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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-24954
JP FOODSERVICE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 52-1634568
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9830 Patuxent Woods Drive
Columbia, Maryland 21046
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (410) 312-7100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. X
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The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant at September 15, 1997 was approximately $666
million.
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding on September 15, 1997 was 22,606,308.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in the Proxy Statement for the 1997 Annual Meeting of
Stockholders of the registrant is incorporated by reference into Part III
hereof.
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TABLE OF CONTENTS
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PART I
<TABLE>
<S> <C> <C>
Item 1. Business.......................................................... 4
Item 2. Properties........................................................ 14
Item 3. Legal Proceedings................................................. 15
Item 4. Submission of Matters to a Vote of Security Holders............... 15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters......................................................... 15
Item 6. Selected Financial Data........................................... 17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 18
Item 7A. Quantitative and Qualitative Disclosure about Market Risk......... 23
Item 8. Financial Statements and Supplementary Data....................... 23
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................ 24
PART III
Item 10. Directors and Executive Officers of the Registrant................ 24
Item 11. Executive Compensation............................................ 24
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 24
Item 13. Certain Relationships and Related Transactions.................... 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K... 25
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This Report contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements include management's expectations and objectives regarding the
Company's future financial position, operating results and business strategy.
These statements are subject to risks and uncertainties that could cause the
Company's actual operating results to differ materially. Such risks and
uncertainties include the sensitivity of the Company's business to national and
regional economic conditions, difficulties in achieving cost savings and
synergies in integrating acquired businesses, and increased competitive
pressures in the Company's industry. The Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 23, 1997 discusses
some of the important factors that could cause JP Foodservice, Inc.'s actual
results to differ materially from those in such forward-looking statements.
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PART I
Item 1. Business
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General
JP Foodservice, Inc. (the "Company" or "JP Foodservice") is a
broadline distributor of food and related products to restaurants and other
institutional foodservice establishments in the Mid-Atlantic, Midwestern,
Northeastern and Western regions of the United States. The Company ranks as the
nation's fifth largest broadline foodservice distributor based on pro forma 1996
calendar year net sales, including the results of its acquisitions of
foodservice distribution businesses consummated in fiscal 1997.
JP Foodservice markets and distributes from its 15 full-service
distribution centers over 30,000 national, private and signature brand items to
over 34,000 foodservice customers, including restaurants, hotels and casinos,
healthcare facilities, cafeterias and schools. This diverse customer base
encompasses both independent (or "street") and multi-unit (or "chain")
businesses. JP Foodservice's comprehensive product line provides its customers
with a single source to satisfy substantially all of their foodservice needs.
JP Foodservice supplemented its internal expansion in fiscal 1997 with
an active program of strategic acquisitions to take advantage of growth
opportunities from ongoing consolidation in the fragmented foodservice
distribution industry. In the first quarter, JP Foodservice extended the scope
of its distribution network into the Western region of the United States through
its acquisition of Valley Industries, Inc. ("Valley"), a broadline distributor
located in Las Vegas, Nevada. Also in the first quarter, pursuant to JP
Foodservice's strategy to increase penetration of its existing service areas, JP
Foodservice acquired Arrow Paper and Supply Co., Inc. ("Arrow"), a broadline
distributor located in Connecticut serving the New England, New York, New Jersey
and Pennsylvania markets. In the second quarter, JP Foodservice filled a gap in
its Midwestern distribution network by acquiring Squeri Food Service, Inc.,
a broadline distributor located in Ohio serving the Greater Cincinnati, Dayton,
Columbus, Indianapolis, Louisville and Lexington markets. In the fourth quarter,
JP Foodservice strengthened its presence in the Mid-Atlantic region through its
acquisition of Mazo-Lerch Company, Inc., a broadline distributor located in
Virginia serving the District of Columbia, Virginia, Maryland, southern New
Jersey and northern North Carolina markets.
Recent Developments
On June 30, 1997, the Company announced that it had entered into an
agreement and plan of merger pursuant to which Rykoff-Sexton, Inc. ("Rykoff-
Sexton") will be merged with and into a wholly-owned subsidiary of JP
Foodservice and will become a wholly-owned subsidiary of JP Foodservice. In the
merger, each outstanding share of Rykoff-Sexton common stock will be converted
into the right to receive 0.84 of one share of JP Foodservice common
stock. Consummation of the merger is subject to, among other things, approval by
stockholders of each of the Company and Rykoff-Sexton and other customary
conditions. The information in this Report does not reflect the anticipated
effects of the merger on the Company's financial condition, operating results or
business. For additional information regarding the merger, see the Company's
Current Reports on Form 8-K dated June 30, 1997 and September 3, 1997 filed with
the Securities and Exchange Commission and Note 17 to the Consolidated Financial
Statements included elsewhere in this Report.
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Foodservice Distribution Industry
Companies in the 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. 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.
Products and Services
Products
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The Company's product line 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 non-food 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
product category during each of the last three fiscal years.
<TABLE>
<CAPTION>
Percentage of Net Sales
Fiscal Year Ended
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July 1, 1995 June 29, 1996 June 28, 1997
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<S> <C> <C> <C>
Canned and dry products.... 27% 26% 28%
Meats...................... 20 20 19
Other frozen foods......... 18 18 17
Poultry.................... 9 10 10
Seafood.................... 8 8 7
Dairy products............. 8 9 8
Perishable food products... 4 3 5
Paper products............. 4 4 4
Equipment and supplies..... 1 1 1
Janitorial supplies........ 1 1 1
--- --- ---
Total net sales........... 100% 100% 100%
=== === ===
</TABLE>
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National Brands. JP Foodservice supplies more than 27,000 national
brand items, which currently account for approximately 86% of the Company's net
sales. 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.
Private Brands. JP Foodservice offers its customers an expanding line
of products under its JP(TM), JP Power(R), and Harvest Value(R) private brands.
The Company currently offers over 1,400 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), Chef's Variety(R) and Harvest Value(R)
private labels, and approximately 70 cleaning products under its JP Power(R)
brand. The Company has developed the multi-tier quality system 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(R) (Italian-style products), Hilltop Hearth(R)
(bread and bakery products), JP Foodservice, Inc. Cattleman's Choice(TM) and JP
Foodservice, Inc. Cattleman's Selection(TM) (meats), Patuxent Farms(R)
(processed meats), el Pasado Authentic Mexican Cuisine with a Touch of the
Past(TM) (Mexican-style products), Rituals(R) (gourmet coffee), Beijing Chef(TM)
(Oriental-style products), Magnifry(TM) and Magnifries(TM) (oil and french
fries) and Harbor Banks(TM) (seafood products). The Company currently offers
more than 1,800 signature brand items.
Private and signature brand items enable the Company to offer its
customers 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 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 represented 14%
of net sales in fiscal 1997. Although it intends to continue to emphasize sales
of national brand products, the Company plans to expand sales of its private and
signature brand product lines through national and local advertising,
representation at national food shows and at food shows sponsored by the Company
at its branches, and training of its sales force regarding the attributes of
these products.
Services
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To strengthen its customer relationships and increase account
penetration, JP Foodservice offers the following types of value-added services:
. Management Support and Assistance. The Company's 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.
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. 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(R)), 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(R), which
automates many restaurant management functions, including the
management and re-ordering of product inventory. The system
automatically re-orders products directly through the Company's
mainframe computer. The Company also has recently introduced its
proprietary software package, Tranzmit(TM), which has upgraded 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 provides its customers with an enhanced personal computer-
based order entry system.
. Publications. The Company promotes active customer use of its other
products and services through the distribution of professionally
printed publications, including its biweekly newsletter, JP
foodNews(R). 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 Buffet, Perkins Family Restaurants, Subway, Eurest Dining Services,
Ruby Tuesday and Pizzeria Uno. The Company 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 customer for fiscal 1997.
<TABLE>
<CAPTION>
Percentage
Type of Customer of Net Sales
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<S> <C>
Restaurants...................................................... 63%
Limited menu establishments...................................... 12
Hotels and casinos............................................... 7
Healthcare institutions.......................................... 4
Schools and colleges............................................. 3
Other............................................................ 11
---
100%
===
</TABLE>
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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 services
offered to these customers.
Street accounts represented approximately 57% of the Company's net
sales in fiscal 1997. The Company pursues a 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.
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. 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 43% of the Company's net
sales in fiscal 1997. The Company's business strategy 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. The Company also targets new chain
customers which it believes represent attractive growth opportunities. The
Company intends to continue to focus on those new 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.
No single customer accounted for more than 7% of the Company's net
sales in fiscal 1997. 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
JP Foodservice's principal marketing activities at June 28, 1997 were
conducted by approximately 760 street sales, 90 chain sales and 130 customer
service representatives. 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 in-house training program for its entry-level
sales and service representatives, which
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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.
The Company maintains sales offices at each of its 15 full-service
distribution centers and at four additional locations in Pennsylvania, Illinois,
South Dakota and Nevada. The Company employs sales and marketing staff at both
the corporate and branch levels to solicit and manage relationships with multi-
unit 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
The Company distributes its products out of its 15 full-service
distribution centers located in Massachusetts, Connecticut, Pennsylvania,
Maryland, Minnesota, Indiana, Illinois, Iowa, Nevada, Ohio, Virginia and
Delaware, and extends this geographic coverage through remote distribution
locations including, among others, facilities in Indiana, Ohio, Maryland,
Michigan, Vermont, Nevada 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
service areas. Services to both street and chain customers are supported by the
same distribution facilities and equipment.
The 15 full-service distribution centers have a total of approximately
2.1 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, distribution and
administration 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 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
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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 touch tone telephone, or through the Company's proprietary restaurant
inventory and management system, the JP Connection(R).
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 automatically 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
over 1,000 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 on-board 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 to continually 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
redistribution facility, where the loads are then transferred to smaller
equipment for delivery in the normal fashion.
Suppliers
At June 28, 1997, JP Foodservice employed approximately 30 purchasing
agents with expertise in specific product lines to purchase products for the
Company from approximately 2,400 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.
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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 28, 1997 actively involved approximately 90 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 15 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.
Proprietary Information Systems
Except for the branches acquired in fiscal 1997, 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.
However, without additional upgrades, the Company's existing system
will be unable to perform its functions beyond the year 2000. Therefore,
beginning in fiscal 1997, the Company began the development of an enhanced
distributed processing computer system to replace its existing, mainframe-based,
system. The system will work on a real-time, on-line mode and is written in a
fourth generation programming language which will facilitate future
enhancements. The Company contemplates putting all of its operations on this new
system before the year 2000.
Competition
The foodservice distribution industry is extremely fragmented, with
over 3,000 companies in operation in 1997. 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
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company, generally SYSCO Corp. or Alliant Foodservice, Inc., as well as with
numerous regional and local distributors.
JP Foodservice 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 the Company's common stock provides
the Company with an advantage over many of its competitors.
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
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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
The Company 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 ten or twenty years, which is renewable for additional
ten year periods 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.
Equipment and Machinery
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 over 1,000
vehicles, consisting of tractors, trailers and straight trucks, which are used
for long hauls and local deliveries. At June 28, 1997, the Company owned
approximately 40% of these vehicles and leased the remainder. See Note 11 to
the Consolidated Financial Statements included elsewhere in this Report.
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 1997, the Company spent $33 million on capital expenditures, primarily
for new trucks and trailers, investment in laptop computers for the sales force
and expansion of its distribution centers in Allentown, Pennsylvania, Fort
Wayne, Indiana and Las Vegas, Nevada. The Company will undertake expansion or
replacement of its facilities as and when needed to accommodate the Company's
growth. Facility expansion costs are expected to total approximately $9 million
in fiscal 1998.
Executive Officers of the Company Who Are Not Directors
George T. Megas, age 44, joined the Company in 1991 as Vice President-
Finance, with responsibility 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
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Management Consulting, and served as a Controller for certain regions of Mercer
Management Consulting until 1991.
Employees
At the end of fiscal 1997, the Company had approximately 3,700 full-
time employees, of whom approximately 150 were employed in corporate management
and administration and approximately 2,300 of whom were hourly employees.
Approximately 920 of the Company's employees were covered by collective
bargaining contracts with 11 different local unions which are associated with
the International Brotherhood of Teamsters. Collective bargaining contracts,
covering approximately 350 employees, will expire during fiscal 1998. 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.
Item 2. Properties
- -------------------
The Company 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's 15 full-service distribution centers contain a total of
approximately 2.1 million square feet of warehouse space. The centers contain
dry, refrigerated and frozen storage areas and office space for the sales and
administrative operations of the branch. The following chart provides
information on the approximate size and ownership of each of the Company's
distribution centers.
<TABLE>
<CAPTION>
Location Area in Square Feet Owned/Leased
-------- ------------------- ------------
<S> <C> <C>
Las Vegas, Nevada......... 258,000 Owned and Leased
Norwich, Connecticut...... 200,000 Owned
Baltimore, Maryland....... 187,000 Owned
Altoona, Pennsylvania..... 164,000 Owned
Minneapolis, Minnesota.... 160,000 Owned
Allentown, Pennsylvania... 155,000 Owned
Boston, Massachusetts..... 149,000 Owned
Streator, Illinois........ 146,000 Owned
Hartford Connecticut...... 141,000 Owned
Des Moines, Iowa.......... 131,000 Owned
Fort Wayne, Indiana....... 131,000 Owned
Alexandria, Virginia...... 112,000 Owned
Cincinnati, Ohio.......... 87,000 Owned
Sandston, Virginia........ 59,000 Leased
Seaford, Delaware......... 45,000 Leased
---------
Total............. 2,125,000
=========
</TABLE>
14
<PAGE>
Item 3. Legal Proceedings
- --------------------------
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.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
There were no matters submitted to the Company's security holders in
the fourth quarter of fiscal 1997.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- --------------------------------------------------------------------------
Matters
- -------
The common stock of JP Foodservice (the "Common Stock") has been
listed on the New York Stock Exchange ("NYSE") under the symbol "JPF" since
December 31, 1996. Prior to December 31, 1996, the Common Stock was quoted on
the Nasdaq National Market under the symbol "JPFS." The table below sets forth,
for the periods indicated, the reported high and low bid prices of the Common
Stock on the Nasdaq National Market prior to December 31, 1996 and, beginning on
December 31, 1996, the reported high and low sales prices on the NYSE Composite
Tape.
<TABLE>
<CAPTION>
Fiscal Year Ended June 29, 1996
<S> <C> <C>
First Quarter.......................................... $18.00 $12.75
Second Quarter......................................... 19.75 15.25
Third Quarter.......................................... 22.75 18.00
Fourth Quarter......................................... 25.00 18.00
Fiscal Year Ended June 28, 1997
First Quarter.......................................... $26.00 $20.50
Second Quarter......................................... 28.75 20.38
Third Quarter.......................................... 29.25 25.75
Fourth Quarter......................................... 30.19 26.00
Fiscal Year Ending June 27, 1998
First Quarter (through September 15, 1997)............. $32.44 $28.25
</TABLE>
As of September 15, 1997, there were 292 holders of record and
approximately 7,600 beneficial holders of the Common Stock. On September 15,
1997, the reported closing sale price of the Common Stock on the NYSE Composite
Tape was $29.88 per share.
15
<PAGE>
The Company has never declared or paid cash dividends on its Common
Stock and does not anticipate doing so 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 terms of the Company's revolving credit facility (the "Bank
Facility") and the Company's outstanding senior notes restrict the Company's
ability to pay cash dividends on the Common Stock. Pursuant to such terms, the
amount of dividends payable to JP Foodservice, Inc. by JP Foodservice
Distributors, Inc. ("JP"), the Company's principal operating subsidiary, and
certain of JP's subsidiaries, together with the aggregate amount of restricted
investments by such entities, may not exceed the sum of (i) 50% of the
cumulative consolidated net income of JP and such subsidiaries after November
22, 1994, plus (ii) the net cash proceeds to JP from the issuance or sale on or
after November 22, 1994 of capital stock of JP or from contributions to the
common equity capital of JP, plus (iii) any net return of capital from
investments in or advances to certain subsidiaries or restricted investments,
plus (iv) $1.0 million.
16
<PAGE>
Item 6. Selected Financial Data
- --------------------------------
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------------
July 3, July 2, July 1, June 29, June 28,
Statement of Operations Data: 1993 /(1)/ 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales................................................... $1,152,709 $1,178,826 $1,288,315 $1,449,303 $1,691,913
Cost of sales............................................... 953,701 979,108 1,069,494 1,198,797 1,396,223
--------- --------- --------- --------- ---------
Gross profit................................................ 199,008 199,718 218,821 250,506 295,690
Operating expenses.......................................... 166,976 163,917 177,490 202,953 232,435
Amortization of intangible assets........................... 2,266 2,265 2,263 2,338 2,918
Stock compensation charge................................... -- -- 709 -- --
--------- --------- --------- --------- ---------
Income from operations...................................... 29,766 33,536 38,359 45,215 60,337
Interest expense and other financing charge costs, net/(2)/. 38,577 32,255 22,074 15,187 16,522
Nonrecurring charges........................................ -- -- -- 1,517 5,400/(3)/
--------- --------- --------- --------- ---------
Income (loss) before income taxes and extraordinary charge.. (8,811) 1,281 16,285 28,511 38,415
Recovery of (provision for) income taxes.................... 2,191 (1,579) (7,358) (11,598) (16,167)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary charge................... (6,620) (298) 8,927 16,913 22,248
Extraordinary charge........................................ -- -- 4,590 -- --
--------- --------- --------- --------- ---------
Net income (loss)........................................... (6,620) (298) 4,337 16,913 22,248
Preference dividends........................................ (2,427) (504) (40) -- --
--------- --------- --------- --------- ---------
Net income (loss) applicable to common stockholders......... $ (9,047) $ (802) $ 4,297 $ 16,913 $ 22,248
========= ========= ========= ========= =========
Per Share Data:
Net income (loss) per common share:
Before extraordinary charge............................ $ (1.95) $ (0.17) $ 0.68 $ 0.90 $ 1.02
Extraordinary charge................................... -- -- 0.35 -- --
--------- --------- --------- --------- ---------
Net income (loss) per common share.......................... $ (1.95) $ (0.17) $ 0.33 $ 0.90 $ 1.02
========= ========= ========= ========= =========
Weighted average number of shares of common stock
outstanding............................................ 4,633,371 4,633,371 13,103,798 18,808,738 21,862,254
Balance Sheet Data:
Working capital............................................. $109,537 $ 94,038 $ 109,326 $ 120,866 $ 153,424
Total assets................................................ 376,768 386,726 415,212 448,279 524,148
Long-term debt, excluding current maturities................ 326,205 279,152 160,166 168,647 168,515
Mandatorily redeemable stock................................ -- -- 2,388 -- --
Stockholders' equity (deficit).............................. (62,086) (24,255) 110,105 128,149 228,946
</TABLE>
- ------------------
(1) 53-week fiscal year.
(2) Includes discount on sales of trade accounts receivable and amortization of
loan acquisition costs.
(3) Reflects transaction-related fees required to complete the Company's
acquisitions of Valley and Squeri, which were accounted for as poolings of
interests.
17
<PAGE>
Item 7. Management's Discussion and Analysis of
- -------------------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
General
Overview. In recent years, the Company's net sales have increased
predominantly as a result of internal expansion through continued growth in
street account and chain account sales. 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'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.
Acquisitions. JP Foodservice supplemented its internal expansion in
fiscal 1997 with an active program of strategic acquisitions to take advantage
of growth opportunities from ongoing consolidation in the fragmented foodservice
distribution industry. In the first quarter, JP Foodservice extended the scope
of its distribution network into the Western region of the United States through
its acquisition of Valley Industries, Inc. ("Valley"), a broadline distributor
located in Las Vegas, Nevada. Also in the first quarter, pursuant to JP
Foodservice's strategy to increase penetration of its existing service areas, JP
Foodservice acquired Arrow Paper and Supply Co., Inc. ("Arrow"), a broadline
distributor located in Connecticut serving the New England, New York, New Jersey
and Pennsylvania markets. In the second quarter, JP Foodservice filled a gap in
its Midwestern distribution network by acquiring Squeri Food Service, Inc.
("Squeri"), a broadline distributor located in Ohio serving the greater
Cincinnati, Dayton, Columbus, Indianapolis, Louisville and Lexington markets. In
the fourth quarter, JP Foodservice strengthened its presence in the Mid-Atlantic
region through its acquisition of Mazo-Lerch Company, Inc. ("Mazo-Lerch"), a
broadline distributor located in Virginia serving the District of Columbia,
Virginia, Maryland, southern New Jersey and northern North Carolina markets.
The Valley and Squeri acquisitions were accounted for under the
pooling of interests method of accounting, and accordingly, the operating
results for all years presented have been restated to incorporate the results of
Valley and Squeri. The Arrow and Mazo-Lerch acquisitions were accounted for
under the purchase method of accounting, and accordingly, the operating results
of Arrow and Mazo-Lerch are included only from the date of acquisition. The
acquisition of Mazo-Lerch was completed in the fourth quarter of fiscal 1997
and, therefore, did not materially affect fiscal 1997 results.
On June 30, 1997, the Company announced that it had entered into an
agreement and plan of merger pursuant to which Rykoff-Sexton, Inc. will be
merged with and into a wholly-owned subsidiary of JP Foodservice and will become
a wholly-owned subsidiary of JP Foodservice. See "Business--Recent
Developments." Rykoff-Sexton is the nation's third largest broadline foodservice
distributor based on 1996 calendar year net sales. Following completion of the
merger, which is expected to occur in the second quarter of fiscal 1998, JP
Foodservice will have a nationwide distribution network capable of serving an
area covering more than 85% of the country's population.
18
<PAGE>
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 1997, 1996 and 1995 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 1, June 29, June 28,
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Statement of Operations Data:
Net sales................................ 100.00% 100.00% 100.00%
Cost of sales............................ 83.01 82.72 82.52
------ ------ ------
Gross profit............................. 16.99 17.28 17.48
Operating expenses....................... 13.78 14.00 13.74
Amortization of intangible assets........ 0.18 0.16 0.17
Stock compensation charge................ 0.06 -- --
------ ------ ------
Income from operations................... 2.97 3.12 3.57
Interest expense and other
financing costs, net.................. 1.71 1.05 0.98
Nonrecurring charges..................... -- 0.10 0.32
------ ------ ------
Income before income taxes and
extraordinary charge.................. 1.26 1.97 2.27
Provision for income taxes............... 0.57 0.80 0.96
------ ------ ------
Income before extraordinary charge....... 0.69 1.17 1.31
Extraordinary charge on early
extinguishment of debt................ (0.35) -- --
------ ------ ------
Net income............................... 0.34% 1.17% 1.31%
====== ====== ======
</TABLE>
The principal components of expenses include costs 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 1.0%, 0.5%
and 0.5% in fiscal 1997, 1996 and 1995, respectively.
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
19
<PAGE>
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 1997 Compared to Fiscal 1996
-----------------------------------
Net Sales. Net sales increased 16.7% to $1.692 billion in fiscal 1997
from $1.449 billion in fiscal 1996. The Arrow acquisition accounted for net
sales growth of 5.8%. Higher chain account and street sales both contributed to
the Company's sales growth in fiscal 1997. An increase of 17.2% in chain account
sales reflected the continued growth in sales to the Company's larger customers.
As a percentage of net sales, chain account sales increased to 42.6% in fiscal
1997 from 42.4% in fiscal 1996. Street sales increased 16.4% over fiscal 1996
primarily as a result of the growth of the sales force and continued
improvements in sales force productivity. 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 17.5% in fiscal 1997
from 17.3% in fiscal 1996. The increase was primarily attributable to increased
sales of the Company's private and signature brand products, which increased to
20.0% of street sales at the end of fiscal 1997 from 16.3% at the end of fiscal
1996. The Company also realized purchasing synergies through the consolidation
of purchasing programs with the acquired entities.
Operating Expenses. Operating expenses increased 14.5% to $232.4
million in fiscal 1997 from $203.0 million in fiscal 1996 primarily as a result
of the increase in net sales. As a percentage of net sales, operating expenses
decreased to 13.7% in fiscal 1997 from 14.0% in fiscal 1996. The decrease in
operating expenses, as a percentage of net sales, resulted from distribution
cost savings related to higher percentage of sales to chain accounts, increased
penetration of street accounts, savings resulting from revised management
compensation agreements relating to certain of the acquired businesses, and the
absence of costs corresponding to those associated with the severe winter
weather conditions experienced in a majority of the Company's markets in fiscal
1996.
Income from Operations. Income from operations increased 33.4% to
$60.3 million in fiscal 1997 from $45.2 million in fiscal 1996 primarily as a
result of the fiscal 1997 increase in net sales, the increase in gross profit
margin and the decrease in operating expenses as a percentage of sales.
Operating margin increased to 3.6% in fiscal 1997 from 3.1% in fiscal 1996.
Interest Expense and Other Financing Costs. Interest expense and other
financing costs increased 8.8% to $16.5 million in fiscal 1997 from $15.2
million in fiscal 1996. The increase was primarily attributable to increased
borrowings incurred in connection with the acquisitions consummated in fiscal
1997.
20
<PAGE>
Nonrecurring Charge. In fiscal 1997, the Company recorded nonrecurring
charges of $5.4 million principally related to transaction fees required to
complete the Company's acquisitions of Valley and Squeri, which were accounted
for as poolings of interests.
Income Taxes. The provision for income taxes for fiscal 1997 increased
$4.6 million over the provision for fiscal 1996. The increase in the provision
was attributable to the Company's greater pretax profit level in fiscal 1997.
The Company's effective tax rate of 42.1% for fiscal 1997 increased from the
effective rate of 40.7% for fiscal 1996 primarily because of the non-deductible
portion of the nonrecurring charges related to the acquisitions consummated in
fiscal 1997.
