85% of eligible
receivables and subsidiary borrowing base plus 50% of eligible inventory. While
the Company may repay all or a portion of such borrowings at any time, any
outstanding principal must be paid in full on or before November 10, 1999. The
Company is required to pay an annual commitment fee of 0.2% on the unused
portion of the credit arrangement.
In May 1996, the Company entered into a three year agreement pursuant to
which the Company sells, on an ongoing basis and without recourse, an undivided
percentage ownership interest in a designated pool of trade accounts receivable
to an independent issuer of receivable-backed paper (the "Conduit") for proceeds
of up to $50 million. In order to maintain the designated balance in the pool of
accounts receivables sold, the Company is obligated to sell undivided percentage
interests in new receivables as existing receivables are collected. Pursuant to
the agreement, the Company established a wholly-owned, bankruptcy remote
subsidiary (JPFD Funding Company) to purchase the receivables from the operating
subsidiaries and then sell the undivided percentage ownership interest in the
designated pool of receivables to the Conduit. The commitment of the Conduit
under the agreement is renewable annually. The Company has retained
substantially the same credit risk as if the receivables had not been sold. The
Company retains collection and administrative responsibilities on the
participating interest sold as agent for the purchaser. The interest rate on
borrowings under this program is reset at intervals not exceeding 90 days, at
the option of the Company, and is based on the Conduit's commercial paper rates
plus 30 basis points. The effective interest rate on outstanding borrowings
under the agreement at June 29, 1996 is 5.70%.
F-13
<PAGE> 60
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 10 -- DEBT -- (CONTINUED)
The senior notes are payable in seven annual installments beginning in
October 1998. Interest is paid semiannually at an annual rate of 8.55%.
The note payable to a bank secured by real estate, matures at various dates
from 2003 to 2009. Interest rates range from 9% to 10%.
The notes to bank secured by land and building bear a fixed interest rate
of 6.95% until November 2000 at which time the rate will be adjusted to either a
new fixed rate or a variable rate at the option of the Company. The new rate
will be in effect through maturity in November 2003.
The note payable to financing Company secured by vehicles mature at various
dates from 1997 to 2000. Interest rates range from 7% to 11%.
Other notes payable consist of unsecured notes due in 1996 and 1997 to a
bank, financing company and unrelated parties. Fixed interest rates are set at
8% to 11% with a flexible rate set at prime.
In 1989, the Company loaned to PYA/Monarch $110 million in exchange for a
promissory note. The note is due in installments through December 31, 1998 and
bears interest at rates between 10.35% and 10.8% per annum. The Company assumed
a promissory note payable to PYA/Monarch of $112 million which is due in
installments through May 31, 1998 and bears interest at 11.0% per annum. Under a
Note Offset Agreement between the parties, maturities of principal and interest
payable under the two notes are to be settled by offsetting amounts due, with
the net difference being carried until settlement as an obligation or
receivable. The accompanying consolidated balance sheets reflect a net
noncurrent note payable balance of $4,000 and $4,067 at July 1, 1995 and June
29, 1996, respectively.
Notes payable to shareholders, officers and related parties are unsecured
and due on demand through 2005. Interest rate vary up to 11.5%.
At June 29, 1996, the Company has approximately $12.1 million of
outstanding letters of credit securing the Company's medical and workers'
compensation insurance policies.
Bank loan and senior note covenants restrict the payment of dividends and
require the Company and certain subsidiaries to maintain specified levels of
working capital and net worth to meet various financial ratios. Bank and senior
note borrowings are unsecured.
Aggregate annual principal payments applicable to long-term debt, excluding
capital leases (see Note 11), are as follows:
<TABLE>
<CAPTION>
FISCAL
YEAR ENDING
------------
<S> <C>
1997...................................................................... $ 4,517
1998...................................................................... 4,868
1999...................................................................... 12,874
2000...................................................................... 63,068
2001...................................................................... 12,731
2002 and thereafter....................................................... 57,457
--------
$155,515
========
</TABLE>
Based on the borrowing rates currently available to the Company for
indebtedness with similar terms and average maturities, the fair value of the
Company's long-term debt is estimated to be $157,411.
F-14
<PAGE> 61
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 11 -- LEASES
Operating
The Company leases its corporate office facilities and certain equipment
under operating leases. Charges to operations for all operating leases were
$5,765, $6,374 and $6,461 in fiscal 1994, 1995 and 1996, respectively.
Capital
The Company leases the majority of its delivery fleet under capital leases.
Capitalized delivery fleet leases are reflected for the targeted lease periods.
The interest portion on the significant amount of the future minimum capital
lease payments has been calculated using a combination of a floating interest
rate, currently at 4.5%, and fixed rates ranging from 4.85% to 8.43% based on
the terms of the lease. The Company is charged interest monthly based on a fixed
or floating rate option based on the prime rate or the lessor's commercial paper
rate.
Set forth below are the future minimum lease payments under capital leases
and operating leases with noncancelable terms beyond one year.
<TABLE>
<CAPTION>
FISCAL OPERATING CAPITAL
YEAR ENDING LEASES LEASES
------------ --------- -------
<S> <C> <C>
1997.............................................................. $ 5,108 $ 6,185
1998.............................................................. 4,035 5,078
1999.............................................................. 2,322 4,577
2000.............................................................. 1,882 4,164
2001.............................................................. 1,767 3,564
2002 and thereafter............................................... 1,734 2,739
--------- -------
$16,848 26,307
=======
Less interest portion............................................. (3,586)
-------
22,721
Less current obligations.......................................... (5,072)
-------
Noncurrent obligations............................................ $17,649
=======
</TABLE>
NOTE 12 -- INCOME TAXES
The components of income tax expense (before extraordinary charge) are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Current tax (expense) benefit
U.S. federal....................................... $ (547) $(3,957) $(10,242)
State and local.................................... (345) (1,060) (1,208)
------- ------- --------
Total current................................. (892) (5,017) (11,450)
------- ------- --------
Deferred tax (expense) benefit
U.S. federal....................................... (681) (2,271) (156)
State and local.................................... (6) (70) 8
------- ------- --------
Total deferred................................ (687) (2,341) (148)
------- ------- --------
Total tax expense recorded.............................. $(1,579) $(7,358) $(11,598)
======= ======= ========
</TABLE>
F-15
<PAGE> 62
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 12 -- INCOME TAXES -- (CONTINUED)
Deferred income taxes represent the taxes payable by the Company in future
periods arising from temporary differences between assets and liabilities for
financial reporting and tax purposes. Deferred tax (expense) benefit results
from changes in the deferred tax assets and liabilities. Temporary differences
and the resulting deferred income taxes are as follows:
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
<S> <C> <C>
Current Inventory............................................ $ (859) $ (847)
Allowance for doubtful accounts......................... 692 1,011
Accrued expenses and other.............................. 466 316
------------ -------------
Current deferred tax asset......................... 299 480
------------ -------------
Noncurrent Property and equipment............................ (9,383) (9,589)
Intangible assets....................................... (1,712) (1,623)
Other, net.............................................. (1,042) (814)
------------ -------------
Noncurrent deferred tax liability.................. (12,137) (12,026)
------------ -------------
Total deferred income taxes........................ $(11,838) $ (11,546)
========= ==========
</TABLE>
The effective income tax rate on consolidated pre-tax income (loss) differs
from the statutory U.S. federal income tax rate for fiscal 1994, 1995 and 1996
as shown below:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------------------
1994 1995 1996
------------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Computed statutory
expense................. $ (448) (35.00)% $(5,700) (35.00)% $ (9,979) (35.00)%
State and local income
tax, net of federal
tax..................... (213) (16.63) (720) (4.42) (858) (3.01)
Permanent differences..... (788) (61.51) (1,172) (7.20) (858) (3.01)
Enacted tax rate change... (156) (12.18)
Gas tax credit............ 125 9.76 156 0.96 97 0.34
Other..................... (99) (7.73) 78 0.48
------- -------- ------- ------- -------- -------
$(1,579) (123.29)% $(7,358) (45.18)% $(11,598) (40.68)%
======= ======== ======= ======= ======== =======
</TABLE>
All tax years of the Company are open for examination. The Internal Revenue
Service and certain state authorities have examinations in process. In fiscal
1994, the Company increased its U.S. deferred tax liability as a result of tax
legislation enacted August 10, 1993 increasing the corporate tax rate from 34%
to 35%.
NOTE 13 -- STOCKHOLDERS' EQUITY
Original Capitalization and Recapitalization
For financial reporting purposes, the original capitalization of the
Company was accounted for under guidelines established for leveraged buyout
transactions when the previous owner's interest declines as established by the
Financial Accounting Standards Board's Emerging Issues Task Force. Under this
guidance, the capitalization of the Company was treated as an asset purchase
(fair value accounting) to the extent of new investors' interests and as a
capital reorganization (carryover basis) to the extent of PYA/Monarch's
continuing interest. Distributions to PYA/Monarch in excess of its carryover
basis for its continuing ownership interest were treated as a separate component
of stockholders' equity.
In November 1994, the Company completed a recapitalization plan (the
"Recapitalization"). The principal components of the Recapitalization included:
(1) the initial public offering (the "Offering") of 7,825,000 shares of common
stock, par value $0.01 per share, of the Company at a price of $11.00 per share;
F-16
<PAGE> 63
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 13 -- STOCKHOLDERS' EQUITY -- (CONTINUED)
(2) the establishment of a new $110 million bank credit facility; (3) the
private placement of $85 million aggregate principal amount of 8.55% Senior
Notes due 2004; (4) the conversion into shares of common stock of $47.3 million
principal amount of subordinated payment-in-kind Promissory Notes due 2004; (5)
the conversion into shares of common stock of all of the outstanding shares of
the Company's zero coupon senior preferred stock having a mandatory redemption
date of July 3, 2004; and (6) the redemption of all of the outstanding shares of
the Company's zero coupon junior preferred stock having a mandatory redemption
date of July 3, 2004. The net proceeds from the Recapitalization were used to
repay or refinance substantially all of the existing indebtedness of the Company
and to redeem the junior preferred stock. In connection with the
Recapitalization, the Company incurred a $4.6 million extraordinary charge (net
of tax benefits of $3.1 million) in the second quarter of fiscal 1995 for the
write-off of deferred financing costs relating to existing indebtedness as well
as other fees and expenses related to the early extinguishment of debt. As of
the Offering closing date, all outstanding shares of all classes of the
Company's common stock were converted into the class of common stock issued in
the Offering.
Employee Stock Purchase Plan
Effective on the Offering closing date, the Company adopted the 1994
Employee Stock Purchase Plan, pursuant to which all full-time employees of the
Company and its subsidiaries who have been employed by the Company for 90 days
or more are eligible to purchase shares of common stock from the Company. An
aggregate 1,500,000 shares of common stock may be issued and purchased under the
plan. Eligible employees may purchase shares of common stock at a price equal to
85% of the market price per share on each quarterly investment date. Purchases
under this plan totaled 28,080 shares and 33,940 shares during fiscal 1995 and
fiscal 1996, respectively.
Management Stock Options
Effective on the Offering closing date, the Company adopted the 1994 Stock
Incentive Plan (the "Stock Option Plan"). The Stock Option Plan, which
terminates on the tenth anniversary of the effective date of the Plan,
authorizes the grant of incentive stock options, non-qualified stock options,
restricted stock awards, stock appreciation rights, or any combination thereof,
at the discretion of the Compensation Committee of JP's Board of Directors.
Subject to adjustment in certain circumstances, the aggregate number of shares
of common stock which may be issued under the Stock Option Plan upon the
exercise of options or stock appreciation rights and vesting of restricted stock
may not exceed 1,532,404 shares.
The option price per share under each option granted under the Stock Option
Plan may not be less than 100% (110% in the case of an optionee who is a 10%
stockholder) of the fair market value per share on the date of the option grant.
One-third of each option granted to a participant vests on each of the first,
second and third anniversary of the date on which the option was granted. Upon a
change in control (as defined in the Stock Option Plan) of the Company, all
outstanding and previously unvested options will become immediately exercisable.
The Company applied the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," in accounting for its stock option awards. Accordingly, the Company
has not recognized any related compensation expense. Beginning with financial
statements for fiscal 1997, the Company will be required to make certain
additional disclosures as if the fair value based method of accounting defined
in SFAS No. 123, "Accounting for Stock-Based Compensation," had been applied to
the Company's stock option grants made subsequent to 1994.
F-17
<PAGE> 64
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 13 -- STOCKHOLDERS' EQUITY -- (CONTINUED)
A summary of changes in outstanding stock options follows:
<TABLE>
<CAPTION>
INCENTIVE OPTION PRICE
STOCK OPTIONS PER SHARE
------------- ---------------
<S> <C> <C>
Balance, July 2, 1994................................... 0
Options granted.................................... 400,877 $11.00 - $12.50
Options cancelled.................................. (32,245) $11.00
Options exercised.................................. 0
------------- ---------------
Balance, July 1, 1995................................... 368,632 $11.00 - $12.50
Options granted.................................... 158,868 $14.25 - $17.75
Options canceled................................... (57,142) $11.00 - $14.25
Options exercised.................................. (16,881) $11.00 - $12.50
------------- ---------------
Balance, June 29, 1996.................................. 453,477 $11.00 - $17.75
</TABLE>
The Compensation Committee has the authority to determine the terms and
conditions of any restricted stock awards under the Stock Option Plan. No such
awards were made through June 29, 1996.
Directors Stock Options
Effective on the Offering closing date, the Company adopted the Outside
Directors Stock Option Plan (the "Plan"). The Plan provides for an initial grant
of an option to each director of the Company who is not also an employee of the
Company or a nominee or officer of Sara Lee or its affiliates to purchase 5,000
shares and for an annual grant of an option to purchase 1,000 shares at the then
current market value. Options are granted for a term of ten years. One fourth of
each option granted under the Plan vests on the date of grant, and an additional
one-fourth of each such option vests on each of the first, second and third
anniversary of the option grant date. Options for 15,000 shares and 8,000 shares
were granted under the Plan at an exercise price of $11.00 per share and
$15.75 -- $19.25 per share during fiscal 1995 and fiscal 1996, respectively. All
such options granted remain outstanding at June 29, 1996.
Shareholder Rights Plan
In 1996, the Board of Directors of the Company adopted a shareholder rights
plan. Issuance of rights under the rights plan, subject to specified exceptions,
would be triggered by the acquisition (or certain actions that would result in
the acquisition) of 10% or more of the Company's common stock by any person or
group and by the acquisition (or certain actions that would result in the
acquisition) of any additional shares of common stock by any person or group
owning 10% or more of the common stock on February 19, 1996.
Pursuant to this plan, the Board of Directors of the Company declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of common stock of the Company. The dividend was paid on March 1, 1996 to
stockholders of record at the close of business on March 1, 1996. Each newly
issued share of common stock will have attached one Right which will be
initially represented by such share. Each Right entitles the registered holder
of common stock to purchase from the Company, upon the occurrence of the
specified triggering events, one-hundredth of a share of a newly authorized
issue of junior participating preferred stock at a price of $95, subject to
adjustment. The Company may redeem the Rights at a price of $.01 per Right prior
to a triggering event. The Rights expire on February 19, 2006.
NOTE 14 -- EMPLOYEE RETIREMENT BENEFITS
The majority of the Company's union employees are covered by
union-administered pension plans. Since these plans are part of multi-employer
pension arrangements, it is not practicable to determine the amount of
accumulated plan benefits or plan net assets applicable solely to the Company's
employees. Charges to
F-18
<PAGE> 65
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 14 -- EMPLOYEE RETIREMENT BENEFITS -- (CONTINUED)
operations for all employer defined benefit pension contributions required by
union agreements aggregated $1,632, $1,848 and $2,329 in fiscal 1994, 1995 and
1996, respectively.
The Company sponsors a savings and retirement plan which qualifies under
Section 401(k) of the Internal Revenue Code and for which all full-time
non-union employees of the Company are eligible. In accordance with the terms of
the plan, employees may contribute up to 15% of their annual compensation,
subject to certain limitations. The Company is required to match up to 2% of
each qualified employee's annual contribution, and may make any additional
contributions on an elective basis. The Company's matching contribution may be
made with common stock of the Company. Employer contributions to this plan vest
on the fifth anniversary of participation in the plan. Charges to operations for
employer contributions under this plan were $1,145, $1,274 and $1,482 in fiscal
1994, 1995 and 1996, respectively.
The Company has a profit sharing and salary reduction plan that covers
substantially all full-time non-union employees of the Valley operating
location. The Company matches the lesser of 50% of the employee's salary
reduction or 8.33% of the employee's salary, reduced by the employee's salary
reduction. Additional amounts may be contributed at the discretion of the
Company's Board of Directors. For the years ended January 31, 1994, 1995 and
1996, matching contributions charged to expense totaled $173,633, $190,047 and
$243,019, respectively.
The Company, together with other employers, has a contributory defined
benefit pension plan for the benefit of its union employees at the Squeri
operating location. Contributions to the plan are determined by negotiated union
contracts. Pension expense was $12,192 in 1994, $23,857 in 1995 and $21,713 in
1996.
The Company has a defined contribution profit-sharing plan covering
substantially all non-union employees of The Squeri operating location.
Contributions are made to the profit-sharing plan at the discretion of the Board
of Directors, but may not be more than the maximum amount deductible for federal
income tax purposes. Contributions to the Plan were $50,000 in 1994, 1995 and
1996.
The Company has no defined benefit pension plan for non-union employees.
The Company does not grant any post-retirement benefits other than those
described above.
NOTE 15 -- CONTINGENCIES
The Company is involved, from time to time, in litigation and proceedings
arising out of the ordinary course of business. There are no pending material
legal proceedings or environmental investigations to which the Company is a
party or to which the property of the Company is subject.
The Company is aware of an unasserted environmental claim related to the
Company's Boston branch. The Company has not been the subject of any action or
proceeding related to the site. The Company has been indemnified against any
losses it may incur in connection with hazardous substances on the site, and
does not believe resolution of this matter will have a material adverse effect
on its financial condition or operating results.
NOTE 16 -- SUBSEQUENT EVENTS
Arrow Acquisition
Effective August 31, 1996, the Company completed the acquisition of Arrow
Paper and Supply Co., Inc. (together with its affiliates, "Arrow"), a broadline
distributor in Norwich, Connecticut. Under the terms of the agreement, which is
accounted for as a purchase, the Company purchased certain assets, assumed or
discharged certain liabilities and paid consideration of $29.6 million.
Approximately $1.7 million of the consideration was paid in the form of common
stock and the remainder was paid in cash. The excess of
F-19
<PAGE> 66
JP FOODSERVICE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT WHERE NOTED)
NOTE 16 -- SUBSEQUENT EVENTS -- (CONTINUED)
purchase price over the fair value of net assets is approximately $30.6 million
and will be amortized using the straight-line method over 40 years. Audited
fiscal 1995 net sales for Arrow were $74.6 million.
Stock Offering
In August 1996, the Company completed the sale of 3,000,000 shares of
common stock in a public offering (the "Offering") and generated $65.7 million
in net proceeds. The net proceeds of the Offering were used to fund the cash
portion of the Arrow purchase price and to repay indebtedness assumed or
discharged by the Company in connection with its acquisitions of Valley and
Arrow, as discussed above. In September 1996, the Company received additional
net proceeds of $1.6 million in the Offering from the sale of 75,000 shares to
cover over-allotments.
NOTE 17 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the fiscal years ended July 1, 1995
and June 29, 1996 is as follows:
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1996
Net sales................................... $356,323 $353,525 $349,717 $389,738
Gross profit................................ 60,762 60,625 60,865 68,254
Net income.................................. 3,687 3,856 2,201 7,169
Net income per common share................. $ 0.20 $ 0.21 $ 0.12 $ 0.38
======== ======== ======== ========
1995
Net sales................................... $321,802 $316,203 $305,038 $345,272
Gross profit................................ 54,358 52,841 51,372 60,250
Net income (loss) before extraordinary
item...................................... (407) 1,870 2,185 5,279
Net income (loss)........................... (407) (2,720) 2,185 5,279
Net income (loss) per common share before
extraordinary charge...................... $ (0.09) $ 0.17 $ 0.12 $ 0.28
Net income (loss) per common share.......... $ (0.09) $ (0.25) $ 0.12 $ 0.28
======== ======== ======== ========
</TABLE>
F-20
<PAGE> 67
[THE GRAPHICS ON THE INSIDE BACK COVER CONSIST OF TWO COLOR PHOTOGRAPHS,
THE FIRST DEPICTING A SELECTION OF THE COMPANY'S SIGNATURE BRAND PRODUCTS AND
THE SECOND DEPICTING A SELECTION OF THE COMPANY'S OTHER FOOD PRODUCTS.]
<PAGE> 68
[TEXT ACCOMPANYING GRAPHICS ON BACK COVER PAGE]
JP Foodservice has introduced several exclusive signature brand lines in
response to the increasing popularity of foodservice specialties. The Roseli(TM)
line features authentic Italian ingredients in a full line of products. In
addition, during 1996 the Company introduced a full line of Mexican products
under its el Pasado(TM) signature brand and a complete line of gourmet and
foodservice coffees under its Rituals(TM) signature brand.
The Company offers customers a comprehensive range of products, including canned
and dry food products, fresh meats, poultry, seafood, frozen foods, fresh
produce, dairy and other refrigerated foods.
<PAGE> 69
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THIS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference............................ 3
Prospectus Summary..................... 4
Risk Factors........................... 8
Use of Proceeds........................ 11
Price Range of Common Stock
and Dividend Policy.................. 11
Capitalization......................... 12
Unaudited Pro Forma Condensed Financial
Statements........................... 13
Selected Consolidated Financial Data... 17
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 18
Business............................... 23
Management............................. 34
Selling Stockholders................... 36
Shares Eligible for Future Sale........ 37
Underwriting........................... 39
Legal Matters.......................... 41
Experts................................ 41
Available Information.................. 42
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
5,700,000 SHARES
JP FOODSERVICE, INC.
COMMON STOCK
[JP FOODSERVICE, INC. LOGO]
------------
PROSPECTUS
, 1996
------------
SMITH BARNEY INC.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
THE ROBINSON-HUMPHREY
COMPANY, INC.
RODMAN & RENSHAW, INC.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 70
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 1996
PROSPECTUS
5,700,000 SHARES
[JP FOODSERVICE LOGO]
COMMON STOCK
------------------
Of the 5,700,000 shares of Common Stock of JP Foodservice, Inc. (the
"Company" or "JP Foodservice") offered hereby, 4,560,000 shares are being
offered in the United States and Canada (the "U.S. Offering") by the U.S.
Underwriters (as defined herein) and 1,140,000 shares are being offered in a
concurrent international offering (the "International Offering" and, together
with the "U.S. Offering," the "Offering") outside of the United States and
Canada by the Managers (as defined herein). All of the 5,700,000 shares of
Common Stock offered hereby are being sold by certain stockholders of the
Company (collectively, the "Selling Stockholders"). See "Selling Stockholders."
The Company will not receive any of the proceeds from the sale of the shares by
the Selling Stockholders. The Common Stock is quoted on the Nasdaq National
Market under the symbol "JPFS." On November 19, 1996, the last reported sale
price of the Common Stock, as reported on the Nasdaq National Market, was
$23.4375 per share. See "Price Range of Common Stock and Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- ------------------------------------------------------------------------------------------------
Total(2) $ $ $
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) For information regarding indemnification of the U.S. Underwriters and
the Managers, see "Underwriting."
(2) Certain of the Selling Stockholders have granted to the U.S. Underwriters
a 30-day option to purchase up to 709,028 additional shares of Common
Stock solely to cover over-allotments, if any. See "Underwriting." If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Selling Stockholders will be
$ , $ and $ , respectively.
------------------
The shares of Common Stock offered hereby are being offered by the several
Managers named herein, subject to prior sale, when, as and if accepted by them
and subject to certain conditions. It is expected that certificates for the
shares of Common Stock offered hereby will be available for delivery on or about
, 1996, at the offices of Smith Barney Inc., 333 West 34th
Street, New York, New York 10001.
------------------
SMITH BARNEY INC.
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL
THE ROBINSON-HUMPHREY COMPANY, INC.
, 1996
<PAGE> 71
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THIS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference............................ 3
Prospectus Summary..................... 4
Risk Factors........................... 8
Use of Proceeds........................ 11
Price Range of Common Stock
and Dividend Policy.................. 11
Capitalization......................... 12
Unaudited Pro Forma Condensed Financial
Statements........................... 13
Selected Consolidated Financial Data... 17
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 18
Business............................... 23
Management............................. 34
Selling Stockholders................... 36
Shares Eligible for Future Sale........ 37
Underwriting........................... 39
Legal Matters.......................... 41
Experts................................ 41
Available Information.................. 42
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
5,700,000 SHARES
JP FOODSERVICE, INC.
COMMON STOCK
[JP FOODSERVICE, INC. LOGO]
------------
PROSPECTUS
, 1996
------------
SMITH BARNEY INC.
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL
THE ROBINSON-HUMPHREY
COMPANY, INC.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 72
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale and
distribution of the securities being registered. All amounts except the
Securities and Exchange Commission registration fee are estimated. All of the
expenses below will be paid by the Company.
<TABLE>
<CAPTION>
ITEM AMOUNT
------------------------------------------------------------------ --------
<S> <C>
Registration fee.................................................. $ 44,322
NASD filing fee................................................... 15,000
Blue Sky fees and expenses........................................ 50,000
Printing and engraving expenses................................... 200,000
Legal fees and expenses........................................... 150,000
Accounting fees and expenses...................................... 70,000
Transfer Agent and Registrar fees................................. 20,000
Miscellaneous..................................................... 50,678
--------
Total........................................................ $600,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to the provisions of Article XII of the registrant's
Restated Certificate of Incorporation filed as Exhibit 3.1 hereto and the
provisions of Article XII of the registrant's Amended and Restated By-laws filed
as Exhibit 3.2 hereto.
The registrant is a Delaware corporation, subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware (the "DGCL"). Section 145 of the DGCL provides for the indemnification,
under certain circumstances, of any person in connection with any action, suit
or proceeding, whether civil, criminal, administrative or investigative (other
than derivative actions), brought or threatened involving such persons because
of such person's service in any such capacity with respect to another
corporation or other entity at the request of such corporation.
The registrant's Amended and Restated By-Laws provide for the
indemnification of the officers and directors of the registrant to the fullest
extent permitted by the DGCL. Article XII of the By-laws provides that each
person who was or is made a party to (or is threatened to be made a party to)
any civil or criminal action, suit or proceeding by reason of the fact that such
person is or was a director or officer of the registrant shall be indemnified
and held harmless by the registrant to the fullest extent authorized by the DGCL
against all expense, liability and loss (including, without limitation,
attorneys' fees) incurred by such person in connection therewith, if such person
acted in good faith and in a manner he or she reasonably believed to be or not
opposed to the best interests of the registrant and had no reason to believe
that his or her conduct was illegal.