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. 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 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 42.4% in fiscal 1996
from 41.3% in fiscal 1995. Street sales increased 10.1% 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 increased to
16.3% of street sales at the end of fiscal 1996 from 12.3% at the end of fiscal
1995. The increase in sales of private and signature brand 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 14.3% to $203.0
million in fiscal 1996 from $177.5 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 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.
21
<PAGE>
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 17.9% to $45.2 million in fiscal 1996 from $38.4 million in
fiscal 1995. Operating margin increased to 3.1% in fiscal 1996 from 3.0% in
fiscal 1995.
Interest Expense and Other Financing Costs. Interest expense and other
financing costs 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 a recapitalization consummated in the second quarter of fiscal 1995 which
included the Company's initial public offering of Common Stock.
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 special committee,
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 the effective rate of 45.2% for fiscal 1995 primarily
because of the effect on fiscal 1995 taxable income of the non-deductible stock
compensation charge of $0.7 million.
Liquidity and Capital Resources
The Company historically has financed its operations and growth
primarily with cash flow from operations, equity offerings, 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 $25.8 million, $10.5
million and $13.5 million in fiscal 1997, fiscal 1996 and fiscal 1995,
respectively.
The Company's working capital requirement generally averages between
9% and 10% of annual sales. The Company's working capital balance at June 28,
1997 was $153.4 million.
In the fourth quarter of fiscal 1997, the Company amended its bank
revolving credit loan agreement to increase maximum permissible borrowings
thereunder from $110 million to $175 million.
As of June 28, 1997, the Company's long-term indebtedness, including
current portion, was $177.9 million, with an overall weighted average interest
rate of 7.3% (excluding deferred financing costs and costs of interest rate
swaps and interest cap arrangements). As of the same
22
<PAGE>
date, $63.7 million of borrowings and $11.7 million of letters of credit were
outstanding under the Company's bank revolving credit loan agreement and an
additional $99.6 million remained available to finance the Company's working
capital requirements.
The Company made capital expenditures of $33 million in fiscal 1997
and $20 million in fiscal 1996, primarily for new trucks and trailers,
investment in laptop computers for the sales force and the expansion of the
Company's distribution centers in Streator, Illinois; Boston, Massachusetts;
Allentown, Pennsylvania; Fort Wayne, Indiana and Las Vegas, Nevada. The
expenditures for new trucks and trailers were primarily funded from capital
leases. The Company currently expects to make capital expenditures of
approximately $31 million in fiscal 1998, including approximately $9 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 and borrowings under the
bank revolving credit loan agreement will be 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 Seasonability
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. The following table
sets forth certain summary information with respect to the Company's operations
for the most recent eight fiscal quarters.
<TABLE>
<CAPTION>
(Dollars in thousands)
Fiscal Year Ended June 29, 1996 Fiscal Year Ended June 28, 1997
------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $356,323 $353,525 $349,717 $389,738 $414,362 $422,602 $407,665 $447,284
Gross profit 60,762 60,625 60,865 68,254 70,731 73,843 70,978 80,138
Income from operations 10,008 10,456 9,225 15,526 12,467 13,938 12,522 21,410
Operating margin 2.8% 3.0% 2.6% 4.0% 3.0% 3.3% 3.1% 4.8%
Net income 3,687 3,856 2,201 7,169 2,054 4,714 5,081 10,399
Net income per common
share $ 0.20 $ 0.21 $ 0.12 $ 0.38 $ 0.10 $ 0.21 $ 0.23 $ 0.47
</TABLE>
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
- ------------------------------------------------------------------
Not required for fiscal 1997 because the Company's market capitalization
was less than $2.5 billion as of January 28, 1997.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The financial statements and schedules listed in Item 14 are filed as
part of this Report and appear on Pages F-1 through F-23.
23
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information responsive to this Item is incorporated herein by reference
to the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission on or
before October 26, 1997.
Item 11. Executive Compensation
- --------------------------------
Information responsive to this Item is incorporated herein by reference
to the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission on or
before October 26, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Information responsive to this Item is incorporated herein by reference
to the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission on or
before October 26, 1997.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information responsive to this Item is incorporated herein by reference
to the Company's definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission on or
before October 26, 1997.
24
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
(a) The following documents are filed as part of this Report:
1. Financial Statements
--------------------
The following financial statements of the Company appear on pages F-1
through F-23 of this Report and are incorporated by reference in Part II, Item
8:
Report of Independent Accountants
Consolidated Balance Sheets of the Company as of June 29, 1996 and June 28,
1997.
Consolidated Statements of Operations of the Company for the fiscal years
ended July 1, 1995, June 29, 1996 and June 28, 1997.
Consolidated Statements of Stockholders' Equity of the Company for the
fiscal years ended July 1, 1995, June 29, 1996 and June 28, 1997.
Consolidated Statements of Cash Flows of the Company for the fiscal years
ended July 1, 1995, June 29, 1996 and June 28, 1997.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
-----------------------------
I. - Condensed Financial Information of Registrant
II. - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
3. Exhibits
--------
3.1 Restated Certificate of Incorporation of the Company. Filed as
Exhibit 3.1 to the Company's Registration Statement on Form S-3 (No.
333-14039) and incorporated herein by reference.
3.2 Amended and Restated By-Laws of the Company. Filed herewith.
25
<PAGE>
10.1 Employment Agreement dated as of July 3, 1989, as amended, by and
between the Company and James L. Miller. Filed as Exhibit 10.1 to the
Company's Registration Statement on Form S-1 (No. 33-82724) and
incorporated herein by reference.
10.2 Employment Agreement dated as of August 9, 1991, by and between the
Company and Lewis Hay, III. Filed as Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (No. 33-82724) and incorporated
herein by reference.
10.3 Second Amendment, dated as of June 27, 1995, to Employment Agreement,
dated as of July 3, 1989, as amended, by and between the Company and
James L. Miller. Filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended December 30, 1995
and incorporated herein by reference.
10.4 First Amendment, dated as of June 27, 1995, to Employment Agreement,
dated as of August 9, 1991, as amended, by and between the Company and
Lewis Hay, III. Filed as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended December 30, 1995 and
incorporated herein by reference.
10.5 Severance Agreement, dated as of September 27, 1995, by and between the
Company and Mark P. Kaiser. Filed as Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended December
30, 1995 and incorporated herein by reference.
10.6 Severance Agreement, dated as of September 27, 1995, by and between the
Company and George T. Megas. Filed as Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended December
30, 1995 and incorporated herein by reference.
10.7 Employment Agreement, dated as of January 4, 1996, between the Company
and James L. Miller. Filed as Exhibit 10.21 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 1996 and
incorporated herein by reference.
10.8 Employment Agreement, dated as of January 4, 1996, between the Company
and Lewis Hay, III. Filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 1996 and
incorporated herein by reference.
26
<PAGE>
10.9 Employment Agreement, dated as of January 4, 1996, between the Company
and Mark P. Kaiser. Filed as Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 30, 1996 and
incorporated herein by reference.
10.10 Employment Agreement, dated as of January 4, 1996, between the
Company and George T. Megas. Filed as Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March
30, 1996 and incorporated herein by reference.
10.11 Employment Agreement, dated as of June 10, 1996, between the Company
and David M. Abramson. Filed as Exhibit 10.29 to the Company's
Registration Statement on Form S-3 (No. 333-07321) and incorporated
herein by reference.
10.12 JP Foodservice, Inc. 1994 Stock Incentive Plan. Filed as Exhibit
10.3 to the Company's Registration Statement on Form S-1 (No.
33-82724) and incorporated herein by reference.
10.13 JP Foodservice, Inc. Stock Option Plan for Outside Directors, as
amended. Filed as Exhibit 10 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 28, 1996 and
incorporated herein by reference.
10.14 JP Foodservice, Inc. 401(k) Retirement Plan, as amended. Filed
herewith.
10.15 JP Foodservice, Inc. 1994 Employee Stock Purchase Plan. Filed as
Exhibit 10.6 to the Company's Registration Statement on Form S-1 (No.
33-82724) and incorporated herein by reference.
10.16 Form of Stock Option Agreement used generally in connection with the
JP Foodservice, Inc. 1994 Stock Incentive Plan. Filed as Exhibit
10.13 to the Company's Annual Report on Form 10-K for the fiscal year
ended July 1, 1995 and incorporated herein by reference.
10.17 Form of Stock Option Agreement used generally in connection with the
JP Foodservice, Inc. Stock Option Plan for Outside Directors. Filed
as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the
fiscal year ended July 1, 1995 and incorporated herein by reference.
10.18 Lease dated October 29, 1993 between JP Foodservice Distributors,
Inc. and CMANE -- Patuxent Woods II Limited Partnership relating to
the lease of the Company's corporate headquarters. Filed as Exhibit
10.7 to the Company's Registration Statement on Form S-1 (No.
33-82724) and incorporated herein by reference.
27
<PAGE>
10.19 Description of the Company's annual bonus plan. Filed as Exhibit
10.9 to the Company's Registration Statement on Form S-1 (No.
33-82724) and incorporated herein by reference.
10.20 Note Purchase Agreement, dated as of November 10, 1994, relating to
the 8.55% Senior Notes due 2004 of JP Foodservice Distributors, Inc.
Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended October 1, 1994 and incorporated
herein by reference.
10.21 Amendment No. 2, dated as of May 29, 1996, to Note Purchase Agreement,
dated as of November 10, 1994, relating to the 8.55% Senior Notes due
2004 of JP Foodservice Distributors, Inc. Filed as Exhibit 10.20 to the
Company's Registration Statement on Form S-3 (No. 333-07321) and
incorporated herein by reference.
10.22 Amended and Restated Credit Agreement, dated as of June 9, 1997, among
JP Foodservice Distributors, Inc., the lenders party thereto,
NationsBank of North Carolina, N.A., as Administrative Agent and Co-
Arranger, and The Chase Manhattan Bank, N.A., as Syndication Agent and
Co-Arranger. Filed herewith.
10.23 Rights Agreement, dated as of February 19, 1996, between the Company
and The Bank of New York, as Rights Agent (the "Rights Agent"). Filed
as Exhibit 1 to the Company's Registration Statement on Form 8-A dated
February 22, 1996 and incorporated herein by reference.
10.24 Amendment No. 1 to the Rights Agreement, dated as of May 17, 1996.
Filed as Exhibit 10.26 to Amendment No. 1 to the Company 's
Registration Statement on Form S-3 (No. 333-07321) and incorporated
herein by reference.
10.25 Amendment No. 2 to the Rights Agreement, dated as of September 26,
1996. Filed as Exhibit 10.1 to Amendment No. 2 to the Company 's
Registration Statement on Form S-3 (No. 333-14039) and incorporated
herein by reference.
10.26 Amendment No. 3 to the Rights Agreement, dated as of June 30, 1997.
Filed as Exhibit 4.1 to the Company's Current Report on Form 8-K for
reportable event dated June 30, 1997 and incorporated herein by
reference.
10.27 Receivables Purchase Agreement, dated as of May 30, 1996, among JP
Foodservice Distributors, Inc., Illinois Fruit & Produce Corp. and Sky
Bros., Inc., JPFD Funding Company and the Company. Filed as Exhibit
10.27 to the Company's Registration Statement on Form S-3 (No. 333-
07321) and incorporated herein by reference.
28
<PAGE>
10.28 Transfer and Administration Agreement, dated May 30, 1996, among
Enterprise Funding Corporation, JPFD Funding Company, JP Foodservice
Distributors, Inc., NationsBank, N.A. and certain other financial
institutions from time to time parties thereto. Filed as Exhibit 10.28
to the Company's Registration Statement on Form S-3 (No. 333-07321) and
incorporated herein by reference.
10.29 Amendment No. 1, dated as of July 1, 1996, to the Transfer and
Administration Agreement, dated as of May 30, 1996, by and among JPFD
Funding Company, JP Foodservice Distributors, Inc., Enterprise Funding
Corporation, NationsBank, N.A., and the financial institutions from
time to time parties thereto. Filed as Exhibit 10.33 to the Company's
Registration Statement on Form S-3 (No. 333-07321) and incorporated
herein by reference.
10.30 Amendment No. 2, dated as of May 19, 1997, to the Transfer and
Administration Agreement, dated as of May 30, 1996, by and among JPFD
Funding Company, JP Foodservice Distributors, Inc., Enterprise Funding
Corporation, NationsBank, N.A., and the financial institutions from
time to time parties thereto. Filed herewith.
10.31 Amended and Restated Registration Rights Agreement, dated as of
November 22, 1994, by and among the Company, PYA/Monarch, Inc., Chase
Manhattan Investment Holdings, Inc., the Equitable Investors named
therein and the management investors named therein. Filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended October 1, 1994 and incorporated herein by reference.
10.32 Amendment, dated July 16, 1996, to the Amended and Restated
Registration Rights Agreement, dated November 22, 1994, by and among
the Company, PYA/Monarch, Inc., Chase Manhattan Investment Holdings,
Inc., the Equitable Investors named therein and the management
investors named therein. Filed as Exhibit 10.30 to the Company's
Registration Statement on Form S-3 (No. 333-07321) and incorporated
herein by reference.
10.33 Agreement and Plan of Merger, dated as of May 17, 1996, by and among
the Company, JP Foodservice Distributors, Inc., Valley Industries,
Inc., E & H Distributing Co., Inc., Lloyd K. Benson, Duane H. Zobrist,
E. Mark Zobrist, Gerry R. Zobrist, R. Phillip Zobrist and Richard D.
Zobrist. Filed as Exhibit A to the Information Statement/Prospectus
filed as a part of the Company's Registration Statement on Form S-4
(No. 333-6645) and incorporated herein by reference.
29
<PAGE>
10.34 Purchase and Sale Contract, dated as of May 17, 1996, between "Z"
Leasing Co., a Nevada general partnership, and the Company. Filed as
Exhibit B to the Information Statement/Prospectus filed as a part of
the Company's Registration Statement on Form S-4 (No. 333-6645) and
incorporated herein by reference.
10.35 Agreement, dated as of July 17, 1996, for the Purchase and Sale of
Assets among the Company, JP Foodservice Distributors, Inc.,
Shareholders of Arrow Paper and Supply Co., Inc., SGD Associates
Limited Liability Company and Members of SGD Associates Limited
Liability Company. Filed as Exhibit 10.34 to the Company's Registration
Statement on Form S-3 (No. 333-07321) and incorporated herein by
reference.
10.36 Agreement and Plan of Merger, dated as of June 30, 1997, among the
Company, Hudson Acquisition Corp. ("Hudson") and Rykoff-Sexton, Inc.
("Rykoff-Sexton"). Filed as Exhibit 2.1 to the Company's Registration
Statement on Form S-4 (No. 333-32711) and incorporated herein by
reference.
10.37 Amendment No. 1, dated as of September 3, 1997, to Agreement and Plan
of Merger, dated as of June 30, 1997, among the Company, Hudson and
Rykoff-Sexton. Filed as Exhibit 2.2 to the Company's Current Report on
Form 8-K for reportable event dated September 3, 1997 and incorporated
herein by reference.
10.38 Stock Option Agreement, dated as of June 30, 1997, between the Company
and Rykoff-Sexton. Filed as Exhibit 99.1 to the Company's Current
Report on Form 8-K for reportable event dated June 30, 1997 and
incorporated herein by reference.
10.39 Stock Option Agreement, dated as of June 30, 1997, between Rykoff-
Sexton and the Company. Filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K for reportable event dated June 30, 1997 and
incorporated herein by reference.
10.40 Amended and Restated Support Agreement, dated as of June 30, 1997, by
and among the Company and certain stockholders of Rykoff-Sexton. Filed
as Exhibit 99.1 to the Company's Current Report on Form 8-K for
reportable event dated September 3, 1997 and incorporated herein by
reference.
21 Subsidiaries of the Company. Filed herewith.
23.1 Consent of Price Waterhouse LLP, independent accountants. Filed
herewith.
23.2 Consent of KPMG Peat Marwick LLP, independent accountants. Filed
herewith.
30
<PAGE>
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K.
Reports on Form 8-K were filed by the Company on the dates, pursuant to
the Items and with respect to the subjects indicated:
<TABLE>
<CAPTION>
Date Item Subject
---- ---- -------
<S> <C> <C>
April 23, 1997 Item 5 Forward-looking statements
April 24, 1997 Item 5 Earnings release
May 15, 1997 Item 5 Proposed acquisition
</TABLE>
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
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 Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ JAMES L. MILLER
- -------------------------------------------
James L. Miller, Chairman of the Board, September 23, 1997
President and Chief Executive Officer
(Principal Executive Officer)
/s/ LEWIS HAY, III
- -------------------------------------------
Lewis Hay, III, Director, Senior Vice September 23, 1997
President and Chief Financial Officer
(Principal Financial Officer)
/s/ GEORGE T. MEGAS
- -------------------------------------------
George T. Megas, Vice President-Finance September 23, 1997
(Principal Accounting Officer)
/s/ DAVID M. ABRAMSON
- -------------------------------------------
David M. Abramson, Director September 23, 1997
/s/ MICHAEL J. DRABB
- -------------------------------------------
Michael J. Drabb, Director September 23, 1997
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
/s/ ERIC E. GLASS
- -------------------------------------------
Eric E. Glass, Director September 23, 1997
/s/ MARK P. KAISER
- -------------------------------------------
Mark P. Kaiser, Director September 23, 1997
/s/ PAUL I. LATTA, JR.
- -------------------------------------------
Paul I. Latta, Jr., Director September 23, 1997
/s/ JEFFREY D. SERKES
- -------------------------------------------
Jeffrey D. Serkes, Director September 23, 1997
/s/ DEAN R. SILVERMAN
- -------------------------------------------
Dean R. Silverman, Director September 23, 1997
</TABLE>
33
<PAGE>
REPORT OF INDEPENDENT AUDITORS OF
JP FOODSERVICE, INC.
To the Board of Directors and Stockholders of
JP Foodservice, Inc. and Subsidiaries:
We have audited the consolidated financial statements of JP Foodservice, Inc.
and Subsidiaries as of June 28, 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. In
connection with our audit of the consolidated financial statements, we also have
audited the financial statement schedules listed under Item 14(a)(2). These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of JP Foodservice, Inc.
and Subsidiaries as of June 28, 1997 and the results of their operations and
their cash flows for the year ended June 28, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
During the year ended June 28, 1997, the Company adopted Statement of Financial
Accounting Standard No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities".
/s/ KMPG Peat Marwick LLP
August 11, 1997
Baltimore, Maryland
F-1
<PAGE>
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 sheet and the related consolidated statements
of operations, of stockholders' equity and of cash flows as of and for each of
the two fiscal years in the period ended June 29, 1996 (appearing on pages F-4
through F-7 of this Form 10-K Annual Report) present fairly, in all material
respects, the financial position, results of operations and cash flows of JP
Foodservice, Inc. and its subsidiaries as of and for each of the two fiscal
years ended 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 $27,176,000 at
January 31, 1996, and total revenues of $105,406,000 and $121,504,000 for the
years ended January 1, 1995 and 1996, respectively. These 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. We have not audited the consolidated financial
statements of JP Foodservice, Inc. for any period subsequent to June 29, 1996.
/s/ Price Waterhouse LLP
Linthicum, 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>
REPORT OF INDEPENDENT AUDITORS OF
VALLEY INDUSTRIES, INC. AND SUBSIDIARIES AND
Z LEASING (A GENERAL PARTNERSHIP)
The Board of Directors, Stockholders and Partners
Valley Industries, Inc. and Subsidiaries and
Z Leasing Company (A General Partnership):
We have audited the combined balance sheet of Valley Industries, Inc. and
Subsidiaries and Z Leasing Company (A General Partnership collectively, the
Company) as of January 31, 1996, and the related combined statements of
earnings, stockholders' and partners' equity, and cash flows for each of the
years in the two-year period ended January 31, 1996. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Company
as of January 31, 1996, and the combined results of their operations and their
cash flows for each of the years in the two-year period ended January 31, 1996,
in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
June 17, 1996
Las Vegas, Nevada
F-3
<PAGE>
JP FOODSERVICE, INC.
--------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
($ in thousands)
ASSETS
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997
------------- -------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 12,224 $ 11,139
Receivables 154,405 138,754
Inventories 84,138 110,030
Deferred tax asset 480 2,282
Other current assets 9,076 9,664
-------- --------
Total current assets 260,323 271,869
Property and equipment 104,258 141,724
Goodwill and other noncurrent assets 83,698 110,555
-------- --------
Total assets $448,279 $524,148
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Current maturities of long-term debt $ 9,817 $ 4,594
Current obligations under capital leases 5,072 4,817
Accounts payable 110,230 89,923
Accrued expenses 14,338 19,111
-------- --------
Total current liabilities 139,457 118,445
-------- --------
Noncurrent liabilities
Long-term debt 150,998 149,055
Obligations under capital leases 17,649 19,460
Deferred income taxes 12,026 8,242
-------- --------
180,673 176,757
-------- --------
Total liabilities 320,130 295,202
-------- --------
Stockholders' equity
Preferred stock, $.01 par value, 5,000,000
shares authorized, none issued
Common stock, $.01 par value, 75,000,000
shares authorized, 18,880,962 and
22,589,913 issued and outstanding 189 225
Additional paid-in-capital 190,636 226,709
Retained earnings (accumulated deficit) (17,733) 2,012
Distribution in excess of net book value
of continuing stockholder's interest (44,943)
-------- --------
Total stockholders' equity 128,149 228,946
-------- --------
Commitments and contingent liabilities
(Notes 10, 11 and 15)
Total liabilities and stockholders'
equity $448,279 $524,148
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-4
<PAGE>
JP FOODSERVICE, INC.
--------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
July 1, 1995 June 29, 1996 June 28, 1997
------------ ------------- -------------
<S> <C> <C> <C>
Net sales $ 1,288,315 $ 1,449,303 $ 1,691,913
Cost of sales 1,069,494 1,198,797 1,396,223
----------- ----------- -----------
Gross profit 218,821 250,506 295,690
Operating expenses 177,490 202,953 232,435
Amortization of intangible assets 2,263 2,338 2,918
Stock compensation charge 709
----------- ----------- -----------
Income from operations 38,359 45,215 60,337
----------- ----------- -----------
Interest expense and other
financing costs, net 22,074 15,187 16,522
Nonrecurring charges 1,517 5,400
----------- ----------- -----------
22,074 16,704 21,922
----------- ----------- -----------
Income before income taxes and
extraordinary charge 16,285 28,511 38,415
Provision for income taxes 7,358 11,598 16,167
----------- ----------- -----------
Income before extraordinary charge 8,927 16,913 22,248
Extraordinary charge on early
extinguishment of debt (net of
$3,059 of income taxes) (4,590)
----------- ----------- -----------
Net income $ 4,337 $ 16,913 $ 22,248
=========== =========== ===========
Net income per common share
Before extraordinary charge $ 0.68 $ 0.90 $ 1.02
Extraordinary charge (0.35)
----------- ----------- -----------
Net income per common share $ 0.33 $ 0.90 $ 1.02
=========== =========== ===========
Weighted average common shares
outstanding 13,103,798 18,808,738 21,862,254
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
<PAGE>
JP FOODSERVICE, INC.
--------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
JULY 2, 1994 THROUGH JUNE 28, 1997
-----------------------------------
($ in thousands)
<TABLE>
<CAPTION>
Retained Distribution in
Additional Earnings Excess of Net Book
Preferred Common Paid-in (Accumulated Value of Continuing
Stock Stock Capital Deficit) Stockholder's Interest Total
----- ----- ------- -------- ---------------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance July 2, 1994 $ 61 $ 58,076 $ (37,449) $ (44,943) $ (24,255)
Net income 4,337 4,337
Dividends and distributions
to stockholders of acquired
companies (779) (779)
Preference dividends on
preferred stock $ 40 (40)
Initial public offering (40) 78 81,094 81,132
Debt conversion 47 47,221 47,268
Stock issued in connection
with business acquisition 2 2,098 2,100
Employee stock purchases 302 302
-------- ------ -------- --------- --------- ---------
Balance July 1, 1995 188 188,791 (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 247 247
Contributions to 401(k) plan 1 1,260 1,261
Employee stock purchases 338 338
-------- ------ -------- --------- --------- ---------
Balance June 29, 1996 189 190,636 (17,733) (44,943) 128,149
Adjustments with respect to
acquisitions of Valley and
Squeri 2,450 (2,503) (53)
Net income 22,248 22,248
Stock issued in connection
with business acquisitions 4 9,754 9,758
Public stock offering 31 65,944 65,975
Reclassification in connection
with Sara Lee Offering (44,943) 44,943
Stock options exercised 477 477
Contributions to 401(k) plan 1 1,554 1,555
Employee stock purchases 837 837
-------- ------ -------- --------- --------- ---------
Balance June 28, 1997 $ $ 225 $226,709 $ 2,012 $ $ 228,946
======== ====== ======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
<PAGE>
JP FOODSERVICE, INC.
--------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
($ in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
July 1, 1995 June 29, 1996 June 28, 1997
------------ ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 4,337 $ 16,913 $ 22,248
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation of property and equipment 9,671 10,486 14,007
Amortization of intangible assets 2,902 2,599 3,253
Gain on disposal of property and equipment (558) (185) (64)
Increase (decrease) in deferred income taxes 1,695 (292) (2,257)
Write-off of loan acquisition costs 3,065
Changes in operating assets and liabilities, net of effects
from purchase acquisitions
(Increase) decrease in receivables (23,921) (14,570) 31,596
(Increase) decrease in inventories (2,493) (6,561) (13,149)
(Increase) decrease in other current assets (1,613) (347) 130
Increase (decrease) in accounts payable 17,296 1,425 (30,946)
Increase (decrease) in accrued expenses 957 1,042 3,116
Other 2,175 (2,140)
-------- -------- --------
Net cash provided by operating activities 13,513 10,510 25,794
-------- -------- --------
Cash flows from investing activities
Additions to property and equipment (4,889) (9,664) (25,063)
Costs of businesses acquired, net of cash acquired (434) (2,725) (35,964)
(Issuance) collection of note receivable (5,500) 5,500
Proceeds from sales of property and equipment 570 402 397
Other (48) (108)
-------- -------- --------
Net cash used in investing activities (4,801) (17,595) (55,130)
-------- -------- --------
Cash flows from financing activities
Net proceeds from public offerings of common stock 79,927 65,975
Long-term debt (repayments) borrowings (75,533) 7,024 (33,955)
Payments of obligations under capital lease (4,989) (4,536) (5,957)
Payment of financing costs (3,122)
Proceeds from other issuances of common stock 302 1,846 2,869
Redemption of preferred stock (643)
Other (779) (715) (681)
-------- -------- --------
Net cash provided by (used in) financing activities (4,837) 3,619 28,251
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 3,875 (3,466) (1,085)
Cash and cash equivalents
Beginning of period 11,815 15,690 12,224
-------- -------- --------
End of period $ 15,690 $ 12,224 $ 11,139
======== ======== ========
Supplemental disclosure of cash paid during the year for:
Interest $ 18,014 $ 13,861 $ 13,654
Income taxes $ 1,592 $ 10,198 $ 17,622
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-7
<PAGE>
JP FOODSERVICE, INC.
--------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Dollars in thousands except where noted)
NOTE 1 - BUSINESS
- -----------------
JP Foodservice, Inc. ("JP Foodservice") and its consolidated subsidiaries (the
"Company") operate 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 principal customers are restaurants,
hotels, healthcare facilities, cafeterias and schools encompassing both
independent and multi-unit businesses.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
A. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of JP Foodservice and
its subsidiaries all of which are wholly-owned. 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. Fair Value of Financial Instruments
-----------------------------------
Information regarding fair value of long-term debt is set forth in Note 10 to
the financial statements. Fair values of other instruments, such as receivables
and payables, approximate carrying values.
D. 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.
Allowances and credits received from suppliers in connection with the Company's
buying and merchandising activities are recognized as earned.
E. 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.
F. 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
consolidated statement of operations.
F-8
<PAGE>
Depreciation is computed using the straight-line method over estimated useful
lives from date of acquisition as follows:
Buildings and improvements 25-40 years
Machinery and equipment 5-15 years
Leasehold improvements Life of lease
Delivery vehicles 7-10 years
G. Goodwill and Other Noncurrent Assets
------------------------------------
Goodwill and other intangible assets are amortized using the straight-line
method over the periods expected to be benefited not to exceed 40 years. The
Company assesses the recoverability of goodwill by determining whether
amortization of the goodwill over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operations. Goodwill
impairment, if any, is measured by determining the amount by which the carrying
value of the goodwill exceeds its fair value based upon discounting future cash
flows.
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 10).
H. Impairment of Long-Lived Assets
-------------------------------
The recoverability of long-lived assets is assessed whenever events or changes
in circumstances indicate the carrying value of an asset may not be recoverable
through future undiscounted cash flows expected to be generated by the asset.
If such assets are deemed to be impaired, the impairment is measured by
determining the amount by which the carrying value of the asset exceeds its
estimated fair value.
I. Income Taxes
------------
Income taxes are accounted for using the asset and liability method. Deferred
tax assets and liabilities are recognized based on the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rate is recognized in income in the period that included the
enactment date.
J. Statement of Cash Flows - Noncash Activities
--------------------------------------------
During fiscal years 1995, 1996 and 1997, the Company's additions to its
transportation fleet of $4,410, $10,179 and $7,513, respectively, were financed
through capital lease obligations.
K. Net Income Per Common Share
---------------------------
Net income per common share is based on the weighted average number of shares
outstanding. Common shares issuable upon exercise of stock options are excluded
from the computation because their effect is not material. Net income per
common share, for the year ended July 1, 1995, has been adjusted for the
preference dividends of $40 for computational purposes.
L. Derivative Instruments
----------------------
The Company uses interest rate swap and cap contracts to manage exposure to
fluctuations in interest rates. The interest rate differential on interest rate
swap contracts used to hedge underlying debt obligations is reflected as an
adjustment to interest expense over the life of the swap contract. Upon early
termination of an interest rate swap or cap contract, the gains or losses on
termination are deferred and amortized as an adjustment to the interest expense
on the related debt instrument over the remaining period originally covered by
the contract.
F-9
<PAGE>
M. Accounting for Stock-Based Compensation
---------------------------------------
The Company has elected to continue to apply the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB No. 25), with pro forma disclosure of net income and
net income per common share as if the fair value based method prescribed by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), had been applied.
N. 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.
O. Reclassifications
-----------------
Certain amounts in the prior years' consolidated financial statements have been
reclassified to conform to the current year's presentation.
NOTE 3 - ACQUISITIONS
- ---------------------
Acquisitions Accounted for as Poolings of Interests
- ---------------------------------------------------
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. Under the terms of the merger, the Company exchanged 1,936,494
common shares with an approximate value of $40.7 million (net of indebtedness
assumed or discharged) 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 affiliates "Squeri"), a broadline distributor located in
Cincinnati, Ohio. Under the terms of the merger, the Company exchanged
1,079,875 common shares with an approximate value of $24.8 million (net of
indebtedness assumed or discharged) for all of Squeri's common shares and
ownership interests.
The mergers with Valley and Squeri, as discussed above, were accounted for as
poolings of interests. The Company's consolidated financial statements for the
years ended 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 respective 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 1995 and 1996 restated
financial statements of the Company combine the July 1, 1995 and June 29, 1996
financial statements of the Company with the January 31, 1995 and 1996 financial
statements of Valley, respectively, and the December 31, 1994 and 1995 financial
statements of Squeri, respectively. The fiscal years of Valley and Squeri have
been conformed with the Company's fiscal year 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 has been
reflected as adjustments to retained earnings as of June 30, 1996. Combined net
sales, loss from operations and net loss for the periods February 1, 1996 to
June 29, 1996 for Valley and January 1, 1996 to June 29, 1996 for Squeri were
$99,660, $2,028 and $1,848, respectively.
F-10
<PAGE>
Net sales and net income of Valley and Squeri (the "Combining Companies"), for
the periods prior to the acquisition, are summarized below:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------
July 1, 1995 June 29, 1996
------------ -------------
<S> <C> <C>
Net sales
As previously reported $1,108,253 $1,242,676
Combining Companies 180,062 206,627
---------- ----------
Combined $1,288,315 $1,449,303
========== ==========
Net income
As previously reported $ 1,940 $ 14,057
Combining Companies 2,397 2,856
---------- ----------
Combined $ 4,337 $ 16,913
========== ==========
</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 income 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 at the Company's income tax rate.
Distributions to S-Corporation shareholders have been adjusted for the effects
of corporate, Federal and state income taxes payable on an annualized basis.
Acquisitions Accounted for as Purchases
- ---------------------------------------
Arrow Acquisition
- -----------------
Effective August 31, 1996, the Company completed the acquisition of Arrow Paper
and Supply Co., Inc. (together with its affiliate, "Arrow"), a broadline
foodservice distributor located in Norwich, Connecticut. Under the terms of the
acquisition, which is accounted for as a purchase, the Company purchased certain
assets, assumed or discharged certain liabilities and paid consideration of
$28.9 million. Approximately $1.7 million of the consideration was paid with
73,977 common shares of the Company and the remainder was paid in cash. The
excess of the purchase price over the fair value of net tangible assets of Arrow
was approximately $28.2 million and is being amortized using the straight-line
method over 40 years. Results of Arrow for the period September 1, 1996 to June
28, 1997 have been included in the Company's 1997 consolidated statement of
operations.
Mazo-Lerch Acquisition
- ----------------------
Effective June 19, 1997, the Company completed the acquisition of Mazo-Lerch
Company, Inc. ("Mazo-Lerch"), a broadline foodservice distributor located in
Alexandria, Virginia. Under the terms of the acquisition, which is accounted
for as a purchase, the Company acquired all of the outstanding common stock of
Mazo-Lerch in exchange for 279,268 common shares of the Company valued at
approximately $8 million. The purchase price approximated the fair market value
of the net tangible assets of Mazo-Lerch. Results of Mazo-Lerch for the period
June 20, 1997 to June 28, 1997 have been included in the Company's 1997
consolidated statement of operations.
F-11
<PAGE>
Pro Forma Information
- ---------------------
Unaudited pro forma information for the years ended June 29, 1996 and June 28,
1997, as if the Arrow and Mazo-Lerch acquisitions had occurred on the first day
of the respective periods, is shown below.
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
June 29, 1996 June 28, 1997
------------- -------------
(In thousands, except per share data)
<S> <C> <C>
Net sales $ 1,602,766 $ 1,782,877
Income from operations 47,386 60,853
Net income 17,601 22,214
Net income per common share $ 0.92 $ 1.00
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
In December 1996, Sara Lee Corporation ("Sara Lee") sold its ownership interest
of approximately 27% of the Company's outstanding common shares in a public
offering. As a result, the Company has reclassified $44,943 of distributions in
excess of net book value of continuing stockholder's interest as a reduction to
additional paid-in-capital.
Total product purchases from Sara Lee and its affiliates, for resale to
customers, aggregated $72,590, $64,774 and $35,128 in fiscal 1995, 1996 and 1997
(through the date of sale of Sara Lee's ownership interest), respectively. The
Company believes that those purchases were at prices not more favorable than
those charged to unrelated distributors of Sara Lee products.
NOTE 5 - NONRECURRING CHARGES
- -----------------------------
In connection with the mergers of Valley and Squeri, the Company recorded a
nonrecurring charge of approximately $5.4 million of merger costs and expenses
(consisting primarily of legal and other professional fees) required to complete
the transactions. The after-tax impact of the nonrecurring transaction costs to
the Company's net income per common share for the year ended June 28, 1997 was
$0.21. Excluding these nonrecurring transaction costs, the Company's net income
per common share for the year ended June 28, 1997 would have been $1.23.
On February 19, 1996, the Company terminated discussions with Sara Lee regarding
the proposed combination of Sara Lee's subsidiary, PYA/Monarch, Inc.
("PYA/Monarch"), with the Company. As a result of the termination of these
discussions, the Company wrote off the costs incurred related to the transaction
(consisting primarily of legal and other professional fees) of approximately
$1.5 million. The after-tax impact of this non-recurring charge, for the year
ended June 29, 1996, 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.
NOTE 6 - RECEIVABLES
- --------------------
Receivables are composed of the following:
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997
-------------- --------------
<S> <C> <C>
Customer accounts and notes $ 109,838 $ 62,820
Residual interest in customer accounts sold 20,098
Less allowance for doubtful accounts (2,447) (3,275)
-------- --------
Net customer 107,391 79,643
-------- --------
From suppliers 39,838 51,293
From related parties 1,566
Less allowance for doubtful accounts (100) (255)
-------- --------
Net supplier 41,304 51,038
-------- --------
Other 5,710 8,073
-------- --------
$ 154,405 $ 138,754
======== ========
</TABLE>
F-12
<PAGE>
During the year ended June 28, 1997, the Company changed its method of
accounting for trade receivables sold under its securitization arrangement to
comply with the new accounting standard described in Note 10. Under the new
standard, sale of the undivided ownership interest in $50 million of trade
accounts receivables has been reflected as a reduction of receivables. At June
29, 1996, the Company recorded amounts sold under its securitization arrangement
as a secured borrowing.
NOTE 7 - PROPERTY AND EQUIPMENT
- -------------------------------
The components of property and equipment are as follows:
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997
------------- -------------
<S> <C> <C>
Land $ 11,251 $ 16,873
Buildings 64,498 87,729
Machinery and equipment 39,800 66,207
Leasehold improvements 6,321 7,016
Vehicles held under capital leases (Note 11) 45,495 50,113
-------- --------
167,365 227,938
Accumulated depreciation (63,107) (86,214)
-------- --------
$ 104,258 $ 141,724
======== ========
</TABLE>
<TABLE>
<CAPTION>
NOTE 8 - GOODWILL AND OTHER NONCURRENT ASSETS
- -----------------------------------------------
Goodwill and other noncurrent assets are composed of the following:
June 29, 1996 June 28, 1997
------------- -------------
<S> <C> <C>
Goodwill $ 85,916 $ 121,385
Accumulated amortization (14,456) (17,227)
------------- -------------
71,460 104,158
------------- -------------
Loan acquisition costs 1,703 1,729
Accumulated amortization (419) (679)
------------- -------------
1,284 1,050
------------- -------------
Other intangible assets 5,700 5,601
Accumulated amortization (1,564) (1,785)
------------- -------------
4,136 3,816
------------- -------------
Other 527 872
Receivables from related parties 6,291 659
------------- -------------
$ 83,698 $ 110,555
============= =============
</TABLE>
<TABLE>
<CAPTION>
NOTE 9 - ACCRUED EXPENSES
- -------------------------
The components of accrued expenses are as
follows:
June 29, 1996 June 28, 1997
------------- -------------
<S> <C> <C>
Compensation $ 4,362 $ 6,333
Benefits and payroll taxes 2,781 4,669
Interest 1,887 1,695
Other 5,308 6,414
------------- -------------
$ 14,338 $ 19,111
============= =============
</TABLE>
F-13
<PAGE>
NOTE 10 - DEBT
- --------------
Long-term debt is composed of the following:
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997
------------- -------------
<S> <C> <C>
Revolving line of credit loans $ 1,000 $ 63,700
Trade accounts receivable securitization 49,378
Senior notes 85,000 85,000
Promissory note payable to PYA/Monarch 4,067 4,331
Notes payable to shareholders, officers and related parties 5,513 308
Other 15,857 310
------------- -------------
160,815 153,649
Less current maturities (9,817) (4,594)
------------- -------------
$ 150,998 $ 149,055
============= =============
</TABLE>
Revolving Line of Credit
- ------------------------
Under its revolving credit loan arrangement, amended in June 1997, the Company
is entitled to borrow up to $175 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 .275% per annum. The Company is also required to pay an
annual facility fee of .125%. 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 May 9, 2002. Borrowings outstanding at June 28, 1997 bear interest at
5.9% to 6.1%.
Trade Accounts Receivable Securitization
- ----------------------------------------
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 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. 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.
Prior to January 1, 1997, the net proceeds from the sale of the undivided
ownership interest in the pool of receivables was accounted for as a secured
borrowing. Effective January 1, 1997, the Company adopted, as required,
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities" (SFAS No.
125). SFAS No. 125 is required to be applied to transfers of assets occurring
after December 31, 1996. Under the new standard, the sale of the undivided
ownership interest has been reflected as a reduction of trade accounts
receivable, and the Company is no longer reporting the $50 million proceeds as a
secured borrowing. In the 1997 consolidated statement of cash flows, the sale
has been reflected as a change in working capital and a decrease in long-term
debt. The Company's residual interest, in the undivided ownership interest of
the designated pool of trade accounts receivable sold, is included in trade
accounts receivable on the balance sheet. There was no material effect on net
income as a result of adopting the new standard. Discounts on the sale of the
undivided ownership interest in the pool of receivables, since January 1, 1997,
amounted to $1,372 and are included in interest expense and other financing
costs on the consolidated statement of operations.
Notes Payable
- -------------
The senior notes are payable in seven annual installments beginning in October
1998. Interest is paid semiannually at an annual rate of 8.55%.
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
F-14
<PAGE>
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.
Interest Rate Swap Agreement
- ----------------------------
In May 1997, the Company entered into a three-year interest rate swap contract
whereby the Company pays, quarterly, the holder interest at a fixed rate of
5.97% on a notional principal amount of $70 million and receives LIBOR, as
defined, on the same notional amount provided LIBOR does not exceed 7% on the
quarterly reset dates. If LIBOR is equal to or greater than 7%, no payment is
made by either party during the calculation period. At June 28, 1997, the
Company estimated it would have paid $213 to terminate the swap contract.
Interest expense and other financing costs consist of the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------
July 1, 1995 June 29, 1996 June 28, 1997
------------ ------------- -------------
<S> <C> <C> <C>
Amounts attributable to third party debt $ 20,833 $ 14,625 $ 13,138
Amounts attributable to PYA/Monarch note 602 68 264
Amortization of loan acquisition costs 639 259 260
Amounts attributable to trade accounts
receivable securitization 235 2,860
------------ ------------- -------------
$ 22,074 $ 15,187 $ 16,522
============ ============= =============
</TABLE>
The revolving line of credit and senior note loan 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 are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
<S> <C>
1998 $ 4,594
1999 12,306
2000 12,202
2001 12,202
2002 75,904
2003 and thereafter 36,441
---------
$ 153,649
=========
</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 $157,159.
At June 28, 1997, the Company has approximately $11.71 million of outstanding
letters of credit securing the Company's medical and workers' compensation
insurance policies.
Extraordinary Charge
- --------------------
In connection with a recapitalization in fiscal 1995, 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.
F-15
<PAGE>
NOTE 11 - LEASES
- ----------------
The Company leases its corporate office facilities and certain distribution
facilities and equipment under operating leases. The Company leases the
majority of its delivery fleet under capital leases. Charges to operations for
all operating leases were $6,374, $6,461 and $7,835 in fiscal 1995, 1996 and
1997, respectively.
Set forth below are the future minimum lease payments under capital leases and
operating leases with noncancelable terms beyond one year.
<TABLE>
<CAPTION>
Operating Capital
Fiscal Year Ended Leases Leases
----------------- ------ ------
<S> <C> <C>
1998 $ 5,117 $ 6,072
1999 3,311 5,570
2000 2,684 5,195
2001 2,623 4,732
2002 1,569 2,174
2003 and thereafter 1,555 4,451
------- -------
$16,859 28,194
Less interest portion ======= 3,917
-------
24,277
Less current obligations 4,817
-------
Noncurrent obligations $19,460
=======
</TABLE>
NOTE 12 - INCOME TAXES
- ----------------------
The components of income tax expense (before extraordinary charge) are as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
July 1, 1995 June 29, 1996 June 28, 1997
------------ ------------- -------------
<S> <C> <C> <C>
Current tax expense
Federal $ 3,957 $ 10,242 $ 16,414
State and local 1,060 1,208 2,010
------------ ------------- -------------
Total current 5,017 11,450 18,424
------------ ------------- -------------
Deferred tax expense (benefit)
Federal 2,271 156 (1,941)
State and local 70 (8) (316)
------------ ------------- -------------
Total deferred 2,341 148 (2,257)
------------ ------------- -------------
$ 7,358 $ 11,598 $ 16,167
============ ============= =============
</TABLE>
Temporary differences and the resulting deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997
------------- -------------
<S> <C> <C>
Current
Inventory $ (847) $ 167
Allowance for doubtful accounts 1,011 1,366
Accrued expenses and other 316 749
------------- -------------
Current deferred tax asset 480 2,282
Noncurrent
Property and equipment (9,589) (6,914)
Intangible assets (1,623) (1,916)
Other, net (814) 588
------------- -------------
Noncurrent deferred tax liability (12,026) (8,242)
------------- -------------
Net deferred income taxes $ (11,546) $ (5,960)
============= =============
</TABLE>
F-16
<PAGE>
Deferred tax benefits of $879 related to the periods from February 1, 1996 to
June 29, 1996 and January 1, 1996 to June 29, 1996 for the Valley and Squeri
acquisitions, respectively, are not included above, but have been included in
retained earnings activity in the consolidated statement of stockholders' equity
as discussed in Note 3.
Included in the Company's temporary differences is $2,450 related to an increase
in the tax basis of certain assets resulting from the acquisition of Valley.
The establishment of the deferred tax asset has been recorded as a credit to
additional paid-in-capital.
A reconciliation of the statutory Federal income tax rate to the income tax rate
on consolidated income, before income taxes and extraordinary charge, for fiscal
1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------
July 1, 1995 June 29, 1996 June 28, 1997
------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Computed statutory expense $5,700 35.00% $ 9,979 35.00% $13,445 35.00%
State and local income tax, net
of Federal tax benefit 720 4.42 858 3.01 1,099 2.86
Permanent differences 1,172 7.20 858 3.01 1,586 4.13
Gas tax credit and other (234) (1.44) (97) (0.34) 37 0.10
------ ------ ------- ------- ------- ------
$7,358 45.18% $11,598 40.68% $16,167 42.09%
====== ====== ======= ======= ======= ======
</TABLE>
All tax years of the Company, since fiscal 1994, are open for examination. The
Internal Revenue Service and certain state authorities have examinations in
progress.
NOTE 13 - STOCKHOLDERS' EQUITY
- ------------------------------
Issuance of Common Stock
- ------------------------
In August and September 1996, the Company sold 3,075,000 shares of common stock
in a public offering for $65.9 million, net. 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.
Employee Stock Purchase Plan
- ----------------------------
The Company sponsors an 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 of 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,
33,940 shares and 38,902 shares during fiscal 1995, 1996 and 1997, respectively.
The Company applies APB No. 25 and related interpretations in accounting for the
employee stock purchase plan. Accordingly, no compensation cost has been
recognized for this plan. Had compensation cost been determined under SFAS No.
123, the Company would have recognized as compensation expense the 15% discount
from the market price or $127 and $157 for fiscal 1996 and 1997, respectively.
Stock Option Plans
- ------------------
The Company has employee and outside director stock option plans. The employee
stock option plan authorizes the grants, at the discretion of the Company's
Board of Directors, of incentive stock options, non-qualified stock options,
restricted stock awards, stock appreciation rights, or any combination thereof,
at the fair market value on the date of grant. Options granted under the
employee stock option plan generally have a life of ten years and vest over a
three-year period. The outside director stock option plan provides for an
initial award of 5,000 options and an annual award of 1,000 options, at fair
market value, for a ten-year period with one-fourth vesting upon grant and the
balance vesting equally over three years. During fiscal year 1997, the Board of
Directors agreed to increase the annual award to directors from 1,000 to 2,000
options subject to shareholder approval at the next annual meeting.
The aggregate number of shares reserved for the issuance of common stock under
stock option plans was 1,472,404 at June 28, 1997. Upon a change of control of
the Company, as defined, all outstanding and previously unvested options will
become immediately exercisable.
The Company applies APB No. 25 and related interpretations when accounting for
stock-based employee compensation grants as permitted under SFAS No. 123.
Accordingly, no compensation cost has been recognized for its stock option
plans. Had compensation cost been determined under the fair value method of SFAS
No. 123, the Company's net income and net income per common share would have
been reduced to the pro forma amounts indicated below (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
June 29, 1996 June 28, 1997
------------- -------------
<S> <C> <C>
Net income:
As reported $ 16,913 $ 22,248
------------- -------------
Pro forma $ 16,655 $ 20,879
------------- -------------
Earnings per share:
As reported $ 0.90 $ 1.02
------------- -------------
Pro forma $ 0.89 $ 0.96
------------- -------------
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in fiscal 1996 and 1997: dividend yield of 0%;
expected volatility of 41.45% and 45.44% for fiscal 1996 and 1997, respectively;
risk-free interest rate of 6.18% and 6.36% for fiscal 1996 and 1997,
respectively; and expected lives of 5 years. The weighted average fair value of
options granted during fiscal 1996 and 1997 was $6.48 and $11.21, respectively.
Pro forma net income reflects only options granted in fiscal 1996 and 1997.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 for fiscal 1996 and 1997 is not reflected in the pro forma
net income amounts presented above, because compensation cost is reflected over
the options' vested period of three years and compensation cost for options
granted prior to July 2, 1995 is not considered.
A summary of changes in outstanding stock options follows:
<TABLE>
<CAPTION>
Weighted Average
Incentive Exercise Price
Stock Options per Share
------------- ---------
<S> <C> <C>
Options granted in fiscal 1995 400,877 $ 11.06
Options cancelled (32,245) $ 11.00
--------- --------
Balance, July 1, 1995 368,632 $ 11.06
Options granted 158,868 $ 14.46
Options cancelled (57,142) $ 11.77
Options exercised (16,881) $ 11.44
--------- --------
Balance, June 29, 1996 453,477 $ 12.13
Options granted 666,510 $ 21.81
Options cancelled (30,083) $ 13.17
Options exercised (25,826) $ 18.37
--------- --------
Balance, June 28, 1997 1,064,078 $ 17.87
========= ========
</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 28, 1997.
F-17
<PAGE>
The following table summarizes information about stock options outstanding at
June 28, 1997:
<TABLE>
<CAPTION>
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices June 28, 1997 Contractual Life Exercise Price June 28, 1997 Exercise Price
--------------- ------------- ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$11.00 - $15.75 435,983 7.65 $12.07 245,001 $11.63
$19.25 - $24.50 626,095 9.22 $21.88 51,133 $21.30
$27.75 - $27.75 2,000 9.65 $27.75 500 $27.75
--------- -------
1,064,078 8.58 $17.87 296,634 $13.33
========= =======
</TABLE>
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 (or 15% or more by any person eligible to report its ownership of the
Company's common stock on Schedule 13G under the Securities Exchange Act of
1934).
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. Each share of common stock has attached one Right
which 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 operations for all employer defined benefit pension contributions
required by union agreements aggregated $1,848, $2,329 and $2,565 in fiscal
1995, 1996 and 1997, respectively.
The Company and certain of its subsidiaries sponsor defined contribution profit
sharing plans for which all full-time non-union employees are generally
eligible. Terms of the plans provide for employee and Company contributions.