Article XII of the registrant's Restated Certificate of Incorporation
provides that, to the fullest extent permitted by the DGCL, the registrant's
directors will not be personally liable to the registrant or its stockholders
for monetary damages resulting from a breach of their fiduciary duties as
directors. However, nothing contained in such Article XII shall eliminate or
limit the liability of directors (i) for any breach of the director's duty of
loyalty to the registrant or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit.
Under the terms of the Amended and Restated Registration Rights Agreement
by and among the registrant, PYA/Monarch, Inc. ("PYA/Monarch") and the other
investors named therein, the registrant has
II-1
<PAGE> 73
agreed to indemnify PYA/Monarch (and its permitted transferees), its officers
and directors and each underwriter and person, if any, who controls PYA/Monarch,
from certain liabilities relating to any registration statement that may be
filed by the registrant on behalf of such stockholder, under the terms of that
agreement.
There are in effect directors' and officers' liability insurance policies
which insure the registrant's directors and officers against certain liabilities
that they may incur in such capacities.
The form of U.S. Underwriting Agreement (filed as Exhibit 1.1 hereto) and
the form of International Underwriting Agreement (filed as Exhibit 1.2 hereto)
provide for indemnification by the U.S. Underwriters, the Managers and the
Selling Stockholders of the Company and its officers and directors, and by the
Company of the U.S. Underwriters, the Managers and the Selling Stockholders, for
certain liabilities arising under the Securities Act or otherwise.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following Exhibits are filed herewith and incorporated herein by
reference:
<TABLE>
<S> <C>
**1.1 Form of U.S. Underwriting Agreement.
**1.2 Form of International Underwriting Agreement.
**3.1 Restated Certificate of Incorporation of the Company.
**3.2 Amended and Restated By-Laws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
Incorporation and the Amended and Restated By-Laws of the Company defining the
rights of holders of the Company's Common Stock.
4.2 Specimen certificate representing common stock, par value $.01 per share, of
the Company. Filed as Exhibit 4.3 to the Company's Registration Statement on
Form S-1 (No. 33-82724) and incorporated herein by reference.
**5.1 Opinion of Shaw, Pittman, Potts & Trowbridge, counsel to the Company,
regarding the validity of the securities being offered.
**10.1 Amendment No. 2 to Rights Agreement, dated as of September 26, 1996, amending
Rights Agreement, dated as of February 19, 1996, between the Company and The
Bank of New York, as Rights Agent.
**23.1 Consent of Price Waterhouse LLP, Independent Accountants.
**23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants.
**23.3 Consent of Blum Shapiro and Company, P.C., Independent Accountants.
**23.4 Consent of Shaw, Pittman, Potts & Trowbridge (contained in Exhibit 5.1).
***24.1 Power of Attorney (included on page II-4).
***27 Financial Data Schedule.
</TABLE>
- ---------------
** Filed herewith.
*** Previously filed.
(b) Financial Statement Schedules
Either not applicable or shown in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's
II-2
<PAGE> 74
annual report pursuant to section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted as to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described in Item 15, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 75
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbia, State of Maryland, on November 20, 1996.
JP FOODSERVICE, INC.
(Registrant)
By /s/ JAMES L. MILLER
------------------------------------
James L. Miller
President and Chief Executive
Officer
(Duly Authorized Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 20, 1996.
<TABLE>
<S> <C>
/s/ JAMES L. MILLER
-----------------------------------------------
James L. Miller, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ LEWIS HAY, III
-----------------------------------------------
Lewis Hay, III, Director,
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ GEORGE T. MEGAS
-----------------------------------------------
George T. Megas, Vice President -- Finance
(Principal Accounting Officer)
/s/ JEFFREY D. SERKES
-----------------------------------------------
Jeffrey D. Serkes, Director
/s/ MICHAEL J. DRABB
-----------------------------------------------
Michael J. Drabb, Director
/s/ DAVID M. ABRAMSON
-----------------------------------------------
David M. Abramson, Director,
Senior Vice President and General Counsel
/s/ ERIC E. GLASS
-----------------------------------------------
Eric E. Glass, Director
/s/ MARK P. KAISER
-----------------------------------------------
Mark P. Kaiser, Director,
Senior Vice President -- Sales,
Marketing and Procurement
/s/ PAUL I. LATTA
-----------------------------------------------
Paul I. Latta, Director
/s/ DEAN R. SILVERMAN
-----------------------------------------------
Dean R. Silverman, Director
</TABLE>
II-4
<PAGE> 76
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
-------- ------------------------------------------------------------------------------
<S> <C>
**1.1 Form of U.S. Underwriting Agreement.
**1.2 Form of International Underwriting Agreement.
**3.1 Restated Certificate of Incorporation of the Company.
**3.2 Amended and Restated By-Laws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
Incorporation and the Amended and Restated By-Laws of the Company defining the
rights of holders of the Company's Common Stock.
4.2 Specimen certificate representing common stock, par value $.01 per share, of
the Company. Filed as Exhibit 4.3 to the Company's Registration Statement on
Form S-1 (No. 33-82724) and incorporated herein by reference.
**5.1 Opinion of Shaw, Pittman, Potts & Trowbridge, counsel to the Company,
regarding the validity of the securities being offered.
**10.1 Amendment No. 2 to Rights Agreement, dated as of September 26, 1996, amending
Rights Agreement, dated as of February 19, 1996, between the Company and The
Bank of New York, as Rights Agent.
**23.1 Consent of Price Waterhouse LLP, Independent Accountants.
**23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants.
**23.3 Consent of Blum Shapiro and Company, P.C., Independent Accountants.
**23.4 Consent of Shaw, Pittman, Potts & Trowbridge (contained in Exhibit 5.1).
***24.1 Power of Attorney (included on page II-4).
***27 Financial Data Schedule.
</TABLE>
- ---------------
** Filed herewith.
*** Previously filed.
<PAGE> 1
EXHIBIT 1.1
4,560,000 Shares
JP Foodservice, Inc.
Common Stock
FORM OF U.S. UNDERWRITING AGREEMENT
November 21, 1996
SMITH BARNEY INC.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO. INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
RODMAN & RENSHAW, INC.
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
The persons named in Part A of Schedule I hereto (the "Selling
Stockholders") propose to sell an aggregate of 4,560,000 shares of common
stock, par value $0.01 per share ("Common Stock"), of JP Foodservice, Inc., a
Delaware corporation (the "Company"), to the several underwriters named in
Schedule II hereto (the "Underwriters"), for whom Smith Barney Inc., Goldman,
Sachs & Co., Morgan Stanley & Co. Incorporated, The Robinson-Humphrey Company,
Inc. and Rodman & Renshaw, Inc. are acting as representatives (the
"Representatives"). The 4,560,000 shares of Common Stock to be sold to the
Underwriters by the Selling Stockholders are referred to herein as the "Firm
Shares." The Selling Stockholders listed in Part B of Schedule I hereto also
propose to sell to the Underwriters, upon the terms and conditions set forth in
Section 2 hereof, up to an additional 709,028 shares (the "Additional Shares")
of Common Stock. The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares."
It is understood that the Company and the Selling Stockholders
are concurrently entering into an International Underwriting Agreement, dated
the date hereof (the "International Underwriting Agreement"), providing for the
sale of 1,140,000 shares of the Common Stock (the "International Shares") by
the Selling Stockholders through arrangements with certain underwriters outside
the United States and Canada (the "Managers"), for whom Smith Barney Inc.,
Goldman Sachs International, Morgan Stanley & Co. International and The
Robinson-Humphrey Company, Inc. are acting as lead managers (the "Lead
Managers"). The International Shares and the Shares, collectively, are herein
referred to as the "Underwritten Shares."
The Company and the Selling Stockholders also understand that
the Representatives and the Lead Managers have entered into an agreement (the
"Agreement Between U.S. Underwriters and Managers") contemplating the
coordination of certain transactions between the Underwriters and the Managers
and that,
<PAGE> 2
pursuant thereto and subject to the conditions set forth therein, the
Underwriters may purchase from the Managers a portion of the International
Shares or sell to the Managers a portion of the Shares. The Company and the
Selling Stockholders understand that any such purchases and sales between the
Underwriters and the Managers shall be governed by the Agreement Between U.S.
Underwriters and Managers and shall not be governed by the terms of this
Agreement or the International Underwriting Agreement.
The Company and the Selling Stockholders wish to confirm as
follows their respective agreements with you, in connection with the several
purchases of the Shares by the Underwriters.
1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 under the Act
(the "registration statement"), including prospectuses subject to completion
relating to the Underwritten Shares. The term "Registration Statement" as used
in this Agreement means the registration statement (including all financial
schedules and exhibits), as amended at the time it becomes effective, or, if
the registration statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of this Agreement.
If it is contemplated, at the time this Agreement is executed, that a
post-effective amendment to the registration statement will be filed and must
be declared effective before the offering of the Shares may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. If an abbreviated
registration statement is prepared and filed with the Commission in accordance
with Rule 462(b) under the Act (an "Abbreviated Registration Statement"), the
term "Registration Statement" as used in this Agreement includes the
Abbreviated Registration Statement. The term "Prospectuses" as used in this
Agreement means the prospectuses in the forms included in the Registration
Statement, or, if the prospectuses included in the Registration Statement omit
information in reliance on Rule 430A under the Act and such information is
included in prospectuses filed with the Commission pursuant to Rule 424(b)
under the Act, the term "Prospectuses" as used in this Agreement means the
prospectuses in the forms included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectuses filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectuses" as used in this Agreement means the prospectuses
subject to completion in the forms included in the registration statement at
the time of the initial filing of the registration statement with the
Commission, and as such prospectuses shall have been amended from time to time
prior to the date of the Prospectuses. Any reference in this Agreement to the
registration statement, the Registration Statement, any Prepricing Prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of the registration statement, the Registration Statement,
such Prepricing Prospectus or the Prospectus, as the case may be, and any
reference to any amendment or supplement to the registration statement, the
Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Exchange Act") which, upon
filing, are incorporated by reference therein, as required by paragraph (b) of
Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means
the documents which at the time are incorporated by reference in the
registration statement, the Registration Statement, any Prepricing Prospectus,
the Prospectus, or any amendment or supplement thereto.
It is understood that two forms of Prepricing Prospectus and
two forms of Prospectus are to be used in connection with the offering and sale
of the Underwritten Shares: a Prepricing Prospectus and a
-2-
<PAGE> 3
Prospectus relating to the Shares that are to be offered and sold in the United
States (as defined herein) or Canada (as defined herein) or to U.S. or Canadian
Persons (the "U.S. Prepricing Prospectus" and the "U.S. Prospectus,"
respectively), and a Prepricing Prospectus and a Prospectus relating to the
Shares which are to be offered and sold outside the United States or Canada to
persons other than U.S. or Canadian Persons (the "International Prepricing
Prospectus" and the "International Prospectus," respectively). The U.S.
Prospectus and the International Prospectus are herein collectively called the
"Prospectuses," and the U.S. Prepricing Prospectus and the International
Prepricing Prospectus are herein called the "Prepricing Prospectuses." For
purposes of this Agreement: "U.S. or Canadian Person" means any resident or
national of the United States or Canada, any corporation, partnership or other
entity created or organized in or under the laws of the United States or Canada
or any estate or trust the income of which is subject to United States or
Canadian income taxation regardless of the source of its income (other than the
foreign branch of any U.S. or Canadian Person), and includes any United States
or Canadian branch of a person other than a U.S. or Canadian Person; "United
States" means the United States of America (including the states thereof and
the District of Columbia) and its territories, its possessions and other areas
subject to its jurisdiction; and "Canada" means Canada and its territories, its
possessions and other areas subject to its jurisdiction.
2. Agreements to Sell and Purchase. Subject to such
adjustments as you may determine to avoid fractional shares, each Selling
Stockholder agrees, subject to all the terms and conditions set forth herein,
to sell to each Underwriter and, upon the basis of the representations,
warranties and agreements of the Company and the Selling Stockholders herein
contained and subject to all the terms and conditions set forth herein, each
Underwriter agrees, severally and not jointly, to purchase from each Selling
Stockholder at a purchase price of $__ per share (the "purchase price per
share") the number of Firm Shares which bears the same proportion to the number
of Firm Shares set forth opposite the name of such Selling Stockholder in
Schedule I hereto as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule II hereto (or such number of Firm Shares increased
as set forth in Section 13 hereof) bears to the aggregate number of Firm Shares
to be sold by the Selling Stockholders.
The Selling Stockholders listed in Part B of Schedule I hereto
also agree, upon the basis of the agreements of the Underwriters herein
contained and subject to all the terms and conditions set forth herein, to sell
to the Underwriters, and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Stockholders herein contained and
subject to all the terms and conditions set forth herein, the Underwriters
shall have the right to purchase from the Selling Stockholders listed in Part B
of Schedule I hereto, at the purchase price per share, pursuant to an option
(the "over-allotment option") which may be exercised at any time and from time
to time prior to 9:00 P.M., New York City time, on the 30th day after the date
of the U.S. Prospectus (or, if such 30th day shall be a Saturday or Sunday or
a holiday, on the next business day thereafter when the New York Stock Exchange
is open for trading) (the "Option Expiration Date"), up to an aggregate of
709,028 Additional Shares from the Selling Stockholders listed in Part B of
Schedule I hereto (the maximum number of Additional Shares which each of them
agrees to sell upon the exercise by the Underwriters of the over-allotment
option is set forth opposite their respective names in Part B of Schedule I).
Additional Shares may be purchased only for the purpose of
covering over-allotments made in connection with the offering of the Firm
Shares. The number of Additional Shares which the Underwriters elect to
purchase upon any exercise of the over-allotment option shall be provided by
each Selling Stockholder who has agreed to sell Additional Shares in proportion
to the respective maximum numbers of Additional Shares which each such Selling
Stockholder has agreed to sell. Upon any exercise of the over-allotment
option,
-3-
<PAGE> 4
each Underwriter, severally and not jointly, agrees to purchase from each
Selling Stockholder who has agreed to sell Additional Shares the number of
Additional Shares (subject to such adjustments as you may determine in order to
avoid fractional shares) which bears the same proportion to the number of
Additional Shares to be sold by each Selling Stockholder who has agreed to sell
Additional Shares as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule II hereto (or such number of Firm Shares increased
as set forth in Section 13 hereof) bears to the aggregate number of Firm Shares
to be sold by the Selling Stockholders.
Certificates in transferable form for the Shares (including
any Additional Shares) which each of the Selling Stockholders agrees to sell
pursuant to this Agreement have been placed in custody with The Bank of New
York (the "Custodian") for delivery under this Agreement pursuant to a Custody
Agreement and Power of Attorney (the "Custody Agreement") executed by each of
the Selling Stockholders appointing two representatives designated by
Sara Lee Foodservice Holdings, Inc. and Sara Lee Foundation (collectively, the
"Sara LeeSelling Stockholders") as agents and attorneys-in-fact (the
"Attorneys-in-Fact"). Each Selling Stockholder agrees that the Shares
represented by the certificates held in custody pursuant to the Custody
Agreement are subject to the interests of the Underwriters. If any Selling
Stockholder that is a natural person shall die or be incapacitated or, with
respect to any Selling Stockholder that is not a natural person, a liquidation,
dissolution, winding up or similar event (a "Liquidation") shall occur before
the delivery of the Shares hereunder, certificates for the Shares of such
Selling Stockholder shall be delivered to the Underwriters by the
Attorneys-in-Fact in accordance with the terms and conditions of this Agreement
and the Custody Agreement as if such death or incapacity or Liquidation had not
occurred, regardless of whether or not the Attorneys-in-Fact or any Underwriter
shall have received notice of such death, incapacity or Liquidation. Each
Attorney-in-Fact is authorized, on behalf of each of the Selling Stockholders,
to execute this Agreement and any other documents necessary or desirable in
connection with the sale of the Shares to be sold hereunder by such Selling
Stockholder, to make delivery of the certificates for such Shares, to receive
the proceeds of the sale of such Shares, to give receipts for such proceeds, to
pay therefrom any expenses to be borne by such Selling Stockholder pursuant to
the terms hereof in connection with the sale and public offering of such
Shares, to distribute the balance thereof to such Selling Stockholder, and to
take such other action as may be necessary or desirable in connection with the
transactions contemplated by this Agreement. Each Attorney-in-Fact agrees to
perform his duties under the Custody Agreement.
3. Terms of Public Offering. The Selling Stockholders
have been advised by you that the Underwriters propose to make a public
offering of their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable and initially to offer the Shares upon the terms set
forth in the U.S. Prospectus.
4. Delivery of the Shares and Payment Therefor.
Delivery to the Underwriters of and payment for the Firm Shares shall be made
at the office of Smith Barney Inc., 388 Greenwich Street, New York, NY 10013,
at 10:00 A.M., New York City time, on November 26, 1996 (the "Closing Date").
The place of closing for the Firm Shares and the Closing Date may be varied by
agreement among you and the Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at the aforementioned
office of Smith Barney Inc. at such time on such date (the "Option Closing
Date"), which may be the same as the Closing Date but shall in no event be
earlier than the Closing Date nor later than ten business days after the giving
of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Company and the
Attorneys-in-Fact
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<PAGE> 5
of the Underwriters' determination to purchase a number, specified in such
notice, of Additional Shares. Such notice shall be delivered prior to the
Option Expiration Date. The place of closing for any Additional Shares and the
Option Closing Date for such Shares may be varied by agreement among you, the
Company and the Attorneys-in-Fact.
Certificates for the Firm Shares and for any Additional Shares
to be purchased hereunder shall be registered in such names and in such
denominations as you shall request prior to 9:30 A.M., New York City time, on
the second business day preceding the Closing Date or any Option Closing Date,
as the case may be. Such certificates shall be made available to you in New
York City for inspection and packaging not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date or the Option Closing
Date, as the case may be. The certificates evidencing the Firm Shares and any
Additional Shares to be purchased hereunder shall be delivered to you on the
Closing Date or the Option Closing Date, as the case may be, against payment of
the purchase price therefor by wire transfer in immediately available funds.
5. Agreements of the Company. The Company agrees with
the several Underwriters as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto or any Abbreviated Registration Statement to be declared
effective before the offering of the Shares may commence, the Company will
endeavor to cause the Registration Statement or such post-effective amendment
or Abbreviated Registration Statement to become effective as soon as possible
and will advise you promptly and, if requested by you, will confirm such advice
in writing, when the Registration Statement or such post-effective amendment or
Abbreviated Registration Statement has become effective.
(b) The Company will advise you and the Sara Lee Selling
Stockholders promptly and, if requested by you or the Sara Lee Selling
Stockholders, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration Statement, any
Prepricing Prospectuses or the Prospectuses or for additional information; (ii)
of the receipt by the Company of any notification with respect to the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement; (iii) of the receipt by the Company of any notification
with respect to the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iv) within the period of time referred to in paragraph (f) below, of any
change in the Company's condition (financial or other), business, prospects,
properties, net worth or results of operations, or of the happening of any
event, which makes any statement of a material fact made in the Registration
Statement or the Prospectuses (as then amended or supplemented) untrue or which
requires the making of any additions to or changes in the Registration
Statement or the Prospectuses (as then amended or supplemented) in order to
state a material fact required by the Act to be stated therein or necessary in
order to make the statements therein not misleading (in the case of the
Prospectuses or any such supplement or amendment, in the light of the
circumstances under which they were made), or of the necessity to amend or
supplement the Prospectuses (as then amended or supplemented) to comply with
the Act or any other law. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.
(c) The Company will furnish to you and the Sara Lee
Selling Stockholders, without charge, (i) five signed copies of the
registration statement as originally filed with the Commission and of each
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<PAGE> 6
amendment thereto, including financial statements and all exhibits to the
registration statement, (ii) such number of conformed copies of the
registration statement as originally filed and of each amendment thereto, but
without exhibits, as you may request, (iii) such number of copies of the
Incorporated Documents, without exhibits, as you may request, and (iv) five
copies of the exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus
or, prior to the end of the period of time referred to in the first sentence in
paragraph (f) below, file any document which, upon filing becomes an
Incorporated Document, of which you or the Sara Lee Selling Stockholders shall
not previously have been advised or to which, after you or the Sara Lee Selling
Stockholders shall have received a copy of the document proposed to be filed,
you or the Sara Lee Selling Stockholders shall reasonably object.
(e) Prior to the execution and delivery of this
Agreement, the Company has delivered to you and the Sara Lee Selling
Stockholders, without charge, in such quantities as you have requested, copies
of each form of the U.S. Prepricing Prospectus. The Company consents to the
use, in accordance with the provisions of the Act and with the securities or
Blue Sky laws of the jurisdictions in which the Shares are offered by the
several Underwriters and by dealers, prior to the date of the U.S. Prospectus,
of each U.S. Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in
the opinion of counsel for the Underwriters a U.S. Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer,
the Company will expeditiously deliver to each Underwriter and each dealer,
without charge, as many copies of the U.S. Prospectus (and of any amendment or
supplement thereto) as you may request. The Company consents to the use of the
U.S. Prospectus (and of any amendment or supplement thereto) in accordance with
the provisions of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the several Underwriters and
by all dealers to whom Shares may be sold, both in connection with the offering
and sale of the Shares and for such period of time thereafter as the U.S.
Prospectus is required by the Act to be delivered in connection with sales by
any Underwriter or dealer. If during such period of time any event shall occur
that in the judgment of the Company or in the opinion of counsel for the
Underwriters or the Sara Lee Selling Stockholders is required to be set forth
in the U.S. Prospectus (as then amended or supplemented) or should be set forth
therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the U.S. Prospectus (or to file under the Exchange Act
any document which, upon filing, becomes an Incorporated Document) in order to
comply with the Act or any other law, the Company will forthwith prepare and,
subject to the provisions of paragraph (d) above, file with the Commission an
appropriate supplement or amendment thereto (or to such document), and will
expeditiously furnish to the Underwriters and dealers and to the Sara Lee
Selling Stockholders a reasonable number of copies thereof. In the event that
the Company and you, as Representatives of the several Underwriters, agree that
the U.S. Prospectus should be amended or supplemented, the Company, if
requested by you, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel
for the Underwriters in connection with the registration or qualification of
the Shares for offering and sale by the several Underwriters and by dealers
under the securities or Blue Sky laws of such jurisdictions as you may
designate and will file such consents to service of process or other documents
necessary or appropriate in order to effect such
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<PAGE> 7
registration or qualification; provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to service of process in
suits, other than those arising out of the offering or sale of the Shares, or
to taxation in any jurisdiction where it is not now so subject.
(h) The Company will make generally available to its
security holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing not later than the first day of the
fiscal quarter following the fiscal quarter that includes the Closing Date, as
soon as practicable after the end of such period, but in any event not later
than 120 days after the end of such period, which consolidated earnings
statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder.
(i) During the period of three years hereafter, the
Company will furnish to the Representatives (i) as soon as practicable after
they are available, copies of each report of the Company mailed to stockholders
or filed with the Commission, and (ii) from time to time such other information
concerning the Company as you may reasonably request.
(j) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provisions hereof (otherwise than
pursuant to the second paragraph of Section 13 hereof or by notice given by you
terminating this Agreement pursuant to Section 13 or Section 14 hereof) or if
this Agreement shall be terminated by the Underwriters because of any failure
or refusal on the part of the Company or any of the Selling Stockholders to
comply with the terms or fulfill any of the conditions of this Agreement, the
Company agrees to reimburse the Representatives for all reasonable
out-of-pocket expenses (including reasonable fees and expenses of counsel for
the Underwriters) incurred by you in connection herewith.
(k) If Rule 430A of the Act is employed, the Company will
timely file the Prospectuses pursuant to Rule 424(b) under the Act and will
advise you of the time and manner of such filing.
(l) Except pursuant to this Agreement or as otherwise
provided in this paragraph (1), the Company will not offer, sell, contract to
sell or otherwise dispose of any Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, or grant any options or
warrants to purchase Common Stock, for a period of 90 days after the date of
the Prospectuses, without the prior written consent of Smith Barney Inc. This
paragraph (l) shall not prohibit or limit any of the following: (i) the grant
of options to purchase Common Stock or the making of other awards pursuant to
the Company's 1994 Stock Incentive Plan or the grant of options to purchase
Common Stock pursuant to the Company's Stock Option Plan for Outside Directors;
or (ii) the offering, issuance or sale of Common Stock pursuant to the
Company's 1994 Stock Incentive Plan, Stock Option Plan for Outside Directors,
Employee Stock Purchase Plan or 401(k) Retirement Plan.
(m) The Company has furnished or will furnish to you
"lock-up" letters, in form and substance satisfactory to you, signed by (i)
certain executive officers of the Company set forth on Schedule III hereto, and
(ii) the Selling Stockholders (collectively, the "Lock-Up Letters").
(n) Except as stated in this Agreement and in the
International Underwriting Agreement and the Prepricing Prospectuses and the
Prospectuses, the Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
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<PAGE> 8
6. Agreements of the Selling Stockholders. Each of the
Selling Stockholders, severally and not jointly, agrees with the several
Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the extent
necessary to cause the Registration Statement or any post- effective amendment
thereto to become effective at the earliest possible time.
(b) Such Selling Stockholder will pay all Federal and
other taxes, if any, on the transfer or sale of the Shares being sold by the
Selling Stockholder to the Underwriters.
(c) Such Selling Stockholder will do or perform all
things required to be done or performed by the Selling Stockholder prior to the
Closing Date or any Option Closing Date, as the case may be, to satisfy the
conditions set forth in Sections 10(i) and 10(j) hereof.
(d) Such Selling Stockholder has executed or will execute
a Lock-Up Letter as provided in Section 5(m) hereof and will not sell, contract
to sell or otherwise dispose of any Common Stock, except for the sale of
Underwritten Shares to the Underwriters and Managers pursuant to this Agreement
and the International Underwriting Agreement, prior to the expiration of 90
days after the date of the Prospectus, without the prior written consent of
Smith Barney Inc.
(e) Except as stated in this Agreement, the International
Underwriting Agreement, in the Prepricing Prospectuses and the Prospectuses,
such Selling Stockholder has not taken, and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Stockholder will advise you promptly
and, if requested by you, will confirm such advice in writing, within the
period of time referred to in Section 5(f) hereof, of any change in the
information furnished by or on behalf of such Selling Stockholder expressly for
use in the Registration Statement and the Prospectuses which comes to the
attention of such Selling Stockholder that suggests that any statement made in
the Registration Statement or the Prospectuses (as then amended or
supplemented, if amended or supplemented) is or may be untrue in any material
respect or that the Registration Statement or Prospectuses (as then amended or
supplemented, if amended or supplemented) omits or may omit to state a material
fact or a fact necessary to be stated therein in order to make the statements
therein not misleading in any material respect.
7. Representations and Warranties of the Company. The
Company represents and warrants to each Underwriter that:
(a) Each U.S. Prepricing Prospectus included as part of
the registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.
(b) The Company and the transactions contemplated by this
Agreement and the International Underwriting Agreement meet the requirements
for use of Form S-3 under the Act. The registration statement in the form in
which it became or becomes effective and also in such form as it may be when
any post-effective
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<PAGE> 9
amendment thereto or any Abbreviated Registration Statement shall become
effective and the Prospectuses and any supplement or amendment thereto when
filed with the Commission under Rule 424(b) under the Act, complied or will
comply in all material respects with the provisions of the Act and did not or
will not at any such times contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of the Prospectuses or
any supplement or amendment thereto, in the light of the circumstances under
which they were made), except that this representation and warranty does not
apply to statements in or omissions from the Registration Statement or the
Prospectuses made in reliance upon and in conformity with information (i)
relating to any Selling Stockholder furnished to the Company in writing by or
on behalf of such Selling Stockholder expressly for use therein, or (ii)
relating to any Underwriter furnished to the Company in writing by or on behalf
of an Underwriter through the Representatives or a Manager through the Lead
Managers expressly for use therein.
(c) The Incorporated Documents heretofore filed, when
they were filed (or, if any amendment with respect to any such document was
filed, when such amendment was filed), conformed in all material respects with
the requirements of the Exchange Act, any further Incorporated Documents so
filed will, when they are filed, conform in all material respects with the
requirements of the Exchange Act; no such document when it was filed (or, if an
amendment with respect to any such document was filed, when such amendment was
filed), contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further document, when it is
filed, will contain an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(d) All the outstanding shares of Common Stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights; and the capital
stock of the Company conforms to the description thereof in the Registration
Statement and the Prospectuses.
(e) The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectuses, and is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify would not
have a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries (as hereinafter defined) taken as a whole.
(f) All the Company's significant subsidiaries (as
defined in Rule 1-02(w) of Regulation S-X and as required by Item 601(b)(21) of
Regulation S-K) (collectively, the "Subsidiaries") as of June 29, 1996 are
listed in an exhibit to the Company's Annual Report on Form 10-K which is
incorporated by reference into the Registration Statement. Each Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectuses, and is duly
registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify would not have a material adverse effect on
the condition (financial or other), business, properties, net worth or results
of operations of the Company and the
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<PAGE> 10
Subsidiaries taken as a whole. All the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, and are owned by the Company directly, or
indirectly through one of the other Subsidiaries, free and clear of any lien,
adverse claim, security interest, equity or other encumbrance.
(g) There are no legal or governmental proceedings
pending or, to the knowledge of the Company, threatened, against the Company or
any of the Subsidiaries, or to which the Company or any of the Subsidiaries, or
any of their respective properties is subject, that are required by the Act to
be described in the Registration Statement or the Prospectuses but are not
described as required, and there are no agreements, contracts, indentures,
leases or other instruments that are required by the Act to be described in the
Registration Statement or the Prospectuses or required by the Act or the
Exchange Act to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as required by the Act or
the Exchange Act.
(h) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or by-laws, or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries, or in default
in the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
agreement, indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, which default or violation (other than of its
certificate of incorporation or articles of incorporation or by-laws, or other
organizational documents) could reasonably be expected to have a material
adverse effect on the condition (financial or other), business, net worth, or
results of operations of the Company and the Subsidiaries taken as a whole.
(i) Neither the sale of the Shares, the execution,
delivery or performance of this Agreement or the International Underwriting
Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby or thereby (i) requires any consent, approval,
authorization or other order of or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official by or on behalf of the Company (except such as may be required for the
registration of the Underwritten Shares under the Act and compliance with the
securities or Blue Sky laws of various jurisdictions, all of which have been or
will be effected in accordance with this Agreement) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or by-laws, or other
organizational documents, of the Company or any of the Subsidiaries or (ii)
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound, or violates or will violate
any statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiaries or any of their respective
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject.
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<PAGE> 11
(j) The accountants, Price Waterhouse LLP, who have
certified or shall certify the financial statements included or incorporated by
reference in the Registration Statement and the Prospectuses (or any amendment
or supplement thereto) are independent public accountants as required by the
Act.
(k) The consolidated historical and pro forma financial
statements, together with related schedules and notes, set forth in the
Prospectuses and the Registration Statement (and any amendment or supplement
thereto), comply as to form in all material respects with the requirements of
the Act. Such historical financial statements and related schedules and notes
present fairly the consolidated financial position of the Company and the
Subsidiaries at the respective dates indicated and the results of their
operations and their cash flows for the respective periods indicated in
accordance with generally accepted accounting principles ("GAAP") consistently
applied (except as set forth in such financial statements) throughout such
periods. Such pro forma financial statements and related schedules and notes
have been prepared on a basis consistent with such historical statements,
except for the pro forma adjustments specified therein, and give effect to
assumptions made on a reasonable basis and present fairly the historical and
proposed transactions contemplated by the Prospectuses and this Agreement and
the International Underwriting Agreement. The other historical and pro forma
financial and statistical information and data included in the Prospectuses and
the Registration Statement are accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company.
(l) The execution and delivery of, and the performance by
the Company of its obligations under this Agreement and the International
Underwriting Agreement have been duly and validly authorized by the Company,
and each of this Agreement and the International Underwriting Agreement has
been duly executed and delivered by the Company and constitutes the valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that (i) rights to indemnity and contribution
hereunder and under the International Underwriting Agreement may be limited by
federal or state securities laws or by general equitable principles and (ii)
the enforceability of this Agreement and the International Underwriting
Agreement may be limited by the effects of bankruptcy, insolvency,
reorganization, moratorium and other similar laws, relating to or affecting
creditors' rights generally and by the application of general equitable
principles and the discretion of a court in which any proceeding is brought.
(m) Except as disclosed in the Registration Statement and
the Prospectuses (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectuses (or any amendment or supplement thereto),
neither the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any change in the capital
stock, or material increase in the short-term debt or long-term debt, of the
Company or any of the Subsidiaries, or any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
business, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(n) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectuses as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except such as are disclosed in the
Registration Statement and the Prospectuses or in a document filed as an
exhibit to the Registration Statement and all the property described in
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<PAGE> 12
the Prospectuses as being held under lease by each of the Company and each
Subsidiary is held by it under valid, subsisting and enforceable leases.
(o) The Company has not distributed and, prior to the
later to occur of (i) the Closing Date and (ii) completion of the distribution
of the Shares, will not distribute any offering material in connection with
the offering and sale of the Shares other than the Registration Statement, the
Prepricing Prospectuses, the Prospectuses or other materials, if any, permitted
by the Act.
(p) Each of the Company and each Subsidiary has such
permits, licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its properties and to conduct
its business in the manner described in the Prospectuses, subject to such
qualifications as may be set forth in the Prospectuses; the Company and each of
the Subsidiaries has fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set forth in the
Prospectuses; and, except as described in the Prospectuses, none of such
permits contains any restriction that is materially burdensome to the Company
or any of the Subsidiaries.
(q) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(r) To the Company's knowledge, neither the Company nor
any of its Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectuses.
(s) Each of the Company and each Subsidiary has filed all
tax returns required to be filed, which returns are complete and correct, and
neither the Company nor any Subsidiary is in default in the payment of any
taxes which were payable pursuant to said returns or any assessments with
respect thereto.
(t) No holder of any security of the Company has any
right which has not been waived to require registration of shares of Common
Stock or any other security of the Company because of the filing of the
registration statement or consummation of the transactions contemplated by this
Agreement or the International Underwriting Agreement.
(u) The Company and the Subsidiaries own or possess all
patents, trademarks, trademark registration, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectuses as being owned by them or any of them or
necessary for the conduct of their respective businesses, and the Company is
not aware of any claim to the contrary or any challenge by any other person to
the rights of the Company and the Subsidiaries with respect to the foregoing.
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<PAGE> 13
(v) The Company is not now, and after the sale of the
Shares will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(w) There are no labor disputes with the Company's
employees or with employees of the Subsidiaries that exist or, to the Company's
knowledge, are imminent that could materially adversely affect the Company and
the Subsidiaries taken as a whole, and the Company is not aware of any existing
or imminent labor disturbance by any of its or the Subsidiaries' principal
suppliers, contractors or customers that could be expected to materially
adversely affect the condition (financial or other), business, net worth or
results of operations of the Company and the Subsidiaries taken as a whole.
(x) With respect to each employee benefit plan, program
and arrangement (including, without limitation, any "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), maintained or contributed to by the Company or the
Subsidiaries, or with respect to which the Company or the Subsidiaries could
incur any liability under ERISA (collectively, the "Benefit Plans"), no event
has occurred and there exists no condition or set of circumstances in
connection with which the Company or the Subsidiaries could be subject to any
liability under the terms of such Benefit Plan or applicable law (including,
without limitation, ERISA and the Internal Revenue Code of 1986, as amended
(the "Code")) that could materially adversely affect the condition (financial
or other), business, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(y) The Company and the Subsidiaries are (i) (A) in full
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (B) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses, and (C) and are in full compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a material adverse effect on the Company and its Subsidiaries taken as a
whole; (ii) except as disclosed in the Registration Statement and the
Prospectuses, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
threatened release, or disposal of any material (including radiation and
noise), that could form the basis of any claim (whether by a governmental
authority or other person or entity) under Environmental Laws for cleanup
costs, damages, penalties, fines, or otherwise, against any of the Company or
the Subsidiaries, or against any person or entity whose liability for such
claim may have been retained by any of the Company or the Subsidiaries, whether
by contract or law; and (iii) the Company and the Subsidiaries have fully
disclosed to the Underwriters and their counsel all studies, reports,
assessments, audits and other information in their possession or control
relating to any pollution or release, threatened release or disposal of
materials regulated under Environmental Laws on, at, under, from or transported
from any of their currently or formerly owned, leased or operated properties,
including, without limitation, all information relating to underground storage
tanks and asbestos containing materials. Except for the action captioned Delta
Quarries & Disposal, Inc. v. ABC Mack Sales, Inc. et al., with respect to
which a Subsidiary executed a settlement agreement with the plaintiffs in
October 1992, neither the Company nor any of the Subsidiaries has been named as
a "potentially responsible party" under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended ("CERCLA").
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(z) The Company has complied with all provisions of
Florida Statutes,Section 517.075, relating to issuers doing business with
Cuba.
8. Representations and Warranties of the Selling
Stockholders. Each Selling Stockholder, severally and not jointly, represents
and warrants to each Underwriter that:
(a) Such Selling Stockholder now has, and on the Closing
Date and any Option Closing Date will have, valid title to the Shares to be
sold by such Selling Stockholder, free and clear of any lien, claim, security
interest or other encumbrance, including, without limitation, any restriction
on transfer.
(b) Such Selling Stockholder now has, and on the Closing
Date and any Option Closing Date will have, full legal right, power and
authorization, and any approval required by applicable law, to sell, assign,
transfer and deliver such Shares in the manner provided in this Agreement and
in the International Underwriting Agreement and upon delivery of and payment
for such Shares hereunder, the several Underwriters will acquire valid title to
such Shares free and clear of any lien, claim, security interest or other
encumbrance.
(c) This Agreement, the International Underwriting
Agreement and the Custody Agreement have been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder and are the valid and
binding agreements of such Selling Stockholder enforceable against such Selling
Stockholder in accordance with their terms, except as to rights to indemnity
and contribution thereunder may be limited by federal or state securities laws
or the public policy underlying such laws, and subject to the qualification
that the enforceability of the Company's obligations hereunder may be limited
by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium,
and other laws relating to or affecting creditors' rights generally and by
general equitable principles.
(d) Neither the execution and delivery of this Agreement,
the International Underwriting Agreement or the Custody Agreement by or on
behalf of such Selling Stockholder nor the consummation of the transactions
herein or therein contemplated by or on behalf of such Selling Stockholder
requires any consent, approval, authorization or order of, or filing or
registration with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required under the
Act and the Exchange Act or such as may be required under state securities or
Blue Sky laws governing the purchase and distribution of the Shares) or
conflicts or will conflict with or constitutes or will constitute a breach of,
or default under, or violates or will violate, any agreement, indenture or
other instrument to which such Selling Stockholder is a party or by which such
Selling Stockholder is or may be bound or to which any of such Selling
Stockholder's property or assets is subject, or any statute, law, rule,
regulation, ruling, judgment, injunction, order or decree applicable to such
Selling Stockholder or to any property or assets of such Selling Stockholder.
(e) The Registration Statement and the Prospectuses,
insofar as they relate to such Selling Stockholder, do not and will not contain
an untrue material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(f) Such Selling Stockholder has not taken, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares, except for the lock-up
arrangements described in the Prospectuses.
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9. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each of you and each other Underwriter,
each Selling Stockholder, each officer, director, employee, advisor, agent and
partner of each Selling Stockholder and each person, if any, who controls any
Selling Stockholder or any Underwriter within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act (each such person, an "Indemnitee")
(i) from and against any and all losses, claims, damages, liabilities and
expenses whatsoever (including reasonable costs of investigation), joint or
several, to which such Indemnitee may become subject under the Securities Act
or the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any U.S. Prepricing Prospectus or in the Registration Statement or
the U.S. Prospectus or in any amendment or supplement thereto, or arise out of
or are based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the U.S. Prepricing Prospectus or the U.S.
Prospectus or any amendment or supplement thereto, in the light of the
circumstances in which they were made), (ii) from and against any and all
losses, claims, damages, liabilities and expenses whatsoever, as incurred, to
the extent of the aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such settlement
is effected with the written consent of the Company, and (iii) from and against
any and all expenses whatsoever, as incurred (including reasonable fees and
disbursements of counsel chosen by the Indemnitee), reasonably incurred in
investigating, preparing or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) above; provided, however,
that the Company shall not be required to indemnify and hold harmless or
reimburse an Indemnitee to the extent that any such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to such Indemnitee furnished in writing to the Company by or on behalf
of such Indemnitee through you expressly for use in connection therewith;
further provided, however, that the indemnification contained in this paragraph
(a) with respect to any U.S. Prepricing Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Shares by such Underwriter to any person if a copy
of the U.S. Prospectus shall not have been delivered or sent to such person
within the time required by the Act, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
U.S. Prepricing Prospectus was corrected in the U.S. Prospectus, provided that
the Company has delivered the U.S. Prospectus to the several Underwriters in
requisite quantity on a timely basis to permit such delivery or sending. The
foregoing indemnity agreement shall be in addition to any liability which the
Company may otherwise have.
(b) If any action, suit or proceeding shall be brought
against any person (an "indemnified party") in respect of which indemnity may
be sought against any party under paragraph (a), (c) or (d) hereof, such
indemnified party shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties") and, unless in
such indemnified party's reasonable judgment a conflict of interest may exist
between such indemnified party and such indemnifying parties with respect to
such claim, such indemnifying parties shall assume the defense thereof,
including the employment of counsel reasonably acceptable to the indemnified
party and payment of all fees and expenses. Such indemnified party shall have
the right to employ separate counsel in any such action, suit or proceeding and
to participate in the defense thereof,
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<PAGE> 16
but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying parties have agreed in writing to
pay such fees and expenses, (ii) the indemnifying parties have failed to assume
the defense and employ counsel or (iii) the named parties to any such action,
suit or proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying parties and such indemnified party shall
have been advised by its counsel that representation of such indemnified party
and any indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying
parties shall not have the right to assume the defense of such action, suit or
proceeding on behalf of such indemnified party). It is understood, however,
that the indemnifying parties shall, in connection with any one such action,
suit or proceeding or separate but substantially similar or related actions,
suits or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
only one separate firm of attorneys (in addition to any local counsel) at any
time for all such indemnified parties not having actual or potential differing
interests among themselves, which firm shall be designated in writing by such
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. The indemnifying parties shall not be liable for any
settlement of any such action, suit or proceeding effected without their
written consent (which consent shall not be unreasonably withheld), but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the indemnifying parties
agree to indemnify and hold harmless any indemnified party, to the extent
provided in the preceding paragraph, from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
(c) Each Selling Stockholder agrees, severally and not
jointly, to indemnify and hold harmless each of you and each other Underwriter,
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, the Company, its directors,
advisors, agents, officers and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act (each such person, a "Selling Stockholder Indemnitee"), each to the same
extent as the foregoing indemnity from the Company to each Indemnitee pursuant
to paragraph (a) above, against all losses, claims, damages, liabilities or
expenses to which any such Selling Stockholder Indemnitee may become subject,
under the Securities Act or the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based on any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
U.S. Prepricing Prospectus or the U.S. Prospectus or in any amendment or
supplement thereto, or arise out of or are based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
U.S. Prepricing Prospectus or the U.S. Prospectus or any amendment or
supplement thereto, in the light of the circumstances in which they were made),
or in each case to the extent, but only to the extent, that such untrue
statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, the U.S. Prepricing Prospectus or the U.S. Prospectus,
or any amendment or supplement thereto. If any action, suit or proceeding
shall be brought against any Selling Stockholder Indemnitee in respect of which
indemnity may be sought against any Selling Stockholder pursuant to this
paragraph (c), such Selling Stockholder shall have the rights and duties given
to the indemnifying parties by paragraph (b) above (except that if the Company
shall have assumed the defense thereof, such Selling Stockholder shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at such
Selling Stockholder's expense), and each Selling Stockholder Indemnitee shall
have the rights and duties given
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<PAGE> 17
to the indemnified party by paragraph (b) of this Section 9. The foregoing
indemnity agreement shall be in addition to any liability which any Selling
Stockholder may otherwise have.
(d) Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, each Selling Stockholder and their
respective directors, officers, employees and agents, and any person who
controls the Company or such Selling Stockholder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company and the Selling Stockholders to each
Underwriter, but only with respect to information relating to such Underwriter
furnished in writing by or on behalf of such Underwriter through you expressly
for use in the Registration Statement, the U.S. Prospectus or any U.S.
Prepricing Prospectus, or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against the Company, any directors,
officers, employees or agents of the Company or any Selling Stockholder, or any
such controlling person based on the Registration Statement, the U.S.
Prospectus or the U.S. Prepricing Prospectus, or any amendment or supplement
thereto, and in respect of which indemnity may be sought against any
Underwriter pursuant to this paragraph (d), such Underwriter shall have the
rights and duties given to the indemnifying parties by paragraph (b) above
(except that if the Company or the Selling Stockholders shall have assumed the
defense thereof, such Underwriter shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof, but the
fees and expenses of such counsel shall be at such Underwriter's expense), and
the Company, the directors, officers, employees and agents of the Company or
any Selling Stockholder and any such controlling person shall have the rights
and duties given to the indemnified party by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which any
Underwriter may otherwise have.
(e) If the indemnification provided for in this Section 9
is unavailable to an indemnified party under paragraph (a), (c) or (d) above
(other than by reason of the exceptions provided therein) in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative benefits received by each party from the
offering of the Shares and the relative fault of each party in connection with
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page
of the U.S. Prospectus; provided that, in the event that the Underwriters shall
have purchased any Additional Shares hereunder, any determination of the
relative benefits received by the Company and the Selling Stockholders or the
Underwriters from the offering of the Shares shall include the net proceeds
(before deducting expenses) received by the Company and the Selling
Stockholders, and the underwriting discounts and commissions received by the
Underwriters, from the sale of such Additional Shares. The relative fault of
each party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
such party and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, no Selling Stockholder will be required to
contribute any amount in excess of the amount such Selling Stockholder would
have been required to pay an indemnified party if the indemnification provided
for in Section 9(c) were available.
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(f) The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by a pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in paragraph (e) above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities and
expenses referred to in paragraph (a), (c) or (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Shares underwritten by it and distributed to the public exceeds
the amount of any damages which such Underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 9 are several in proportion
to the respective numbers of Firm Shares set forth opposite their names in
Schedule II hereto (or such numbers of Firm Shares increased as set forth in
Section 13 hereof) and not joint.
(g) No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or contribution
under this Section 9 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred.
The indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholders set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers,
or the Selling Stockholders or any person controlling the Company (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
9.
10. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto or any Abbreviated Registration Statement to be declared
effective before the offering of the Shares may commence, the Registration
Statement or such post-effective amendment or any Abbreviated Registration
Statement shall have become effective not later than 5:30 P.M., New York City
time, on the date hereof, or at such later date and time as shall be consented
to in writing by you, and all filings, if any, required by Rules 424 and 430A
under the Act shall have been timely made; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding
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for that purpose shall have been instituted or, to the knowledge of the Company
or any Underwriter, threatened by the Commission, and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectuses or otherwise) shall have been complied with to
your satisfaction.
(b) Subsequent to the effective date of this Agreement,
there shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectuses, which in your opinion, as
Representatives of the several Underwriters, would materially adversely affect
the market for the Shares, or (ii) any event or development relating to or
involving the Company or any executive officer or director of the Company or
any Selling Stockholder which makes any statement made in the Prospectuses
untrue in any material respect or which, in the opinion of the Company and its
counsel or the Underwriters and their counsel, requires the making of any
addition to or change in the Prospectuses in order to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, if amending or supplementing the Prospectuses to reflect such event
or development would, in your opinion, as Representatives of the several
Underwriters, materially adversely affect the market for the Shares.
(c) You shall have received on the Closing Date, an
opinion of and a letter from Shaw, Pittman, Potts & Trowbridge, counsel to the
Company, dated the Closing Date and addressed to you, as Representatives of the
several Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectuses (and any amendment or
supplement thereto), and is duly qualified or licensed to conduct its
business as a foreign corporation and is in good standing in the State
of Maryland;
(ii) JP Foodservice Distributors, Inc. ("JP") is a
corporation validly existing and in good standing under the laws of
the State of Delaware with full corporate power and authority to own,
lease, and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectuses (and any
amendment or supplement thereto); and all of the outstanding shares of
capital stock of JP are owned by the Company directly, or indirectly
through one of the other Subsidiaries, free and clear of any perfected
security interest, or, to the best knowledge of such counsel after
reasonable inquiry, any other security interest, lien, adverse claim,
equity or other encumbrance. Based upon such counsel's review of the
capital stock records of Sky Bros., Inc. and Illinois Fruit & Produce
Corp., all of the outstanding shares of capital stock of such
corporation are owned indirectly through subsidiaries of the Company;
(iii) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable. The authorized and outstanding capital stock
of the Company is as set forth under the caption "Capitalization" in
the Prospectuses;
(iv) The Shares have been duly authorized, validly issued,
fully paid and are nonassessable and free of any preemptive rights
under the General Corporation Law of the State of Delaware. To such
counsel's knowledge, except as described in the Prospectuses, (i)
there are no outstanding options, warrants or other rights calling for
the issuance of, or any commitment, plan or arrangement to issue,
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<PAGE> 20
any shares of capital stock of the Company or any security convertible
into or exchangeable or exercisable for capital stock of the Company
and (ii) no holder of any security of the Company or any other person
has the right, contractual or otherwise, to cause the Company to
permit them to underwrite the sale of, the Shares or the right to have
any shares of Common Stock or other securities of the Company included
in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act
of any shares of Common Stock or other securities of the Company;
(v) The form of certificates for the Shares conforms to
the requirements of the Delaware General Corporation Law;
(vi) The Registration Statement and all post-effective
amendments, if any, or any Abbreviated Registration Statement have
become effective under the Act and, to such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose are pending before
or contemplated by the Commission. Any required filing of the
Prospectuses pursuant to Rule 424(b) has been made in accordance with
Rule 424(b);
(vii) The Company has the corporate power and authority to
enter into this Agreement and this Agreement has been duly authorized,
executed and delivered by the Company;
(viii) The offer, sale and delivery of the Shares pursuant
to this Agreement (i) do not conflict with and do not and will not
constitute a breach of, or a default under, the certificate of
incorporation or bylaws of the Company or JP or any agreement,
indenture, lease or other instrument to which the Company or JP is a
party or by which either of them or any of their respective properties
is filed as an exhibit to the Registration Statement or to any
Incorporated Document, or which is otherwise known to such counsel,
(ii) do not result and will not result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or JP and (iii) do not result and will not result in any
violation by the Company of (A) any existing law, regulation, ruling
(assuming compliance with all applicable state securities and Blue Sky
laws), in each case that in the experience of such counsel are
normally applicable to transactions provided for in this Agreement, or
(B) any judgment, injunction, order or decree known to such counsel,
applicable to the Company, JP or any of their respective properties;
(ix) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official
is required on the part of the Company (except as have been obtained
under the Act and the Exchange Act or such as may be required under
state securities or Blue Sky laws governing the purchase and
distribution of the Shares) for the valid sale of the Shares to the
Underwriters as contemplated by this Agreement;
(x) The Registration Statement and the Prospectuses and
any supplements or amendments thereto (except for the financial
statements and the notes thereto and the schedules and other financial
and statistical data included therein, as to which such counsel need
not express any opinion) comply as to form in all material respects
with the requirements of the Act; and each of the Incorporated
Documents (except for the financial statements and the notes thereto
and the schedules and other financial and statistical data included
therein, as to which counsel need not express any opinion)
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<PAGE> 21
complies as to form in all material respects with the Exchange Act and
the rules and regulations of the Commission thereunder;
(xi) To such counsel's knowledge, (A) there are no legal
or governmental proceedings pending or threatened against the Company
or any of the Subsidiaries, or to which the Company, any of the
Subsidiaries or any of their respective properties, is subject which
are required to be described in the Registration Statement or
Prospectuses (or any amendment or supplement thereto) that are not
described as required by the Act and (B) there are no agreements,
contracts, indentures, leases or other instruments, that are required
to be described in the Registration Statement or the Prospectuses (or
any amendment or supplement thereto) or to be filed as an exhibit to
the Registration Statement or any Incorporated Document that are not
described or filed as required by the Act or the Exchange Act, as the
case may be;
(xii) The statements in the Registration Statement and
Prospectuses, insofar as they constitute statements of law or legal
conclusions, are accurate in all material respects;
(xiii) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and
does not assume any responsibility for, the accuracy or completeness
of the statements in the Registration Statement, such counsel has
participated in the preparation of the Registration Statement and the
Prospectuses, including review and discussion of the contents thereof
(including review and discussion of the contents of all Incorporated
Documents), and nothing has come to the attention of such counsel that
has caused them to believe that the Registration Statement (including
the Incorporated Documents) at the time the Registration Statement
became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectuses or any amendment or supplement thereto, as of its
respective date, and as of the Closing Date or the Option Closing
Date, as the case may be, contained any untrue statement of a material
fact or omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading (it being understood that such counsel
need express no opinion with respect to the financial statements and
the notes thereto and the schedules and other financial and
statistical data included in the Registration Statement or the
Prospectuses or any Incorporated Document).