The Company's Savings and Retirement 401(k) plan allows Company contributions to
be made in common stock of the Company, and provides for vesting by employees in
Company contributions on the fifth anniversary of participation in the plan.
Charges to operations for employer contributions to the plans were $1,514,
$1,775 and $1,811 in fiscal 1995, 1996 and 1997, respectively.
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.
F-18
<PAGE>
NOTE 16 - ACCOUNTING PRONOUNCEMENTS
- -----------------------------------
During 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128); No.
129, "Disclosure of Information About Capital Structure" (SFAS No. 129); No.
130, "Reporting Comprehensive Income" (SFAS No. 130); and No. 131, "Disclosures
About Segments of an Enterprise and Related Information" (SFAS No. 131). These
pronouncements generally require additional disclosure and are not expected to
have any effect on the Company's financial position or results of operations.
The Company expects to adopt SFAS No. 128 and No. 129 during the third quarter
of fiscal 1998 and SFAS No. 130 and No. 131 during fiscal 1999. The Company is
currently evaluating the impact, if any, that the new pronouncements will have
on the Company's financial statement disclosures.
NOTE 17 - SUBSEQUENT EVENTS
- ---------------------------
Merger with Rykoff-Sexton, Inc.
- -------------------------------
On June 30, 1997, the Company announced it had entered into a definitive
agreement to merge with Rykoff-Sexton, Inc. ("Rykoff-Sexton"), a broadline
foodservice distributor with corporate headquarters in Wilkes-Barre,
Pennsylvania. Under the terms of the merger, to be accounted for as a pooling
of interests, the Company will exchange .84 of one share of its common shares
for each share of Rykoff-Sexton's 28.6 million outstanding common shares. The
transaction is expected to close in the second quarter of fiscal 1998.
Upon consummation of the merger, the financial position and results of
operations of the Company and Rykoff-Sexton will be restated to give effect to
the merger for all periods presented. Presented below are unaudited pro forma
condensed combined financial statement information as of and for the year ended
June 28, 1997, as if the merger had been consummated at that date:
<TABLE>
<CAPTION>
Unaudited Pro Forma Condensed
Combined Balance Sheet Information
Company Rykoff-Sexton Combined
---------- ------------- --------
<S> <C> <C> <C>
Assets
Current assets $ 271,869 $ 441,355 $ 713,224
Property, plant and equipment, net 141,724 296,012 437,736
Other noncurrent assets 110,555 481,655 592,210
---------- ---------- ----------
$ 524,148 $1,219,022 $1,743,170
========== ========== ==========
Liabilities and stockholders' equity
Current liabilities $ 118,445 $ 356,933 $ 475,378
Long-term obligations 168,515 486,731 655,246
Other noncurrent liabilities 8,242 21,185 29,427
---------- ---------- ----------
295,202 864,849 1,160,051
Stockholders' equity 228,946 354,173 583,119
---------- ---------- ----------
$ 524,148 $1,219,022 $1,743,170
========== ========== ==========
Unaudited Pro Forma Condensed Combined
Statement of Operations Information
(in thousands, except per share amounts)
<CAPTION>
Company Rykoff-Sexton Combined
---------- ------------- ----------
<S> <C> <C> <C>
Net sales $1,691,913 $3,477,493 $5,169,406
Income from operations 60,337 85,487 145,824
Net income 22,248 16,038 38,286
Net income per common share $1.02 $0.56 $.83
</TABLE>
F-19
<PAGE>
JP FOODSERVICE, INC. SCHEDULE I
- -------------------- ----------
CONDENSED FINANCIAL INFORMATION OF REGISTRANT Page 1 of 3
(Dollars in thousands)
The following are the condensed balance sheets, statements of operations and
cash flows for JP Foodservice, Inc. with its subsidiaries at equity:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
June 29, June 28,
1996 1997
- ---------------------------------------------------------------------------
Condensed Balance Sheets
- ------------------------
Assets
- ------
<S> <C> <C>
Cash and cash equivalents $ 134 $ 126
Other current assets 131 125
Intra-company receivable 3,850 82,384
Investments in subsidiaries 124,034 146,311
-----------------------
$128,149 $228,946
=======================
Liabilities and Stockholders' Equity
- ------------------------------------
Stockholders' equity
Common stock $ 189 $ 225
Paid-in capital 190,636 226,709
Retained earnings (accumulated deficit) (17,733) 2,012
Distribution in excess of net book value of
continuing stockholder's interest (44,943)
-----------------------
Total stockholders' equity 128,149 228,946
-----------------------
$128,149 $228,946
=======================
</TABLE>
F-20
<PAGE>
JP FOODSERVICE, INC. SCHEDULE I
- -------------------- ----------
CONDENSED FINANCIAL INFORMATION OF REGISTRANT Page 2 of 3
(Dollars in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
July 1, June 29, June 28,
1995 1996 1997
- --------------------------------------------------------------------------------
Condensed Statements of Operations
- ----------------------------------
<S> <C> <C> <C>
Operating expenses $ (6) $ (29)
Interest expense $(2,926)
Income tax benefit 1,024
-----------------------------------
Loss before equity in undistributed
net income of subsidiary (1,902) (6) (29)
Equity in net income of unconsolidated
subsidiary 6,239 16,919 22,277
-----------------------------------
Net loss applicable to common stock $ 4,337 $16,913 $22,248
===================================
</TABLE>
F-21
<PAGE>
JP FOODSERVICE, INC. SCHEDULE I
- -------------------- ----------
CONDENSED FINANCIAL INFORMATION OF REGISTRANT Page 3 of 3
- --------------------------------------------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
July 1, June 29, June 28,
1995 1996 1997
- --------------------------------------------------------------------------------------------------------------
Condensed Statements of Cash Flows
- ----------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 4,337 $ 16,913 $ 22,248
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in undistributed income of subsidiary (6,239) (16,919) (22,277)
(Increase) decrease in other current assets 129 (6)
Preferred stock liquidation 182
PIK note interest payable in additional notes 394
Increase (decrease) in other assets 1,981 (1,869) (68,817)
Increase (decrease) in other liabilities 12,506
------------------------------------
Net cash provided by (used in) operating activities 13,161 (1,746) (68,852)
------------------------------------
Cash flows from investing activities:
Payment of recapitalization costs (1,432)
Investment in unconsolidated subsidiary (64,257)
------------------------------------
Net cash used in investing activities (65,689)
------------------------------------
Cash flows from financing activities:
Redemption of preferred stock (643)
Long-term debt repayment (27,026)
Net proceeds from public offerings of common stock 79,927 65,975
Proceeds from other issuances of common stock 302 1,846 2,869
------------------------------------
Net cash provided by financing activities 52,560 1,846 68,844
------------------------------------
Net increase (decrease) in cash and cash equivalents 32 100 (8)
Cash and cash equivalents, at beginning of year 2 34 134
------------------------------------
Cash and cash equivalents, at end of year $ 34 $ 134 $ 126
====================================
</TABLE>
F-22
<PAGE>
JP FOODSERVICE, INC. SCHEDULE II
- -------------------- -----------
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
YEAR ENDED JULY 1, 1995
<TABLE>
<CAPTION>
Additions
--------------------
Amounts
Balance at Charged charged Balance
beginning to costs Charged to off at
of and other less end of
Description period expenses accounts recoveries period
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts $3,037 $1,940 $2,117 $2,860
</TABLE>
YEAR ENDED JUNE 29, 1996
<TABLE>
<CAPTION>
Additions
--------------------
Amounts
Balance at Charged charged Balance
beginning to costs Charged to off at
of and other less end of
Description period expenses accounts recoveries period
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts $2,860 $2,048 $2,361 $2,547
</TABLE>
YEAR ENDED JUNE 28, 1997
<TABLE>
<CAPTION>
Additions
--------------------
Amounts
Balance at Charged charged Balance
beginning to costs Charged to off at
of and other less end of
Description period expenses accounts/(1)/ recoveries period
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts $2,547 $2,253 $1,611 $2,881 $3,530
</TABLE>
(1) Other charges consist of $511 in reserves acquired through purchase
acquisitions during the year and net increase in reserves of $1,100 during
the "stub period" from pooled acquisitions.
F-23
<PAGE>
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 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.
<PAGE>
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 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.
-2-
<PAGE>
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 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. Notwithstanding any other provision of these by-laws, (i) no
person who has attained 70 years of age may be elected to the Board, other than
pursuant to the Agreement and Plan of Merger dated as of June 30, 1997 among the
Corporation, Hudson Acquisition Corp. and Rykoff-Sexton, Inc., and (ii) any
director who attains 70 years of age after such director's election to the Board
may serve for the entire term of the class of the Board to which such director
was elected. The
-3-
<PAGE>
requirements of the preceding sentence shall not apply to any director of the
Corporation elected to the Board prior to June 29, 1997.
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 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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 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
-7-
<PAGE>
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 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
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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 at 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.
(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
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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.
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
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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
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.
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.
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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.
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.
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<PAGE>
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 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
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<PAGE>
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.
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
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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
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, 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
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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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EXHIBIT 10.14
JP FOODSERVICE, INC. 401(k) RETIREMENT SAVINGS PLAN
IMPORTANT NOTE
Neither Connecticut General Life Insurance Company nor any of its employees can
provide you with legal advice in connection with the execution of this document.
Prior to execution of this document, you should consult your attorney on whether
this document is appropriate for you.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I DEFINITIONS.......................................... 1
ARTICLE II SERVICE.............................................. 14
ARTICLE III ELIGIBILITY, ENROLLMENT AND PARTICIPATION............ 16
ARTICLE IV CONTRIBUTIONS........................................ 18
ARTICLE V LIMITATIONS ON ALLOCATIONS........................... 27
ARTICLE VI DISTRIBUTION OF BENEFITS............................. 33
ARTICLE VI-A DISTRICT ROLLOVERS................................... 39
ARTICLE VII Retirement BENEFITS.................................. 40
ARTICLE VIII JOINT AND SURVIVOR ANNUITY REQUIREMENTS.............. 40
ARTICLE IX TERMINATION OF EMPLOYMENT............................ 44
ARTICLE X WITHDRAWALS.......................................... 45
ARTICLE XI FIDUCIARY DUTIES AND RESPONSIBILITIES................ 48
ARTICLE XII THE ADMINISTRATOR.................................... 48
ARTICLE XIII PARTICIPANTS' RIGHTS................................. 50
ARTICLE XIII-A INVESTMENTS.......................................... 52
ARTICLE XIV AMENDMENT OR TERMINATION OF THE PLAN................. 53
ARTICLE XV SUBSTITUTION OF PLANS................................ 55
ARTICLE XVI MISCELLANEOUS........................................ 55
ARTICLE XVII TRUST AGREEMENT...................................... 60
</TABLE>
<PAGE>
ARTICLE I
DEFINITIONS
1.1 ACCRUED BENEFIT. The term Accrued Benefit means the value on any
applicable date of the Participant's Account.
1.2 ACT. The Securities and Exchange Act of 1934, as amended from time to
time.
1.3 ACTIVE PARTICIPANT. The term Active Participant means any Participant who
(a) performs duties as an Employee for the Employer, and (b) is not an
Inactive Participant.
1.4 ACTUAL CONTRIBUTION PERCENTAGE. The term Actual Contribution Percentage
means the average of the Actual Contribution Ratios of a specified group
computed to the nearest one-hundredth of one percent.
1.5 ACTUAL CONTRIBUTION PERCENTAGE TEST.
(A) For each Plan Year, the Plan shall satisfy the contribution percentage
requirement described in section 401(m)(2) of the Code and the
regulations thereunder, which are incorporated herein.
The Plan satisfies the Actual Contribution Percentage Test if:
(1) The Actual Contribution Percentage for the group of eligible
Highly Compensated Employees is not more than the Actual
Contribution Percentage for the group of all other eligible
Employees multiplied by 1.25; or
(2) The excess of the Actual Contribution Percentage for the group of
eligible Highly Compensated Employees over the Actual Contribution
Percentage for the group of all other eligible Employees is not
more than two percentage points, and the Actual Contribution
Percentage for the group of eligible Highly Compensated Employees
is not more than the Actual Contribution Percentage for the group
of all other eligible Employees multiplied by two.
(B) Special Rules.
(1) Matching Contributions and Qualified Nonelective Contributions
will be considered for a Plan Year only if allocated to the
Employee's Account as of any date within the Plan Year being
tested and only if made before the last day of the twelve month
period immediately following the Plan Year to which such
contributions relate.
(2) A Matching Contribution that is forfeited to correct Excess
Aggregate Contributions, or because the contribution to which it
relates is treated as an Excess Contribution, Excess Deferral, or
Excess Aggregate Contribution, shall not be taken into account for
purposes of the Actual Contribution Percentage Test.
(3) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Contribution Percentage Test, including
records showing the extent to which Qualified Nonelective
Contributions and Elective Deferral Contributions are taken into
account.
1
<PAGE>
1.6 ACTUAL CONTRIBUTION RATIO.
(A) An Employee's Actual Contribution Ratio is the sum of the Contribution
Percentage Amounts allocated to the Employee's Account for the Plan
Year (including any amounts required to be taken into account under
subparagraphs (B) (1) and (B) (2) of this section) divided by the
Employee's Compensation for the Plan Year. If no Matching
Contributions, Qualified Nonelective Contributions, or Elective
Deferral Contributions are taken into account with respect to an
eligible Employee, the Actual Contribution Ratio of the Employee is
zero.
(B) Special Rules.
(1) In the event that this Plan is aggregated with one or more plans
for purposes of section 410(b) of the Code (other than for
purposes of the average benefit percentage test), or if one or
more other plans satisfy the requirements of section 410(b) of the
Code (other than the average benefit percentage test) only if
aggregated with this Plan, then this section shall be applied by
determining the Actual Contribution Ratios of Employees as if all
such plans were a single plan. Plans may be aggregated only if
they have the same Plan Year.
(2) The Actual Contribution Ratio of a Highly Compensated Employee who
is eligible to participate in more than one plan of the Employer
to which employee contributions or Matching Contributions are made
shall be calculated by treating all such plans in which the
Employee is eligible to participate as one plan. For Plan Years
beginning after December 31, 1988, if a Highly Compensated
Employee participates in two or more plans that have different
plan years, all plans ending with or within the same calendar year
shall be treated as a single plan. However, plans that are not
permitted to be aggregated under Treasury Regulation section
1.401(m)-I(b)(3)(ii) shall not be aggregated for purposes of this
section.
(3) For purposes of determining the Actual Contribution Ratio of a
Participant who is a 5-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participant shall
include the Contribution Percentage Amounts (including any amounts
required to be taken into account under subparagraphs (B)(1) and
(B)(2) of this section) and Compensation for the Plan Year of all
Family Members.
If the Participant is required to be aggregated as a member of
more than one family group under the Plan, all eligible Employees
who are members of those family groups that include that Employee
are aggregated as one family group.
Family Members, with respect to Highly Compensated Employees,
shall be disregarded as separate Employees in determining the
Actual Contribution Ratio both for Participants who are Nonhighly
Compensated Employees and for Participants who are Highly
Compensated Employees.
(4) The determination and treatment of the Actual Contribution Ratio
amounts of any Participant shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
1.7 ACTUAL DEFERRAL PERCENTAGE. The term Actual Deferral Percentage means the
average of the Actual Deferral Ratios of a specified group, computed to the
nearest one-hundredth of one percent.
2
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[BLANK PAGE]
3
<PAGE>
1.8 ACTUAL DEFERRAL PERCENTAGE TEST.
(A) For each Plan Year, the Plan shall satisfy the Actual Deferral
Percentage Test described in section 401(k)(3) and the regulations
thereunder, which are herein incorporated by reference.
The Plan satisfies the Actual Deferral Percentage Test for a Plan Year
only if:
(1) The Actual Deferral Percentage for the group of eligible Highly
Compensated Employees is not more than the Actual Deferral
Percentage for the group of all other eligible Employees
multiplied by 1.25; or
(2) The excess of the Actual Deferral Percentage for the group of
eligible Highly Compensated Employees over the Actual Deferral
Percentage for the group of all other eligible Employees is not
more than two percentage points, and the Actual Deferral
Percentage for the group of eligible Highly Compensated Employees
is not more than the Actual Deferral Percentage for the group of
all other eligible Employees multiplied by two.
(B) Special Rules.
(1) For purposes of determining the Actual Deferral Percentage Test,
Elective Deferral Contributions, Qualified Nonelective
Contributions, and Qualified Matching Contributions must be
allocated to the Employee's Account as of a date within the Plan
Year being tested and must be made before the last day of the
twelve-month period immediately following the Plan Year to which
such contributions relate.
(2) The Excess Deferrals of a Highly Compensated Employee shall be
taken into account for purposes of the Actual Deferral Percentage
Test. Conversely, the Excess Deferrals of an Employee who is a
Nonhighly Compensated Employee shall not be taken into account for
purposes of the Actual Deferral Percentage Test.
(3) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Deferral Percentage Test, including the
extent to which Qualified Nonelective Contributions and Qualified
Matching Contributions are taken into account.
1.9 ACTUAL DEFERRAL RATIO.
(A) An Employee's Actual Deferral Ratio for the Plan Year is the sum of the
Employee's Deferral Percentage Amounts allocated to the Employee's
Account for the Plan Year (including any amounts required to be taken
into account under subparagraphs (B)(1) and (B)(2) of this section),
divided by the Employee's Compensation taken into account for the Plan
Year. If an eligible Employee makes no Elective Deferral Contributions,
and no Qualified Matching Contributions or Qualified Nonelective
Contributions are taken into account with respect to the Employee, the
Actual Deferral Ratio of the Employee is zero.
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(B) Special Rules.
(1) In the event that this Plan is aggregated with one or more plans
for purposes of section 410(b) of the Code (other than for
purposes of the average benefit percentage test), or if one or
more other plans satisfy the requirements of section 410(b) of the
Code (other than the average benefit percentage test) only if
aggregated with this Plan, then this section shall be applied by
determining the Actual Deferral Ratio of Employees as if all such
plans were a single plan. Plans may be aggregated only if they
have the same Plan Year.
(2) The Actual Deferral Ratio of a Highly Compensated Employee who is
eligible to participate in more than one cash or deferred
arrangement (as described in section 401 (k) of the Code) of the
same Employer shall be calculated by treating all the cash or
deferred arrangements in which the Employee is eligible to
participate as one arrangement. If the cash or deferred
arrangements that are treated as a single arrangement under the
preceding sentence are parts of plans that have different Plan
Years, the cash or deferred arrangements are treated as a single
arrangement with respect to the Plan Years ending with or within
the same calendar year. However, plans that are not permitted to
be aggregated under Treasury Regulation section 1.401(k)-
1(b)(3)(ii)(B) are not aggregated for purposes of this section.
(3) For purposes of determining the Actual Deferral Ratio of a
Participant who is a 5 percent owner or one of the 10 most Highly
Compensated Employees, the Deferral Percentage Amounts and
Compensation of such Participant shall include the Deferral
Percentage Amounts (including any amounts required to be taken
into account under subparagraphs (B) (1) and (B) (2) of this
section) and Compensation for the Plan Year of Family Members.
If an Employee is required to be aggregated as a member of more
than one family group under the Plan, all eligible Employees who
are members of those family groups that include that Employee are
aggregated as one family group.
Family Members, with respect to such Highly Compensated Employees,
shall be disregarded as separate Employees in determining the
Actual Deferral Percentage both for Participants who are Non-
highly Compensated Employees and for Participants who are Highly
Compensated Employees.
(4) The determination and treatment of the Actual Deferral Ratio
amounts of any Participant shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
1.10 ANNUITY. The term Annuity means a series of payments made over a
specified period of time which, for a fixed annuity are, of equal, specified
amounts, and for a variable annuity increase or decrease to reflect changes in
investment performance of the underlying portfolio.
1.11 ANNUITY STARTING DATE. The term Annuity Starting Date means the first
day of the first period for which an amount is payable as an Annuity. In the
case of a benefit not payable in the form of an Annuity, the term Annuity
Starting Date means the first day on which all events have occurred which
entitle the Participant to such benefit.
1.12 BENEFICIARY. The Participant's Spouse is the designated Beneficiary of
the Participant's entire Vested Interest. However, each Participant shall have
the right to designate another Beneficiary and to specify the
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form of death benefit the Beneficiary is to receive, subject to the
requirements of the "Qualified Election" provisions of Article VIII, Joint
and Survivor and/or the form of death benefit Requirements. The Participant
may change the Beneficiary and/or the form of death benefit at any time,
subject to the requirements of the "Qualified Election" provisions of
Article VIII, Joint and Survivor and/or the form of death benefit
Requirements.
If any distribution hereunder is made to a Beneficiary in the form of an
Annuity, and if such Annuity provides for a death benefit, then such
Beneficiary shall also have the right to designate a Beneficiary and to
change that Beneficiary from time to time. As an alternative to receiving
the benefit in the form of an Annuity, the Beneficiary may elect to receive
a single cash payment or any other form of payment provided for in the
Plan.
If a Beneficiary has not been designated, or if a beneficiary designation
or change of Beneficiary designation does not meet the requirements of the
"Qualified Election" provisions of Article VIII, Joint and Survivor and/or
the form of death benefit Requirements, (including any designation made
prior to August 23, 1984 by a married Participant who has an Hour of
Service on or after August 23, 1984), or if no designated Beneficiary
survives the Participant, the Participant's entire Vested Interest shall be
distributed to the Participant's Spouse, if living; otherwise in equal
shares to any surviving children of the Participant. In the event none of
the above named individuals survives the Participant, the Participant's
entire Vested Interest shall be paid to the executor or administrator of
the Participant's estate.
1.13 BOARD OF DIRECTORS. The term Board of Directors means the Employer's board
of directors or other comparable governing body.
1.14 CODE. The term Code means the Internal Revenue Code of 1986, as amended
from time to time.
1.15 COMPENSATION
(A) Except as otherwise provided in the Plan, the term Compensation means
wages, salaries, and fees for professional services and other amounts
received (without regard to whether or not an amount is paid in cash)
for personal services actually rendered in the course of employment
with the Employer maintaining the Plan, to the extent that the amounts
are includible in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips,
bonuses, fringe benefits, and reimbursements, or other expense
allowances under a nonaccountable plan (as described in 1.62-2(c)), and
foreign earned income (as defined in section 911 (b) of the Code)
whether or not excludable from gross income under section 911 of the
Code. The term Compensation does not include:
(1) Employer contributions to a plan of deferred compensation which
are not includible in the employee's gross income for the taxable
year in which contributed, or employer contributions under a
simplified employee pension plan to the extent such contributions
are deductible by the Employee, or any distributions from a plan
of deferred compensation;
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
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(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
(B) Compensation shall include only that Compensation which is actually
paid to the Participant during the determination period. Except as
provided elsewhere in the Plan, the determination period shall be the
Plan Year.
(C) Compensation shall include any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is not
includible in the gross income of the employee under sections 125,
402(e)(3), 402(h), or 403(b) of the Code; Compensation deferred under
an eligible deferred compensation plan within the meaning of section
457(d) of the Code; and employee contributions described in section
414(h)(2) of the Code that are picked up by the employing unit and,
thus, are treated as employer contributions.
(D) For Plan Years beginning prior to January 1, 1994, the annual
Compensation of each Participant taken into account for determining all
benefits provided under the Plan for any determination period shall not
exceed $200,000. This limitation shall be adjusted by the Secretary of
the Treasury at the time and in the same manner as under section 415(d)
of the Code, except that the dollar increase in effect on January 1 of
any calendar year is effective for determination periods beginning in
such calendar year and the first adjustment to the $200,000 limitation
is effected on January 1, 1990. For Plan Years beginning on or after
January 1, 1994, the annual Compensation of each Participant taken into
account for determining all benefits provided under the Plan shall not
exceed $150,000. This limitation shall be adjusted by the Secretary of
the Treasury at the time and in the manner provided under Section
401(a)(17) of the Code. If the period for determining Compensation used
in calculating an Employee's allocation for a determination period is a
short Plan Year (i.e., shorter than 12 months), the annual Compensation
limit is an amount equal to the otherwise applicable annual
Compensation limit multiplied by a fraction, the numerator of which is
the number of months in the short Plan Year, and the denominator of
which is 12.
For Plan Years beginning prior to January 1, 1997, in determining the
Compensation of a Participant for purposes of this limitation, the
rules of section 414(q)(6) of the Code shall apply, except in applying
such rules, the term "family" shall include only the Spouse of the
Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the year. If, as a result of the
application of such rules, the adjusted $200,000 (or $150,000)
limitation is exceeded, then either the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this section prior to the application
of this limitation, or the limitation shall be allocated among the
affected individuals in an objective and nondiscriminatory manner based
on a reasonable, good faith interpretation of section 401(a)(17) of the
Code. The method chosen in the preceding sentence shall be uniformly
applied to all affected individuals in a Plan Year and shall be applied
consistently from year to year.
If Compensation for any prior determination period is taken into
account in determining an Employee's allocations or benefits for the
current determination period, the Compensation for such prior
determination period is subject to the applicable annual Compensation
limit in effect for that prior year.
1.16 CONSIDERED NET PROFITS. The term Considered Net Profits means the entire
amount of the accumulated or current operating profits (excluding capital
gains from the sale or involuntary conversion of capital or business
assets) of the Employer after all expenses and charges other than (i) the
contributions
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made by the Employer to the Plan, and (ii) federal or state or local taxes
based upon or measured by income, as determined by the Employer, either on
an estimated basis or a final basis, in accordance with the generally
accepted accounting principles used by the Employer. When the amount of
Considered Net Profits has been determined by the Employer, and the
contributions are made by the Employer on the basis of such determination,
for any Plan Year, such determination and contribution shall be final and
conclusive and shall not be subject to change because of any adjustments in
income or expense which may be required by the Internal Revenue Service or
otherwise. Such determination and contribution shall not be open to
question by any Participant either before or after the contributions by the
Employer have been made.