In rendering their opinion as aforesaid, such counsel may rely
upon an opinion or opinions, each dated the Closing Date, of other counsel
retained by them or the Company as to laws of any jurisdiction other than the
United States or the State of Maryland, provided that (1) each such local
counsel is acceptable to the Representatives, (2) such reliance is expressly
authorized by each opinion so relied upon and a copy of each such opinion is
delivered to the Representatives and is, in form and substance satisfactory to
them and their counsel, and (3) counsel shall state in their opinion that they
believe that they and the Underwriters are justified in relying thereon.
(d) (i) You shall have received on the Closing Date an
opinion from Skadden, Arps, Slate, Meagher & Flom, counsel to the Sara Lee
Selling Stockholders, and from corporate counsel to the Sara Lee Selling
Stockholders, dated the Closing Date and addressed to you, as Representatives
of the several Underwriters, with respect to the Sara Lee Selling Stockholders,
to the effect that:
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<PAGE> 22
(A) Each Sara Lee Selling Stockholder has the requisite
corporate power and authority to enter into this Agreement and
to sell and deliver the Shares to be sold by such Sara Lee
Selling Stockholder under this Agreement;
(B) This Agreement has been duly authorized, executed and
delivered by or on behalf of each Sara Lee Selling Stockholder
and constitutes the valid and binding obligation of such Sara
Lee Selling Stockholder;
(C) The execution and delivery of this Agreement and the
sale of the Shares by each Sara Lee Selling Stockholder to the
Underwriters, and compliance by such Sara Lee Selling
Stockholder with the terms of this Agreement, including the
delivery to the Underwriters of certificates evidencing such
Shares and the execution and delivery to the Underwriters of a
stock power in blank, have been duly authorized by all
necessary action on the part of such Sara Lee Selling
Stockholder and do not, and will not, result in a violation of
the certificate of incorporation and bylaws or comparable
constitutional documents of such Sara Lee Selling Stockholder,
and do not, and will not, conflict with, or result in a breach
of any of the terms and provisions of, or constitute a default
under (I) any statute, rule or regulation relating to such
Sara Lee Selling Stockholder or its legal or regulatory status
in each case, that in the experience of such counsel are
normally applicable to transactions of the type provided for
in this Agreement, (II) any material judgment, order, rule,
injunction or regulation of any court or governmental agency
or body, domestic or foreign, having jurisdiction over such
Sara Lee Selling Stockholder or any of its respective
properties or (III) any material contract, agreement or other
instrument to which such Sara Lee Selling Stockholder is a
party or by which it or any of its properties are subject;
(D) Upon consummation of the sale of the Shares pursuant
to this Agreement, assuming the Underwriters purchased the
Shares for value, in good faith and without notice of adverse
claim, the Underwriters will have acquired all rights of the
Sara Lee Selling Stockholder in the Shares free and clear of
any security interest, mortgage, lien, pledge, encumbrance,
claim or equity, and the owner of the Shares, if other than
such Sara Lee Selling Stockholder, is precluded from asserting
against the Underwriters the ineffectiveness of any
unauthorized endorsement.
(ii) You shall have received on the Closing Date an opinion
from Alden Tueller, Esq., counsel to the Mark and Linda Zobrist Charitable
Remainder Annuity Trust (the "Trust"), dated the Closing Date and addressed to
you, as Representatives of the several Underwriters, with respect to the Trust,
to the effect that:
(A) The Trust has the requisite corporate power and
authority to enter into this Agreement and to sell and deliver
the Shares to be sold by the Trust under this Agreement;
(B) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Trust and constitutes the
valid and binding obligation of the Trust;
(C) The execution and delivery of this Agreement and the
sale of the Shares by the Trust to the Underwriters, and
compliance by the Trust with the terms of this Agreement,
including the delivery to the Underwriters of certificates
evidencing such Shares and the execution and delivery to the
Underwriters of a stock power in blank, have been duly
authorized by all
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<PAGE> 23
necessary action on the part of the Trust and do not, and will
not, result in a violation of the certificate of incorporation
and bylaws or comparable constitutional documents of the
Trust, if any, and do not, and will not, conflict with, or
result in a breach of any of the terms and provisions of, or
constitute a default under (I) any statute, rule or regulation
relating to such party or its legal or regulatory status, in
each case that in the experience of such counsel are normally
applicable to transactions of the type provided for in this
Agreement, (II) any material judgment, order, rule, injunction
or regulation of any court or governmental agency or body,
domestic or foreign, having jurisdiction over the Trust or any
of its respective properties or (III) any material contract,
agreement or other instrument to which the Trust is a party or
by which it or any of its properties are subject;
(D) Upon consummation of the sale of the Shares pursuant
to this Agreement, assuming the Underwriters purchased the
Shares for value, in good faith and without notice of adverse
claim, the Underwriters will have acquired all rights of the
Trust in the Shares free and clear of any security interest,
mortgage, lien, pledge, encumbrance, claim or equity, and the
owner of the Shares, if other than the Trust, is precluded
from asserting against the Underwriters the ineffectiveness of
any unauthorized endorsement.
(iii) You shall have received on the Closing Date an opinion
from Carlsmith Ball Wichman Murray Case & Ichiki, counsel to the Selling
Stockholders denoted by an asterisk in Schedule I hereto (the "Individual
Selling Stockholders"), dated the Closing Date and addressed to you, as
Representatives of the several Underwriters, with respect to each of the
Individual Selling Stockholders, to the effect that:
(A) To the best of our knowledge, the execution
and delivery of this Agreement and the sale of the Shares by
the Individual Selling Stockholder to the Underwriters, and
compliance by the Individual Selling Stockholder with the
terms of this Agreement, including the delivery to the
Underwriters of certificates evidencing such Shares and the
execution and delivery to the Underwriters of a stock power in
blank, will not, conflict with, or result in a breach of any
of the terms and provisions of, or constitute a default under
(I) any statute, rule or regulation relating to the Individual
Selling Stockholder or its legal or regulatory status, in each
case that in the experience of such counsel are normally
applicable to transactions of the type provided for in this
Agreement, (II) any material judgment, order, rule, injunction
or regulation of any court or governmental agency or body,
domestic or foreign, having jurisdiction over the Individual
Selling Stockholder or any of its respective properties or
(III) any material contract, agreement or other instrument to
which the Individual Selling Stockholder is a party or by
which it or any of its properties are subject;
(B) Upon consummation of the sale of the Shares pursuant
to this Agreement, assuming the Underwriters purchased the
Shares for value, in good faith and without notice of adverse
claim, the Underwriters will have acquired all rights of the
Individual Selling Stockholder in the Shares free and clear
of any security interest, mortgage, lien, pledge, encumbrance,
claim or equity, and the owner of the Shares, if other than
such Individual Selling Stockholder, is precluded from
asserting against the Underwriters the ineffectiveness of any
unauthorized endorsement.
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<PAGE> 24
(e) You shall have received on the Closing Date an
opinion of Wachtell, Lipton, Rosen & Katz, counsel for the Underwriters, dated
the Closing Date and addressed to you, as Representatives of the several
Underwriters, with respect to such matters as you may request.
(f) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Price Waterhouse LLP, independent certified public
accountants, substantially in the forms heretofore approved by you and of a
form satisfactory to Price Waterhouse LLP.
(g) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there
shall not have been any change in the capital stock of the Company nor any
material increase in the short-term or long-term debt of the Company (other
than in the ordinary course of business) from that set forth or contemplated in
the Registration Statement or the Prospectuses (or any amendment or supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectuses
(or any amendment or supplement thereto), except as may otherwise be stated in
the Registration Statement and the Prospectuses (or any amendment or supplement
thereto), any material adverse change in the condition (financial or other),
business, prospects, properties, net worth or results of operations of the
Company and the Subsidiaries taken as a whole; (iv) the Company and the
Subsidiaries shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Company and the Subsidiaries taken as a whole, other than those
reflected in the Registration Statement or the Prospectuses (or any amendment
or supplement thereto); and (v) all the representations and warranties of the
Company contained in this Agreement shall be true and correct on and as of the
date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate, dated the Closing Date
and signed by the chief executive officer and the chief financial officer of
the Company (or such other officers as are acceptable to you), to the effect
set forth in this Section 10(g) and in Section 10(h) hereof.
(h) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements contained
in this Agreement or in the International Underwriting Agreement and required
to be performed or complied with by it hereunder at or prior to the Closing
Date.
(i) All the several representations and warranties of the
Selling Stockholders contained in this Agreement or in the International
Underwriting Agreement shall be true and correct on and as of the date hereof
and on and as of the Closing Date as if made on and as of the Closing Date, and
you shall have received a certificate, dated the Closing Date and signed by or
on behalf of each of the Selling Stockholders to the effect set forth in this
Section 10(i) and in Section 10(j) hereof.
(j) The Selling Stockholders shall not have failed at or
prior to the Closing Date to have performed or complied with any of their
agreements contained in this Agreement or in the International Underwriting
Agreement and required to be performed or complied with by them at or prior to
the Closing Date.
(k) The closing under the International Underwriting
Agreement shall have occurred on the Closing Date concurrently with the Closing
hereunder.
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<PAGE> 25
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the
Company or any Attorney-in-Fact or any Selling Stockholder and delivered to
you, as Representatives of the Underwriters, or to counsel for the
Underwriters, shall be deemed a representation and warranty by the Company, the
Selling Stockholders or the particular Selling Stockholder, as the case may be,
to each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase
Additional Shares are subject to the satisfaction on and as of any Option
Closing Date of the conditions set forth in this Section 10, except that, if
any Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (i) shall be dated
the Option Closing Date in question and the opinions called for by paragraphs
(c), (d) and (e) shall be revised to reflect the sale of Additional Shares.
11. Expenses. The Company agrees to pay the following
costs and expenses and all other costs and expenses incident to the performance
by them of their obligations hereunder: (i) the preparation, printing or
reproduction, and filing with the Commission of the registration statement
(including financial statements and exhibits thereto), each of the Prepricing
Prospectuses, the Prospectuses, and each amendment or supplement to any of
them; (ii) the printing (or reproduction) and delivery (including postage, air
freight charges and charges for counting and packaging) of such copies of the
registration statement, each U.S. Prepricing Prospectus, the U.S. Prospectus,
the Incorporated Documents, and all amendments or supplements to any of them,
as may be reasonably requested by the Selling Stockholders or the Underwriters
for use in connection with the offering and sale of the Shares; (iii) the
preparation, printing, authentication, issuance and delivery of certificates
for the Shares; (iv) the printing (or reproduction) and delivery of this
Agreement, the International Underwriting Agreement, the Supplemental Agreement
Among U.S. Underwriters, the Agreement Among Managers, the Agreement Between
U.S. Underwriters and Managers, the International Selling Agreement, the
Manager's Questionnaire, the preliminary and supplemental Blue Sky Memoranda
and all other agreements, memoranda, correspondence or documents printed (or
reproduced) and delivered in connection with the offering of the Underwritten
Shares; (v) the registration or qualification of the Shares for offer and sale
under the securities or Blue Sky laws of the several states as provided in
Section 5(g) hereof (including reasonable fees, expenses and disbursements of
counsel for the Underwriters and Managers relating thereto); (vi) the filing
fees and the fees and expenses of counsel for the Underwriters in connection
with any filings required to be made with the National Association of
Securities Dealers, Inc.; (vii) the transportation and other expenses incurred
by or on behalf of Company representatives in connection with presentations to
prospective purchasers of the Shares; (viii) the fees and disbursements of the
Company's accountants and legal counsel; and (ix) the reasonable fees and
expenses of Skadden, Arps, Slate, Meagher & Flom, counsel to the Sara Lee
Selling Stockholders.
Each Selling Stockholder shall pay and bear all expenses
incurred incident to the delivery of the Shares sold by such Selling
Stockholder, including any stock transfer taxes payable upon the sale of such
shares to the purchaser thereof.
12. Limitation of Liability. The total liabilities of
each Selling Stockholder under this Agreement, including without limitation
any liabilities for breach of representation or warranty or with respect to any
obligation of indemnity, shall not in any event exceed in aggregate amount the
proceeds of the Shares sold hereunder by such Selling Stockholder, provided
that this Section 12 shall not limit the liability of
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<PAGE> 26
the Selling Stockholders to pay expenses required to be paid by the Selling
Stockholders pursuant to Section 11 hereof.
13. Effective Date of Agreement. This Agreement shall
become effective: (i) upon the execution and delivery hereof by the parties
hereto; or (ii) if, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company or the Selling Stockholders, by notifying you, or by you, as
Representatives of the several Underwriters, by notifying the Company and the
Selling Stockholders.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters
are obligated to purchase on the Closing Date, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number of Firm
Shares set forth opposite its name in Schedule II hereto bears to the aggregate
number of Firm Shares set forth opposite the names of all non-defaulting
Underwriters or in such other proportion as you may specify in accordance with
Section 20 of the Master Agreement Among Underwriters of Smith Barney Inc., to
purchase the Shares which such defaulting Underwriter or Underwriters are
obligated, but fail or refuse, to purchase. If any one or more of the
Underwriters shall fail or refuse to purchase Shares which it or they are
obligated to purchase on the Closing Date and the aggregate number of Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated to purchase on
the Closing Date and arrangements satisfactory to you, the Company and the
Selling Stockholders for the purchase of such Shares by one or more
non-defaulting Underwriters or other party or parties approved by you, the
Company and the Selling Stockholders are not made within 36 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders. In any
such case which does not result in termination of this Agreement, either you,
the Company or the Selling Stockholders shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any such default of any such Underwriter under this Agreement. The
term "Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule II hereto who, with your approval
and the approval of the Company and the Selling Stockholders, purchases Shares
which a defaulting Underwriter is obligated, but fails or refuses, to purchase.
Any notice under this Section 13 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.
14. Termination of Agreement. This Agreement shall be
subject to termination in your absolute discretion, without liability on the
part of any Underwriter to the Company or any Selling Stockholder, by notice to
the Company and the Sara Lee Selling Stockholders, if, prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares to be purchased on such Option Closing Date),
as the case may be, (i) trading in securities generally on the New York Stock
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<PAGE> 27
Exchange, the American Stock Exchange or the Nasdaq National Market shall have
been suspended or materially limited, (ii) a general moratorium on commercial
banking activities in New York or Maryland shall have been declared by either
federal or state authorities, or (iii) there shall have occurred any outbreak
or escalation of hostilities or other international or domestic calamity,
crisis or change in political, financial or economic conditions, the effect of
which on the financial markets of the United States is such as to make it, in
your judgment, impracticable or inadvisable to commence or continue the
offering of the Shares at the offering price to the public set forth on the
cover page of the U.S. Prospectus or to enforce contracts for the resale of the
Shares by the Underwriters. Notice of such termination may be given by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
15. Information Furnished by the Underwriters and the
Selling Stockholders. The statements set forth in the last paragraph on the
cover page, the legends on the inside cover page, and the statements in the
first, second, fourth and fourteenth paragraphs under the caption
"Underwriting" in any U.S. Prepricing Prospectus and in the U.S. Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections 7(b) and 9 hereof.
The information set forth in the Prospectuses under the
caption "Selling Stockholders" which specifically relates to the Selling
Stockholders constitutes the only information furnished by or on behalf of the
Selling Stockholders as such information is referred to in Sections 7(b) and 9
hereof.
16. Miscellaneous. Except as otherwise provided in
Sections 5, 13 and 14 hereof, notice given pursuant to any provision of this
Agreement shall be in writing and shall be delivered (i) if to the Company, at
the office of the Company at JP Foodservice, Inc., 9830 Patuxent Woods Drive,
Columbia, MD 21046, Attention: Lewis Hay III, Senior Vice President and Chief
Financial Officer; or (ii) if to the Individual Selling Stockholders, at
Carlsmith Ball Wichman Murray Case & Ichiki, 555 South Flower Street, 25th
Floor, Los Angeles, CA 90007-2326 Attention: Randolph G. Muhlestein, Esq.; or
(iii) if to the Trust, at 8355 South Austrian Way, Salt Lake City, UT 84121,
Attention: E. Mark Zobrist; or (iv) if to the Sara Lee Selling Stockholders,
at Skadden, Arps, Slate, Meagher & Flom, 333 West Wacker Drive, Chicago, IL
60606, Attention: Brian W. Duwe, Esq.; or (v) if to you, as Representatives of
the several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013, Attention: Manager, Investment Banking Division. Notices
to Sara Lee Corporation shall be deemed duly given if provided as required
pursuant to this Section.
By the signature of its executive officer below, Sara Lee
Corporation confirms the representations, warranties and agreements of its
wholly owned subsidiary, Sara Lee Foodservice Holdings, Inc., contained herein.
This Agreement has been and is made solely for the benefit of
the several Underwriters, the Company, the Selling Stockholders, the directors,
officers, agents, employees and advisors of the Company and the Selling
Stockholders, and the other controlling persons referred to in Section 9
hereof, and their respective successors and assigns, to the extent provided
herein, and no other person shall acquire or have any right under or by virtue
of this Agreement. Neither the term "successor" nor the term "successors and
assigns" as used in this Agreement shall include a purchaser from any
Underwriter of any of the Shares in his status as such purchaser.
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<PAGE> 28
17. Applicable Law; Counterparts. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York applicable to contracts made and to be performed within the State of New
York.
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.
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<PAGE> 29
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Selling Stockholders and the several
Underwriters.
Very truly yours,
JP Foodservice, Inc.
By ____________________________
Name:
Title:
Each of the Selling Stockholders
named in Schedule I hereto
By ____________________________
Attorney-in-Fact
By ____________________________
Attorney-in-Fact
Sara Lee Corporation
By ____________________________
Name:
Title:
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<PAGE> 30
Confirmed as of the date first above mentioned on behalf of
themselves and the other several Underwriters named in
Schedule II hereto.
SMITH BARNEY INC.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO. INCORPORATED
THE ROBINSON - HUMPHREY COMPANY, INC.
RODMAN & RENSHAW, INC.
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By ____________________________
Name:
Title:
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<PAGE> 31
SCHEDULE I
JP FOODSERVICE, INC.
Part A - Firm Shares
<TABLE>
<CAPTION>
Number of
Selling Stockholders Firm Shares
-------------------- -----------
<S> <C>
Sara Lee Foodservice Holdings, Inc. 5,138,210
Sara Lee Foundation 323,988
Richard D. Zobrist* 32,344
Mark and Linda Zobrist Charitable
Remainder Annuity Trust
E. Mark Zobrist* 67,496
---------
Total........... 4,560,000
</TABLE>
Part B - Additional Shares
_________
<TABLE>
<CAPTION>
Number of
Selling Stockholders Additional Shares
-------------------- -----------------
<S> <C>
Sara Lee Foundation
Richard D. Zobrist*
Mark and Linda Zobrist Charitable
Remainder Annuity Trust
E. Mark Zobrist*
---------
Total.......... 709,028
</TABLE>
-31-
<PAGE> 32
SCHEDULE II
JP FOODSERVICE, INC.
<TABLE>
<CAPTION>
Number of Number of
Underwriter Firm Shares Additional Shares
----------- ----------- -----------------
<S> <C> <C>
Smith Barney Inc.
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
The Robinson-Humphrey Company, Inc.
Rodman & Renshaw, Inc.
Total .......................... 4,560,000 709,028
</TABLE>
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<PAGE> 33
SCHEDULE III
JP FOODSERVICE, INC.
James L. Miller
Lewis Hay, III
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<PAGE> 1
EXHIBIT 1.2
1,140,000 Shares
JP Foodservice, Inc.
Common Stock
FORM OF INTERNATIONAL UNDERWRITING AGREEMENT
November 21, 1996
SMITH BARNEY INC.
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY & CO. INTERNATIONAL
THE ROBINSON-HUMPHREY COMPANY, INC.
As Lead Managers for the Several Managers
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
The persons named in Schedule I hereto (the "Selling
Stockholders") propose to sell an aggregate of 1,140,000 shares of common
stock, par value $0.01 per share ("Common Stock"), of JP Foodservice, Inc., a
Delaware corporation (the "Company"), to the several Managers named in Schedule
II hereto (the "Managers") for whom Smith Barney Inc., Goldman Sachs
International, Morgan Stanley & Co. International and The Robinson-Humphrey
Company, Inc. are acting as lead managers (the "Lead Managers"). The 1,140,000
shares of Common Stock to be sold to the Managers by the Selling Stockholders
are hereinafter referred to as the "Shares."
It is understood that the Company and the Selling Stockholders
are concurrently entering into a U.S. Underwriting Agreement, dated the date
hereof (the "U.S. Underwriting Agreement"), providing for the sale by the
Selling Stockholders of 4,560,000 shares of the Common Stock (the "Firm U.S.
Shares") (plus an option granted by certain of the Selling Stockholders to
purchase up to an additional 709,028 shares of Common Stock (the "Additional
Shares") solely for the purpose of covering over-allotments) through
arrangements with certain underwriters in the United States and Canada (the
"U.S. Underwriters"), for whom Smith Barney Inc., Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated, The Robinson-Humphrey Company, Inc. and Rodman &
Renshaw, Inc. are acting as representatives (the "Representatives"). All
shares of Common Stock proposed to be offered to U.S. Underwriters pursuant to
the U.S. Underwriting Agreement, including the Firm U.S. Shares and the
Additional Shares, are herein called the "U.S. Shares"; the U.S. Shares and the
Shares, collectively, are herein called the "Underwritten Shares."
<PAGE> 2
The Company and the Selling Stockholders also understand that
the Lead Managers and the Representatives have entered into an agreement (the
"Agreement Between U.S. Underwriters and Managers") contemplating the
coordination of certain transactions between the Managers and the U.S.
Underwriters and that, pursuant thereto and subject to the conditions set forth
therein, the Managers may purchase from the U.S. Underwriters a portion of the
U.S. Shares or sell to the Managers a portion of the Shares. The Company and
the Selling Stockholders understand that any such purchases and sales between
the Managers and the U.S. Underwriters shall be governed by the Agreement
Between U.S. Underwriters and Managers and shall not be governed by the terms
of this Agreement or the U.S. Underwriting Agreement.
The Company and the Selling Stockholders wish to confirm as
follows their respective agreements with you, in connection with the several
purchases of the Shares by the Managers.
1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 under the Act
(the "registration statement"), including prospectuses subject to completion,
relating to the Underwritten Shares. The term "Registration Statement" as used
in this Agreement means the registration statement (including all financial
schedules and exhibits), as amended at the time it becomes effective, or, if
the registration statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of this Agreement.
If it is contemplated, at the time this Agreement is executed, that a
post-effective amendment to the registration statement will be filed and must
be declared effective before the offering of the Shares may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. If an abbreviated
registration statement is prepared and filed with the Commission in accordance
with Rule 462(b) under the Act (an "Abbreviated Registration Statement"), the
term "Registration Statement" as used in this Agreement includes the
Abbreviated Registration Statement. The term "Prospectuses" as used in this
Agreement means the prospectuses in the forms included in the Registration
Statement, or, if the prospectuses included in the Registration Statement omit
information in reliance on Rule 430A under the Act and such information is
included in prospectuses filed with the Commission pursuant to Rule 424(b)
under the Act, the term "Prospectuses" as used in this Agreement means the
prospectuses in the forms included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectuses filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectuses" as used in this Agreement means the prospectuses
subject to completion in the forms included in the registration statement at
the time of the initial filing of the registration statement with the
Commission, and as such prospectuses shall have been amended from time to time
prior to the date of the Prospectuses. Any reference in this Agreement to the
registration statement, the Registration Statement, any Prepricing Prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of the registration statement, the Registration Statement,
such Prepricing Prospectus or the Prospectus, as the case may be, and any
reference to any amendment or supplement to the registration statement, the
Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Exchange Act") which, upon
filing, are incorporated by reference therein, as required by paragraph (b) of
Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means
the documents which at the time are incorporated by reference in the
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registration statement, the Registration Statement, any Prepricing Prospectus,
the Prospectus, or any amendment or supplement thereto.
It is understood that two forms of Prepricing Prospectus and
two forms of Prospectus are to be used in connection with the offering and sale
of the Underwritten Shares: a Prepricing Prospectus and a Prospectus relating
to the U.S. Shares that are to be offered and sold in the United States (as
defined herein) or Canada (as defined herein) or to U.S. or Canadian Persons
(the "U.S. Prepricing Prospectus" and the "U.S. Prospectus," respectively), and
a Prepricing Prospectus and a Prospectus relating to the Shares which are to be
offered and sold outside the United States or Canada to persons other than U.S.
or Canadian Persons (the "International Prepricing Prospectus" and the
"International Prospectus," respectively). The U.S. Prospectus and the
International Prospectus are herein collectively called the "Prospectuses," and
the U.S. Prepricing Prospectus and the International Prepricing Prospectus are
herein called the "Prepricing Prospectuses." For purposes of this Agreement:
"U.S. or Canadian Person" means any resident or national of the United States
or Canada, any corporation, partnership or other entity created or organized in
or under the laws of the United States or Canada or any estate or trust the
income of which is subject to United States or Canadian income taxation
regardless of the source of its income (other than the foreign branch of any
U.S. or Canadian Person), and includes any United States or Canadian branch of
a person other than a U.S. or Canadian Person; "United States" means the United
States of America (including the states thereof and the District of Columbia)
and its territories, its possessions and other areas subject to its
jurisdiction; and "Canada" means Canada and its territories, its possessions
and other areas subject to its jurisdiction.
2. Agreements to Sell and Purchase. Subject to such
adjustments as you may determine to avoid fractional shares, each Selling
Stockholder agrees, subject to all the terms and conditions set forth herein,
to sell to each Manager and, upon the basis of the representations, warranties
and agreements of the Company and the Selling Stockholders herein contained and
subject to all the terms and conditions set forth herein, each Manager agrees,
severally and not jointly, to purchase from each Selling Stockholder, at a
purchase price of $__ per share (the "purchase price per share"), the number of
Shares that bears the same proportion to the number of Shares set forth
opposite the name of such Selling Stockholder in Schedule I hereto as the
number of Shares set forth opposite the name of such Manager in Schedule II
hereto (or such number of Shares increased as set forth in Section 13 hereof)
bears to the aggregate number of Shares to be sold by the Selling Stockholders.
Certificates in transferable form for the Shares that each of
the Selling Stockholders agrees to sell pursuant to this Agreement have been
placed in custody with The Bank of New York (the "Custodian") for delivery
under this Agreement pursuant to a Custody Agreement and Power of Attorney (the
"Custody Agreement") executed by each of the Selling Stockholders appointing
two representatives designated by Sara Lee Foodservice Holdings, Inc. and
Sara Lee Foundation (collectively, the "Sara Lee Selling Stockholders"), as
agents and attorneys-in-fact (the "Attorneys-in-Fact"). Each Selling
Stockholder agrees that the Shares represented by the certificates held in
custody pursuant to the Custody Agreement are subject to the interests of the
Managers. If any Selling Stockholder that is a natural person shall die or be
incapacitated or, with respect to any Selling Stockholder that is not a natural
person, a liquidation, dissolution, winding up or similar event (a
"Liquidation") shall occur before the delivery of the Shares hereunder,
certificates for the Shares of such Selling Stockholder shall be delivered to
the Managers by the Attorneys-in-Fact in accordance with the terms and
conditions of this Agreement and the Custody Agreement as if such death or
incapacity or Liquidation had not occurred, regardless of whether or not the
Attorneys-in-Fact or any Manager shall have received notice of such death,
incapacity or Liquidation. Each Attorney-in-Fact is authorized, on behalf of
each of the Selling
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Stockholders, to execute this Agreement and any other documents necessary or
desirable in connection with the sale of the Shares to be sold hereunder by
such Selling Stockholder, to make delivery of the certificates for such Shares,
to receive the proceeds of the sale of such Shares, to give receipts for such
proceeds, to pay therefrom any expenses to be borne by such Selling Stockholder
pursuant to the terms hereof in connection with the sale and public offering of
such Shares, to distribute the balance thereof to such Selling Stockholder, and
to take such other action as may be necessary or desirable in connection with
the transactions contemplated by this Agreement. Each Attorney-in-Fact agrees
to perform his duties under the Custody Agreement.
3. Terms of Public Offering. The Selling Stockholders have
been advised by you that the Managers propose to make a public offering of
their respective portions of the Shares as soon after the Registration
Statement and this Agreement have become effective as in your judgment is
advisable and initially to offer the Shares upon the terms set forth in the
International Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to
the Managers of and payment for the Shares shall be made at the office of Smith
Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New York
City time, on November 26, 1996 (the "Closing Date"). The place of closing
for the Shares and the Closing Date may be varied by agreement among you and
the Attorneys-in-Fact.
Certificates for the Shares to be purchased hereunder shall be
registered in such names and in such denominations as you shall request prior
to 9:30 A.M., New York City time, on the second business day preceding the
Closing Date or any Option Closing Date, as the case may be. Such certificates
shall be made available to you in New York City for inspection and packaging
not later than 9:30 A.M., New York City time, on the business day next
preceding the Closing Date or the Option Closing Date, as the case may be. The
certificates evidencing the Shares to be purchased hereunder shall be delivered
to you on the Closing Date against payment of the purchase price therefor by
wire transfer in immediately available funds.
5. Agreements of the Company. The Company agrees with the
several Managers as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto or any Abbreviated Registration Statement to be declared
effective before the offering of the Shares may commence, the Company will
endeavor to cause the Registration Statement or such post-effective amendment
or Abbreviated Registration Statement to become effective as soon as possible
and will advise you promptly and, if requested by you, will confirm such advice
in writing, when the Registration Statement or such post-effective amendment or
Abbreviated Registration Statement has become effective.
(b) The Company will advise you and the Sara Lee
Selling Stockholders promptly and, if requested by you or the Sara Lee Selling
Stockholders, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration Statement, any
Prepricing Prospectuses or the Prospectuses or for additional information; (ii)
of the receipt by the Company of any notification with respect to the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement; (iii) of the receipt by the Company of any notification
with respect to the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iv) within the period of time referred to in paragraph (f) below, of any
change in the Company's condition (financial or other), business, prospects,
properties, net worth or results of operations, or of the happening of
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<PAGE> 5
any event, which makes any statement of a material fact made in the
Registration Statement or the Prospectuses (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectuses (as then amended or supplemented) in
order to state a material fact required by the Act to be stated therein or
necessary in order to make the statements therein not misleading (in the case
of the Prospectuses or any such supplement or amendment, in the light of the
circumstances under which they were made), or of the necessity to amend or
supplement the Prospectuses (as then amended or supplemented) to comply with
the Act or any other law. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.
(c) The Company will furnish to you and the Sara Lee
Selling Stockholders, without charge, (i) five signed copies of the
registration statement as originally filed with the Commission and of each
amendment thereto, including financial statements and all exhibits to the
registration statement, (ii) such number of conformed copies of the
registration statement as originally filed and of each amendment thereto, but
without exhibits, as you may request, (iii) such number of copies of the
Incorporated Documents, without exhibits, as you may request, and (iv) five
copies of the exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus
or, prior to the end of the period of time referred to in the first sentence in
paragraph (f) below, file any document which, upon filing becomes an
Incorporated Document, of which you or the Sara Lee Selling Stockholders shall
not previously have been advised or to which, after you or the Sara Lee Selling
Stockholders shall have received a copy of the document proposed to be filed,
you or the Sara Lee Selling Stockholders shall reasonably object.
(e) Prior to the execution and delivery of this
Agreement, the Company has delivered to you and the Sara Lee Selling
Stockholders, without charge, in such quantities as you have requested, copies
of each form of the International Prepricing Prospectus. The Company consents
to the use, in accordance with the provisions of the Act and with the
securities laws of the jurisdictions in which the Shares are offered by the
several Managers and by dealers, prior to the date of the International
Prospectus, of each International Prepricing Prospectus so furnished by the
Company.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in
the opinion of counsel for the Managers an International Prospectus is required
by the Act to be delivered in connection with sales by any Manager or dealer,
the Company will expeditiously deliver to each Manager and each dealer, without
charge, as many copies of the International Prospectus (and of any amendment or
supplement thereto) as you may request. The Company consents to the use of the
International Prospectus (and of any amendment or supplement thereto) in
accordance with the provisions of the Act and with the securities laws of the
jurisdictions in which the Shares are offered by the several Managers and by
all dealers to whom Shares may be sold, both in connection with the offering
and sale of the Shares and for such period of time thereafter as the
International Prospectus is required by the Act to be delivered in connection
with sales by any Manager or dealer. If during such period of time any event
shall occur that in the judgment of the Company or in the opinion of counsel
for the Managers or the Sara Lee Selling Stockholders is required to be set
forth in the International Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the International Prospectus (or to
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<PAGE> 6
file under the Exchange Act any document which, upon filing, becomes an
Incorporated Document) in order to comply with the Act or any other law, the
Company will forthwith prepare and, subject to the provisions of paragraph (d)
above, file with the Commission an appropriate supplement or amendment thereto
(or to such document), and will expeditiously furnish to the Managers and
dealers and the Sara Lee Selling Stockholders a reasonable number of copies
thereof. In the event that the Company and you, as Lead Managers for the
several Managers, agree that the International Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(g) The Company will cooperate with you and with
counsel for the Managers in connection with the registration or qualification
of the Shares for offering and sale by the several Managers and by dealers
under the securities laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided
that in no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any action which
would subject it to service of process in suits, other than those arising out
of the offering or sale of the Shares, or to taxation in any jurisdiction where
it is not now so subject.
(h) The Company will make generally available to its
security holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing not later than the first day of the
fiscal quarter following the fiscal quarter that includes the Closing Date, as
soon as practicable after the end of such period, but in any event not later
than 120 days after the end of such period, which consolidated earnings
statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder.
(i) During the period of three years hereafter, the
Company will furnish to the Lead Managers (i) as soon as practicable after they
are available, copies of each report of the Company mailed to stockholders or
filed with the Commission, and (ii) from time to time such other information
concerning the Company as you may reasonably request.
(j) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provisions hereof (otherwise than
pursuant to the second paragraph of Section 13 hereof or by notice given by you
terminating this Agreement pursuant to Section 13 or Section 14 hereof) or if
this Agreement shall be terminated by the Managers because of any failure or
refusal on the part of the Company or any of the Selling Stockholders to comply
with the terms or fulfill any of the conditions of this Agreement, the Company
agrees to reimburse the Lead Managers for all reasonable out-of-pocket expenses
(including reasonable fees and expenses of counsel for the Managers) incurred
by you in connection herewith.
(k) If Rule 430A of the Act is employed, the Company
will timely file the Prospectuses pursuant to Rule 424(b) under the Act and
will advise you of the time and manner of such filing.
(l) Except pursuant to this Agreement or as
otherwise provided in this paragraph (1), the Company will not offer, sell,
contract to sell or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or grant any
options or warrants to purchase Common Stock, for a period of 90 days after the
date of the Prospectuses, without the prior written consent of Smith Barney
Inc. This paragraph (l) shall not prohibit or limit any of the following: (i)
the grant of options to purchase Common Stock or the making of other awards
pursuant to the Company's 1994 Stock
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Incentive Plan or the grant of options to purchase Common Stock pursuant to the
Company's Stock Option Plan for Outside Directors; or (ii) the offering,
issuance or sale of Common Stock pursuant to the Company's 1994 Stock Incentive
Plan, Stock Option Plan for Outside Directors, Employee Stock Purchase Plan or
401(k) Retirement Plan.
(m) The Company has furnished or will furnish to you
"lock-up" letters, in form and substance satisfactory to you, signed by (i)
certain executive officers of the Company set forth on Schedule III hereto, and
(ii) the Selling Stockholders (collectively, the "Lock-Up Letters").
(n) Except as stated in this Agreement and in the
U.S. Underwriting Agreement and the Prepricing Prospectuses and the
Prospectuses, the Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
6. Agreements of the Selling Stockholders. Each of the
Selling Stockholders, severally and not jointly, agrees with the several
Managers as follows:
(a) Such Selling Stockholder will cooperate to the
extent necessary to cause the Registration Statement or any post-effective
amendment thereto to become effective at the earliest possible time.
(b) Such Selling Stockholder will pay all Federal
and other taxes, if any, on the transfer or sale of the Shares being sold by
the Selling Stockholder to the Managers.
(c) Such Selling Stockholder will do or perform all
things required to be done or performed by the Selling Stockholder prior to the
Closing Date to satisfy the conditions set forth in Sections 10(i) and 10(j)
hereof.
(d) Such Selling Stockholder has executed or will
execute a Lock-Up Letter as provided in Section 5(m) hereof and will not sell,
contract to sell or otherwise dispose of any Common Stock, except for the sale
of Underwritten Shares to the Managers and Underwriters pursuant to this
Agreement and the U.S. Underwriting Agreement, prior to the expiration of 90
days after the date of the Prospectus, without the prior written consent of
Smith Barney Inc.
(e) Except as stated in this Agreement, the U.S.
Underwriting Agreement and in the Prepricing Prospectuses and the Prospectuses,
such Selling Stockholder has not taken, and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Stockholder will advise you
promptly, and if requested by you, will confirm such advice in writing, within
the period of time referred to in Section 5(f) hereof, of any change in the
information furnished by or on behalf of such Selling Stockholder expressly for
use in the Registration Statement and the Prospectuses which comes to the
attention of such Selling Stockholder that suggests that any statement made in
the Registration Statement or the Prospectuses (as then amended or
supplemented, if amended or supplemented) is or may be untrue in any material
respect or that the Registration Statement or
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<PAGE> 8
Prospectuses (as then amended or supplemented, if amended or supplemented)
omits or may omit to state a material fact or a fact necessary to be stated
therein in order to make the statements therein not misleading in any material
respect.
7. Representations and Warranties of the Company. The
Company represents and warrants to each Manager that:
(a) Each International Prepricing Prospectus
included as part of the registration statement as originally filed or as part
of any amendment or supplement thereto, or filed pursuant to Rule 424 under the
Act, complied when so filed in all material respects with the provisions of the
Act. The Commission has not issued any order preventing or suspending the use
of any Prepricing Prospectus.
(b) The Company and the transactions contemplated by
this Agreement and the U.S. Underwriting Agreement meet the requirements for
use of Form S-3 under the Act. The registration statement in the form in which
it became or becomes effective and also in such form as it may be when any
post-effective amendment thereto or any Abbreviated Registration Statement
shall become effective and the Prospectuses and any supplement or amendment
thereto when filed with the Commission under Rule 424(b) under the Act,
complied or will comply in all material respects with the provisions of the Act
and did not or will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
Prospectuses or any supplement or amendment thereto, in the light of the
circumstances under which they were made); except that this representation and
warranty does not apply to statements in or omissions from the Registration
Statement or the Prospectuses made in reliance upon and in conformity with
information (i) relating to any Selling Stockholder furnished to the Company in
writing by or on behalf of such Selling Stockholder expressly for use therein,
or (ii) relating to any Manager furnished to the Company in writing by or on
behalf of a Manager through the Lead Managers or by an Underwriter through the
Representatives expressly for use therein.
(c) The Incorporated Documents heretofore filed,
when they were filed (or, if any amendment with respect to any such document
was filed, when such amendment was filed), conformed in all material respects
with the requirements of the Exchange Act, any further Incorporated Documents
so filed will, when they are filed, conform in all material respects with the
requirements of the Exchange Act; no such document when it was filed (or, if an
amendment with respect to any such document was filed, when such amendment was
filed), contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further document, when it is
filed, will contain an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(d) All the outstanding shares of Common Stock of
the Company have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights; and the capital
stock of the Company conforms to the description thereof in the Registration
Statement and the Prospectuses.
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(e) The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectuses, and is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify would not
have a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries (as hereinafter defined) taken as a whole.
(f) All the Company's significant subsidiaries (as
defined in Rule 1-02(w) of Regulation S-X and as required by Item 601(b)(21) of
Regulation S-K) (collectively, the "Subsidiaries") as of June 29, 1996 are
listed in an exhibit to the Company's Annual Report on Form 10-K which is
incorporated by reference into the Registration Statement. Each Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectuses, and is duly
registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify would not have a material adverse effect on
the condition (financial or other), business, properties, net worth or results
of operations of the Company and the Subsidiaries taken as a whole. All the
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable, and are owned
by the Company directly, or indirectly through one of the other Subsidiaries,
free and clear of any lien, adverse claim, security interest, equity or other
encumbrance.
(g) There are no legal or governmental proceedings
pending or, to the knowledge of the Company, threatened, against the Company or
any of the Subsidiaries, or to which the Company or any of the Subsidiaries, or
any of their respective properties is subject, that are required by the Act to
be described in the Registration Statement or the Prospectuses but are not
described as required, and there are no agreements, contracts, indentures,
leases or other instruments that are required by the Act to be described in the
Registration Statement or the Prospectuses or required by the Act or the
Exchange Act to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as required by the Act or
the Exchange Act.
(h) Neither the Company nor any of the Subsidiaries
is in violation of its certificate or articles of incorporation or by-laws, or
other organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries, or in default
in the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
agreement, indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, which default or violation (other than of its
certificate of incorporation or articles of incorporation or by-laws, or other
organizational documents) could reasonably be expected to have a material
adverse effect on the condition (financial or other), business, net worth, or
results of operations of the Company and the Subsidiaries taken as a whole.
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<PAGE> 10
(i) Neither the sale of the Shares, the execution,
delivery or performance of this Agreement or the U.S. Underwriting Agreement by
the Company nor the consummation by the Company of the transactions
contemplated hereby or thereby (i) requires any consent, approval,
authorization or other order of or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official by or on behalf of the Company (except such as may be required for the
registration of the Underwritten Shares under the Act and compliance with the
securities or Blue Sky laws of various jurisdictions, all of which have been or
will be effected in accordance with this Agreement) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or by-laws, or other
organizational documents, of the Company or any of the Subsidiaries or (ii)
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound, or violates or will violate
any statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiaries or any of their respective
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject.
(j) The accountants, Price Waterhouse LLP, who have
certified or shall certify the financial statements included or incorporated by
reference in the Registration Statement and the Prospectuses (or any amendment
or supplement thereto) are independent public accountants as required by the
Act.
(k) The consolidated historical and pro forma
financial statements, together with related schedules and notes, set forth in
the Prospectuses and the Registration Statement (and any amendment or
supplement thereto), comply as to form in all material respects with the
requirements of the Act. Such historical financial statements and related
schedules and notes present fairly the consolidated financial position of the
Company and the Subsidiaries at the respective dates indicated and the results
of their operations and their cash flows for the respective periods indicated
in accordance with generally accepted accounting principles ("GAAP")
consistently applied (except as set forth in such financial statements)
throughout such periods. Such pro forma financial statements and related
schedules and notes have been prepared on a basis consistent with such
historical statements, except for the pro forma adjustments specified therein,
and give effect to assumptions made on a reasonable basis and present fairly
the historical and proposed transactions contemplated by the Prospectuses and
this Agreement and the U.S. Underwriting Agreement. The other historical and
pro forma financial and statistical information and data included in the
Prospectuses and the Registration Statement are accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company.
(l) The execution and delivery of, and the
performance by the Company of its obligations under this Agreement and the U.S.
Underwriting Agreement have been duly and validly authorized by the Company,
and each of this Agreement and the U.S. Underwriting Agreement has been duly
executed and delivered by the Company and constitutes the valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that (i) rights to indemnity and contribution hereunder
and under the U.S. Underwriting Agreement may be limited by federal or state
securities laws or by general equitable principles and (ii) the enforceability
of this Agreement and the U.S. Underwriting Agreement may be limited by the
effects of bankruptcy, insolvency, reorganization,
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moratorium and other similar laws, relating to or affecting creditors' rights
generally and by the application of general equitable principles and the
discretion of a court in which any proceeding is brought.
(m) Except as disclosed in the Registration
Statement and the Prospectuses (or any amendment or supplement thereto),
subsequent to the respective dates as of which such information is given in the
Registration Statement and the Prospectuses (or any amendment or supplement
thereto), neither the Company nor any of the Subsidiaries has incurred any
liability or obligation, direct or contingent, or entered into any transaction,
not in the ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any change in the capital
stock, or material increase in the short-term debt or long-term debt, of the
Company or any of the Subsidiaries, or any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
business, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(n) Each of the Company and the Subsidiaries has
good and marketable title to all property (real and personal) described in the
Prospectuses as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except such as are disclosed in the
Registration Statement and the Prospectuses or in a document filed as an
exhibit to the Registration Statement and all the property described in the
Prospectuses as being held under lease by each of the Company and each
Subsidiary is held by it under valid, subsisting and enforceable leases.
(o) The Company has not distributed and, prior to
the later to occur of (i) the Closing Date and (ii) completion of the
distribution of the Shares, will not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Prepricing Prospectuses, the Prospectuses or other materials, if
any, permitted by the Act.
(p) Each of the Company and each Subsidiary has such
permits, licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its properties and to conduct
its business in the manner described in the Prospectuses, subject to such
qualifications as may be set forth in the Prospectuses; the Company and each of
the Subsidiaries has fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set forth in the
Prospectuses; and, except as described in the Prospectuses, none of such
permits contains any restriction that is materially burdensome to the Company
or any of the Subsidiaries.
(q) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
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<PAGE> 12
(r) To the Company's knowledge, neither the Company
nor any of its Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectuses.
(s) Each of the Company and each Subsidiary has
filed all tax returns required to be filed, which returns are complete and
correct, and neither the Company nor any Subsidiary is in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(t) No holder of any security of the Company has any
right which has not been waived to require registration of shares of Common
Stock or any other security of the Company because of the filing of the
registration statement or consummation of the transactions contemplated by this
Agreement or the U.S. Underwriting Agreement.
(u) The Company and the Subsidiaries own or possess
all patents, trademarks, trademark registration, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectuses as being owned by them or any of them or
necessary for the conduct of their respective businesses, and the Company is
not aware of any claim to the contrary or any challenge by any other person to
the rights of the Company and the Subsidiaries with respect to the foregoing.
(v) The Company is not now, and after the sale of
the Shares will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(w) There are no labor disputes with the Company's
employees or with employees of the Subsidiaries that exist or, to the Company's
knowledge, are imminent that could materially adversely affect the Company and
the Subsidiaries taken as a whole, and the Company is not aware of any existing
or imminent labor disturbance by any of its or the Subsidiaries' principal
suppliers, contractors or customers that could be expected to materially
adversely affect the condition (financial or other), business, net worth or
results of operations of the Company and the Subsidiaries taken as a whole.
(x) With respect to each employee benefit plan,
program and arrangement (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), maintained or contributed to by the Company or
the Subsidiaries, or with respect to which the Company or the Subsidiaries
could incur any liability under ERISA (collectively, the "Benefit Plans"), no
event has occurred and there exists no condition or set of circumstances in
connection with which the Company or the Subsidiaries could be subject to any
liability under the terms of such Benefit Plan or applicable law (including,
without limitation, ERISA and the Internal Revenue Code of 1986, as amended
(the "Code")) that could materially adversely affect the condition (financial
or other), business, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(y) The Company and the Subsidiaries are (i) (A) in
full compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and
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<PAGE> 13
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (B) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses, and (C) and are in full compliance with
all terms and conditions of any such permit, license or approval, except where
such noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries
taken as a whole; (ii) except as disclosed in the Registration Statement and
the Prospectuses, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, threatened release, or disposal of any material (including
radiation and noise), that could form the basis of any claim (whether by a
governmental authority or other person or entity) under Environmental Laws for
cleanup costs, damages, penalties, fines, or otherwise, against any of the
Company or the Subsidiaries, or against any person or entity whose liability
for such claim may have been retained by any of the Company or the
Subsidiaries, whether by contract or law; and (iii) the Company and the
Subsidiaries have fully disclosed to the Managers and their counsel all
studies, reports, assessments, audits and other information in their possession
or control relating to any pollution or release, threatened release or disposal
of materials regulated under Environmental Laws on, at, under, from or
transported from any of their currently or formerly owned, leased or operated
properties, including, without limitation, all information relating to
underground storage tanks and asbestos containing materials. Except for the
action captioned Delta Quarries & Disposal, Inc. v. ABC Mack Sales, Inc. et
al., with respect to which a Subsidiary executed a settlement agreement with
the plaintiffs in October 1992, neither the Company nor any of the Subsidiaries
has been named as a "potentially responsible party" under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
("CERCLA").
(z) The Company has complied with all provisions of
Florida Statutes, Section 517.075, relating to issuers doing business with
Cuba.
8. Representations and Warranties of the Selling
Stockholders. Each Selling Stockholder, severally and not jointly, represents
and warrants to each Manager that:
(a) Such Selling Stockholder now has, and on the
Closing Date will have, valid title to the Shares to be sold by such Selling
Stockholder, free and clear of any lien, claim, security interest or other
encumbrance, including, without limitation, any restriction on transfer.
(b) Such Selling Stockholder now has, and on the
Closing Date will have, full legal right, power and authorization, and any
approval required by applicable law, to sell, assign, transfer and deliver such
Shares in the manner provided in this Agreement and in the U.S. Underwriting
Agreement, and upon delivery of and payment for such Shares hereunder, the
several Managers will acquire valid title to such Shares free and clear of any
lien, claim, security interest or other encumbrance.
(c) This Agreement, the U.S. Underwriting Agreement
and the Custody Agreement have been duly authorized, executed and delivered by
or on behalf of such Selling Stockholder and are the valid and binding
agreements of such Selling Stockholder enforceable against such Selling
Stockholder in accordance with their terms, except as to rights to indemnity
and contribution thereunder may be limited by federal or state securities laws
or the public policy underlying such laws, and subject to the qualification
that
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<PAGE> 14
the enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles.
(d) Neither the execution and delivery of this
Agreement, the U.S. Underwriting Agreement or the Custody Agreement by or on
behalf of such Selling Stockholder nor the consummation of the transactions
herein or therein contemplated by or on behalf of such Selling Stockholder
requires any consent, approval, authorization or order of, or filing or
registration with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required under the
Act and the Exchange Act or such as may be required under the securities laws
governing the purchase and distribution of the Shares) or conflicts or will
conflict with or constitutes or will constitute a breach of, or default under,
or violates or will violate any agreement, indenture, or other instrument to
which such Selling Stockholder is a party or by which such Selling Stockholder
is or may be bound or to which any of such Selling Stockholder's property or
assets is subject, or any statute, law, rule, regulation, ruling, judgment,
injunction, order or decree applicable to such Selling Stockholder or to any
property or assets of such Selling Stockholder.
(e) The Registration Statement and the Prospectuses,
insofar as they relate to such Selling Stockholder, do not and will not contain
an untrue material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(f) Such Selling Stockholder has not taken, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares, except for the lock-up
arrangements described in the Prospectuses.
9. Indemnification and Contribution. (a) The Company agrees
to indemnify and hold harmless each of you and each other Manager, each Selling
Stockholder, each officer, director, employee, advisor, agent and partner of
each Selling Stockholder and each person, if any, who controls any Selling
Stockholder or any Manager within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act (each such person, an "Indemnitee") (i) from
and against any and all losses, claims, damages, liabilities and expenses
whatsoever (including reasonable costs of investigation), joint or several, to
which such Indemnitee may become subject under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
any International Prepricing Prospectus or in the Registration Statement or the
International Prospectus or in any amendment or supplement thereto, or arise
out of or are based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the International Prepricing Prospectus
or the International Prospectus or any amendment or supplement thereto, in the
light of the circumstances in which they were made), (ii) from and against any
and all losses, claims, damages, liabilities and expenses whatsoever, as
incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of the Company, and (iii)
from and against any and all expenses whatsoever, as incurred (including
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<PAGE> 15
reasonable fees and disbursements of counsel chosen by the Indemnitee),
reasonably incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii) above;
further provided, however, that the Company shall not be required to indemnify
and hold harmless or reimburse an Indemnitee to the extent that any such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission which
has been made therein or omitted therefrom in reliance upon and in conformity
with the information relating to such Indemnitee furnished in writing to the
Company by or on behalf of such Indemnitee through you expressly for use in
connection therewith; provided, however, that the indemnification contained in
this paragraph (a) with respect to any International Prepricing Prospectus
shall not inure to the benefit of any Manager (or to the benefit of any person
controlling such Manager) on account of any such loss, claim, damage, liability
or expense arising from the sale of the Shares by such Manager to any person if
a copy of the International Prospectus shall not have been delivered or sent to
such person within the time required by the Act and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in such International Prepricing Prospectus was corrected in the
International Prospectus, provided that the Company has delivered the
International Prospectus to the several Managers in requisite quantity on a
timely basis to permit such delivery or sending. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(b) If any action, suit or proceeding shall be
brought against any person (an "indemnified party") in respect of which
indemnity may be sought against any party under paragraph (a), (c) or (d)
hereof, such indemnified party shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties") and, unless in
such indemnified party's reasonable judgment a conflict of interest may exist
between such indemnified party and such indemnifying parties with respect to
such claim, such indemnifying parties shall assume the defense thereof,
including the employment of counsel reasonably acceptable to the indemnified
party and payment of all fees and expenses. Such indemnified party shall have
the right to employ separate counsel in any such action, suit or proceeding and
to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying parties have agreed in writing to pay such fees and expenses, (ii)
the indemnifying parties have failed to assume the defense and employ counsel
or (iii) the named parties to any such action, suit or proceeding (including
any impleaded parties) include both such indemnified party and the indemnifying
parties and such indemnified party shall have been advised by its counsel that
representation of such indemnified party and any indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying parties shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such indemnified party). It is
understood, however, that the indemnifying parties shall, in connection with
any one such action, suit or proceeding or separate but substantially similar
or related actions, suits or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of only one separate firm of attorneys (in addition to any
local counsel) at any time for all such indemnified parties not having actual
or potential differing interests among themselves, which firm shall be
designated in writing by such indemnified parties, and that all such fees and
expenses shall be reimbursed as they are incurred. The indemnifying parties
shall not be liable for any settlement of any such action, suit or proceeding
effected without their written consent (which consent shall not be
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<PAGE> 16
unreasonably withheld), but if settled with such written consent, or if there
be a final judgment for the plaintiff in any such action, suit or proceeding,
the indemnifying parties agree to indemnify and hold harmless any indemnified
party, to the extent provided in the preceding paragraph, from and against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment.