1.17 CONTRIBUTION PERCENTAGE AMOUNTS. The term Contribution Percentage Amounts
means the sum of the Matching Contributions and Qualified Matching
Contributions (to the extent not taken into account for purposes of the
Actual Deferral Percentage Test) made under the Plan on behalf of the
Employee for the Plan Year. The term Contribution Percentage Amounts also
includes Qualified Nonelective Contributions and Elective Deferral
Contributions treated as Matching Contributions and taken into account in
determining the Employee's Actual Contribution Ratio for the Plan Year.
1.18 CONTRIBUTION PERIOD. The term Contribution Period means that regular period
specified by the Employer in Article IV for which contributions shall be
made.
1.19 DEFERRAL PERCENTAGE AMOUNTS. The term Deferral Percentage Amounts means an
Employee's Elective Deferral Contributions for the Plan Year. The term
Deferral Percentage Amounts also includes Qualified Nonelective
Contributions and Qualified Matching Contributions treated as Elective
Deferral Contributions and taken into account in determining the Employee's
Actual Deferral Ratio for the Plan Year.
1.20 DISABILITY. The term Disability means a Participant's incapacity to engage
in any substantial gainful activity because of a medically determinable
physical or mental impairment which can be expected to result in death, or
to be of long, continued and indefinite duration. Such determination of
Disability shall be made by the Administrator with the advice of competent
medical authority. All Participants in similar circumstances will be
treated alike.
1.21 DISABILITY RETIREMENT DATE. The term Disability Retirement Date means the
first day of the month after the Plan Administrator has determined that a
Participant's incapacity is a Disability.
1.22 EFFECTIVE DATE. The term Effective Date means January 1, 1993.
1.23 ELECTIVE DEFERRAL CONTRIBUTION. The term Elective Deferral Contribution
means any Employer Contribution made to the Plan at the election of the
Participant, in lieu of cash compensation, and includes contributions made
pursuant to a Salary Deferral Agreement or other deferral mechanism.
Solely for purposes of the dollar limitation specified in section 402(g) of
the Code, with respect to any taxable year, a Participant's Elective
Deferral Contributions are the sum of all employer contributions made on
behalf of such Participant pursuant to an election to defer under any
qualified cash or deferred arrangement as described in section 401(k) of
the Code, any simplified employee pension cash or deferred arrangement
described in section 402(h)(1)(B) of the Code, any plan as described under
section 501 (c)(18) of the Code, and any employer contributions made on
behalf of a Participant for the purchase of a tax sheltered annuity
contract under section 403(b) of the Code pursuant to a salary reduction
agreement.
The term Elective Deferral Contribution shall not include any deferrals
properly distributed as excess annual additions.
1.24 EMPLOYEE. The term Employee means an individual who performs services for
the Employer and who is either a common law employee on the active payroll
of the Employer or a self-employed individual/owner
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employee treated as an Employee pursuant to Code section 401 (c)(1). The
term Employee also includes a Leased Employee who is treated as an Employee
of the Employer-recipient pursuant to the provisions of Code section 414(n)
or 414(o). For purposes of determining the Highly Compensated Employees,
the Employer may elect, on a reasonable and consistent basis, to treat such
Leased Employees covered by a plan described in Code section 414(n)(5) as
Employees.
1.25 EMPLOYEE CONTRIBUTIONS. The term Employee Contributions means any
contributions to the Plan or any other plan that are designated or treated
at the time of contribution as after-tax Employee Contributions and are
allocated to a separate account to which the attributable earnings and
losses are allocated. Such term includes Employee Contributions applied to
the purchase of life insurance policies.
Such term does not include buy-back of benefits described in code section
(411)(a)(7)(c) or employee contributions transferred to this Plan.
1.26 EMPLOYER. The term Employer means JP Foodservice, Distributors, Inc. and
any successor organization to such Employer which elects to continue the
Plan. In the case of a group of employers which constitutes a controlled
group of corporations (as defined in Code section 414(b)), or which
constitutes trades or businesses (whether or not incorporated) which are
under common control (as defined in Code section 414(c)), or which
constitutes an affiliated service group (as defined in Code section
414(m)), all such employers shall be considered a single employer for
purposes of participation, vesting, Top-Heavy provisions and determination
of Highly Compensated Employees.
1.27 EMPLOYER CONTRIBUTION. The term Employer Contribution means any
contribution made to the Plan by the Employer on behalf of a Participant,
other than a Rollover Contribution or a mandatory or voluntary contribution
made to the Plan by the Employee that is treated at the time of
contribution as an after-tax employee contribution.
1.28 EMPLOYER STOCK. The term Employer Stock means the common stock, $0.01 par
value, of JP Foodservice, Inc., a Delaware corporation, or any successor
thereto.
1.29 ENTRY DATE. The term Entry Date means either the Effective Date or the
thirtieth day after the date of hire thereafter when an Employee who has
fulfilled the eligibility requirements commences participation in the Plan.
If the Employee does not desire to become a Participant at that time, the
Employee may have as an Entry Date the first day of any calendar quarter
thereafter, provided he still meets the eligibility requirements.
Any Employee who has satisfied the maximum eligibility requirements
permissible under ERISA, shall be eligible to commence participation in
this Plan no later than the earlier of (A) or (B) below, as applicable;
provided that the Employee has not separated from the Service of the
Employer:
(A) The first day of the first Plan Year beginning after the date on which
the Employee satisfied such requirements; or
(B) The date six months after the date on which the Employee satisfied such
requirements.
If an Employee is not in the active Service of the Employer as of his
initial Entry Date, his subsequent Entry Date shall be the date he returns
to the active Service of the Employer, provided he still meets the
eligibility requirements. If an Employee does not enroll as a Participant
as of his initial Entry Date, his subsequent Entry Date shall be the
applicable Entry Date as specified above when the Employee actually enrolls
as a Participant.
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1.30 ERISA. The term ERISA means the Employee Retirement Income Security
Act of 1974 (PL 93-406) as it may be amended from time to time, and
any regulations issued pursuant thereto as such Act and such
regulations affect this Plan and Trust.
1.31 EXCESS AGGREGATE CONTRIBUTIONS.
(A) The term Excess Aggregate Contributions means, with respect to any
Plan Year, the excess of the aggregate amount of the Contribution
Percentage Amounts actually made on behalf of Highly Compensated
Employees for the Plan Year (including any amounts required to be
taken into account under subparagraphs (B)(1) and (B)(2) of
Section 1.5 of the Plan), over the maximum amount of contributions
permitted under the Actual Contribution Percentage Test. The
amount of Excess Aggregate Contributions for each Highly
Compensated Employee is determined by using the method described
in paragraph (B) of this section.
(B) The amount of Excess Aggregate Contributions for a Highly
Compensated Employee for a Plan Year is the amount (if any) by
which the Employee's Matching Contributions must be reduced for
the Employee's Actual Contribution Ratio to equal the highest
permitted Actual Contribution Ratio under the Plan.
To calculate the highest permitted Actual Contribution Ratio under
the Plan, the Actual Contribution Ratio of the Highly Compensated
Employee with the highest Actual Contribution Ratio is reduced by
the amount required to cause the Employee's Actual Contribution
Ratio to equal the ratio of the Highly Compensated Employee with
the next highest Actual Contribution Ratio. If a lesser reduction
would enable the Plan to satisfy the Actual Contribution
Percentage Test, only this lesser reduction may be made. This
process shall be repeated until the Plan satisfies the Actual
Contribution Percentage Test. The highest Actual Contribution
Percentage Ratio remaining under the Plan after leveling is the
highest permitted Actual Contribution Ratio.
For each Highly Compensated Employee, the amount of Excess
Aggregate Contributions for a Plan Year is equal to the total
Contribution Percentage Amounts (including any amounts required to
be taken into account under subparagraphs (B) (1) and (B) (2) of
Section 1.5 of the Plan), minus the amount determined by
multiplying the Employee's highest permitted Actual Contribution
Ratio (determined after application of this section) by the
compensation used in determining the ratio.
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1.32 EXCESS CONTRIBUTION.
(A) The term Excess Contribution means, with respect to a Plan Year,
the excess of Deferral Percentage Amounts made on behalf of
eligible Highly Compensated Employees for the Plan Year (including
any amounts required to be taken into account under subparagraphs
(B) (1) and (B) (2) of Section 1.8 of the Plan) over the maximum
amount of such contributions permitted under the Actual Deferral
Percentage Test for the Plan Year. The amount of Excess
Contributions for each Highly Compensated Employee is determined
by using the method described in paragraph (B) of this section.
(B) The amount of Excess Contributions for a Highly Compensated
Employee for a Plan Year is the amount (if any) by which the
Employee's Elective Deferral Contributions must be reduced for the
Employee's Actual Deferral Ratio to equal the highest permitted
Actual Deferral Ratio under the Plan.
To calculate the highest permitted Actual Deferral Ratio under the
Plan, the Actual Deferral Ratio of the Highly Compensated Employee
with the highest Actual Deferral Ratio is reduced by the amount
required to cause the Employee's Actual Deferral Ratio to equal
the ratio of the Highly Compensated Employee with the next highest
Actual Deferral Ratio. If a lesser reduction would enable the
arrangement to satisfy the Actual Deferral Percentage Test, only
this lesser reduction shall be made. This process shall be
repeated until the cash or deferred arrangement satisfies the
Actual Deferral Percentage Test. The highest Actual Deferral Ratio
remaining under the Plan after leveling is the highest permitted
Actual Deferral Ratio.
1.33 EXCESS DEFERRALS. The term Excess Deferrals means those Elective
Deferral Contributions that are includible in a Participant's gross
income under section 402(g) of the Code to the extent such
Participant's Elective Deferral Contributions for a taxable year
exceed the dollar limitation under such Code section.
1.34 FAIL-SAFE CONTRIBUTION. The term Fail-Safe Contribution means a
Nonelective Contribution, designated by the Employer at the time of
contribution as a Qualified Nonelective Contribution, which is
contributed to the Plan solely for the purposes of satisfying either
the Actual Deferral Percentage Test or the Actual Contribution
Percentage Test and is made in accordance with the provisions of
Article IV of this Plan.
1.35 FAIR MARKET VALUE. The term Fair Market Value means the closing price
of Employer Stock as reported by the National Association of
Securities Dealers Automated Quotation System (NASDAQ) in the national
market or the date as of which the Employer Stock is to be valued,
provided that if there should be no sales of Employer Stock on such
date, the Fair Market Value shall be deemed equal to the closing price
as reported by NASDAQ on the last preceding date on which sales of
Employer Stock were reported. In the event Employer Stock is listed
upon an established stock exchange or exchanges, Fair Market Value
means the closing price of Employer Stock on the exchange that trades
the largest volume of Employer Stock on the date as of which Employer
Stock is to be valued.
1.36 FAMILY MEMBER. The term Family Member means, with respect to any
Employee, such Employee's Spouse and lineal ascendants and descendants
and the spouses of such lineal ascendants and descendants.
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1.37 FIDUCIARY. The term Fiduciary means any, or all, of the following, as
applicable:
(A) Any Person who exercises any discretionary authority or control
respecting the management of the Plan or its assets; or
(B) Any Person who renders investment advice for a fee or other
compensation, direct or indirect, respecting any monies or other
property of the Plan or has authority or responsibility to do so;
or
(C) Any Person who has discretionary authority or responsibility in
the administration of the Plan; or
(D) Any Person who has been designated by a Named Fiduciary pursuant
to authority granted by the Plan, who acts to carry out a
fiduciary responsibility, subject to any exceptions granted
directly or indirectly by ERISA.
1.38 FORFEITURE. The term Forfeiture means the amount, if any, by which the
value of a Participant's Account exceeds his Vested Interest following
such Participant's Termination of Employment, and at the time
specified in Section 9.1.
1.39 HIGHLY COMPENSATED EMPLOYEE. The term Highly Compensated Employee
means any Highly Compensated Active Employee or Highly Compensated
Former Employee as further defined herein.
For purposes of the determination of Highly Compensated Employees, the
term Compensation means Compensation as defined in Article V of the
Plan, but includes the amount of any elective contributions made by
the Employer on the Employee's behalf to a cafeteria plan established
in accordance with the provisions of Code section 125, a qualified
cash or deferred arrangement in accordance with the provisions of Code
section 402(e)(3), a simplified employee pension plan in accordance
with the provisions of Code section 402(h), or a tax sheltered annuity
plan maintained in accordance with the provisions of Code section
403(b).
A "Highly Compensated Active Employee" is any Employee who performs
services for the Employer during the current Plan Year and who, during
the current Plan Year or the 12-month period immediately preceding
such Plan Year:
(A) Owns (or is considered to own within the meaning of section 318 of
the Code, as modified by section 416(i)(1)(B)(iii) of the Code),
more than 5% of the outstanding stock of the Employer or stock
possessing more than 5% of the total combined voting power of all
stock of the Employer, or, if the Employer is other than a
corporation, owns more than 5% of the capital or profits interest
in the Employer. The determination of 5% ownership shall be made
separately for each member of a controlled group of corporations
(as defined in Code section 414(b)), or of a group of trades or
businesses (whether or not incorporated) that are under common
control (as defined in Code section 414(c)), or of an affiliated
service group (as defined in Code section 414(m)); or
(B) Receives Compensation in excess of $75,000 multiplied by the
applicable cost-of-living adjustment factor prescribed under Code
section 415(d) and then prorated in the case of a short Plan Year,
or
(C) Receives Compensation in excess of $50,000, as adjusted for cost-
of-living increases in accordance with Code section 415(d) and
then prorated in the case of a short Plan Year, and is in the top
20% of Employees ranked by Compensation; or
(D) Is, at any time, an officer of the Employer and receives
Compensation in excess of 50% of the amount in effect under Code
section 415(bj(l)(A) for the applicable period.
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If no officer receives Compensation in excess of the amount
specified above, the highest paid officer for the applicable
period shall be a Highly Compensated Employee.
In no event if there are more than 500 Employees, shall more than
50 Employees or, if there are less than 500 Employees, shall the
greater of firm Employees or 10% of all Employees, be taken into
account as officers.
In determining both the top 20% of Employees ranked by Compensation for
purposes of paragraph (C) above, and officers of the Employer for purposes
of paragraph (D) above, Employees who have not completed six months of
Service by the end of the applicable period, Employees who normally work
less than 17-1/2 hours per week, Employees who normally work less than six
months during a year, Employees who have not attained 21, and nonresident
aliens who receive no earned income from U.S. sources shall be excluded.
Also excluded under the above paragraph are Employees who are covered by
an agreement which the Secretary of Labor finds to be a collective
bargaining agreement. Such Employees will be excluded only if retirement
benefits were the subject of good faith bargaining, 90% of the Employees
of the Employer are covered by the agreement, and the Plan covers only
Employees who are not covered by the agreement.
Notwithstanding the above provisions, an Employee, other than a 5% owner
as described in paragraph (A) above who was not highly compensated during
the 12-month period immediately preceding the current Plan Year will not
be considered to be a Highly Compensated Employee in the current Plan Year
unless such Employee is one of the top 100 Employees ranked by
Compensation for the current Plan Year.
A "Highly Compensated Former Employee" is any former Employee who
separated from Service with the Employer in a Plan Year preceding the
current Plan Year and was a Highly Compensated Active Employee in either:
(A) The Plan Year in which his separation from Service occurred; or
(B) any Plan Year ending on or after such former Employee's 55th birthday.
A former Employee is an Employee who performs no services for the Employer
during a Plan Year (for example, by reason of a leave of absence).
1.40 INACTIVE PARTICIPANT. The term Inactive Participant means any Participant
who does not currently meet the requirements to be an Active Participant
due to a suspension of the performance of duties for the Employer.
In addition, a Participant who ceases to meet the eligibility requirements
in accordance with Section 3.1 shall be considered an Inactive
Participant.
1.41 INSTALLMENT REFUND ANNUITY. The term Installment Refund Annuity means an
annuity which provides fixed monthly payments for a period certain of not
less than three nor more than 15 years. If the Participant dies before the
period certain expires, the annuity will be paid to the Participant's
Beneficiary for the remainder of the period certain. The period certain
shall be chosen by the Participant at the time the annuity is purchased,
and the Installment Refund Annuity will be the amount of benefit which can
be purchased with the Participant's Vested Interest. The Installment
Refund Annuity is not a life annuity and in no event shall the period
certain extend to a period which equals or exceeds the life expectancy of
the Participant.
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1.42 JOINT AND SURVIVOR ANNUITY. The term Joint and Survivor Annuity means
an Annuity for the life of the Participant with a survivor Annuity for
the life of the Participant's Spouse which is not less than one-half,
nor greater than, the amount of the Annuity payable during the joint
lives of the Participant and the Participant's Spouse. The Joint and
Survivor Annuity will be the amount of benefit which can be purchased
with the Participant's vested account balance. In the case of an
unmarried Participant, Joint and Survivor Annuity means an Annuity
payable over the Participant's life.
1.43 LATE RETIREMENT DATE. The term Late Retirement Date means the first
day of the month coinciding with or next following the date a
Participant is separated from Service with the Employer after his
Normal Retirement Age, for any reason other than death.
1.44 LEASED EMPLOYEE. The term Leased Employee means any person (other than
an Employee of the recipient) who, pursuant to an agreement between
the recipient and any other person ("leasing organization"), has
performed services for the recipient (or for the Employer and related
persons determined in accordance with Code section 414(n)(6)) on a
substantially full-time basis for a period of at least one year, and
such services are of a type historically performed by employees in the
business field of the recipient Employer.
1.45 MATCHING CONTRIBUTIONS. The term Matching Contributions means
contributions made by the Employer to the Plan on behalf of a
Participant on account of either Elective Deferral Contributions, if
any, Employee Contributions, if any, or required contributions, if
any.
1.46 NAMED FIDUCIARY. The term Named Fiduciary means the Plan
Administrator, the Trustee and any other Fiduciary designated in
writing by the Employer, and any successor thereto.
1.47 NONELECTIVE CONTRIBUTIONS. The term Nonelective Contributions means
contributions made by the Employer (other than Matching Contributions)
that the Participant may not elect to have paid in cash or other
benefits instead of being contributed to the Plan.
1.48 NONHIGHLY COMPENSATED EMPLOYEE. The term Nonhighly Compensated
Employee means an Employee who is not a Highly Compensated Employee.
1.49 NORMAL RETIREMENT AGE. The term Normal Retirement Age means the date
the Participant attains age 65.
1.50 NORMAL RETIREMENT DATE. The term Normal Retirement Date means the
first day of the month coinciding with or next following the date a
Participant attains his Normal Retirement Age.
1.51 PARTICIPANT. The term Participant means any Employee of the Employer,
who is or becomes eligible to participate under this Plan in
accordance with its provisions and shall include an Active Participant
and an Inactive Participant.
1.52 PARTICIPANT'S ACCOUNT. The term Participant's Account means the sum
of the following sub-accounts held on behalf of each Participant:
. Elective Deferral Contributions, if any, and earnings thereon.
. Matching Contributions made prior to January 1, 1995, if any, and
earnings thereon.
. Matching Contributions made on or after January 1, 1995, if any,
and earnings thereon.
. Qualified Matching Contributions, if any, and earnings thereon.
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. Nonelective Contributions made prior to January 1, 1995, if any,
and earnings thereon.
. Nonelective Contributions made on or after January 1, 1995, if any,
and earnings thereon.
. Qualified Nonelective Contributions, if any, and earnings thereon.
. Rollover Contributions, if any, and earnings thereon.
Participant's Account shall be invested in accordance with the rules
established by the Plan Administrator, which shall be applied in a
consistent and nondiscriminatory manner.
1.53 PERSON. The term Person means any natural person, partnership,
corporation, trust or estate.
1.54 PLAN. The term Plan means JP Foodservice, Inc. 401(k) Retirement
Savings Plan, the terms of which are set forth herein as it may be
amended from time to time.
1.55 PLAN ADMINISTRATOR. The terms Plan Administrator and Administrator are
used interchangeably throughout the Plan and Trust and shall mean the
Employer.
1.56 PLAN YEAR. The term Play Year means the 9-month period commencing on
April 1, 1995 and ending on December 31, 1995. Thereafter, the term
Plan Year means the 12-month period commencing on January 1 and ending
on the following December 31.
1.57 QUALIFIED MATCHING CONTRIBUTIONS. The term Qualified Matching
Contributions shall mean Matching Contributions which are subject to
the distribution and nonforfeitability requirements under section
401(k) of the Code when made.
1.58 QUALIFIED NONELECTIVE CONTRIBUTIONS. The term Qualified Nonelective
Contributions shall mean Nonelective Contributions which are subject
to the distribution and nonforfeitability requirements under section
401 (k) of the Code when made.
1.59 ROLLOVER CONTRIBUTION. The term Rollover Contribution means an amount
representing all or part of a distribution from a pension or profit-
sharing plan meeting the requirements of Code section 401 (a) that is
eligible for rollover to this Plan in accordance with the requirements
set forth in Code section 402 or Code section 408(d)(3), whichever is
applicable.
1.60 SALARY DEFERRAL AGREEMENT. The term Salary Deferral Agreement means an
agreement between a Participant and the Employer to defer the
Participant's Compensation for the purpose of making Elective Deferral
Contributions to the Plan.
1.61 TERMINATION OF EMPLOYMENT. The term Termination of Employment means a
severance of the Employer-Employee relationship which occurs prior to
a Participant's Normal Retirement Age for any reason other than
Disability or death.
1.62 TRUST. The term Trust means the trust agreement entered into by the
Employer, the Administrator and the Trustee, which trust agreement
forms a part of, and implements the provisions of this Plan.
1.63 TRUSTEE. The term Trustee means one or more individuals collectively
appointed and acting under the trust agreement, and any successor
thereto.
1.64 VESTED INTEREST. The term Vested Interest on any date means the
nonforfeitable right to an immediate or deferred benefit in the amount
which is equal to the following:
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(A) the value on that date of that portion of the Participant's Account that
is attributable to the following contributions:
. Elective Deferral Contributions, if any
. Rollover Contributions, if any
. Qualified Matching Contributions, if any
. Qualified Nonelective Contributions, if any
(B) plus the value on that date of that portion of the Participant's Account
that is attributable to and derived from:
. Matching Contributions, if any
. Nonelective Contributions, if any
Such contributions pursuant to Subsection (B), plus the earnings thereon,
shall be, at any relevant time, a part of the Participant's Vested
Interest equal to an amount ("X") determined by the following formula:
X = P(AB + D)-D
For the purposes of applying this formula:
P = The Participant's Vesting Percentage at the relevant time.
AB = The account balance attributable to such contributions, plus the
earnings thereon, at the relevant time.
D = The amount of the distribution.
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1.65 VESTING PERCENTAGE. The term Vesting Percentage means the percentage used
to determine a Participant's Vested Interest in contributions made by the
Employer, plus the earnings thereon, credited to his Participant's Account
that are not 100% immediately vested. The Vesting Percentage for each
Participant shall be determined in accordance with the following schedule
based on Years of Service with the Employer
<TABLE>
<CAPTION>
Years of Service Vesting Percentage
---------------- ------------------
<S> <C>
Less than five 0%
Five or more 100%
</TABLE>
However, if an Active Participant dies prior to attaining his Normal
Retirement Age, his Vesting Percentage shall be 100%.
1.66 VOTING COMMITTEE. The term Voting Committee means a committee of at least
three Employees appointed by the Employer to vote the Employer Stock held
by the Plan, provided that none of the Employees appointed to the Voting
Committee may be an officer, director, or ten-percent shareholder of JP
Foodservice, Inc. who is subject to Section 16(b) of the Act.
ARTICLE II
SERVICE
2.1 SERVICE. The term Service means active employment with the Employer as an
Employee. For purposes of determining Service, employment with any company
which is under common control with the Employer as specified in section
414 of the Internal Revenue Code shall be treated as employment with the
Employer.
2.2 ABSENCE FROM EMPLOYMENT. Absence from employment on account of a leave of
absence authorized by the Employer pursuant to the Employer's established
leave policy will be counted as employment with the Employer provided that
such leave of absence is of not more than two years' duration. Absence
from employment on account of active duty with the Armed Forces of the
United States will be counted as employment with the Employer. If the
Employee does not return to active employment with the Employer, his
Service will be deemed to have ceased on the date the Administrator
receives notice that such Employee will not return to the active Service
of the Employer. The Employer's leave policy shall be applied in a uniform
and nondiscriminatory manner to all Participants under similar
circumstances.
FOR PURPOSES OF VESTING, THE FOLLOWING PROVISIONS SHALL APPLY:
2.3 HOUR OF SERVICE. The term Hour of Service means a period of Service during
which an Employee shall be credited with one Hour of Service as described
in (A), (B), (C), and (D) below:
(A) Each hour for which an Employee is directly or indirectly paid, or
entitled to payment, by the Employer for the performance of duties.
These hours shall be credited to the Employee for the computation
period or periods in which the duties are performed; and
(B) Each hour for which an Employee is directly or indirectly paid, or
entitled to payment, by the Employer for reasons (such as vacation,
sickness or Disability) other than for the performance of duties.
Hours under this Subsection shall be calculated and credited
pursuant to section 2530.200b-2 of the Department of Labor
Regulations which are incorporated herein by this reference; and
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(C) Each hour for which back pay, irrespective of mitigation of damages,
has been either awarded or agreed to by the Employer. These hours
shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement or payment is made;
and
(D) Each hour for which an Employee is on an authorized unpaid leave
(such as service with the Armed Forces, jury duty, educational
leave). These hours shall be credited to the Employee for the
computation period or periods in which such authorized leave takes
place. However, no more than 501 hours shall be credited under this
subparagraph (D).