(c) Each Selling Stockholder agrees, severally and
not jointly, to indemnify and hold harmless each of you and each other Manager,
each person, if any, who controls any Manager within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, the Company, its directors,
advisors, agents, officers and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act (each such person, a "Selling Stockholder Indemnitee"), each to the same
extent as the foregoing indemnity from the Company to each Indemnitee pursuant
to paragraph (a) above, against all losses, claims, damages, liabilities or
expenses to which any such Selling Stockholder Indemnitee may become subject,
under the Securities Act or the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based on any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
International Prepricing Prospectus or the International Prospectus or in any
amendment or supplement thereto, or arise out of or are based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of the International Prepricing Prospectus or the International Prospectus or
any amendment or supplement thereto, in the light of the circumstances in which
they were made), in each case to the extent, but only to the extent, that such
untrue statement or omission or alleged untrue statement or omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, the International Prepricing Prospectus or the
International Prospectus, or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against any Selling Stockholder
Indemnitee in respect of which indemnity may be sought against any Selling
Stockholder pursuant to this paragraph (c), such Selling Stockholder shall have
the rights and duties given to the indemnifying parties by paragraph (b) above
(except that if the Company shall have assumed the defense thereof, such
Selling Stockholder shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Selling Stockholder's expense), and
each Selling Stockholder Indemnitee shall have the rights and duties given to
the indemnified party by paragraph (b) of this Section 9. The foregoing
indemnity agreement shall be in addition to any liability which any Selling
Stockholder may otherwise have.
(d) Each Manager agrees, severally and not jointly,
to indemnify and hold harmless the Company, each Selling Stockholder and their
respective directors, officers, employees and agents and any person who
controls the Company or such Selling Stockholder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company and the Selling Stockholders to each
Manager, but only with respect to information relating to such Manager
furnished in writing by or on behalf of such Manager through you expressly for
use in the Registration Statement, the International Prepricing Prospectus or
the International Prospectus, or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company, any directors,
officers, employees or agents of the Company or any Selling Stockholder, or any
such controlling person based on the Registration Statement, the International
Prepricing Prospectus or the International Prospectus, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against any
Manager pursuant to this paragraph (d), such Manager shall have the rights and
duties given to the indemnifying
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<PAGE> 17
parties by paragraph (b) above (except that if the Company or the Selling
Stockholders shall have assumed the defense thereof, such Manager shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at
such Manager's expense), and the Company, the directors, officers, employees
and agents of the Company or any Selling Stockholder and any such controlling
person shall have the rights and duties given to the indemnified party by
paragraph (b) above. The foregoing indemnity agreement shall be in addition to
any liability which any Manager may otherwise have.
(e) If the indemnification provided for in this
Section 9 is unavailable to an indemnified party under paragraph (a), (c) or
(d) above (other than by reason of the exceptions provided therein) in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then an indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by each
party from the offering of the Shares and the relative fault of each party in
connection with statements or omissions that resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Managers on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholders bear
to the total underwriting discounts and commissions received by the Managers,
in each case as set forth in the table on the cover page of the International
Prospectus. The relative fault of each party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, no Selling Stockholder
will be required to contribute any amount in excess of the amount such Selling
Stockholder would have been required to pay to an indemnified party if the
indemnification provided for in Section 9(c) were available.
(f) The Company, the Selling Stockholders and the
Managers agree that it would not be just and equitable if contribution pursuant
to this Section 9 were determined by a pro rata allocation (even if the
Managers were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in paragraph (e) above. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities and expenses referred
to in paragraph (a), (c) or (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating any claim or defending
any such action, suit or proceeding. Notwithstanding the provisions of this
Section 9, no Manager shall be required to contribute any amount in excess of
the amount by which the total price of the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such Manager
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Managers' obligations to contribute pursuant to this
Section 9 are several in proportion to the respective numbers of Shares set
forth opposite their names in Schedule II hereto (or such numbers of Shares
increased as set forth in Section 13 hereof) and not joint.
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<PAGE> 18
(g) No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or
expenses for which an indemnified party is entitled to indemnification or
contribution under this Section 9 shall be paid by the indemnifying party to
the indemnified party as such losses, claims, damages, liabilities or expenses
are incurred. The indemnity and contribution agreements contained in this
Section 9 and the representations and warranties of the Company and the Selling
Stockholders set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf of
any Managers or any person controlling any Manager, the Company, its directors
or officers or the Selling Stockholders or any person controlling the Company,
(ii) acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Manager or any person
controlling any Manager, or to the Company, its directors or officers, or any
person controlling the Company shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
9.
10. Conditions of Managers' Obligations. The several
obligations of the Managers to purchase the Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto or any Abbreviated Registration Statement to be declared
effective before the offering of the Shares may commence, the Registration
Statement or such post-effective amendment or any Abbreviated Registration
Statement shall have become effective not later than 5:30 P.M., New York City
time, on the date hereof, or at such later date and time as shall be consented
to in writing by you, and all filings, if any, required by Rules 424 and 430A
under the Act shall have been timely made; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the knowledge of
the Company or any Manager, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectuses or otherwise) shall have been complied with to
your satisfaction.
(b) Subsequent to the effective date of this
Agreement, there shall not have occurred (i) any change, or any development
involving a prospective change, in or affecting the condition (financial or
other), business, properties, net worth, or results of operations of the
Company or the Subsidiaries not contemplated by the Prospectuses, which in your
opinion, as Lead Managers for the several Managers, would materially, adversely
affect the market for the Shares, or (ii) any event or development relating to
or involving the Company or any executive officer or director of the Company or
any Selling Stockholder which makes any statement made in the Prospectuses
untrue in any material respect or which, in the opinion of the Company and its
counsel or the Managers and their counsel, requires the making of any addition
to or change in the Prospectuses in order to make the statements therein, in
the light of the circumstances in which they were made, not misleading, if
amending or supplementing the Prospectuses to reflect such event or development
would, in your opinion, as Lead Managers for the several Managers, materially
adversely affect the market for the Shares.
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(c) You shall have received on the Closing Date, an
opinion of and a letter from Shaw, Pittman, Potts & Trowbridge, counsel to the
Company, dated the Closing Date and addressed to you, as Lead Managers for the
several Managers, to the effect that:
(i) The Company is a corporation duly
incorporated, validly existing and in good standing
under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate
its properties and to conduct its business as described
in the Registration Statement and the Prospectuses (and
any amendment or supplement thereto), and is duly
qualified or licensed to conduct its business as a
foreign corporation and is in good standing in the
State of Maryland;
(ii) JP Foodservice Distributors, Inc.
("JP") is a corporation validly existing and in good
standing under the laws of the State of Delaware with
full corporate power and authority to own, lease, and
operate its properties and to conduct its business as
described in the Registration Statement and the
Prospectuses (and any amendment or supplement
thereto); and all of the outstanding shares of
capital stock of JP are owned by the Company
directly, or indirectly through one of the other
Subsidiaries, free and clear of any perfected
security interest, or, to the best knowledge of such
counsel after reasonable inquiry, any other security
interest, lien, adverse claim, equity or other
encumbrance. Based upon such counsel's review of the
capital stock records of Sky Bros., Inc. and Illinois
Fruit & Produce Corp., all of the outstanding shares
of capital stock of such corporation are owned
indirectly through subsidiaries of the Company;
(iii) All of the outstanding shares of
capital stock of the Company have been duly
authorized and validly issued and are fully paid and
non-assessable. The authorized and outstanding
capital stock of the Company is as set forth under
the caption "Capitalization" in the Prospectuses;
(iv) The Shares have been duly
authorized, validly issued, fully paid and are
nonassessable and free of any preemptive rights under
the General Corporation Law of the State of Delaware.
To such counsel's knowledge, except as described in
the Prospectuses, (i) there are no outstanding
options, warrants or other rights calling for the
issuance of, or any commitment, plan or arrangement
to issue, any shares of capital stock of the Company
or any security convertible into or exchangeable or
exercisable for capital stock of the Company and (ii)
no holder of any security of the Company or any other
person has the right, contractual or otherwise, to
cause the Company to sell or otherwise issue to them,
or to permit them to underwrite the sale of, the
Shares or the right to have any shares of Common
Stock or other securities of the Company included in
the Registration Statement or the right, as a result
of the filing of the Registration Statement, to
require registration under the Act of any shares of
Common Stock or other securities of the Company;
(v) The form of certificates for the
Shares conforms to the requirements of the Delaware
General Corporation Law;
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(vi) The Registration Statement and all
post-effective amendments, if any, or any Abbreviated
Registration Statement have become effective under
the Act and, to such counsel's knowledge, no stop
order suspending the effectiveness of the
Registration Statement has been issued and no
proceedings for that purpose are pending before or
contemplated by the Commission. Any required filing
of the Prospectuses pursuant to Rule 424(b) has been
made in accordance with Rule 424(b);
(vii) The Company has the corporate power
and authority to enter into this Agreement and this
Agreement has been duly authorized, executed and
delivered by the Company;
(viii) The offer, sale and delivery of the
Shares pursuant to this Agreement (i) do not conflict
with and do not and will not constitute a breach of,
or a default under, the certificate of incorporation
or bylaws of the Company or JP or any agreement,
indenture, lease or other instrument to which the
Company or JP is a party or by which either of them
or any of their respective properties is filed as an
exhibit to the Registration Statement or to any
Incorporated Document, or which is otherwise known to
such counsel, (ii) do not result and will not result
in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the
Company or JP and (iii) do not result and will not
result in any violation by the Company of (A) any
existing law, regulation, ruling (assuming compliance
with all applicable state securities and Blue Sky
laws), in each case that in the experience of such
counsel are normally applicable to transactions
provided for in this Agreement, or (B) any judgment,
injunction, order or decree known to such counsel,
applicable to the Company, JP or any of their
respective properties;
(ix) No consent, approval, authorization
or other order of, or registration or filing with,
any court, regulatory body, administrative agency or
other governmental body, agency, or official is
required on the part of the Company (except as have
been obtained under the Act and the Exchange Act or
such as may be required under state securities or
Blue Sky laws governing the purchase and distribution
of the Shares) for the valid sale of the Shares to
the Managers as contemplated by this Agreement;
(x) The Registration Statement and the
Prospectuses and any supplements or amendments
thereto (except for the financial statements and the
notes thereto and the schedules and other financial
and statistical data included therein, as to which
such counsel need not express any opinion) comply as
to form in all material respects with the
requirements of the Act; and each of the Incorporated
Documents (except for the financial statements and
the notes thereto and the schedules and other
financial and statistical data included therein, as
to which counsel need not express any opinion)
complies as to form in all material respects with the
Exchange Act and the rules and regulations of the
Commission thereunder;
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<PAGE> 21
(xi) To such counsel's knowledge, (A)
there are no legal or governmental proceedings
pending or threatened against the Company or any of
the Subsidiaries, or to which the Company, any of the
Subsidiaries or any of their respective properties,
is subject which are required to be described in the
Registration Statement or Prospectuses (or any
amendment or supplement thereto) that are not
described as required by the Act and (B) there are no
agreements, contracts, indentures, leases or other
instruments, that are required to be described in the
Registration Statement or the Prospectuses (or any
amendment or supplement thereto) or to be filed as an
exhibit to the Registration Statement or any
Incorporated Document that are not described or filed
as required by the Act or the Exchange Act, as the
case may be;
(xii) The statements in the Registration
Statement and Prospectuses, insofar as they
constitute statements of law or legal conclusions,
are accurate in all material respects;
(xiii) Although counsel has not undertaken,
except as otherwise indicated in their opinion, to
determine independently, and does not assume any
responsibility for, the accuracy or completeness of
the statements in the Registration Statement, such
counsel has participated in the preparation of the
Registration Statement and the Prospectuses,
including review and discussion of the contents
thereof (including review and discussion of the
contents of all Incorporated Documents), and nothing
has come to the attention of such counsel that has
caused them to believe that the Registration
Statement (including the Incorporated Documents) at
the time the Registration Statement became effective
contained an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading or that the Prospectuses or
any amendment or supplement thereto, as of its
respective date, and as of the Closing Date or the
Option Closing Date, as the case may be, contained
any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading (it being
understood that such counsel need express no opinion
with respect to the financial statements and the
notes thereto and the schedules and other financial
and statistical data included in the Registration
Statement or the Prospectuses or any Incorporated
Document).
In rendering their opinion as aforesaid, such counsel may rely
upon an opinion or opinions, each dated the Closing Date, of other counsel
retained by them or the Company as to laws of any jurisdiction other than the
United States or the State of Maryland, provided that (1) each such local
counsel is acceptable to the Lead Managers, (2) such reliance is expressly
authorized by each opinion so relied upon and a copy of each such opinion is
delivered to the Lead Managers and is, in form and substance, satisfactory to
them and their counsel, and (3) counsel shall state in their opinion that they
believe that they and the Managers are justified in relying thereon.
(d) (i) You shall have received on the Closing Date
an opinion from Skadden, Arps, Slate, Meagher & Flom, counsel to the Sara Lee
Selling Stockholders, and from corporate counsel to the
21
<PAGE> 22
Sara Lee Selling Stockholders, dated the Closing Date and addressed to you, as
Lead Managers for the several Managers, with respect to the Sara Lee Selling
Stockholders, to the effect that:
(A) Each Sara Lee Selling Stockholder has the requisite
corporate power and authority to enter into this Agreement and
to sell and deliver the Shares to be sold by such Sara Lee
Selling Stockholder under this Agreement;
(B) This Agreement has been duly authorized, executed and
delivered by or on behalf of each Sara Lee Selling Stockholder
and constitutes the valid and binding obligation of such Sara
Lee Selling Stockholder;
(C) The execution and delivery of this Agreement and the sale
of the Shares by each Sara Lee Selling Stockholder to the
Managers, and compliance by such Sara Lee Selling Stockholder
with the terms of this Agreement, including the delivery to
the Managers of certificates evidencing such Shares and the
execution and delivery to the Managers of a stock power in
blank, have been duly authorized by all necessary action on
the part of such Sara Lee Selling Stockholder and do not, and
will not, result in a violation of the certificate of
incorporation and bylaws or comparable constitutional
documents of such Sara Lee Selling Stockholder, and do not,
and will not, conflict with, or result in a breach of any of
the terms and provisions of, or constitute a default under (I)
any statute, rule or regulation relating to such Sara Lee
Selling Stockholder or its legal or regulatory status in each
case, that in the experience of such counsel are normally
applicable to transactions of the type provided for in
this Agreement, (II) any material judgment, order, rule,
injunction or regulation of any court or governmental agency
or body, domestic or foreign, having jurisdiction over such
Sara Lee Selling Stockholder or any of its respective
properties or (III) any material contract, agreement or other
instrument to which such Sara Lee Selling Stockholder is a
party or by which it or any of its properties are subject;
(D) Upon consummation of the sale of the Shares pursuant
to this Agreement, assuming the Managers purchased the Shares
for value, in good faith and without notice of adverse claim,
the Managers will have acquired all rights of the Sara Lee
Selling Stockholder in the Shares free and clear of any
security interest, mortgage, lien, pledge, encumbrance, claim
or equity, and the owner of the Shares, if other than such
Sara Lee Selling Stockholder, is precluded from asserting
against the Managers the ineffectiveness of any unauthorized
endorsement.
(ii) You shall have received on the
Closing Date an opinion from Alden Tueller, Esq., counsel to the Mark and Linda
Zobrist Charitable Remainder Annuity Trust (the "Trust"), dated the Closing
Date and addressed to you, as Lead Managers for the several Managers, with
respect to the Trust, to the effect that:
(A) The Trust has the requisite corporate power and authority
to enter into this Agreement and to sell and deliver the
Shares to be sold by the Trust under this Agreement;
(B) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Trust and constitutes the
valid and binding obligation of the Trust;
22
<PAGE> 23
(C) The execution and delivery of this Agreement and the sale
of the Shares by the Trust to the Managers, and compliance by
the Trust with the terms of this Agreement, including the
delivery to the Managers of certificates evidencing such
Shares and the execution and delivery to the Managers of a
stock power in blank, have been duly authorized by all
necessary action on the part of the Trust and do not, and will
not, result in a violation of the certificate of incorporation
and bylaws or comparable constitutional documents of the
Trust, if any, and do not, and will not, conflict with, or
result in a breach of any of the terms and provisions of, or
constitute a default under (I) any statute, rule or regulation
relating to such party or its legal or regulatory status in
each case, that in the experience of such counsel are normally
applicable to transactions of the type provided for in this
Agreement, (II) any material judgment, order, rule, injunction
or regulation of any court or governmental agency or body,
domestic or foreign, having jurisdiction over the Trust or any
of its respective properties or (III) any material contract,
agreement or other instrument to which the Trust is a party or
by which it or any of its properties are subject;
(D) Upon consummation of the sale of the Shares pursuant
to this Agreement, assuming the Managers purchased the Shares
for value, in good faith and without notice of adverse claim,
the Managers will have acquired all rights of the Trust in the
Shares free and clear of any security interest, mortgage,
lien, pledge, encumbrance, claim or equity, and the owner of
the Shares, if other than the Trust, is precluded from
asserting against the Managers the ineffectiveness of any
unauthorized endorsement.
(iii) You shall have received on the
Closing Date an opinion from Carlsmith Ball Wichman Murray Case & Ichiki,
counsel to the Selling Stockholders denoted by an asterisk in Schedule I hereto
(the "Individual Selling Stockholders"), dated the Closing Date and addressed
to you, as Lead Managers for the several Managers, with respect to each of the
Individual Selling Stockholders, to the effect that:
(A) To the best of our knowledge, the execution and delivery
of this Agreement and the sale of the Shares by the Individual
Selling Stockholder to the Managers, and compliance by the
Individual Selling Stockholder with the terms of this
Agreement, including the delivery to the Managers of
certificates evidencing such Shares and the execution and
delivery to the Managers of a stock power in blank, will not,
conflict with, or result in a breach of any of the terms and
provisions of, or constitute a default under (I) any statute,
rule or regulation relating to the Individual Selling
Stockholder or its legal or regulatory status, in each case
that in the experience of such counsel are normally applicable
to transactions of the type provided for in this Agreement,
(II) any material judgment, order, rule, injunction or
regulation of any court or governmental agency or body,
domestic or foreign, having jurisdiction over the Individual
Selling Stockholder or any of its respective properties or
(III) any material contract, agreement or other instrument to
which the Individual Selling Stockholder is a party or by
which it or any of its properties are subject;
(B) Upon consummation of the sale of the Shares pursuant to
this Agreement, assuming the Managers purchased the Shares for
value, in good faith and without notice of adverse claim, the
Managers will have acquired all rights of the Individual
Selling Stockholder in the Shares free and clear of any
security interest, mortgage, lien, pledge, encumbrance, claim
or equity, and the owner of the Shares, if other than such
23
<PAGE> 24
Individual Selling Stockholder, is precluded from asserting
against the Managers the ineffectiveness of any unauthorized
endorsement.
(e) You shall have received on the Closing Date an
opinion of Wachtell, Lipton, Rosen & Katz, counsel for the Managers, dated the
Closing Date and addressed to you, as Lead Managers for the several Managers,
with respect to such matters as you may request.
(f) You shall have received letters addressed to
you, as Representatives of the several Underwriters, and dated the date hereof
and the Closing Date from Price Waterhouse LLP, independent certified public
accountants, substantially in the forms heretofore approved by you and of a
form satisfactory to Price Waterhouse LLP.
(g) (i) No stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings for
that purpose shall have been taken or, to the knowledge of the Company, shall
be contemplated by the Commission at or prior to the Closing Date; (ii) there
shall not have been any change in the capital stock of the Company nor any
material increase in the short-term or long-term debt of the Company (other
than in the ordinary course of business) from that set forth or contemplated in
the Registration Statement or the Prospectuses (or any amendment or supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectuses
(or any amendment or supplement thereto), except as may otherwise be stated in
the Registration Statement and the Prospectuses (or any amendment or supplement
thereto), any material adverse change in the condition (financial or other),
business, prospects, properties, net worth or results of operations of the
Company and the Subsidiaries taken as a whole; (iv) the Company and the
Subsidiaries shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Company and the Subsidiaries taken as a whole, other than those
reflected in the Registration Statement or the Prospectuses (or any amendment
or supplement thereto); and (v) all the representations and warranties of the
Company contained in this Agreement shall be true and correct on and as of the
date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate, dated the Closing
Date and signed by the chief executive officer and the chief financial officer
of the Company (or such other officers as are acceptable to you), to the
effect set forth in this Section 10(g) and in Section 10(h) hereof.
(h) The Company shall not have failed at or prior to
the Closing Date to have performed or complied with any of its agreements
contained in this Agreement or in the U.S. Underwriting Agreement and required
to be performed or complied with by it hereunder at or prior to the Closing
Date.
(i) All the several representations and warranties
of the Selling Stockholders contained in this Agreement or in the U.S.
Underwriting Agreement shall be true and correct on and as of the date hereof
and on and as of the Closing Date as if made on and as of the Closing Date, and
you shall have received a certificate, dated the Closing Date and signed by or
on behalf of each of the Selling Stockholders to the effect set forth in this
Section 10(i) and in Section 10(j) hereof.
(j) The Selling Stockholders shall not have failed
at or prior to the Closing Date to have performed or complied with any of their
agreements contained in this Agreement or in the U.S. Underwriting Agreement
and required to be performed or complied with by them at or prior to the
Closing Date.
24
<PAGE> 25
(k) The closing under the U.S. Underwriting
Agreement shall have occurred on the Closing Date concurrently with the Closing
hereunder.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the
Company or any Attorney-in-Fact or any Selling Stockholder and delivered to
you, as Lead Managers for the several Managers, or to counsel for the Managers,
shall be deemed a representation and warranty by the Company, the Selling
Stockholders or the particular Selling Stockholder, as the case may be, to each
Manager as to the statements made therein.
11. Expenses. The Company agrees to pay the following costs
and expenses and all other costs and expenses incident to the performance by
them of their obligations hereunder: (i) the preparation, printing or
reproduction, and filing with the Commission of the registration statement
(including financial statements and exhibits thereto), each of the Prepricing
Prospectuses, the Prospectuses, and each amendment or supplement to any of
them; (ii) the printing (or reproduction) and delivery (including postage, air
freight charges and charges for counting and packaging) of such copies of the
registration statement, each International Prepricing Prospectus, the
International Prospectus, the Incorporated Documents, and all amendments or
supplements to any of them, as may be reasonably requested by the Selling
Stockholders or the Managers for use in connection with the offering and sale
of the Shares; (iii) the preparation, printing, authentication, issuance and
delivery of certificates for the Shares; (iv) the printing (or reproduction)
and delivery of this Agreement, the U.S. Underwriting Agreement, the
Supplemental Agreement Among U.S. Underwriters, the Agreement Among Managers,
the Agreement Between U.S. Underwriters and Managers, the International Selling
Agreement, the Manager's Questionnaire, the preliminary and supplemental Blue
Sky Memoranda and all other agreements, memoranda, correspondence or documents
printed (or reproduced) and delivered in connection with the offering of the
Underwritten Shares; (v) the registration or qualification of the Shares for
offer and sale under the securities laws of the several jurisdictions as
provided in Section 5(g) hereof (including reasonable fees, expenses and
disbursements of counsel for the U.S. Underwriters and Managers relating
thereto); (vi) the filing fees and the fees and expenses of counsel for the
Managers in connection with any filings required to be made with the National
Association of Securities Dealers, Inc.; (vii) the transportation and other
expenses incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Shares; (viii) the fees and
disbursements of the Company's accountants and legal counsel; and (ix) the
reasonable fees and expenses of Skadden, Arps, Slate, Meagher & Flom, counsel
to the Sara Lee Selling Stockholders.
Each Selling Stockholder shall pay and bear all expenses
incurred incident to the delivery of the Shares sold by such Selling
Stockholder, including any stock transfer taxes payable upon the sale of such
shares to the purchaser thereof.
12. Limitation of Liability. The total liabilities of
each Selling Stockholder under this Agreement, including without limitation
any liabilities for breach of representation or warranty or with respect to any
obligation of indemnity, shall not in any event exceed in aggregate amount the
proceeds of the Shares sold hereunder by such Selling Stockholder, provided
that this Section 12 shall not limit the liability
25
<PAGE> 26
of the Selling Stockholders to pay expenses required to be paid by the Selling
Stockholders pursuant to Section 11 hereof.
13. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company or the Selling Stockholders, by notifying you, or by you, as Lead
Managers for the several Managers, by notifying the Company and the Selling
Stockholders.
If any one or more of the Managers shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting Manager
or Managers are obligated but fail or refuse to purchase is not more than
one-tenth of the aggregate number of Shares which the Managers are obligated to
purchase on the Closing Date, each non-defaulting Manager shall be obligated,
severally, in the proportion which the number of Shares set forth opposite its
name in Schedule II hereto bears to the aggregate number of Shares set forth
opposite the names of all non-defaulting Managers or in such other proportion
as you may specify in accordance with Section 20 of the Master Agreement Among
Underwriters of Smith Barney Inc., to purchase the Shares which such defaulting
Manager or Managers are obligated, but fail or refuse, to purchase. If any one
or more of the Managers shall fail or refuse to purchase Shares which it or
they are obligated to purchase on the Closing Date and the aggregate number of
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares which the Managers are obligated to purchase on the
Closing Date and arrangements satisfactory to you, the Company and the Selling
Stockholders for the purchase of such Shares by one or more non-defaulting
Managers or other party or parties approved by you, the Company and the Selling
Stockholders are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Manager, the
Company or the Selling Stockholders. In any such case which does not result in
termination of this Agreement, either you, the Company or the Selling
Stockholders shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Manager from liability in respect of any such default of
any such Manager under this Agreement. The term "Manager" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule II hereto who, with your approval and the approval of the Company and
the Selling Stockholders, purchases Shares which a defaulting Manager is
obligated, but fails or refuses, to purchase.