Hours of Service will be credited for employment with other members of an
affiliated service group (under Internal Revenue Code section 414(m)), a
controlled group of corporations (under Internal Revenue Code section
414(b)), or a group of trades or businesses under common control (under
Internal Revenue Code section 414(c)), of which the adopting employer is a
member. Hours of Service will also be credited for any individual
considered an Employee under Internal Revenue Code section 414(n).
Solely for purposes of determining whether a One-Year Break in Service, as
defined in Section 2.4, for participation and vesting purposes has
occurred in a computation period, an individual who is absent from work
for maternity or paternity reasons shall receive credit for the Hours of
Service which would otherwise have been credited to such individual but
for such absence, or in any case in which such hours cannot be determined,
eight Hours of Service per day of such absence. For purposes of this
paragraph, an absence from work for maternity or paternity reasons means
an absence (1) by reason of the pregnancy of the individual (2) by reason
of a birth of a child of the individual, (3) by reason of the placement of
a child with the individual in connection with the adoption of such child
by such individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement. The Hours
of Service credited under this paragraph shall be credited (1) in the
computation period in which the absence begins if the crediting is
necessary to prevent a Break in Service in that period, or (2) in all
other cases, in the following computation period.
2.4 ONE-YEAR BREAK IN SERVICE. The term One-Year Break in Service means any
Plan Year during which an Employee fails to complete more than 500 Hours
of Service.
2.5 DETERMINING VESTING PERCENTAGE. Vesting credit shall be given for each
Year of Service except those periods specified in Section 2.7.
If a Participant completes less than 1,000 Hours of Service during a Plan
Year while remaining in the Service of the Employer, his Vesting
Percentage shall not be increased for such Plan Year. However, at such
time as the Participant again completes at least 1,000 Hours of Service in
any subsequent Plan Year, his Vesting Percentage shall then take into
account all Year(s) of Service with the Employer except those specified in
Section 2.7.
If an individual who ceases to be an Employee and is subsequently rehired
as an Employee enrolls (or re-enrolls) in the Plan, upon his participation
(or subsequent participation) his Vesting Percentage shall then take into
account all Year(s) of Service except those specified in Section 2.7.
2.6 YEAR(S) OF SERVICE. The term Year(s) of Service means a 12-consecutive-
month period during which an Employee has completed at least 1,000 Hours
of Service.
In computing Years of Service and Breaks in Service for vesting, the 12-
consecutive-month period shall be the Plan Year. However, active
participation as of the last day of the Plan Year is not required in order
for a Participant to be credited with a Year of Service for vesting
purposes.
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<PAGE>
For purposes of the Vesting Computation Period, if any Plan Year is less
than 12-consecutive months, and if a Participant would have been credited
with a Year of Service during the 12-consecutive-month period beginning on
the first day of the short Plan Year, then the Participant will receive a
Year of Service for the short Plan Year. The Participant receives credit
for an additional Year of Service if the Participant would have been
credited with a Year of Service for the Plan Year immediately following
the short Plan Year.
For each Participant who was employed by PYA/Monarch on July 1, 1989, his
Years of Service with PYA/Monarch will be counted as Years of Service for
purposes of this Plan.
For each Participant who was employed by Cooks Foodservice on August 3,
1991, his Years of Service with Cooks Foodservice will be counted as Years
of Service for purposes of this Plan.
For each Participant who was employed by Tri River Foods, Inc. on July 1,
1995, his Years of Service with Tri River Foods, Inc. will be counted as
Years of Service for purposes of this Plan.
For each Participant who was employed by The Doyen Company on November 24,
1995, his Years of Service with The Doyen Company will be counted as Years
of Service for purposes of this Plan.
For each Participant who was employed by Rotelle, Inc. on November 27,
1995, his Years of Service with Rotelle, Inc. will be counted as Years of
Service for purposes of this Plan.
2.7 EXCLUDED YEARS OF SERVICE. In determining the Vesting Percentage of an
Employee, all Years of Service with the Employer shall be taken into
account except:
. Plan Years during which a Participant did not complete at least 1,000
Hours of Service.
2.8 PREDECESSOR ORGANIZATION SERVICE. For purposes of this Article, Service
with a predecessor organization of the Employer shall be treated as
Service with the Employer in any case in which the Employer maintains the
Plan of such predecessor organization.
ARTICLE III
ELIGIBILITY, ENROLLMENT AND PARTICIPATION
3.1 ELIGIBILITY. Each Employee who was a Participant prior to the Effective
Date and who is in the Service of the Employer on the Effective Date shall
continue as a Participant in the Plan Each other Employee, including a
Leased Employee, shall be eligible to become a Participant as of the Entry
Date when he first meets the following requirement(s):
. Not in a unit of Employees covered by an agreement which the Secretary
of Labor finds to be a collective bargaining agreement between Employee
representatives and the Employer, if there is evidence that retirement
benefits were the subject of good faith bargaining between such
Employee representatives and the Employer, unless the collective
bargaining agreement provides for coverage under this Plan.
3.2 ENROLLMENT AND PARTICIPATION. Each eligible Employee may enroll as of his
Entry Date by completing and delivering to the Administrator an enrollment
form and, if applicable, a Salary Deferral Agreement. He will then become
a Participant as of his Entry Date.
3.3 RE-EMPLOYED EMPLOYEE. In the case of an individual who ceases to be an
Employee and is subsequently rehired as an Employee, the following
provisions shall apply in determining his eligibility to again participate
in the Plan:
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<PAGE>
(A) If the Employee had met the eligibility requirement(s) specified in
Section 3.1 prior to his separation from employment, he shall become an
Active Participant in the Plan as of the date he is re-employed, after
completing the applicable form(s), in accordance with Section 3.2.
(B) If the Employee had not met the eligibility requirement(s) specified in
Section 3.1 prior to his separation from employment, he shall be
eligible to participate in the Plan on the first Entry Date following
his fulfillment of such eligibility requirement(s).
For purposes of this Subsection, all Years of Service with the Employer,
including any Years of Service prior to any Breaks in Service, shall be
taken into account.
3.4 ELIGIBLE CLASS. In the event a Participant becomes ineligible to
participate because he is no longer a member of an eligible class of
Employees, such Employee shall participate immediately upon his return to
an eligible class of Employees.
In the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, such Employee shall
participate immediately.
3.5 WAIVER OF PARTICIPATION. Notwithstanding any provision of the Plan to the
contrary, any Employee in accordance with the rules of the Plan may decline
to become a Participant or cease to be an Active Participant by filing a
written waiver of participation with the Administration in the manner he
prescribes. Such waiver must be filed prior to the date such Employee is
eligible to become a Participant, or in the case of an Active Participant,
in the last month of the Plan Year immediately preceding the Plan Year for
which he wishes to cease being and Active Participant.
Any Employee who files such a waiver shall not become a Participant, or if
an Active Participant, shall elect to cease to be such as of the first day
of the succeeding Plan Year; and such Employee shall not receive any
additional compensation or other sums by reason of his waiver of
participation.
Any such waiver may be rescinded by an Employee effective on the first day
of the first Plan Year following one or more Plan Years commencing after
the filing of such waiver in which he was not an Active Participant, in
which event he shall become a Participant, or again become an Active
Participant, as the case may be, effective as of such date.
ARTICLE IV
CONTRIBUTIONS
4.1 ELECTIVE DEFERRAL CONTRIBUTIONS. Each Active Participant may enter into a
written Salary Deferral Agreement with the Employer in an amount equal to
not less than 1% nor more than 15% of his Compensation for the Contribution
Period. In consideration of such agreement, the Employer will make a
contribution for each Contribution Period on behalf of the Participant in
an amount equal to the total amount by which the Participant's Compensation
from the Employer was deferred during the Contribution Period pursuant to
the Salary Deferral Agreement then in effect. Elective Deferral
Contributions shall be paid by the Employer to the Trust not less
frequently than four-weekly, but in no event later than 90 days following
the date the amounts were deferred.
Salary Deferral Agreements shall be governed by the following provisions
(A) Amounts contributed pursuant to a Salary Deferral Agreement shall be
100% vested and non-forfeitable at all times.
20
<PAGE>
(B) No Participant shall be permitted to have Elective Deferral
Contributions made under this Plan, or any other qualified plan
maintained by the Employer, during any taxable year, in excess of the
dollar limitation contained in section 402(g) of the Code in effect
at the beginning of the taxable year.
(C) Amounts contributed pursuant to a Salary Deferral Agreement which are
not in excess of the limit described in Subsection (B) above, shall
be subject to the Limitations on Allocations in accordance with
Article V. Elective Deferral Contributions that are in excess of the
limit described in Subsection (B) shall also be subject to the
Limitations on Allocations in accordance with Article
(D) A Salary Deferral Agreement may be changed by a Participant four
times during the Plan Year, on any January 1, April 1, July I and
October 1, by filing written notice thereof with the Administrator.
Such notice shall be effective, and the Salary Deferral Agreement
shall be changed on the date specified in such notice or as soon as
administratively possible, which date must be at least 15 days after
such notice is filed.
(E) Elective Deferral Contributions shall be subject to the Actual
Deferral Percentage Test limitations.
(F) Correction of Excess Contributions.
(1) If the Employer determines prior to the end of the Plan Year
that the Actual Deferral Percentage Test may not be satisfied,
the Employer may take the corrective action specified in Section
4.12 of the Plan.
(2) If, after the end of the Plan Year, the Employer determines that
the Plan will fail the Actual Deferral Percentage Test, the
Employer shall take the corrective action specified in Section
4.14 or Section 4.17 of the Plan, or a combination of such
corrective actions, in order to ensure that the Plan does not
fail the Actual Deferral Percentage Test for the Plan Year being
tested.
4.2 MATCHING CONTRIBUTIONS. The Employer shall make a Matching Contribution in
an amount equal to $1.00 for each $1.00 by which a Participant defers his
Compensation pursuant to a Salary Deferral Agreement up to a maximum of 2%
of his Compensation, subject to the Limitations on Allocations specified
in Article V. Matching Contributions may be paid to the Trust either in
cash or in the form of Employer Stock valued at Fair Market Value on the
date on which such Employer Stock is contributed to the Trust. Such
contributions shall be paid to the Trust not less frequently than
annually, but in any event not later than the date which is prescribed by
law for filing the Employer's income tax return, including any extension
thereof. Matching Contributions shall be subject to the Actual
Contribution Percentage Test. The Employer may designate at the time of
contribution that all or a portion of such Matching Contributions be
treated as Qualified Matching Contributions.
If the Employer determines prior to the end of the Plan Year that the
Actual Contribution Percentage Test may not be satisfied, the Employer may
take the corrective action specified in Section 4.13 of the Plan.
If, after the end of the Plan Year, the Employer determines that the Plan
will fail the Actual Contribution Percentage Test the Employer shall take
the corrective action specified in Section 4.15 or Section 4.17 of the
Plan, or a combination of such corrective actions, in order to ensure that
the Plan does not fail the Actual Contribution Percentage Test for the
Plan Year being tested.
Such Matching Contribution shall be allocated as of the last day of the
Plan Year for which such contribution is made to each Participant who:
21
<PAGE>
. is an Active Participant as of the last day of the Plan Year.
Notwithstanding the above provision, an allocation will be made on behalf
of a Participant who dies, retires, or becomes disabled during the Plan
Year.
4.3 NONELECTIVE CONTRIBUTIONS. The Employer may make a contribution under the
Plan for each Plan Year of an amount equal to 1% of the Compensation of
each Participant entitled to an allocation. However, if the Employer's
Board of Directors shall so determine by resolution, the Employer may
entirely omit, increase or decrease its Nonelective Contribution for such
Plan Year and may provide for different amounts of Nonelective
Contributions for Participants employed at different geographical
locations. In such event, such resolution shall either specify a fixed
amount or specify a definite formula by which a fixed amount can be
determined. Nonelective Contributions may be paid to the Trust either in
cash or in Employer Stock valued at Fair Market Value on the date on which
such Employer Stock is contributed to the Trust. The contribution as
described above, for any Plan Year, shall be paid to the Trust at the end
of the Plan Year, or as soon as possible on or after the last day of such
Plan Year, but in any event not later than the date which is prescribed by
law for filing the Employer's income tax return, including any extension
thereof.
The Nonelective Contribution made pursuant to this Section shall be
allocated to each Participant who is an Active Participant as of the last
day of the Plan Year. Notwithstanding the preceding sentence, an
allocation will be made on behalf of a Participant who dies, retires, or
becomes disabled during the Plan Year.
The Employer may designate at the time of contribution that all or a
portion of such Nonelective Contribution be treated as a Qualified
Nonelective Contribution.
4.4 FAIL-SAFE CONTRIBUTION. The Employer reserves the right to make a
discretionary Nonelective Contribution to the Plan for any Plan Year, if
the Employer determines that such a contribution is necessary to ensure
that either the Actual Deferral Percentage Test or the Actual Contribution
Percentage Test will be satisfied for that Plan Year. Such amount shall be
designated by the Employer at the time of contribution as a Qualified
Nonelective Contribution and shall be known as a Fail-Safe Contribution.
The Fail-Safe Contribution shall be made on behalf of all eligible non-
Highly Compensated Employees who are Participants and who are considered
under the Actual Deferral Percentage Test or the Actual Contribution
Percentage Test. This contribution shall be allocated to the Participant's
Account of each such Participant in an amount equal to a fixed percentage
of such Participant's Compensation. The fixed percentage shall be equal to
the minimum fixed percentage necessary to be contributed by the Employer
on behalf of each eligible non-Highly Compensated Employee who is a
Participant so that the Actual Deferral Percentage Test or the Actual
Contribution Percentage Test is satisfied.
The Fail-Safe Contribution for any Plan Year as determined above shall be
paid to the Trust at the end of the Plan Year, or as soon as possible on
or after the last day of such Plan Year, but in no event later than the
date which is prescribed by law for filing the Employer's income tax
return, including any extensions thereof.
4.5 PROFITS NOT REQUIRED. Contributions to this Plan shall not be precluded
because the Employer does not have Considered Net Profits. Notwithstanding
the existence of Considered Net Profits, the Employer may determine in its
sole discretion that it will make no contributions for such Plan Year.
4.6 PAYMENT OF EXPENSES. The Employer may contribute to the Plan the amount
necessary, to pay any applicable expense charges and administration
charges. In lieu of the Employer's contributing the amount necessary to
pay such charges, these expenses may be paid from the Trust fund.
4.7 ALLOCATION OF FORFEITURES. The contributions made by the Employer shall be
reduced by any Forfeitures available as an Employer credit in accordance
with Section 9.3.
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4.8 CREDITING OF ELECTIVE DEFERRAL AND OTHER CONTRIBUTIONS. Elective Deferral
Contributions and other contributions made by the Employer shall be
credited to the Participant Account of each Participant for whom such
contributions are made, in accordance with the provisions of Article
4.9 ROLLOVER CONTRIBUTIONS. The Plan may receive Rollover Contributions on
behalf of an Employee. Receipt of a Rollover Contribution shall be subject
to the approval of the Plan Administrator. Before approving the receipt of
a Rollover Contribution, the Plan Administrator may request any documents
or other information from an Employee or opinions of counsel which the
Plan Administrator deems necessary to establish that such amount is a
Rollover Contribution.
A Participant's Account shall be maintained on behalf of each Employee
from whom Rollover Contributions are received, regardless of such
Employee's eligibility to participate in the Plan in accordance with the
requirements of Article HI, and Rollover Contributions may be invested in
any manner authorized under the provisions of this Plan.
Rollover Contributions received from an Employee who is not otherwise
eligible to participate in the Plan may not be withdrawn in accordance
with the provisions of Article X until such Employee becomes a
Participant, except that such Employee may receive a distribution of his
Participant's Account if his Termination of Employment occurs.
Rollover Contributions shall be credited to the Participant's Account and
may be invested in any manner authorized under the provisions of this
Plan.
4.10 TRANSFERS. Without regard to the Limitations on Allocations imposed under
Article V, the Trustee may receive, directly from another qualified
pension or profit-sharing plan meeting the requirements of Internal
Revenue Code section 401(a), all or part of the entire amount
distributable on behalf of a Participant from such plan. Likewise, the
Trustee may receive Transfers representing the assets of any predecessor
plan.
Transfers may be invested in any manner authorized under the provisions of
this Plan.
4.11 SUSPENSION OF ELECTIVE DEFERRAL CONTRIBUTIONS. The following provisions
shall apply with respect to suspension of Elective Deferral Contributions.
(A) Elective Suspension. An Active Participant may elect to suspend his
Salary Deferral Agreement for Elective Deferral Contributions by
filing a written notice thereof with the Administrator at any time.
The Salary Deferral Agreement shall be suspended on the date
specified in such notice, which date must be at least 15 days after
such notice is filed. The notice shall specify the period for which
such suspension shall be effective. Such period may extend
indefinitely.
(B) Suspension for Leave. A Participant who is absent from employment on
account of an authorized leave of absence or military leave shall
have his Salary Deferral Agreement suspended during such leave. Such
suspension of contributions shall be effective on the date payment
of Compensation by the Employer to him ceases, and shall remain in
effect until payment of Compensation is resumed.
(C) Withdrawal Suspension. An Active Participant who elects a withdrawal
in accordance with Article X may have his Salary Deferral Agreement
suspended on the date such election becomes effective. Such
suspension shall remain in effect for the number of months specified
therein.
(D) Non-Elective Suspension. An Active Participant who ceases to meet
the eligibility requirements as specified in Section 3.1 but who
remains in the employ of the Employer, shall have his Salary
Deferral Agreement suspended, effective as of the date he ceases to
meet the eligibility
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<PAGE>
requirements. Such suspension shall remain in effect until he again
meets such eligibility requirements.
The Participant may elect to reactivate his Salary Deferral Agreement for
Elective Deferral Contributions by filing a written notice thereof with
the Plan Administrator. The Salary Deferral Agreement shall be reactivated
on the January I or July I following the expiration of the suspension
period described above.
4.12 LIMITATION OF ELECTIVE DEFERRAL CONTRIBUTIONS. If the Employer determines
prior to the end of the Plan Year that the Plan may not satisfy the Actual
Deferral Percentage Test for the Plan Year, the Employer may require that
the amount of Elective Deferral Contributions being allocated to the
accounts of Highly Compensated Employees be reduced to the extent
necessary to prevent Excess Contributions from being made to the Plan.
Although the Employer may reduce the amount of Elective Deferral
Contributions that may be allocated to the Participant's Account of Highly
Compensated Employees, the affected Employees shall continue to
participate in the Plan. When the situation that resulted in the reduction
of Elective Deferral Contributions ceases to exist, the Employer shall
reinstate the amount of Elective Deferral Contributions elected by the
Participant in the Salary Deferral Agreement to the fullest extent
possible for all affected Participants in a nondiscriminatory manner.
4.13 LIMITATION OF MATCHING CONTRIBUTIONS. If the Employer determines prior to
the end of the Plan Year that the Plan may not satisfy the Actual
Contribution Percentage Test for the Plan Year, the Employer may require
that the amount of Matching Contributions being allocated to the Accounts
of Highly Compensated Employees be reduced to the extent necessary to
prevent Excess Aggregate Contributions from being made to the Plan.
4.14 CORRECTIVE DISTRIBUTION OF EXCESS CONTRIBUTIONS.
(A) The Employer may distribute Excess Contributions (and income
allocable thereto) to the appropriate Highly Compensated Employee
after the close of the Plan Year in which the Excess Contribution
arose and within 12 months after the close of that Plan Year.
(B) The income allocable to Excess Contributions is equal to the sum of
the allocable gain or loss for the Plan Year and shall be determined
as follows:
(1) The income allocable to Excess Contributions is determined by
multiplying the income for the Plan Year allocable to Deferral
Percentage Amounts by a fraction. The numerator of the fraction
is the Excess Contributions attributable to the Employee for
the Plan Year. The denominator of the fraction is equal to the
sum of (A) the total account balance of the Employee
attributable to Deferral Percentage Amounts as of the beginning
of the Plan Year, plus (B) the Employee's Deferral Percentage
Amounts for the Plan Year.
(2) The allocable gain or loss for the period between the end of
the Plan Year and the date of distribution shall not be taken
into consideration when determining the income allocable to
Excess Contributions.
(C) The amount of Excess Contributions to be distributed with respect to
an Employee for a Plan Year shall be reduced by Excess Deferrals
previously distributed to the Employee for the Employee's taxable
year ending with or within the Plan Year.
(D) The distribution of Excess Contributions made to the Family Members
of a family group that was combined for purposes of determining a
Highly Compensated Employee's Actual Deferral Ratio
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shall be allocated among the Family Members in proportion to the
Elective Deferral Contribution (including any amounts required to be
taken into account under subparagraphs (B)(1) and (B)(2) of Section
1.8 of the Plan) of each Family Member that is combined to determine
the Actual Deferral Ratio.
(E) A corrective distribution of Excess Contributions (and income) shall
be made without regard to any Participant or spousal consent or any
notice otherwise required under sections 411(a)(1 1) and 417 of the
Code.
(F) Any Matching Contributions or Qualified Matching Contributions that
relate to the Excess Contribution being distributed shall be
forfeited. The Matching Contribution so forfeited shall be in
proportion to the applicable Employee's vested and nonvested
interest in Matching Contributions under the Plan for the Plan Year
in which the Excess Contribution arose. Forfeitures of Matching
Contributions or Qualified Matching Contributions that relate to
Excess Contributions shall be applied to reduce Employer
contributions or pay Plan expenses.
(G) In no case may the amount of Excess Contributions to be distributed
for a Plan Year with respect to any Highly Compensated Employee
exceed the amount of Elective Deferral Contributions made on behalf
of the Highly Compensated Employee for the Plan Year.
(H) In the event of a complete termination of the Plan during the Plan
Year in which an Excess Contribution arose, the corrective
distribution must be made as soon as administratively feasible after
the date of the termination of the Plan, but in no event later than
12 months after the date of termination.
(I) Any distribution of less than the entire amount of Excess
Contributions with respect to any Highly Compensated Employee shall
be treated as a pro-rata distribution of Excess Contributions and
allocable income or loss.
4.15 CORRECTION OF EXCESS AGGREGATE CONTRIBUTIONS.
(A) Excess Aggregate Contributions may be corrected using one of the
methods described in subparagraphs (1) and (2) below. The Employer
shall elect the method of correction to be used and shall apply such
method to the correction of the Excess Annual Contribution for the
Plan Year.
(1) Method 1:
(a) The Excess Aggregate Contribution (and income) shall be
forfeited, if forfeitable, or distributed on a pro-rata
basis from the Employee's Account attributable to
Contribution Percentage Amounts. The distribution or
forfeiture shall be made after the close of the Plan Year
in which the Excess Aggregate Contribution arose and within
12 months after the close of that Plan Year. Whether an
amount is distributed or forfeited under this subparagraph
(a) shall be determined based on the rules set forth in
paragraph (B) of this section.
(2) Method 2:
(a) Any Matching Contributions (and Qualified Matching
Contributions, to the extent not taken into account for
purposes of the Actual Deferral Percentage Test), and
income allocable thereto, shall be forfeited, if
forfeitable, or distributed to the appropriate Highly
Compensated Employee. The distribution or forfeiture shall
be made after the close of
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the Plan Year in which the Excess Aggregate Contribution
arose and within 12 months after the close of that Plan
Year. Whether an amount is forfeited or distributed shall
be determined under the rules set forth in paragraph (B) of
this section.
(B) Determination of Distributable and Forfeitable Amounts. For purposes
of paragraph (A) of this section:
(1) An Excess Aggregate Contribution attributable to vested
Matching Contributions, Qualified Matching Contributions (and,
if applicable, Qualified Nonelective Contributions and Elective
Deferral Contributions) shall be distributed to the appropriate
Highly Compensated Employee in accordance with the terms of
this section.
(2) An Excess Aggregate Contribution attributable to an Employee's
nonvested Matching Contributions shall be forfeited in
accordance with the terms of this section.
(3) A Highly Compensated Employee's vested and nonvested interest
in Matching Contributions (and income allocable thereto)
attributable to Excess Aggregate Contributions shall be based
on the proportion that represents the Employee's Vested
Interest in Matching Contributions under the Plan for the Plan
Year in which the Excess Aggregate Contribution arose.
(C) Forfeited Excess Aggregate Contributions. In accordance with
paragraph (B) of this section, the amount that represents the
Employee's nonvested interest in Matching Contributions (and
income), and is attributable to Excess Aggregate Contributions,
shall be forfeited and, as such, shall be applied to reduce Employer
contributions or pay expenses.
(D) Income Allocable to Excess Aggregate Contributions. For purposes of
this section, the income allocable to Excess Aggregate Contributions
is equal to the sum of the allocable gain or loss for the Plan Year,
and shall be determined as follows:
(1) The income allocable to Excess Aggregate Contributions is
determined by multiplying the income for the Plan Year
allocable to Contribution Percentage Amounts by a fraction. The
numerator of the fraction is the Excess Aggregate Contributions
for the Employee for the Plan Year. The denominator of the
fraction is equal to the sum of (A) the total account balance
of the Employee attributable to Contribution Percentage Amounts
as of the beginning of the Plan Year, plus (ii) the
Contribution Percentage Amounts for the Plan Year.
(2) The allocable gain or loss for the period between the end of
the Plan Year and the date of correction shall not be taken
into consideration when determining the income allocable to
Excess Aggregate Contributions.