Any notice under this Section 13 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.
14. Termination of Agreement. This Agreement shall be
subject to termination in your absolute discretion, without liability on the
part of any Manager to the Company or any Selling Stockholder, by notice to the
Company and the Sara Lee Selling Stockholders, if, prior to the Closing Date,
(i) trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market shall have been suspended
or materially limited, (ii) a general moratorium on commercial banking
26
<PAGE> 27
activities in New York or Maryland shall have been declared by either federal
or state authorities, or (iii) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity, crisis
or change in political, financial or economic conditions, the effect of which
on the financial markets of the United States is such as to make it, in your
judgment, impracticable or inadvisable to commence or continue the offering of
the Shares at the offering price to the public set forth on the cover page of
the International Prospectus or to enforce contracts for the resale of the
Shares by the Managers. Notice of such termination may be given by telegram,
telecopy or telephone and shall be subsequently confirmed by letter.
15. Information Furnished by the Managers and the Selling
Stockholders. The statements set forth in the last paragraph on the cover
page, the legends on the inside cover page, and the statements in the first,
second, fourth and fourteenth paragraphs under the caption "Underwriting" in
any International Prepricing Prospectus and in the International Prospectus,
constitute the only information furnished by or on behalf of the Managers
through you as such information is referred to in Sections 7(b) and 9 hereof.
The information set forth in the Prospectuses under the
caption "Selling Stockholders" which specifically relates to the Selling
Stockholders constitutes the only information furnished by or on behalf of the
Selling Stockholders as such information is referred to in Sections 7(b) and 9
hereof.
16. Miscellaneous. Except as otherwise provided in Sections
5, 13 and 14 hereof, notice given pursuant to any provision of this Agreement
shall be in writing and shall be delivered (i) if to the Company, at the office
of the Company at JP Foodservice, Inc., 9830 Patuxent Woods Drive, Columbia,
MD 21046, Attention: Lewis Hay III, Senior Vice President and Chief Financial
Officer; or (ii) if to the Individual Selling Stockholders, at Carlsmith Ball
Wichman Murray Case & Ichiki, 555 South Flower Street, 25th Floor, Los Angeles,
CA 90007-2326 Attention: Randolph G. Muhlestein, Esq.; or (iii) if to the
Trust, at 8355 South Austrian Way, Salt Lake City, UT 84121, Attention: E.
Mark Zobrist; or (iv) if to the Sara Lee Selling Stockholders, at Skadden,
Arps, Slate, Meagher & Flom, 333 West Wacker Drive, Chicago, IL 60606
Attention: Brian W. Duwe, Esq.; or (v) if to you, as Representatives of the
several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013, Attention: Manager, Investment Banking Division.
Notices to Sara Lee Corporation shall be deemed duly given if provided as
required pursuant to this Section.
By the signature of its executive officer below, Sara Lee
Corporation confirms the representations, warranties and agreements of its
wholly owned subsidiary, Sara Lee Foodservice Holdings, Inc., contained herein.
This Agreement has been and is made solely for the benefit of
the several Managers, the Company, the Selling Stockholders, the directors,
officers, agents, employees and advisors of the Company and the Selling
Stockholders, and the other controlling persons referred to in Section 9
hereof, and their respective successors and assigns, to the extent provided
herein, and no other person shall acquire or have any right under or by virtue
of this Agreement. Neither the term "successor" nor the term "successors and
assigns" as used in this Agreement shall include a purchaser from any Manager
of any of the Shares in his status as such purchaser.
27
<PAGE> 28
17. Applicable Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.
28
<PAGE> 29
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Selling Stockholders and the several Managers.
Very truly yours,
JP Foodservice, Inc.
By
-----------------------------
Name:
Title:
Each of the Selling Stockholders
named in Schedule I hereto
By
-----------------------------
Attorney-in-Fact
By
-----------------------------
Attorney-in-Fact
Sara Lee Corporation
By
------------------------------
Name:
Title:
29
<PAGE> 30
Confirmed as of the date first above mentioned on behalf of
themselves and the other several Underwriters named in Schedule
II hereto.
SMITH BARNEY INC.
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY & CO. INTERNATIONAL
THE ROBINSON - HUMPHREY COMPANY, INC.
As Lead Managers for the Several Managers
By SMITH BARNEY INC.
By ______________________________
Name:
Title:
30
<PAGE> 31
SCHEDULE I
JP FOODSERVICE, INC.
Number of
Selling Stockholders Shares
- -------------------- ---------
Sara Lee Foodservice Holdings, Inc.
Sara Lee Foundation
Richard D. Zobrist*
Mark and Linda Zobrist Charitable
Remainder Annuity Trust
E. Mark Zobrist**
---------
Total . . . . . . . . . . . . . . . . 1,140,000
31
<PAGE> 32
SCHEDULE II
JP FOODSERVICE, INC.
Number of
Manager Shares
- ------- ---------
Smith Barney Inc.
Goldman Sachs International
Morgan Stanley & Co. International
The Robinson - Humphrey Company, Inc.
Total . . . . . . . . . . . . . . . . 1,140,000
32
<PAGE> 33
SCHEDULE III
JP FOODSERVICE, INC.
James L. Miller
Lewis Hay, III
33
<PAGE> 1
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
JP FOODSERVICE, INC.
JP Foodservice, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name under which the corporation was originally incorporated is
JPF Holdings, Inc. and the original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware on
June 22, 1989.
2. This Restated Certificate of Incorporation restates and integrates
and does not further amend the provisions of the Certificate of Incorporation
of the corporation as heretofore amended or supplemented, and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
3. This Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation of the corporation is
hereby restated and integrated to read in its entirety as follows:
ARTICLE I
NAME
The name of the corporation is JP Foodservice, Inc. (the
"Corporation").
<PAGE> 2
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose or purposes for which the Corporation is organized are to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware as from time to time
amended (the "General Corporation Law").
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.
ARTICLE V
COMMON STOCK
Except as required by law, all shares of Common Stock shall be
identical in all respects and shall entitle the holders thereof to the same
rights and privileges, subject to the same qualifications, limitations and
restrictions. Except as required by law, the holders of shares of Common Stock
shall be entitled to one vote per share of Common Stock on all matters on which
stockholders of the Corporation have the right to vote.
ARTICLE VI
PREFERRED STOCK
Section A. Preferred Stock. The Corporation is authorized to issue
shares of Preferred Stock from time to time in one or more series as may from
time to time be determined by the Board of Directors of the Corporation (the
"Board"), each of such series to be distinctly designated. The voting powers,
preferences and relative, participating, optional and other special rights,
and the qualifications, limitations or restrictions thereof, if any, of each
such series may differ from those of any and all other series of Preferred
Stock at any time outstanding,
2
<PAGE> 3
and the Board is hereby expressly granted authority to fix or alter, by
resolution or resolutions, the designation, number, voting powers, preferences
and relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, of each such series, including,
but without limiting the generality of the foregoing, the following:
1. The distinctive designation of, and the number of shares of
Preferred Stock that shall constitute, such series, which number (except where
otherwise provided by the Board in the resolution establishing such series) may
be increased (but not above the total number of shares of Preferred Stock) or
decreased (but not below the number of shares of such series then outstanding)
from time to time by like action of the Board.
2. The rights in respect of dividends, if any, of such series of
Preferred Stock, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or any other
series of the same or other class or classes of capital stock of the
Corporation, and whether such dividends shall be cumulative or noncumulative.
3. The right, if any, of the holders of such series of Preferred Stock
to convert the same into, or exchange the same for, shares of any other class
or classes or of any other series of the same or any other class or classes of
capital stock of the Corporation, and the terms and conditions of such
conversion or exchange.
4. Whether or not shares of such series of Preferred Stock shall be
subject to redemption, and the redemption price or prices and the times at
which, and the terms and conditions on which, shares of such series of Preferred
Stock may be redeemed.
5. The rights, if any, of the holders of such series of Preferred Stock
upon the voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation or in the event of any merger or consolidation of or sale of assets
by the Corporation.
6. The terms of any sinking fund or redemption or purchase account, if
any, to be provided for shares of such series of the Preferred Stock.
7. The voting powers, if any, of the holders of any series of Preferred
Stock generally or with respect to any particular matter, which may be less
than, equal to or greater than one vote per share, and which may, without
limiting the generality of the foregoing, include the right, voting as a series
by itself or together with the holders of any other series of Preferred Stock
or all series of Preferred Stock as a class, to elect one or more
3
<PAGE> 4
directors of the Corporation generally or under such specific circumstances and
on such conditions as shall be provided in the resolution or resolutions of the
Board adopted pursuant hereto, including, without limitation, in the event
there shall have been a default in the payment of dividends on or redemption of
any one or more series of Preferred Stock.
Section B. Rights of Preferred Stock.
1. After the provisions with respect to preferential dividends on any
series of Preferred Stock (fixed in accordance with the provisions of Section
(A) of this Article VI), if any, shall have been satisfied and after the
Corporation shall have complied with all the requirements, if any, with respect
to redemption of, or the setting aside of sums as sinking funds or redemption
or purchase accounts with respect to, any series of Preferred Stock (fixed in
accordance with the provisions of Section (A) of this Article VI), and subject
further to any other conditions that may be fixed in accordance with the
provisions of Section (A) of this Article VI, then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as may be
declared from time to time by the Board.
2. In the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, after distribution in full of the
preferential accounts, if any (fixed in accordance with the provisions of
Section (A) of this Article VI), to be distributed to the holders of Preferred
Stock by reason thereof, the holders of Common Stock shall, subject to the
additional rights, if any (fixed in accordance with the provisions of Section
(A) of this Article VI), of the holders of any outstanding shares of Preferred
Stock, be entitled to receive all of the remaining assets of the Corporation,
tangible or intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common Stock held
by them respectively.
3. Except as may otherwise be required by law, and subject to the
provisions of such resolution or resolutions as may be adopted by the Board
pursuant to Section (A) of this Article VI granting the holders of one or more
series of Preferred Stock exclusive voting powers with respect to any matter,
each holder of Common Stock may have one vote in respect to each share of
Common Stock held on all matters voted upon by the stockholders.
4. The number of authorized shares of Preferred Stock and each class of
Common Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of shares having a
majority of the total number of votes which may be cast in the election of
directors of
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<PAGE> 5
the Corporation by all stockholders entitled to vote in such an election,
voting together as a single class.
The Certificate of Designations with respect to the Corporation's
Series A Junior Participating Preferred Stock, as filed with the Secretary of
State of the State of Delaware on February 28, 1996 and attached hereto as
Annex A, is hereby incorporated by reference herein and made a part hereof.
ARTICLE VII
BY-LAWS
The Board is expressly authorized to adopt, amend or repeal the By-laws
of the Corporation.
ARTICLE VIII
ELECTION OF DIRECTORS
The directors of the Corporation shall not be required to be elected by
written ballots unless the By-laws of the Corporation so provide.
ARTICLE IX
BOARD OF DIRECTORS
Section A. Classified Board. The Board, other than those directors
elected by the holders of any series of Preferred Stock as provided for or
fixed pursuant to the provisions of Article VI hereof, shall be divided into
three classes, as nearly equal in number as the then-authorized number of
directors constituting the Board permits, with the term of office of one class
expiring each year and with each director serving for a term ending at the
third annual meeting of stockholders of the Corporation following the annual
meeting at which such director was elected. One class of directors shall be
initially elected for a term expiring at the annual meeting of stockholders to
be held in 1995, another class shall be initially elected for a term expiring
at the annual meeting of stockholders to be held in 1996, and another class
shall be initially elected for a term expiring at the annual meeting of
stockholders to be held in 1997. Members of each class shall hold office until
their successors are elected and qualified. At each succeeding annual meeting
of the stockholders of the Corporation, the successors of the class of
directors whose term expires at that meeting shall be elected by a plurality
vote of all votes cast at such meeting to hold office for a term expiring at
the annual meeting of stockholders held in the third year following the year of
the election.
Section B. Vacancies. Except as otherwise provided for or fixed
pursuant to the provisions of Article VI hereof relating to the rights of the
holders of any series of Preferred Stock to elect additional directors, newly
created directorships resulting from any increase in the authorized number of
directors and any vacancies on the Board resulting from death, resignation,
disqualification, removal or other cause shall be filled only by the
5
<PAGE> 6
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the class of directors in which the new directorship was created or in which
the vacancy occurred and until such director's successor shall have been duly
elected and qualified. No decrease in the number of directors constituting the
Board shall shorten the term of any incumbent director.
Section C. Directors Elected by Holders of Preferred Stock. During any
period when the holders of any series of Preferred Stock have the right to
elect additional directors as provided for or fixed pursuant to the provisions
of Article VI hereof, then upon commencement and for the duration of the period
during which such right continues (i) the then otherwise total authorized
number of directors of the Corporation shall automatically be increased by such
specified number of directors, and the holders of such Preferred Stock shall be
entitled to elect the additional directors so provided for or fixed pursuant to
such provisions, and (ii) each such additional director shall serve until
such director's successor shall have been duly elected and qualified, or until
such director's right to hold such office terminates pursuant to such
provisions, whichever occurs earlier. Except as otherwise provided by the Board
in the resolution or resolutions establishing such series, whenever the holders
of any series of Preferred Stock having such right to elect additional
directors are divested of such right pursuant to the provisions of such stock,
the terms of office of all such additional directors elected by the holders of
such stock, or elected to fill any vacancies resulting from death, resignation,
disqualification or removal of such additional directors, shall forthwith
terminate and the total and authorized number of directors of the Corporation
shall be reduced accordingly. Notwithstanding the foregoing, whenever, pursuant
to the provisions of Article VI hereof, the holders of any one or more series
of Preferred Stock shall have the right, voting separately as a series or
together with holders of other such series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of the Restated Certificate of Incorporation and the Certificate of
Designation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Article IX unless expressly provided by
such terms.
Section D. Number of Directors Constituting the Board. The number of
directors that shall constitute the full Board, other than any directors
elected by the holders of any series of Preferred Stock as provided for or
fixed pursuant to the provisions
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<PAGE> 7
of Article VI hereof, shall be fixed by the By-laws of the Corporation.
ARTICLE X
NO ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
Except as otherwise provided for or fixed pursuant to the provisions of
Article VI hereof relating to the rights of the holders of any series of
Preferred Stock, no action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of
stockholders may be effected by written consent of stockholders in lieu of a
meeting of stockholders.
ARTICLE XI
DIRECTOR NOMINATION PROCEDURE;
ANNUAL MEETING BUSINESS
Section A. Director Nomination Procedure. Except as otherwise provided
for or fixed pursuant to the provisions of Article VI hereof relating to the
rights of the holders of any series of Preferred Stock, nominations for the
election of directors may be made by the affirmative vote of a majority of the
Board or a duly authorized committee thereof or by any holder of record of
shares of capital stock of the Corporation entitled to vote generally for the
election of directors; provided that any stockholder may nominate one or more
persons for election as directors at a meeting only if written notice of such
stockholder's intention to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the Corporation not later than (i) with respect to an election to
be held at an annual meeting of stockholders (other than the first annual
meeting of stockholders), ninety (90) days prior to the date that is one year
from the date of the immediately preceding meeting of stockholders and (ii) with
respect to an election to be held at the first annual meeting of stockholders or
at a special meeting of stockholders for the election of directors, the close of
business on the seventh day following the date on which notice of the meeting is
first given to stockholders. For the purposes of this Section (A) of this
Article XI, the date notice of a meeting is deemed to have been first given
shall include, but not be limited to, the date on which disclosure of the date
of the meeting is first made in a press release reported by the Dow Jones News
Services, Associated Press or comparable national news service, or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) (or the rules and regulations thereunder) of
the Securities Exchange Act of 1934, as amended. Each such notice to the
Secretary shall set forth the following information: (i) the name and address of
record of the stockholder who intends to make the nomination, (ii) a
7
<PAGE> 8
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote generally for the election of directors at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice, (iii) the name, age, business
and residential addresses and principal occupation or employment of each
nominee, (iv) a description of all arrangements or understandings between the
stockholders 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, (v) 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 (vi)
the written consent of each proposed nominee to serve as a director of the
Corporation if so elected. The Corporation may require the proposed nominee to
furnish such other information as may reasonably be required by the Corporation
to determine the eligibility of such proposed nominee to serve as a director of
the Corporation. The presiding officer of the meeting may, if the facts
warrant, determine that a nomination was not made in accordance with the
foregoing procedure, and if such officer should so determine, such officer
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section B. Annual Meeting Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board, (ii) otherwise properly
brought before the meeting by or at the direction of the Board or (iii)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be received at the
principal executive offices of the Corporation (i) not less than sixty (60) days
in advance of such meeting if such meeting is to be held on a day which is
within thirty (30) days preceding the anniversary of the previous year's annual
meeting or ninety (90) days in advance of such meeting if such meeting is to be
held on or after the anniversary of the previous year's annual meeting, and (ii)
with respect to any other annual meeting of stockholders, on or before the close
of business on the 15th day following the date (or the first date, if there be
more than one) of public disclosure of the date of such meeting. For the
purposes of this Section(B) of this Article XI, the date of public disclosure of
a meeting shall include, but not be limited to, the date on which disclosure of
the date of the meeting is first made in a press release reported by the Dow
Jones News Services, Associated Press
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<PAGE> 9
or comparable national news service, or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) (or the rules and regulations thereunder) of the Securities Exchange
Act of 1934, as amended. A stockholder's notice to the Secretary of the
Corporation shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) 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, (ii) the name, age and business and residential
addresses, as they appear on the Corporation's records, of the stockholder
proposing such business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder and (iv) any material interest
of the stockholder in such business. Notwithstanding anything in the By-laws of
the Corporation to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth herein. The Chairman
of the annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions hereof, and if the Chairman should so determine,
the Chairman shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
ARTICLE XII
DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law or (iv)
for any transaction to which the director derived any improper personal
benefit. If the General Corporation Law is amended after the filing of this
Restated Certificate of Incorporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law, as so amended. No modification
or repeal of the provisions of this Article XII shall adversely affect any right
or protection of any director of the Corporation existing at the date of such
modification or repeal or create any liability or adversely affect any such
right or protection for any acts or omissions of such director occurring prior
to such modification or repeal.
9
<PAGE> 10
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and does not further amend the provisions of the
Certificate of Incorporation of the Corporation as heretofore amended or
supplemented and which has been duly adopted in accordance with Section 245 of
the General Corporation Law, as the Corporation has received payment for its
capital stock, has been executed by its Senior Vice President and Secretary
this November 15, 1996.
JP FOODSERVICE, INC.
By: /s/ LEWIS HAY, III
------------------------------
Name: Lewis Hay, III
Title: Senior Vice President
Attest:
By: /s/ DAVID M. ABRAMSON
------------------------------
Name: David M. Abramson
Title: Secretary
10
<PAGE> 11
ANNEX A
-------
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
JP FOODSERVICE, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
---------------------------------
JP Foodservice, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on February 19, 1996:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 350,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or
<PAGE> 12
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the
holders of Common Stock, par value $.01 per share (the "Common Stock"),
of the Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash
on the first day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
<PAGE> 13
(b) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
<PAGE> 14
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law, holders of
Series A Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the
<PAGE> 15
Series A Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
<PAGE> 16
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, Etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at
<PAGE> 17
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of a least two-thirds of the outstanding shares of Series A Preferred
Stock, voting together as a single class.
IN WITNESS WHEREOF, this certificate of Designations is executed on
behalf of the Corporation by its Senior Vice President and Chief Financial
Officer and attested by its Assistant Secretary this 27th day of February, 1996.
/s/ LEWIS HAY, III
-----------------------
Lewis Hay, III
Senior Vice President
Chief Financial Officer
Attest:
/s/ GEORGE T. MEGAS
- ----------------------
George T. Megas
Vice President and
Assistant Secretary
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
JP FOODSERVICE, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, Delaware 19801, in the County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS MEETINGS
Section 1. Places of Meetings. All meetings of stockholders shall
be held at such place or places in or outside of the State of Delaware as shall
be designated from time to time by the Board of Directors and stated in the
notice of meeting or waiver of notice thereof, subject to any provisions of the
laws of the State of Delaware.
Section 2. Annual Meetings. Unless otherwise determined from time
to time by the Board of Directors, the annual meeting of stockholders shall be
held each year for the election of directors and the transaction of such other
business as may properly come before the meeting at such date and time as may
be designated by the Board of Directors. Written notice of the time and place of
the annual meeting shall be given by mail to each stockholder entitled to vote
at such meeting, at the stockholder's address as it appears on the records of
the Corporation, not less than ten (10) nor more than sixty (60) days prior to
the scheduled date thereof.
Section 3. Special Meetings. A special meeting of the stockholders
of the Corporation may be called at any time by the Chairman of the Board or by
the Board of Directors pursuant to a
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resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies. Written notice of the date,
time, place and specific purpose or purposes for which such meeting is called
shall be given by mail to each stockholder entitled to vote thereat at such
stockholder's address as it appears on the records of the Corporation not less
than (10) nor more than sixty (60) days prior to the scheduled date thereof.
Business transacted at any special meeting of stockholders shall be limited to
the purposes stated in the notice.
Section 4. Voting. At all meetings of stockholders, each stockholder
entitled to vote on the record date as determined under these By-Laws or, if
not so determined, as prescribed under the laws of the State of Delaware, shall
be entitled to one vote for each share of stock standing on record in such
stockholder's name, subject to any restrictions or qualifications set forth in
the Restated Certificate of Incorporation of the Corporation or any amendment
thereto (the "Restated Certificate of Incorporation").
Section 5. Quorum; Voting. At any stockholders meeting, a majority of
the number of shares of stock outstanding and entitled to vote thereat, present
in person or by proxy, shall constitute a quorum, but a smaller interest may
adjourn any meeting from time to time, and the meeting may be held as adjourned
without further notice, subject to such limitations as may be imposed under the
laws of the State of Delaware. When a quorum is present at any meeting, the
affirmative vote of the holders of a majority of the number of shares of stock
entitled to vote thereon, present in person or by proxy, shall decide any
question brought before such meeting unless such question is one upon which a
different vote is required by express provision of the Restated Certificate of
Incorporation, these By-Laws, the rules or regulations of the Nasdaq National
Market or any law or other rule or regulation applicable to the Corporation,
in which case such express provision shall govern.
Section 6. Inspectors of Election; Opening and Closing the Polls. The
Board of Directors may, by resolution, appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives of the Corporation, to act at a meeting of stockholders and
make a written report thereof. One or more persons may be designated as
alternative inspectors to replace any inspector who fails to act. If no
inspector or alternate has
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been appointed to act, or if all inspectors or alternates who have been
appointed are unable to act at a meeting of stockholders, the chairman of the
meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall have the
duties prescribed by the General Corporation Law of the State of Delaware.
The chairman of the meeting shall fix and announce at the meeting the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote at the meeting.
Section 7. List of Stockholders. At least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order and showing the address and
the number of shares registered in the name of each stockholder, shall be
prepared by the secretary or the transfer agent in charge of the stock ledger of
the Corporation. Such list shall be open for examination by any stockholder as
required by the laws of the State of Delaware. The stock ledger shall be the
only evidence as to who are the stockholders entitled to examine such list or
the books of the Corporation or to vote in person or by proxy at such meeting.
Section 8. Written Consent in Lieu of Meeting. Except as otherwise
provided for or fixed pursuant to the provisions of the Restated Certificate of
Incorporation relating to the rights of the holders of any series of preferred
stock, no action that is required or permitted to be taken by the stockholders
of the Corporation at any annual or special meeting of stockholders may be
effected by written consent of stockholders in lieu of a meeting of
stockholders.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Number and Qualification. The authorized number of
directors that shall constitute the full Board of Directors of the Corporation
shall be fixed from time to time by resolution of the Board of Directors. The
Board of Directors, other than those directors elected by the holders of any
series of preferred stock, shall be divided into three classes, as nearly equal
in
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number as the then-authorized number of directors constituting the Board
permits, with the term of office of one class expiring each year and with each
director serving for a term ending at the third annual meeting of stockholders
of the Corporation following the annual meeting at which such director was
elected. One class of directors shall be initially elected for a term expiring
at the annual meeting of stockholders to be held in 1995, another class shall be
initially elected for a term expiring at the annual meeting of stockholders to
be held in 1996, and another class shall be initially elected for a term
expiring at the annual meeting of stockholders to be held in 1997. Members of
each class shall hold office until their successors are elected and qualified.
At each succeeding annual meeting of the stockholders of the Corporation, the
successors of the class of directors whose term expires at that meeting shall be
elected by a plurality vote of all votes cast at such meeting to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election. Directors need not be stockholders of the
Corporation.
Section 2. POWERS. The business and affairs of the Corporation
shall be carried on by or under the direction of the Board of Directors, which
shall have all the powers authorized by the laws of the State of Delaware,
subject to such limitations as may be provided by the Restated Certificate of
Incorporation or these By-Laws. Except as otherwise expressly provided herein
or in the Restated Certificate of Incorporation, the vote of the majority of
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 3. COMPENSATION. The Board of Directors may from time to
time by resolution authorize the payment of fees or other compensation to the
directors for services as such to the Corporation, including, but not limited
to, fees for attendance at all meetings of the Board or of the executive or
other committees, and determine the amount of such fees and compensation.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor in amounts authorized or otherwise approved from time to time by the
Board.
Section 4. MEETINGS AND QUORUM. Meetings of the Board of Directors
may be held either in or outside of the State of Delaware. At all meetings of
the Board, a majority of the then authorized number of directors shall
constitute a quorum. If a
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quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
The first meeting of the Board of Directors after the election of a new
class of directors shall be held immediately after the annual meeting of
stockholders and at the same place, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event such meeting is not
held at such time and place, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written
waiver signed by all the directors.
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by the
Board. Notice of special meetings shall be given to each director on one (1)
day's notice to each director, either personally, by mail, telegram, facsimile,
personal delivery or similar means. Special meetings may be called by the
president or the Chairman of the Board of Directors and shall be called by the
president or secretary in the manner and on the notice set forth above upon the
written request of a majority of the total number of directors which the
Corporation would have if there were no vacancies.
Notice of any meeting shall state the time and place of such meeting,
but need not state the purposes thereof unless otherwise required by the laws
of the State of Delaware, the Restated Certificate of Incorporation, these
By-Laws or the Board of Directors.