(E) The distribution of Excess Aggregate Contributions (and income) made
to Family Members of a family group that was combined for purposes
of determining a Highly Compensated Employee's Actual Contribution
Ratio shall be allocated among Family Members in proportion to the
Contribution Percentage Amounts (including any amounts required to
be taken into account under subparagraphs (B) (1) and (B) (2) of
Section 1.5 of the Plan) of each Family Member that are combined to
determine the Actual Contribution Ratio.
(F) In the event of a complete termination of the Plan during the Plan
Year in which an Excess Aggregate Contribution arose, the corrective
distribution or forfeiture shall be made as soon as administratively
feasible after the date of termination of the Plan, but in no event
later than 12 months after the date of termination.
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(G) If the entire account balance of a Highly Compensated Employee is
distributed during the Plan Year in which the Excess Aggregate
Contribution arose, the distribution shall be deemed to have been a
corrective distribution of Excess Aggregate Contributions (and
income) to the extent that a corrective distribution would otherwise
have been required.
(H) Any distribution of less than the entire amount of Excess Aggregate
Contributions (and income) shall be treated as a pro-rata
distribution of Excess Aggregate Contributions and allocable income
or loss.
(I) In no case may the amount of Excess Aggregate Contributions
distributed to a Highly Compensated Employee exceed the amount of
Matching Contributions made on behalf of the Highly Compensated
Employee for the Plan Year.
(J) A distribution of Excess Aggregate Contributions (and income) shall
be made under this section without regard to any notice or consent
otherwise required under sections 41 1 (a)(1 1) and 417 of the Code.
4.16 CORRECTIVE DISTRIBUTION OF EXCESS DEFERRALS. Notwithstanding any other
provision of the Plan, Excess Deferrals, plus any income and minus any
loss allocable thereto, may be distributed to any Participant to whose
account Excess Deferrals were allocated for the individual's taxable year.
Such a corrective distribution shall be made in accordance with this
section.
(A) Correction of Excess Deferrals After Taxable Year.
(1) Not later than the March 15 following the close of a
Participant's taxable year, the Participant may notify the Plan
of the amount of Excess Deferrals received by the Plan during
that taxable year. The notification shall be in writing, shall
specify the Participant's Excess Deferrals, and shall be
accompanied by the Participant's written statement that if such
amounts are not distributed, these amounts, when added to all
other Elective Deferral Contributions made on behalf of the
Participant during the taxable year, shall exceed the dollar
limitation specified in section 402(g) of the Code.
(2) The Participant is deemed to have notified the Plan of Excess
Deferrals if, not later than the March 1 following the close of
a Participant's taxable year, the Employer notifies the Plan on
behalf of the Participant of the Excess Deferrals. Such Excess
Deferrals shall be calculated by taking into account only
Elective Deferral Contributions under the Plan and any other
plans of the Employer.
(3) Not later than the April 15 following the close of the taxable
year, the Plan shall distribute to the Participant the amount
of Excess Deferrals designated under subparagraphs (1) or (2)
above.
(B) Correction of Excess Deferrals During the Taxable Year. A
Participant who has an Excess Deferral during a taxable year may
receive a corrective distribution during the same year. Such a
corrective distribution shall be made if:
(1) The Participant designates the distribution as an Excess
Deferral. The designation shall be made in the same manner as
the notification described in subparagraph (A)(1) of this
section. The Participant will be deemed to have designated the
distribution as an Excess Deferral if the Employer makes the
designation on behalf of the Participant to the extent that the
Participant has Excess Deferrals for the taxable year
calculated by taking into account only Elective Deferral
Contributions to the Plan and other plans of the Employer.
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<PAGE>
(2) The corrective distribution is made after the date on which the
Plan received the Excess Deferral.
(3) The Plan designates the distribution as a distribution of
Excess Deferrals.
(C) If the Participant provides the Employer with satisfactory evidence
and written notice to demonstrate that all Elective Deferral
Contributions by the participant in this Plan and any other
qualified plan exceed the applicable limit under section 402(g) of
the Code for such individual's taxable year, then the Plan
Administrator may (but is not required to) distribute sufficient
Elective Deferral Contributions (not to exceed the amount of
Elective Deferral Contributions actually contributed on behalf of
the Participant to this Plan during the Participant's taxable year)
from this Plan to allow the Participant to comply with the
applicable limit. The evidence provided by the Participant must
establish clearly the amount of Excess Deferrals. The Participant
must present this evidence to the Plan Administrator by the March I
following the end of the calendar year in which the Excess Deferrals
occurred.
(D) Income Allocable to Excess Deferrals. The income allocable to Excess
Deferrals is equal to the sum of allocable gain or loss for the
taxable year of the individual and shall be determined as follows:
(1) The gain or loss allocable to Excess Deferrals is determined by
multiplying the income for the taxable year allocable to
Elective Deferral Contributions by a fraction. The numerator of
the fraction is the Excess Deferrals by the Employee for the
taxable year. The denominator of the fraction is equal to the
sum of:
(a) The total account balance of the Employee attributable to
Elective Deferral Contributions as of the beginning of the
Plan Year, plus
(b) The Employee's Elective Deferral Contributions for the
taxable year.
(2) The income allocable to Excess Deferrals shall not include the
allocable gain or loss for the period between the end of the
taxable year and the date of distribution.
(E) No Employee or Spousal Consent Required. A corrective distribution
of Excess Deferrals (and income) shall be made without regard to any
notice or consent otherwise required under sections 411(a)(11) and
417 of the Code.
(F) Any Matching Contributions or Qualified Matching Contributions that
relate to the Excess Deferral being distributed shall be forfeited.
The Matching Contribution so forfeited shall be in proportion to the
applicable Employee's vested and nonvested interest in Matching
Contributions under the Plan for the Plan Year in which the Excess
Deferral arose. Forfeitures of Matching Contributions or Qualified
Matching Contributions that relate to Excess Deferrals shall be
applied to reduce Employer contributions or pay Plan expenses.
4.17 QUALIFIED CONTRIBUTIONS. In lieu of distributing Excess Contributions as
provided in Section 4.14 of the Plan, or Excess Aggregate Contributions as
provided in Section 4.15 of the Plan, the Employer may take the actions
specified below in order to satisfy the Actual Deferral Percentage Test or
the Actual Contribution Percentage Test, or both, pursuant to the
regulations under the Code.
(A) At the election of the Employer, Qualified Nonelective Contributions
or Qualified Matching Contributions, or both, may be taken into
account as Elective Deferral Contributions for purposes of
calculating the Actual Deferral Ratio of a Participant.
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<PAGE>
The amount of Qualified Nonelective Contributions or Qualified
Matching Contributions made under the terms of this Plan and taken
into account as Elective Deferral Contributions for purposes of
calculating the Actual Deferral Ratio, subject to such other
requirements as may be prescribed by the Secretary of the Treasury,
shall be such Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, that are needed to meet the Actual
Deferral Percentage Test.
(B) At the election of the Employer, Qualified Nonelective Contributions
or Elective Deferral Contributions, or both, may be taken into
account as Matching Contributions for purposes of calculation- the
Actual Contribution Ratio of a Participant.
The amount of Qualified Nonelective Contributions or Elective
Deferral Contributions made under the terms of this Plan and taken
into account for purposes of calculating the Actual Contribution
Ratio, subject to such other requirements as may be prescribed by
the Secretary of the Treasury, shall be such Qualified Nonelective
Contributions or Elective Deferral Contributions, or both, that are
needed to meet the Actual Contribution Percentage Test.
(C) Any Qualified Nonelective Contribution, Qualified Matching
Contribution, and Elective Deferral Contribution taken into account
under paragraphs (A) or (B) must be allocated to the Employee's
Account as of a date within the Plan Year in which the Excess
Contribution or Excess Aggregate Contribution arose and must be paid
to the Plan no later than the 12-month period immediately following
the Plan Year to which the contribution relates.
4.18 MULTIPLE USE OF ALTERNATIVE LIMITATION.
(A) Multiple use of the alternative limitation occurs if all of the
conditions of this paragraph (A) are satisfied:
(1) One or more Highly Compensated Employee of the Employer are
eligible employees in both a cash or deferred arrangement
subject to section 401(k) and a plan maintained by the Employer
subject to section 401(m).
(2) The sum of the Actual Deferral Percentage of the entire group
of eligible Highly Compensated Employees under the arrangement
subject to section 401(k) and the Actual Contribution
Percentage of the entire group of eligible Highly Compensated
Employees under the Plan subject to section 401(m) exceeds the
aggregate limit of paragraph (C) of this section.
(3) Actual Deferral Percentage of the entire group of eligible
Highly Compensated Employees under the arrangement subject to
section 401(k) exceeds the amount described in section
401(k)(3)(A)(ii)(1).
(4) The Actual Contribution Percentage of the entire group of
eligible Highly Compensated Employees under the arrangement
subject to section 401 (m) exceeds the amount described in
section 401(m)(2)(A)(i).
(B) For purposes of this section, the aggregate limit is the greater of:
(1) The sum of-
(a) 1.25 times the greater of the relevant Actual Deferral
Percentage or the relevant Actual Contribution Percentage,
and
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<PAGE>
(b) Two percentage points plus the lesser of the relevant
Actual Deferral Percentage or the relevant Actual
Contribution Percentage. In no event however, may this
amount exceed twice the lesser of the relevant Actual
Deferral Percentage or the Actual Contribution Percentage;
or
(2) The sum of-
(a) 1.25 times the lesser of the relevant Actual Deferral
Percentage or the relevant Actual Contribution Percentage,
and
(b) Two percentage points plus the greater of the relevant
Actual Deferral Percentage or the relevant Actual
Contribution Percentage. In no event, however, may this
amount exceed twice the greater of the relevant Actual
Deferral Percentage or the relevant Actual Contribution
Percentage.
(C) For purposes of paragraph (B) of this section, the term "relevant
Actual Deferral Percentage" means the Actual Deferral Percentage of
the group of Nonhighly Compensated Employees under the arrangement
subject to section 401(k) for the Plan Year, and the term "relevant
Actual Contribution Percentage" means the Actual Contribution
Percentage of the group of Nonhighly Compensated Employees eligible
under the Plan subject to section 401(m) for the Plan Year beginning
with or within the Plan Year of the arrangement subject to section
401(k).
(D) The Actual Deferral Percentage and Actual Contribution Percentage of
the group of eligible Highly Compensated Employees are determined
after use of Qualified Nonelective Contributions and Qualified
Matching Contributions to meet the requirements of the Actual
Deferral Percentage Test and after use of Qualified Nonelective
Contributions and Elective Deferral Contributions to meet the
requirements of the Actual Contribution Percentage Test. The Actual
Deferral Percentage and Actual Contribution Percentage of the group
of Highly Compensated Employees are determined after any corrective
distribution or forfeiture of Excess Deferrals, Excess
Contributions, or Excess Aggregate Contributions and after
recharacterization of Excess Contributions required without regard
to this section. Only plans and arrangements maintained by the
Employer are taken into account under paragraph (B). If the Employer
maintains two or more cash or deferred arrangements subject to
section 401(k) that must be mandatorily disaggregated pursuant to
section 40 1 (k)- I (g)(I 1)(iii) multiple use is tested separately
with respect to each plan.
(E) If multiple use of the alternative limit occurs with respect to two
or more plans or arrangements maintained by the Employer, it shall
be connected by reducing the Actual Contribution Percentage of
Highly Compensated Employees in the manner described in paragraph
(F) of this section. Instead of making this reduction, the Employer
may eliminate the multiple use of the alternative limitation by
making Qualified Nonelective Contributions to the Plan.
(F) The amount of the reduction by which each Highly Compensated
Employee's Actual Contribution Ratio is reduced shall be treated as
an Excess Aggregate Contribution. The Actual Contribution Percentage
of all Highly Compensated Employees under the plan subject to
reduction shall be reduced so that there is no multiple use of the
alternative limitation.
ARTICLE V
LIMITATIONS ON ALLOCATIONS
5.1 LIMITATIONS ON ALLOCATIONS. Definitions - The following definitions are
atypical terms which refer only to terms used in the Limitations on
Allocations Sections of this Article V.
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(A) Annual Additions. The term Annual Additions shall mean the sum of the
following amounts allocated on behalf of a Participant for a Limitation
Year:
(1) all contributions made by the Employer which shall include:
. Elective Deferral Contributions, if any;
. Matching Contributions, if any;
. Qualified Matching Contributions, if any;
. Nonelective Contributions, if any;
. Qualified Nonelective Contributions, if any;
(2) all contributions made by the Employer which shall include: all
Forfeitures, if any;
(3) all Employee Contributions, if any.
For the purposes of this Article, Excess Amounts reapplied under
Section 5.2 (D) shall also be included as Annual Additions. Also, for
the purposes of this Article, Employee Contributions are determined
without regard to deductible employee contributions within the meaning
of section 72(o)(5) of the Code.
Amounts allocated after March 31, 1984, to an individual medical
account, as defined in Internal Revenue Code section 415(l)(1), which
is part of a defined benefit plan maintained by the Employer, are
treated as Annual Additions to a defined contribution plan. Also,
amounts derived from contributions paid or accrued attributable to
post-retirement medical benefits allocated to the separate account of a
key employee, as defined in Internal Revenue Code section 419A(d)(3),
under a welfare benefit fund, as defined in Internal Revenue Code
section 419(e), maintained by the Employer, are treated as Annual
Additions to a defined contribution plan.
Contributions do not fail to be Annual Additions merely because they
are Excess Deferrals, Excess Contributions or Excess Aggregate
Contributions or merely because Excess Contributions or Excess
Aggregate Contributions are corrected through distribution or
recharacterization-Excess Deferrals that are distributed in accordance
with Section 4.16 of the Plan are not Annual Additions.
Forfeited Matching Contributions that are forfeited because the
contributions to which they relate are treated as Excess Aggregate
Contributions, Excess Contributions, or Excess Deferrals and that are
reallocated to the Participant Accounts of other Participants for the
Plan Year in which the forfeiture occurs, are treated as Annual
Additions for the Participants to whose accounts they are reallocated
and for the Participants from whose accounts they are forfeited.
(B) Compensation. The term Compensation means wages, salaries, and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includible in
gross income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits, and
reimbursements, or other expense allowances under a nonaccountable plan
(as described in 1.62-2(c)), and foreign earned
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income (as defined in section 911(b) of the Code) whether or not
excludable from gross income under section 911 of the Code. The term
Compensation does not include:
(1) Employer Contributions to a plan of deferred compensation which
are not includible in the employee's gross income for the taxable
year in which contributed, or Employer Contributions under a
simplified employee pension plan to the extent such contributions
are deductible by the employee, or any distributions from a plan
of deferred compensation;
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange, or other disposition of
stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
For Limitation Years beginning after December 31, 1991, for purposes of
applying the limitations of this article, Compensation for a Limitation
Year is the Compensation actually paid or made available during such
Limitation Year.
(C) Defined Contribution Dollar Limitation. The term Defined Contribution
Dollar Limitation shall mean $30,000 or, if greater, one-fourth of the
defined benefit dollar limitation set forth in Internal Revenue Code
section 415(b)(1) as in effect for the Limitation Year.
(D) Employer. The term Employer shall mean the Employer that adopts this
Plan. In the case of a group of employers which constitutes a
controlled group of corporations (as defined in Internal Revenue Code
section 414(b) as modified by section 415(h)), or which constitutes
trades or business (whether or not incorporated) which are under common
control (as defined in section 414(c) as modified by section 415(h)),
or affiliated service groups (as defined in section 414(m)) of which
the adopting Employer is a part, all such employers shall be considered
a single Employer for purposes of applying the limitations of this
Article.
(E) Excess Amount. The term Excess Amount shall mean the excess of the
Participant's Annual Additions for the Limitation Year over the Maximum
Permissible Amount.
(F) Limitation Year. The term Limitation Year shall mean the calendar year.
(G) Maximum Permissible Amount. The term Maximum Permissible Amount shall
mean the lesser of (1) the Defined Contribution Dollar Limitation, or
(2) 25% of the Participant's Compensation for the Limitation Year.
If a short Limitation Year is created because of an amendment changing
the Limitation Year to a different period of 12 consecutive months, the
Maximum Permissible Amount for the short Limitation Year will be the
lesser of (1) the Defined Contribution Dollar Limitation multiplied by
a fraction, the numerator of which is the number of months in the short
Limitation Year, and the denominator of which is 12, or (2) 25% of the
Participant's Compensation for the short Limitation Year.
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5.2 LIMITATIONS ON ALLOCATIONS. If the Employer does not maintain any
qualified plan in addition to this Plan:
(A) The amount of Annual Additions which may be allocated under this Plan
on a Participant's behalf for a Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation
contained in this Plan.
(B) Prior to the determination of the Participant's actual Compensation for
a Limitation Year, the Maximum Permissible Amount may be determined on
the basis of the Participant's estimated annual Compensation. Such
Compensation shall be determined on a reasonable basis and shall be
uniformly determined for all Participants similarly situated. Any
employer contributions based on estimated annual Compensation shall be
reduced by any Excess Amounts carried over from prior years.
(C) As soon as is administratively feasible after the end of the Limitation
Year, the Maximum Permissible Amount for such Limitation Year shall be
determined on the basis of the Participant's actual Compensation for
such Limitation Year. In the event a Participant separates from the
Service of the Employer prior to the end of the Limitation Year, the
Maximum Permissible Amount for such Participant shall be determined
prior to any distribution of his Participant's Account on the basis of
his actual Compensation. Any Excess Amounts shall be disposed of in
accordance with Section 5.2(D).
(D) If there is an Excess Amount with respect to a Participant for a
Limitation Year as a result of a reasonable error in estimating the
Participant's annual compensation, an allocation of forfeitures, a
reasonable error in determining the amount of elective deferrals
(within the meaning of section 402(g)(3) of the Code) that may be made
with respect to any individual under the limits of section 415 of the
Code, or under other limited facts and circumstances which the
commissioner finds justified, such Excess Amount shall be disposed of
as follows:
(1) If an Excess Amount exists, the Excess Amount in the Participant's
Account (excluding Elective Deferral Contributions) shall be held
unallocated in a suspense account for the Limitation Year and
allocated and reallocated in the next Limitation Year to all
Participants in the Plan. The excess amount must be used to reduce
Employer Contributions for the next Limitation Year (and
succeeding Limitation Years, as necessary) for all of the
Participants in the Plan. For purposes of this subparagraph, the
Excess Amount may not be distributed to Participants or former
Participants.
(2) If, after the application of subparagraph (1) an Excess Amount
still exists, then the Participant's Elective Deferral
Contributions (including earnings and losses thereon) allocated
for the Limitation Year shall be returned to the Participant to
the extent that an Excess Amount exists. This distribution shall
be made as soon as administratively feasible after the Excess
Amount is determined. Any Elective Deferral Contributions returned
under this paragraph shall be disregarded for purposes of the
Actual Deferral Percentage Test.
(3) Alternatively, the Plan Administrator may elect to dispose of the
Excess Amount by applying the procedure in subparagraph (2) before
applying the procedure in subparagraph (1). If the Plan
Administrator makes this election, the Plan Administrator must
apply it uniformly to all Participants in a Limitation Year.
(4) If a suspense account is in existence at any time during a
Limitation Year pursuant to this section, it will not participate
in the allocation of investment gains or losses. If a suspense
account is in existence at any time during a particular Limitation
Year, all amounts in the
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suspense account must be allocated and reallocated to
Participants' Accounts before any Employer Contributions which
would constitute Annual Additions may be made to the Plan for that
Limitation Year.
5.3 LIMITATIONS ON ALLOCATIONS. If the Employer maintains one or more defined
contribution plans in addition to this Plan:
(A) The amount of Annual Additions which may be allocated under this Plan
on a Participant's behalf for a Limitation Year, shall not exceed the
lesser of:
(1) The Maximum Permissible Amount, reduced by the sum of any Annual
Additions allocated to the Participant's Account for the same
Limitation Year under this Plan and such other defined
contribution plan; or
(2) Any other limitation contained in this Plan.
Prior to the determination of the Participant's actual Compensation for
the Limitation Year, the amounts referred to in Subsection (1) above
may be determined on the basis of the Participant's estimated annual
Compensation for such Limitation Year. Such estimated annual
Compensation shall be determined for all Participants similarly
situated.
Any contribution made by the Employer based on estimated annual
Compensation shall be reduced by any Excess Amounts carried over from
prior years, if applicable.
(B) As soon as is administratively feasible after the end of the Limitation
Year, the amounts referred to in Section 5.3 (A) shall be determined on
the basis of the Participant's actual Compensation for such Limitation
Year.
(C) If amounts are contributed to a Participant's Account under this Plan
on an allocation date which does not coincide with the allocation
date(s) for all such other plans, and if a Participant's Annual
Additions under this Plan and all such other plans result in an Excess
Amount, such Excess Amount shall be deemed to have derived from those
contributions last allocated.
(D) If an Excess Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of another
plan, the Excess Amount attributable to this Plan will be the product
of (1) and (2) below:
(1) The total Excess Amount allocated as of such date (including any
amount which would have been allocated but for the limitations of
Internal Revenue Code section 415).
(2) The ratio of (1) the amount allocated to the Participant as of
such date under this Plan, divided by (2) the total amount
allocated as of such date under all qualified defined contribution
plans (determined without regard to the limitations of Internal
Revenue Code section 415).
(E) Any Excess Amounts attributed to this Plan shall be disposed of as
provided in Section 5.2 (D).
5.4 LIMITATIONS ON ALLOCATIONS. If the Employer maintains a defined benefit
plan in addition to this Plan:
(A) If an individual is a Participant at any time in both this Plan and a
defined benefit plan maintained by the Employer, the sum of the Defined
Benefit Plan Fraction and the Defined Contribution Plan
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Fraction for any year may not exceed 1.0. In the event that the sum of
the Defined Contribution Plan Fraction and the Defined Benefit Plan
Fraction exceeds 1.0, the Defined Contribution Plan Fraction will be
reduced until the sum of the Defined Contribution Plan Fraction and the
Defined Benefit Plan Fraction does not exceed 1.0.
If an individual was a Participant in this Plan or in any other defined
contribution plan maintained by the Employer which was in existence on
July 1, 1982, the numerator of the Defined Contribution Plan Fraction
will be adjusted if the sum of the Defined Contribution Plan Fraction
and the Defined Benefit Plan Fraction would otherwise exceed 1.0 under
the terms of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the Fractions over 1.0 times
(2) the denominator of the Defined Contribution Plan Fraction, will be
permanently subtracted from the numerator of the Defined Contribution
Plan Fraction. The adjustment is calculated using the Fractions as they
would be computed as of the later of the end of the last Limitation
Year beginning before January 1, 1983, or June 30, 1983. This
adjustment also will be made if at the end of the last Limitation Year
beginning before January 1, 1984, the sum of the Fractions exceeds 1.0
because of accruals or additions that were made before the limitations
of this Article became effective to any plans of the Employer in
existence on July 1, 1982.
In addition, if an individual was a Participant in this Plan or in any
other defined contribution plan maintained by the Employer which was in
existence on May 6, 1986, the numerator of the Defined Contribution
Plan Fraction will be adjusted if the Employer's defined benefit plan
was also in existence on May 6, 1986, and the sum of the Defined
Contribution Plan Fraction and the Defined Benefit Plan Fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (1) the excess of the sum
of the Fractions over 1.0 times (2) the denominator of the Defined
Contribution Plan Fraction, will be permanently subtracted from the
numerator of the Defined Contribution Plan Fraction. This adjustment is
calculated using the Fractions as they would be computed as of the end
of the last Limitation Year beginning before January 1, 1987. In the
event that a Participant's accrued benefit as of December 31, 1986,
under the defined benefit plan exceeds the defined benefit dollar
limitation set forth in Internal Revenue Code section 415(b)(1), the
amount of that accrued benefit shall be used in both the numerator and
the denominator of the Defined Benefit Plan Fraction in making this
adjustment. For purposes of this Section 5.4, all defined benefit plans
of the Employer, whether or not terminated, will be treated as one
defined benefit plan and all defined contribution plans of the
Employer, whether or not terminated, will be treated as one defined
contribution plan.
(B) The Defined Benefit Plan Fraction for any year is a fraction, the
numerator of which is the Participant's Projected Annual Benefit under
the defined benefit plan (determined as of the close of the Limitation
Year), and the denominator of which is the lesser of (1) or (2) below:
(1) 1.25 times the dollar limitation in effect under Internal Revenue
Code section 415(b)(1)(A) on the last day of the Limitation Year,
or
(2) 1.4 times the amount which may be taken into account under
Internal Revenue Code section 415(b)(1)(B) with respect to such
Participant for the Limitation Year.
Notwithstanding the above, if the Participant was a participant in one
or more defined benefit plans maintained by the Employer which were in
existence on July 1, 1982, the denominator of the Defined Benefit Plan
Fraction will not be less than 125% of the sum of the annual benefits
under such plans which the Participant had accrued as of the later of
the end of the last Limitation Year beginning before January 1, 1983 or
June 30, 1983. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the
requirements of Internal Revenue Code section 415 as in effect at the
end of the 1982 Limitation Year.
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(C) A Participant's Projected Annual Benefit is equal to the annual benefit
to which the Participant would be entitled under the terms of the
defined benefit plan based upon the following assumptions:
(1) The Participant will continue employment until reaching Normal
Retirement Age as determined under the terms of the plan (or
current age, if that is later);
(2) The Participant's Compensation for the Limitation Year under
consideration will remain the same until the date the Participant
attains the age described in sub-division (1) of this
subparagraph; and
(3) All other relevant factors used to determine benefits under the
plan for the Limitation Year under consideration will remain
constant for all future Limitation Years.