Section 5. Executive Committee. The Board of Directors may, by
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies, designate an Executive
Committee to exercise, subject to applicable provisions of law, all the powers
of the Board in the management of the business and affairs of the Corporation
when the Board is not in session, including without limitation the power to
declare dividends and to authorize the issuance of the Corporation's capital
stock, and may, by resolution similarly adopted, designate one or more other
committees, including such
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committees specified in Section 6 of this Article III. The Executive Committee
shall consist of two or more directors of the Corporation. The Board may
designate one or more directors as alternate members of the Executive
Committee, who may replace any absent member at any meeting of the Executive
Committee. The members of the Executive Committee present at any meeting,
whether or not constituting a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent member. The
Executive Committee shall keep written minutes of its proceedings and shall
report such proceedings to the Board when required.
A majority of the Executive Committee may determine its action and fix
the time and place of its meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the Executive
Committee in the manner provided for in Section 4 of this Article III. The Board
shall have power at any time to fill vacancies in, to change the membership of,
or to dissolve the Executive Committee.
Section 6. Other Committees.
(a) The Board shall appoint the following standing committees, the
members of which shall serve at the pleasure of the Board: a Nominating
Committee, a Compensation Committee and an Audit Committee. The Board may
appoint such other committees among the directors of the Corporation as it
deems necessary and appropriate for the proper conduct of the Corporation's
business and may appoint such officers, agents or employees of the Corporation
to assist the committees of the Board as it deems necessary and appropriate.
Meetings of committees may be called by the chairman of the committee on one
(1) day's notice to each committee member, either personally, by mail, telegram,
facsimile or similar means and shall be called by the chairman of the committee
in like manner and on like notice on the written request of a committee member.
Each committee shall keep regular minutes of its meetings and report the same
to the Board of Directors when required.
(b) One or more directors of the Corporation shall be appointed to act
as a Nominating Committee. The Nominating Committee shall be responsible for
proposing to the Board nominees for election as directors and shall possess and
may exercise such additional powers and authority as may be delegated to it by
the Board from time to time. The Nominating Committee shall
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report its actions to the Board at the next meeting of the Board following such
actions. Vacancies in the membership of the Nominating Committee shall be
filled by the Board of Directors.
(c) One or more directors of the Corporation shall be appointed to
act as a Compensation Committee, each of whom shall be directors who are not
also officers or employees of the Corporation or its subsidiaries or any other
individual having a relationship which, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director (each such director, an
"Unaffiliated Director"). The Compensation Committee shall be responsible for
establishing salaries, bonuses and other compensation for the executive
officers of the Corporation and for administering the Corporation's benefit
plans, and shall possess and may exercise such additional powers and authority
as may be delegated to it by the Board from time to time. The Compensation
Committee shall report its actions to the Board at the next meeting of the
Board following such actions. Vacancies in the membership of the Compensation
Committee shall be filled by the Board of Directors.
(d) One or more Unaffiliated Directors of the Corporation shall be
appointed to act as an Audit Committee. The Audit Committee shall have general
oversight responsibility with respect to the Corporation's financial reporting.
In performing its oversight responsibility, the Committee shall make
recommendations to the Board of Directors as to the selection, retention, or
change in the independent accountants of the Corporation, review with the
independent accountants the scope of their examination and other matters
(relating to both audit and non-audit activities), and review generally the
internal auditing procedures of the Corporation. In undertaking the foregoing
responsibilities, the Audit Committee shall have unrestricted access, if
necessary, to personnel of the Corporation and documents and shall be provided
with the resources and assistance necessary to discharge its responsibilities,
including periodic reports from management assessing the impact of regulation,
accounting, and reporting of other significant matters that may affect the
Corporation. The Audit Committee shall review the financial reporting and
adequacy of internal controls of the Corporation, consult with the internal
auditors and certified public accountants, and from time to time, but not less
than annually, report to the Board. Vacancies in the membership of the Audit
Committee shall be filled by the Board of Directors.
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Section 7. Conference Telephone Meetings. Any one or more members of
the Board of Directors or any committee thereof may participate in meetings by
means of a conference telephone or similar communications equipment and such
participation in a meeting shall constitute presence in person at the meeting.
Section 8. Action Without Meetings. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting to the extent and in the manner authorized by
the laws of the State of Delaware.
Section 9. Transactions With Affiliates. No transaction, agreement or
understanding between the Corporation (or any of its subsidiaries) and any
affiliate of the Corporation that, along with its affiliates and associates,
beneficially owns 10% or more of the outstanding common stock of the
Corporation shall be valid and effective unless such transaction, agreement or
understanding shall have been approved or adopted or authorized, as the case
may be, by the Board of Directors or the Executive Committee.
ARTICLE IV
OFFICERS
Section 1. Titles and Election. The officers of the Corporation shall
be the president, a secretary and a treasurer, who shall initially be elected
as soon as convenient by the Board of Directors and thereafter, in the absence
of earlier resignations or removals, shall be elected at the first meeting of
the Board following the annual meeting of stockholders. Each officer shall
hold office at the pleasure of the Board except as may otherwise be approved by
the Board, or until such officer's earlier resignation, removal under these
By-Laws or other termination of employment. Any person may hold more than one
office if the duties can be consistently performed by the same person, to the
extent permitted by the laws of the State of Delaware.
The Board of Directors, in its discretion, may also at any time elect
or appoint a Chairman of the Board of Directors, who shall be a director, and
one or more vice presidents, assistant secretaries and assistant treasurers and
such other officers as
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it may deem advisable, each of whom shall hold office at the pleasure of the
Board, except as may otherwise be approved by the Board, or until such
officer's earlier resignation, removal or other termination of employment,
and shall have such authority and shall perform such duties as shall be
prescribed or determined from time to time by the Board or, in case of officers
other than the Chairman of the Board, if not so prescribed or determined by the
Board, as the president or the then senior executive officer may prescribe or
determine. The Board of Directors may require any officer or other employee or
agent to give bond for the faithful performance of duties in such form and with
such sureties as the Board may require.
Section 2. Duties. Subject to such extension, limitations, and other
provisions as the Board of Directors or these By-Laws may from time to time
prescribe or determine, the following officers shall have the following powers
and duties:
(a) Chairman of the Board. The Chairman of the Board, when present,
shall preside at all meetings of the stockholders and of the Board of Directors
and shall be charged with general supervision of the management and policy of
the Corporation, and shall have such other powers and perform such other duties
as the Board of Directors may prescribe from time to time.
(b) President. Subject to the Board of Directors and the provisions of
these By-Laws, the president shall be the chief executive officer of the
Corporation, shall exercise the powers and authority and perform all of the
duties commonly incident to such office, shall in the absence of the Chairman
of the Board preside at all meetings of the stockholders and of the Board of
Directors if he is a director, and shall perform such other duties as the Board
of Directors shall specify from time to time. Unless some other person is
thereunto specifically authorized by the Board of Directors, the president or a
vice president shall sign all bonds, debentures, promissory notes, deeds and
contracts of the Corporation.
(c) Vice-President. The vice president or vice presidents shall perform
such duties as may be assigned to them from time to time by the Board of
Directors or by the president if the Board does not do so. In the absence or
disability of the president, the vice presidents in order of seniority may,
unless otherwise determined by the Board, exercise the powers and perform the
duties pertaining to the office of president, except that if one or
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more senior vice presidents has been elected or appointed, the person holding
such office in order of seniority shall exercise the powers and perform the
duties of the office of president.
(d) Secretary. The secretary, or in the secretary's absence, an
assistant secretary shall keep the minutes of all meetings of stockholders and
of the Board of Directors, give and serve all notices, attend to such
correspondence as may be assigned to such officer, keep in safe custody the
seal of the Corporation, and affix such seal to all such instruments properly
executed as may require it, and shall have such other duties and powers as may
be prescribed or determined from time to time by the Board of Directors or by
the president if the Board does not do so.
(e) Treasurer. The treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the moneys, funds, valuable
papers and documents of the Corporation (other than such officer's own bond, if
any, which shall be in the custody of the president), and shall have, under the
supervision of the Board of Directors, all the powers and duties commonly
incident to such office. The treasurer shall deposit all funds of the
Corporation in such bank or banks, trust company or trust companies, or with
such firm or firms doing a banking business as may be designated by the Board
of Directors or by the president if the Board does not do so. The treasurer may
endorse for deposit or collection all checks, notes and similar instruments
payable to the Corporation or to its order. The treasurer shall keep accurate
books of account of the Corporation's transactions, which shall be the property
of the Corporation, and together with all of the property of the Corporation in
such officer's possession, shall be subject to all times to the inspection and
control of the Board of Directors. The treasurer shall be subject in every way
to the order of the Board of Directors, and shall render to the Board of
Directors and/or the president of the Corporation, whenever they may require
it, an account of all transactions and of the financial condition of the
Corporation. In addition to the foregoing, the treasurer shall have such duties
as may be prescribed or determined from time to time by the Board of Directors
or by the president if the Board does not do so.
(f) Delegation of Authority. The Board of Directors may at any time
delegate the powers and duties of any officer for the time being to any other
officer, director or employee.
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(g) Compensation. The compensation of the Chairman of the Board, the
president, all senior vice presidents, the secretary and the treasurer shall be
fixed by the Board of Directors, and the fact that any officer is a director
shall not preclude such officer from receiving compensation or from voting upon
the resolution providing the same.
ARTICLE V
RESIGNATIONS AND VACANCIES
Section 1. Resignations. Any director or officer may resign at any
time by giving written notice thereof to the Board of Directors, the president
or the secretary. Any such resignation shall take effect at the time specified
therein or, if the time be not specified, upon receipt thereof; and unless
otherwise specified therein, the acceptance of any resignation shall not be
necessary to make it effective.
Section 2. Vacancies.
(a) Directors. Except for the rights of the holders of any series of
preferred stock to elect additional directors, newly created directorships
resulting from any increase in the authorized number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal, or other cause shall be filled only by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or in which the vacancy occurred and until such director's successor is
duly elected and has been qualified. The directors also may reduce the
authorized number of directors by the number of vacancies on the Board, provided
that such reduction does not reduce the Board to less than the minimum
authorized by the laws of the State of Delaware. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
(b) Officers. The Board of Directors may at any time or from time to
time fill any vacancy among the officers of the Corporation.
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ARTICLE VI
CAPITAL STOCK
Section 1. Certificate of Stock. Every stockholder shall be
entitled to a certificate or certificates for shares of the capital stock of
the Corporation in such form as may be prescribed or authorized by the Board of
Directors, duly numbered and setting forth the number and kind of shares
represented thereby. Such certificates shall be signed by the Chairman of the
Board, the president or a vice president and by the treasurer or an assistant
treasurer or by the secretary or an assistant secretary. Any or all of such
signatures may be in facsimile if and to the extent authorized under the laws
of the State of Delaware.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate has ceased to be
such officer, transfer agent or registrar before the certificate has been
issued, such certificate may nevertheless be issued and delivered by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
Section 2. Transfer of Stock. Shares of the capital stock of the
Corporation shall be transferable only upon the books of the Corporation upon
the surrender of the certificate or certificates properly assigned and endorsed
for transfer. If the Corporation has a transfer agent or agents or transfer
clerk and registrar of transfers acting on its behalf, the signature of any
officer or representative thereof may be in facsimile.
The Board of Directors may appoint a transfer agent and one or more
co-transfer agents and a registrar and one or more co-registrars of transfer
and may make or authorize the transfer agents to make all such rules and
regulations deemed expedient concerning the issue, transfer and registration of
shares of stock.
Section 3. Record Dates.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any
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change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix in advance a record date which, in the
case of a meeting, shall not be less than ten (10) nor more than sixty (60)
days prior to the scheduled date of such meeting and which, in the case of any
other action, shall be not more than the maximum number of days prior to any
such action permitted by the laws of the State of Delaware.
(b) If no such record date is fixed by the Board, the record date
shall be that prescribed by the laws of the State of Delaware.
(c) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 4. Lost Certificates. In case of loss or mutilation or
destruction of a stock certificate, a duplicate certificate may be issued upon
such terms as may be determined or authorized by the Board of Directors or by
the president if the Board does not do so.
ARTICLE VII
FISCAL YEAR, BANK DEPOSITS, CHECK, ETC.
Section 1. Fiscal Year. The fiscal year of the Corporation shall
commence or end at such time as the Board of Directors may designate.
Section 2. Bank Deposits, Checks, etc. The funds of the
Corporation shall be deposited in the name of the Corporation or of any
division thereof in such banks or trust companies in the United States or
elsewhere as may be designated from time to time by the Board of Directors, or
by such officer or officers as the Board may authorize to make such
designations.
All checks, drafts or other orders for the withdrawal of funds from any
bank account shall be signed by such person or persons as may be designated
from time to time by the Board of Directors. The signatures on checks, drafts
or other orders for the withdrawal of funds may be in facsimile if authorized
in the designation.
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ARTICLE VIII
BOOKS AND RECORDS
Section 1. Place of Keeping Books. Unless otherwise expressly
required by the laws of the State of Delaware, the books and records of the
Corporation may be kept outside of the State of Delaware.
Section 2. Examination of Books. Except as may otherwise be provided
by the laws of the State of Delaware, the Restated Certificate of Incorporation
or these By-Laws, the Board of Directors shall have power to determine from
time to time whether and to what extent and at what times and places and under
what conditions any of the accounts, records and books of the Corporation are
to be open to the inspection of any stockholder. No stockholder shall have any
right to inspect any account or book or document of the Corporation except as
prescribed by statute or authorized by express resolution of the stockholders
or of the Board of Directors.
ARTICLE IX
NOTICES
Section 1. Requirements of Notice. Whenever notice is required to be
given by statute, the Restated Certificate of Incorporation or these By-Laws,
it shall not mean personal notice unless so specified, but such notice may be
given in writing by depositing the same in a post office, letter box, or mail
chute postpaid and addressed to the person to whom such notice is directed at
the address of such person on the records of the Corporation, and such notice
shall be deemed given at the time when the same shall be thus mailed.
Section 2. Waivers. Any stockholder, director or officer may, in
writing or by telegram or cable, at any time waive any notice or other
formality required by statute, the Restated Certificate of Incorporation or
these By-Laws. Such waiver of notice, whether given before or after any meeting
or action, shall be deemed equivalent to notice. Presence of a stockholder
either in person or by proxy at any stockholders' meeting and presence of any
director at any meeting of the Board of Directors shall constitute a waiver of
such notice as may be required by any statute, the Restated Certificate of
Incorporation or these By-Laws.
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ARTICLE X
SEAL
The corporate seal of the Corporation shall consist of two concentric
circles between which shall be the name of the Corporation and the date of its
incorporation, and in the center of which shall be inscribed "Corporate Seal,
Delaware."
ARTICLE XI
POWERS OF ATTORNEY
The Board of Directors may authorize one or more of the officers of the
Corporation to execute powers of attorney delegating to named representatives
or agents power to represent or act on behalf of the Corporation, with or
without power of substitution.
In the absence of any action by the Board, the president, any vice
president, the secretary or the treasurer of the Corporation may execute for
and on behalf of the Corporation waivers of notice of stockholders meetings and
proxies for such meetings in any company in which the Corporation may hold
voting securities.
ARTICLE XII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Definitions. As used in this article, the term "person"
means any past, present or future director or officer of the Corporation or any
subsidiary or operating division thereof.
Section 2. Indemnification Granted. The Corporation shall indemnify, to
the full extent and under the circumstances permitted by the General
Corporation Law of the State of Delaware in effect from time to time, any
person as defined above, made or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director or officer of the Corporation or a subsidiary or
operating division thereof, or is or was an employee or agent of the
Corporation, or is or was serving at the specific request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, against
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costs, charges, expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person or
on such person's behalf in connection with such action, suit or proceeding and
any appeal therefrom, if such person acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his or her conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such conduct was unlawful.
Section 3. Requirements for Indemnification. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact that
such person is or was a director, officer, employee or agent of the
Corporation, or a subsidiary thereof or a designated officer of an operating
division of the Corporation, or is or was serving at the specific request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges and expenses (including attorneys' fees) actually and
reasonably incurred by such person or on such person's behalf in connection
with the defense or settlement of such action or suit and any appeal therefrom,
if such person acted in good faith and in a manner that such person reasonably
believed to be in or not opposed to the best interest of the Corporation except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of such liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such costs, charges and expenses which the Court of
Chancery or such other court shall deem proper.
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<PAGE> 17
Section 4. Success on Merits of Any Action. Notwithstanding any
other provision of this Article, to the extent that a director, officer,
employee or agent of the Corporation or any subsidiary or operating division
thereof has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit or proceeding referred to in this Article, or in defense of any
claim, issue or matter therein, such person shall be indemnified against all
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by such person or on such person's behalf in connection therewith.
Section 5. Determination of Standard of Conduct. Any
indemnification under Sections 2 and 3 of this Article (unless ordered by a
court) shall be paid by the Corporation only after a determination has been
made (1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such quorum is not obtainable, or even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(3) by the stockholders, that indemnification of the director, officer,
employee or agent is proper in the circumstances of the specific case because
such person has met the applicable standard of conduct set forth in Sections 2
and 3 of this Article.
Section 6. Advance Payment; Representation by Corporation. Costs,
charges and expenses (including attorneys' fees) incurred by a person referred
to in Sections 2 and 3 of this Article in defending a civil or criminal action,
suit or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding; provided, however, that the
payment of such costs, charges and expenses incurred by a director or officer
in such capacity as officer or director (and not in any other capacity and
which service was or is rendered by such person while a director or officer) in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified
by the Corporation as authorized in this Article. Such costs, charges and
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate. The
Corporation may, in the manner set forth above, and upon
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<PAGE> 18
approval of such director, officer, employee or agent, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action,
suit or proceeding.
Section 7. Procedure for Obtaining Indemnity. Any indemnification
under Sections 2, 3 and 4, or advance of costs, charges and expenses under
Section 6 of this Article, shall be made promptly, and in any event within
sixty (60) days, of the written notice of the director, officer, employee or
agent. The right to indemnification or advances as granted by this Article
shall be enforceable by the director, officer, employee or agent in any court of
competent jurisdiction if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within sixty (60) days. Such
person's costs and expenses incurred in connection with successfully
establishing a right to indemnification, in whole or in part, in any action
shall also be indemnified by the Corporation. It shall be a defense to any such
action (other than an action brought to enforce a claim for the advance of
costs, charges and expenses under Section 6 of this Article where the required
undertaking, if any, has been received by the Corporation) that the claimant
has not met the standard of conduct set forth in Section 2 or 3 of this
Article, but the burden of proving such defense shall be on the Corporation.
Neither failure of the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) to have made a determination
that indemnification of the claimant is proper in the circumstances because
such person has met the applicable standard of conduct set forth in Section 2
or 3 of this Article, nor the fact that there has been an actual determination
by the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 8. Indemnification Not Exclusive. This right of
indemnification shall not be deemed exclusive of any other rights to which a
person indemnified herein may be entitled by law, agreement, vote of
stockholders or disinterested directors or otherwise, and shall continue as to
a person who has ceased to be a director, officer, designated officer, employee
or agent and shall inure to the benefit of the heirs, executors, administrators
and other legal representatives of such person. It is not intended that the
provisions of this Article be applicable to,
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<PAGE> 19
and they are not to be construed as granting indemnity with respect to, matters
as to which indemnification would be in contravention of the laws of Delaware
or of the United States of America, whether as a matter of public policy or
pursuant to statutory provision.
Section 9. Invalidity of Certain Provisions. If this Article or any
portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each director,
officer, employee and agent of the Corporation or any subsidiary or operating
division thereof as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit or proceeding, whether civil, criminal, administrative or investigative,
including any action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the full extent permitted by applicable law.
Section 10. Miscellaneous. The Board of Directors may also on behalf
of the Corporation grant indemnification to any individual other than a person
defined herein to such extent and in such manner as the Board in its sole
discretion may from time to time and at any time determine.
ARTICLE XIII
AMENDMENTS
These By-Laws may be adopted, amended or repealed by the affirmative
vote of a majority of the directors then in office.
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<PAGE> 1
EXHIBIT 5.1
[Letterhead of Shaw, Pittman, Potts & Trowbridge]
November 20, 1996
JP Foodservice, Inc.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
Re: JP Foodservice, Inc.
Registration Statement on Form S-3
File No. 333-14039
Ladies and Gentlemen:
We have acted as counsel to JP Foodservice, Inc., a Delaware
corporation (the "Company"), in connection with the proposed sale by certain
stockholders of the Company (the "Selling Stockholders") of an aggregate of
6,409,028 shares (the "Shares") of common stock, par value $.01 per share, of
the Company (the "Common Stock") pursuant to the U.S. Underwriting Agreement
(the "U.S. Underwriting Agreement") to be entered into among the Company, the
Selling Stockholders, Sara Lee Corporation, and Smith Barney Inc., Goldman,
Sachs & Co., Morgan Stanley & Co. Incorporated, The Robinson-Humphrey Company,
Inc. and Rodman & Renshaw, Inc., as Representatives of the several
Underwriters, and pursuant to the International Underwriting Agreement (the
"International Underwriting Agreement") to be entered among the Company, the
Selling Stockholders, Sara Lee Corporation, and Smith Barney Inc., Goldman
Sachs International, Morgan Stanley & Co. International and The
Robinson-Humphrey Company, Inc., as Lead Managers of the several Managers.
This opinion is furnished pursuant to the requirements of Item
16(a) of Form S-3 under the Securities Act of 1933, as amended (the "Securities
Act"), and Items 601(a) and 601(b) of Regulation S-K under the Securities Act.
We have examined the forms of U.S. Underwriting Agreement and
International Underwriting Agreement filed as exhibits to the above-referenced
Registration Statement (the "Registration Statement"), the Restated
Certificate of Incorporation of the Company,
<PAGE> 2
JP Foodservice, Inc.
November 20, 1996
Page 2
the Amended and Restated By-laws of the Company, resolutions adopted by the
Board of Directors of the Company and such other documents and instruments as
we determined to be necessary in order to render our opinion.
Based upon the foregoing and subject to the following limitations, we
are of the opinion that the Shares have been duly authorized and validly issued
and are fully paid and nonassessable.
The foregoing opinion is, with your concurrence, predicated upon and
qualified by the following:
a. The foregoing opinion is based upon and limited to the
corporate law of the State of Delaware and the relevant laws of the United
States of America, in each case excluding the choice of law provisions thereof,
and we render no opinion with respect to the laws of any other jurisdiction.
b. The foregoing opinion is based upon and limited to laws and
regulations as in effect on the date of this letter. We assume no obligation
to update the opinion set forth herein.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectuses included as a part of the Registration
Statement.
Very truly yours,
SHAW, PITTMAN, POTTS & TROWBRIDGE
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
This Amendment, dated as of September 26, 1996, by and between JP
Foodservice, Inc., a Delaware corporation (the "Company"), and The Bank of New
York, as rights agent (the "Rights Agent"), amends that certain Rights
Agreement, dated as of February 19, 1996 (as heretofore amended, the "Rights
Agreement"), between the Company and the Rights Agent.
RECITALS
WHEREAS, the Board of Directors of the Company has determined it to be
in the best interests of the Company and its stockholders that certain
institutional investors be permitted to hold in excess of 10%, but in no case
more than 15%, of the outstanding shares of common stock of the Company (the
"Common Stock"); and
WHEREAS, under the Rights Agreement, an institutional investor
acquiring in excess of 10% of the outstanding shares of the Common Stock could
suffer certain adverse consequences provided for therein;
WHEREAS, the Board of Directors has determined it to be in the best
interests of the Company and its stockholders that the Rights Agreement be
amended, in accordance with its terms, to permit certain institutional
investors to acquire in excess of 10%, but in no event in excess of 15%, of the
outstanding shares of the Common Stock;
NOW, THEREFORE, the parties hereto agree to amend the Rights Agreement
as follows:
1. Section 1(a) is hereby amended by adding to the end thereof the
following sentence:
"With respect to any Person that is a 13G Eligible Person, each
reference to "10%" in this paragraph (a) shall deemed to be a
reference to "15%."
2. Section 1 is hereby supplemented by adding a new paragraph (r)
thereto as follows:
"(r) "13G Eligible Person" shall mean any Person who is
eligible to report its beneficial ownership of (or will or would be
eligible upon acquisition of) equity securities of the Company
(including Common Shares) on Schedule 13G under the Exchange Act and,
without limiting the foregoing, with respect to whom clause (i) of
paragraph (b)(1) of Rule 13d-1 under the Exchange Act is true and
correct."
<PAGE> 2
3. Section 3(a) is hereby amended by adding immediately after the
phrase "Common Shares aggregating 10%" therein the following parenthetical:
"(or 15%, in the case of a 13G Eligible Person)"
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2 to be duly executed as of the date first written above.
JP FOODSERVICE, INC.
By: /s/ DAVID M. ABRAMSON
-----------------------------------------
David M. Abramson
Senior Vice President and
General Counsel
THE BANK OF NEW YORK
By: /s/ RALPH CHIANESE
-----------------------------------------
Name: Ralph Chianese
Title: Vice President
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in and to the incorporation by reference in
the Prospectus constituting part of this Registration Statement on Form S-3 of
JP Foodservice, Inc. of our report dated August 2, 1996, except as to Note 16,
which is as of September 10, 1996 and except as to the pooling of interests
with Valley Industries, Inc. and with Squeri Food Service, Inc. which is as of
November 14, 1996, which appears in such Prospectus and on page F-1 of JP Foods
Service, Inc.'s Annual Report on Form 10-K for the year ended June 29, 1996. We
also consent to the references to us under the headings "Experts" and
"Selected Consolidated Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Consolidated Financial Data."
PRICE WATERHOUSE LLP
Baltimore, Maryland
November 19, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Valley Industries, Inc. and Subsidiaries
and Z Leasing Company (A General Partnership):
We consent to the incorporation by reference in the Prospectus constituting
part of Amendment No. 2 of the Registration Statement on Form S-3 of JP
Foodservice, Inc. of our report dated June 17, 1996, with respect to the
combined balance sheets of Valley Industries, Inc. and Subsidiaries and Z
Leasing Company (A General Partnership) as of January 31, 1994, 1995, and 1996
and the related combined statements of earnings, stockholders' and partners'
equity, and cash flows for each of the years in the three year period ended
January 31, 1996 which report appears in current report on Form 8-K of JP
Foodservice, Inc. dated June 28, 1996. We also consent to the reference to our
firm under the heading "Experts" in the Prospectus.
KPMG PEAT MARWICK LLP
Las Vegas, Nevada
November 19, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-3 of JP Foodservice, Inc. of our report dated
July 15, 1996, with respect to the combined financial statements of Arrow Paper
and Supply Co., Inc. and Affiliate for the year ended December 29, 1995. We
also consent to the reference to our firm under the heading "Experts" in the
Prospectus.
BLUM SHAPIRO & COMPANY, P.C.
West Hartford, Connecticut
November 15, 1996