(D) The Defined Contribution Plan Fraction for any Limitation Year is a
fraction, the numerator of which is the sum of the Annual Additions to
the Participant's Accounts in such Limitation Year and for all prior
Limitation Years, and the denominator of which is the lesser of (1) or
(2) below for such Limitation Year and for all prior Limitation Years
of such Participant's employment (assuming for this purpose, that
Internal Revenue Code section 415(c) had been in effect during such
prior Limitation Years):
(1) 1.25 times the dollar limitation in effect under Internal Revenue
Code section 415(c)(1)(A) on the last day of the Limitation Year,
or
(2) 1.4 times the amount which may be taken into account under
Internal Revenue Code section 415(c)(1)(B) with respect to such
Participant for the Limitation Year.
For the purposes of determining these Limitations on Allocations, any
non-deductible employee contributions made under a defined benefit plan
will be considered to be a separate defined contribution plan and will
be considered to be part of the Annual Additions for the appropriate
Limitation Year.
Annual Additions for any Limitation Year beginning before January 1,
1987, shall not be recomputed to treat all Employee Contributions as
Annual Additions.
(E) Notwithstanding the foregoing, at the election of the Plan
Administrator, in computing the Defined Contribution Plan Fraction with
respect to any Plan Year ending after December 31, 1982, the
denominator shall be an amount equal to the product of:
(1) The denominator of the Defined Contribution Plan Fraction,
computed in accordance with the rules in effect for the Plan Year,
ending in 1982; and
(2) the transition fraction, which is a fraction
(a) the numerator of which is the lesser of:
(i) $51,875, or
(ii) 1.4 times 25% of the Compensation of the Participant for
the Plan Year ending in 1981, and
(b) the denominator of which is the lesser of:
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(i) $41,500, or
(ii) 25% of the Compensation of the Participant for the Plan
Year ending in 1981.
ARTICLE VI
DISTRIBUTION OF BENEFITS
6.1 DISTRIBUTIONS IN GENERAL. Each Participant may elect, with his Spouse's
consent, if required, a distribution in the form of cash or a combination
of cash and annuity, or, as to that portion of the Participant's Vested
Interest attributable to Employer Stock, in the form of whole shares of
Employer Stock. Fractional shares of Employer Stock shall be valued at Fair
Market Value and distributed in cash. If the Participant elects a
distribution in the form of cash or an annuity, or a combination of cash
and an annuity, any portion of the Participant's Vested Interest
attributable to Employer Stock shall be sold at Fair Market Value and the
proceeds, net of any expenses attributable to such sale, shall be
distributed to the Participant in the form elected. All distributions are
subject to the provisions of Article VIII, Joint and Survivor Annuity
Requirements.
6.2 TIMING OF DISTRIBUTIONS. If the value of a Participant's Vested Interest
exceeds (or at the time of any prior distribution exceeded) $3,500 and is
immediately distributable (as defined in Section 8.5), the Participant and
his Spouse, if required, must consent to the distribution before it is
made.
Instead of consenting to a distribution, the Participant may make a written
election to defer the distribution for a specified period of time ending no
later than the Participant's Normal Retirement Age. Such election to defer
shall be revocable.
If the Participant and Spouse, if applicable, do not consent to a
distribution or if no election to defer is made within 90 days after
receiving a written explanation of the optional forms of benefit available
pursuant to Income Tax Regulation 1.41 1 (a)(1 1), all benefits shall be
deferred to, and distribution shall be made as of the Participant's Normal
Retirement Age. The distribution will be made in the form of a single sum
cash payment (in the case of a Participant's meeting the requirements of
Section 8.1 (A)) or in accordance with Section 8.2 (in the case of a
Participant's not meeting the requirements of Section 8.1 (A)), unless the
Participant elects another form of benefit within the 90-day period prior
to the date the distribution is made.
A Participant whose actual retirement date is on or after his Normal
Retirement Age may not elect to defer distribution of his benefit beyond
the date of his actual retirement.
If the value of a Participant's Vested Interest is $3,500 or less at the
time it becomes payable, the distribution shall be made in the form of a
single sum cash payment and shall be made upon such Participant's
Termination of Employment. Such a distribution may not be deferred.
Unless the Participant elects otherwise, the payment of benefits under this
Plan to the Participant shall begin not later than the 60th day after the
close of the Plan Year in which the later of (A) or (B), below, occurs:
(A) the date on which the Participant attains his Normal Retirement Age or
age 62, if later; or
(B) the date on which the Participant terminates his Service (including
Termination of Employment, death or Disability) with the Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse, if
required, to consent to a distribution while a benefit is immediately
distributable shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy the above paragraph.
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6.3 DISTRIBUTION LIMITATION. Elective Deferral Contributions, Qualified
Nonelective Contributions and Qualified Matching Contributions, and income
allocable to each, are not distributable to a Participant or a Beneficiary,
in accordance with such Participant's or Beneficiary's election, earlier
than upon the Participant's Termination of Employment, death, or
disability.
Such amounts may also be distributed upon:
(A) Termination of the Plan without the establishment or maintenance of a
successor plan.
For purposes of this paragraph, a successor plan is any other defined
contribution plan maintained by the same employer. However, if fewer
than two percent of the Employees who are eligible under the Plan at
the time of its termination are or were eligible under another defined
contribution plan at any time during the 24 month period beginning 12
months before the time of the termination, the other plan is not a
successor plan. The term "defined contribution plan" means a plan that
is a defined contribution plan as defined in section 414(i) of the
Code, but does not include an employee stock ownership plan as defined
in section 4975(e) or 409 of the Code or a simplified employee pension
as defined in section 408(k) of the Code. A plan is a successor plan
only if it exists at the time the Plan is terminated or within the
period ending 12 months after distribution of all assets from the Plan.
A distribution may be made under this paragraph only if it is a lump
sum distribution. The term "lump sum distribution" has the same meaning
provided in section 402(e)(4) of the Code, without regard to
subparagraphs (A)(i) through (iv), (B), and (H) of that section.
(B) The disposition by the Employer to an unrelated corporation of
substantially all the assets (with the meaning of section 409(b)(2) of
the Code) used in the trade or business of the Employer if the Employer
continues to maintain this Plan after the disposition. However, a
distribution may be made under this paragraph only to an Employee who
continues employment with the corporation acquiring such assets.
In addition, this requirement is satisfied only if the purchaser does
not maintain the Plan after the disposition. A purchaser maintains the
plan of the seller if it adopts the plan or otherwise becomes an
employer whose employees accrue benefits under the Plan. A purchaser
also maintains the Plan if the Plan is merged or consolidated with, or
any assets or liabilities are transferred from the Plan to a plan
maintained by the purchaser in a transaction subject to section
414(l)(1) of the Code. A purchaser is not treated as maintaining the
Plan merely because the Plan that it maintains accepts rollover
contributions of amounts distributed by the Plan.
For purposes of this paragraph, the sale of "substantially all" the
assets used in a trade or business means the sale of at least 85
percent of the assets.
A distribution may be made under this paragraph only if it is a lump
sum distribution. The term "lump sum distribution" has the same meaning
provided in section 402(e)(4) of the Code, without regard to
subparagraphs (A)(i) through (iv), (B), and (H) of that section.
(C) The disposition by the Employer to an unrelated entity or individual of
the Employer's interest in a subsidiary (with the meaning of section
409(d)(3) of the Code) if the Employer continues to maintain this Plan.
However, a distribution may be made under this paragraph only to an
Employee who continues employment with such subsidiary.
In addition, this requirement is satisfied only if the purchaser does
not maintain the Plan after the disposition A purchaser maintains the
plan of the seller if it adopts the plan or otherwise becomes
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an employer whose employees accrue benefits under the Plan. A purchaser
also maintains the Plan if the Plan is merged or consolidated with, or
any assets or liabilities are transferred from the Plan to a plan
maintained by the purchaser in a transaction subject to section
414(l)(1) of the Code. A purchaser is not treated as maintaining the
Plan merely because the Plan that it maintains accepts rollover
contributions of amounts distributed by the Plan.
A distribution may be made under this paragraph only if it is a lump
sum distribution. The term "lump sum distribution" has the same meaning
provided in section 402(e)(4) of the Code, without regard to
subparagraphs (A)(i) through (iv), (B), and (H) of that section.
(D) In the case of Elective Deferral Contributions only, the attainment of
age 59-1/2, as described in Section 10.1 of the Plan.
(E) In the case of Elective Deferral Contributions only, the hardship of
the Participant, as described in Section 10.2 of the Plan.
6.4 COMMENCEMENT OF DISTRIBUTIONS. Notwithstanding the provisions of the
preceding Timing of Distributions Section, distributions to a Participant
will commence no later than the date determined in accordance with the
provisions of this Section.
Distribution to a Participant must commence no later than the required
beginning date. The first required beginning date of a Participant is the
first day of April of the calendar year following the calendar year in
which the Participant attains age 70-1/2.
The required beginning date of a Participant who attains age 70-1/2 before
January 1, 1988, shall be the first day of April of the calendar year
following the calendar year in which the later of retirement or attainment
of age 70-1/2 occurs, provided the Participant was not a 5% owner in the
Plan Year ending in the year in which the Participant attained age 66-1/2
or any later Plan Year. A Participant is treated as a 5% owner for purposes
of this section if such Participant is a 5% owner as defined in section
416(i) of the Code (determined in accordance with section 416 but without
regard to whether the Plan is Top-Heavy). The required beginning date of a
Participant who is a 5% owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(A) the calendar year in which the Participant attained age 70-1/2, or
(B) the earlier of the calendar year with or within which ends the Plan
Year in which the Participant becomes a 5% owner, or the calendar year
in which the Participant retires.
Once distributions have begun to a 5% owner under this section, they must
continue to be distributed, even if the Participant ceases to be a 5% owner
in a subsequent year. Distribution to such Participant must commence no
later than the first day of April following the calendar year in which the
Participant's Termination of Employment occurs.
If distribution to any Participant is made in other than a single sum
payment, the second payment shall be distributed no later than the December
31 following the April 1 by which the first payment was required to be
distributed. Each succeeding payment shall be distributed no later than
each December 31 thereafter.
6.5 DISTRIBUTION REQUIREMENTS.
(A) Except as otherwise provided in Article VIII, the requirements of this
Section shall apply to any distribution of a Participant's Accrued
Benefit.
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(B) All distributions required under this Article shall be determined and
made in accordance with the Income Tax Regulations under section
401(a)(9), including the minimum distribution incidental benefit
requirement of section 1.401(a)(9)-2 of the regulations.
(C) Limits on Settlement Options. Distributions, if not made in a lump sum,
may only be made over one of the following periods (or a combination
thereof):
(1) the life of the Participant,
(2) the life of the Participant and a designated Beneficiary,
(3) a period certain not extending beyond the life expectancy of the
Participant, or
(4) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
(D) Minimum Amounts to be Distributed. If the Participant's entire Vested
Interest is to be distributed in other than a lump sum, then the amount
to be distributed each year must be at least an amount equal to the
quotient obtained by dividing the Participant's entire Vested Interest
by the life expectancy of the Participant or the joint and last
survivor expectancy of the Participant and designated Beneficiary. Life
expectancy and joint and last survivor expectancy are computed by the
use of the return multiples contained in section 1.72-9 of the Income
Tax Regulations. For purposes of this computation, a Participant's life
expectancy may be recalculated no more frequently than annually;
however, the life expectancy of a Beneficiary other than the
Participant's Spouse may not be recalculated.
(1) If the Participant's Spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least 50% of
the present value of the amount available for distribution is paid
within the life expectancy of the Participant.
(2) For calendar years beginning after December 31, 1988, the amount
to be distributed each year, beginning with distributions for the
first distribution calendar year, shall not be less than the
quotient obtained by dividing the Participant's benefit by the
lesser of (1) the applicable life expectancy or (2) if the
Participant's Spouse is not the designated Beneficiary, the
applicable divisor determined from the table set forth in Q&A-4 of
section 1.401(a)(9)-2 of the Income Tax Regulations. Distributions
after the death of the Participant shall be distributed using the
applicable life expectancy in subsection (d)(1) above as the
relevant divisor without regard to regulations
section 1.401(a)(9)-2.
(3) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution
for other calendar years, including the minimum distribution for
the distribution calendar year in which the Employee's required
beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
6.6 NON-TRANSFERABLE. The Participant's right to any Annuity payments,
benefits, and refunds is not transferable and shall be free from the claims
of all creditors to the fullest extent permitted by law.
6.7 DEATH DISTRIBUTION PROVISIONS. If the Participant dies before distribution
of his Vested Interest commences, the following provisions shall apply:
(A) If a distribution is to be made to a Beneficiary other than the
Surviving Spouse:
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(1) If the present value of the Participant's Vested Interest exceeds
(or at the time of any prior distribution exceeded) $3,500, unless
the Beneficiary elects another form of distribution, that portion
of the Participant's Vested Interest payable to the Beneficiary
will be distributed in the form of a single sum cash payment
within a reasonable period of time after the Plan Administrator is
notified of the Participant's detail
(2) If the present value of the Participant's Vested Interest is
$3,500 or less at the time it becomes payable, the distribution
shall always be made in the form of a single sum cash payment and
shall be paid within a reasonable period of time after the Plan
Administrator is notified of the Participant's death.
(B) If the distribution is to be made to a Beneficiary who is the Surviving
Spouse, such distribution will be made in accordance with the
following:
(1) If the Participant had never elected a life Annuity form of
distribution under the Plan:
(a) If the present value of the Participant's Vested Interest
exceeds (or at the time of any prior distribution exceeded)
$3,500, unless the surviving spouse elects another form of
distribution, that portion of the Participant's Vested
Interest payable to the Surviving Spouse will be distributed
in the form of a single sum cash payment within a reasonable
period of time after the Plan Administrator is notified of
the Participant's death.
(b) If the present value of the Participant's Vested Interest
payable to the Surviving Spouse is $3,500 or less at the time
it becomes payable, the distribution shall always be made in
the form of a single sum cash payment and shall be made
within a reasonable period of time after the Plan
Administrator is notified of the Participant's death.
(2) If the Participant had previously elected a life Annuity form of
distribution under the Plan:
(a) If the present value of the Participant's Vested Interest
exceeds (or at the time of any prior distribution exceeded)
$3,500 and is immediately distributable (as defined in
Section 8.5), the Surviving Spouse must consent to the
distribution before it is made. If the Surviving Spouse does
not consent to a distribution, all benefits shall be deferred
to a date that complies with the terms of Section 6.8 (B).
The distribution shall be made in accordance with the
provisions of Section 8.3.
(b) If the present value of the Participant's Vested Interest is
$3,500 or less at the time it becomes payable, the
distribution shall always be made in the form of a single sum
cash payment and shall be paid within a reasonable period of
time after the Plan Administrator is notified of the
Participant's death .
6.8 DEATH DISTRIBUTION COMMENCEMENT DATE. Upon the death of the Participant,
the following distribution provisions shall take effect:
(A) If the Participant dies after distribution of his entire Vested
Interest has commenced, the remaining portion of such Vested Interest
will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
In no event shall distribution of the Participant's remaining Vested
Interest be made in a lump sum after the Participant's death unless
such distribution is consented to, in writing, by the Participant's
Surviving Spouse, if any.
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(B) If the Participant dies before distribution of his Vested Interest
commences, the Participant's entire Vested Interest will be
distributed no later than five years after the Participant's death
except to the extent that an election is made to receive
distributions in accordance with (1) or (2) below:
(1) If any portion of the Participant's Vested Interest is payable to
a designated Beneficiary, distributions may be made in
substantially equal installments over the life or life expectancy
of the designated Beneficiary (or over a period not extending
beyond the life expectancy of such Beneficiary), commencing no
later than one year after the Participant's death;
(2) If the designated Beneficiary is the Participant's Surviving
Spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the date on
which the Participant would have attained age 70-1/2. However,
the Surviving Spouse may elect, at any time following the
Participant's death, to defer the date on which distributions
will begin until no later than the date on which the Participant
would have attained age 70-1/2 and, if the Spouse dies before
payments begin, subsequent distributions shall be made as if the
Spouse had been the Participant.
(C) For purposes of (B) above, payments will be calculated by use of the
return multiples specified in section 1.72-9 of the Income Tax
Regulations. Life expectancy of a Surviving Spouse may be
recalculated annually; however, in the case of any other designated
Beneficiary, such life expectancy will be calculated at the time
payment first commences without further recalculation.
(D) For purposes of this Section (Death Distribution Commencement Date)
any amount paid to a child of the Participant will be treated as if
it had been paid to the Surviving Spouse if the amount becomes
payable to the Surviving Spouse when the child reaches the age of
majority.
6.9 ALTERNATE PAYEE SPECIAL DISTRIBUTION. Distributions pursuant to Section
16.8 may be made
(A) without regard to the age or employment status of the Participant.
ARTICLE VI-A
DIRECT ROLLOVERS
6A.1. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Article, a Distributee
may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee
in a Direct Rollover, except as otherwise provided by the Employer's
administrative procedures as permitted by regulations. In addition, a
Distributee's election of a Direct Rollover shall be subject to the
following requirements:
(B) If the Distributee elects to have only a portion of an Eligible
Rollover Distribution paid to an Eligible Retirement Plan in a Direct
Rollover, that portion must be equal to at least $500.
(C) If the entire amount of a Distributee's Eligible Rollover
Distribution is $500 or less, the distribution may not be divided.
Instead, the entire amount must either be paid to the Distributee or
to an Eligible Retirement Plan in a Direct Rollover.
(D) A Distributee may not elect a Direct Rollover if the Distributee's
Eligible Rollover Distributions during a year are reasonably expected
by the Plan Administrator to total less than $200 (or any lower
minimum amount specified by the Plan Administrator).
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(E) A Distributee's election to make or not make a Direct Rollover with
respect to one payment in a series of periodic payments shall apply
to all subsequent payments in the series, except that a Distributee
shall be permitted at any time to change, with respect to subsequent
payments in the series of periodic payments, a previous election to
make or not make a Direct Rollover. A change of election shall be
accomplished by the Distributee notifying the Plan Administrator of
the change. Such notice must be in the form and manner prescribed by
the Plan Administrator.
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6A.2 Definitions.
(A) Direct Rollover: A Direct Rollover is a payment by the plan to the
Eligible Retirement Plan specified by the Distributee.
(B) Distributee: A Distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
Surviving Spouse and the Employee's or former Employee's Spouse
who is the alternate payee under a qualified domestic relations
order, as defined in section 414(p) of the Code, are Distributees
with regard to the interest of the Spouse or former Spouse.
(C) Eligible Retirement Plan: An Eligible Retirement Plan is an
individual retirement account described in section 408(a) of the
code, an individual retirement annuity described in section 408(b)
of the Code, an annuity plan described in section 403(a) of the
Code, or a qualified trust described in section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover
Distribution to the Surviving Spouse, an Eligible Retirement Plan
is an individual retirement account or an individual retirement
annuity.
(D) Eligible Rollover Distribution: An Eligible Rollover Distribution
is any distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the Distributee or the joint lives (or joint life expectancies)
of the Distributee and the Distributee's designated beneficiary,
or for a specified period of ten years or more; any distribution
to the extent such distribution is required under section 40 1
(a)(9) of the Code; and the portion of any distribution that is
not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
ARTICLE VII
RETIREMENT BENEFITS
7.1 NORMAL RETIREMENT. A Participant who attains his Normal Retirement Age
shall have a Vesting Percentage of 100%. If a Participant retires from the
active Service of the Employer on his Normal Retirement Date, he shall be
entitled to receive a distribution of the entire value of his Participant's
Account as of his Normal Retirement Date.
7.2 LATE RETIREMENT. A Participant may continue in the Service of the Employer
after his Normal Retirement Age, and in such event he shall retire on his
Late Retirement Date. Such Participant shall continue as a Participant
under this Plan until such Late Retirement Date. The Participant shall have
a Vesting Percentage of 100% and shall be entitled to receive a
distribution of the entire value of his Participant's Account as of his
Late Retirement Date.
7.3 DISABILITY RETIREMENT. A Participant who retires from the Service of the
Employer on account of Disability shall have a Vesting Percentage of 100%
and shall be entitled to receive a distribution of the entire value of his
Participant's Account as of his Disability Retirement Date.
ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 GENERAL. The provisions of this Article shall take precedence over any
conflicting provision in this Plan.
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The provisions of this Article shall apply to any Participant who is
credited with at least one Hour of Service with the Employer on or after
August 23, 1984, and such other Participants as provided in Section 8.7,
unless:
(A) upon the death of the Participant the Participant's entire Vested
Interest will be paid to the Participant's Surviving Spouse, but if
there is no Surviving Spouse, or, if the Surviving Spouse has already
consented in a manner conforming to a Qualified Election, then to the
Participant's designated Beneficiary;
(B) the Participant does not elect payments in the form of a Life Annuity
and has not previously elected payments in the form of a Life Annuity
under the Plan, and
(C) as to the Participant, the Plan is not a direct or indirect
transferee of a defined benefit plan, money purchase pension plan
(including a target benefit plan), stock bonus, or profit-sharing
plan which would otherwise provide for a Life Annuity form of payment
to the Participant.
8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an optional form of
benefit is selected pursuant to a Qualified Election within the ninety-day
period ending on the first day on which all events have occurred which
entitle the Participant to a benefit, a married Participant's Vested
Interest will be paid in the form of a Qualified Joint and Survivor
Annuity.
An unmarried Participant will be provided a single Life Annuity unless the
Participant elects another form of benefit during the applicable Election
Period.
8.3 PAYMENT OF QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Unless an optional
form of benefit has been selected within the Election Period pursuant to a
Qualified Election, if a married Participant dies before his Annuity
Starting Date, then the Participant's entire Vested Interest shall be
applied toward the purchase of an immediate Annuity for the life of the
Surviving Spouse. As an alternative to receiving the benefit in this form
of an Annuity, the Surviving Spouse may elect to receive a single cash
payment or any other form of payment provided for in the Plan within a
reasonable time after the Participant's death.
8.4 DEFINITIONS.
(A) Election Period: The period which begins on the first day of the Plan
Year in which the Participant attains age 35 and ends on the date of
the Participant's death. If a Participant separates from Service
prior to the first day of the Plan Year in which age 35 is attained,
with respect to the account balance as of the date of separation, the
Election Period shall begin on the date of separation.
A Participant who has not attained age 35 as of the end of a Plan
Year, may make a special Qualified Election to waive the Qualified
Preretirement Survivor Annuity for the period beginning on the date
of such election and ending on the first day of the Plan Year in
which the Participant will attain age 35. Such election shall not be
valid unless the Participant receives 'a written explanation of the
Qualified Preretirement Survivor Annuity in such terms as are
comparable to the explanation required under Section 8.6 (A).
Qualified Preretirement Survivor Annuity coverage will be
automatically reinstated as of the first day of the Plan Year in
which the Participant attains age 35. Any new waiver on or after such
date shall be subject to the full requirements of this Article.
(B) Qualified Election: A waiver of a Qualified Joint and Survivor
Annuity or a Qualified Preretirement Survivor Annuity. Any waiver of
a Qualified Joint and Survivor Annuity or a Qualified Preretirement
Survivor Annuity shall not be effective unless: (a) the Participant's
Spouse
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consents in writing to the election; (b) the election designates a
specific Beneficiary, including any class of Beneficiaries or any
contingent Beneficiaries, which may not be changed without spousal
consent (or the Spouse expressly permits designations by the
Participant without any further spousal consent); (c) the Spouse's
consent acknowledges the effect of the election; and (d) the Spouse's
consent is witnessed by a Plan representative or notary public.
Additionally, a Participant's waiver of the Qualified Joint and
Survivor Annuity shall not be effective unless the election
designates a form of benefit payment which may not be changed without
spousal consent (or the Spouse expressly permits designations by the
Participant without any further spousal consent). If it is
established to the satisfaction of a Plan representative that such
written consent cannot be obtained because:
(1) there is no Spouse;
(2) the Spouse cannot be located;
(3) the Participant is legally separated or has been abandoned
within the meaning of local law, and the Participant has a court
order to such effect;
(4) of other circumstances as the Secretary of the Treasury may by
regulations prescribe,
the Participant's election to waive coverage will be considered a
Qualified Election.
Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained) shall
be effective only with respect to such Spouse. A consent that permits
designations by the Participant without any requirement of further
consent by such Spouse must acknowledge that the Spouse has the right
to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a prior
waiver may be made by a Participant without the consent of the Spouse
at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant has received notice
as provided in Section 8.6 below.
(C) Qualified Joint and Survivor Annuity: An immediate Annuity for the
life of the Participant with a survivor Annuity for the life of the
Spouse which is not less than 50% and not more than 100% of the
amount of the Annuity which is payable during the joint lives of the
Participant and the Spouse and which is the amount of benefit which
can be purchased with the Participant's entire Vested Interest. If no
survivor Annuity percentage has been specified in an election, the
percentage payable to the Spouse will be 50%.
Notwithstanding the above paragraph, a Qualified Joint and Survivor
Annuity for an unmarried Participant shall mean an Annuity for the
life of the Participant.
(D) Qualified Preretirement Survivor Annuity: A survivor Annuity for the
life of the Spouse in the amount which can be purchased with the
Participant's entire Vested Interest.
(E) Spouse (Surviving Spouse): The Spouse or Surviving Spouse of the
Participant. A former Spouse may be treated as the Spouse or
Surviving Spouse to the extent provided under a Qualified Domestic
Relations Order as described in Internal Revenue Code section 414(p).
8.5 CONSENT REQUIREMENTS. Only the Participant need consent to the commencement
of a distribution in the form of a Qualified Joint and Survivor Annuity
while the account balance is immediately distributable. Neither the consent
of the Participant nor the Participant's Spouse shall be required to the
extent that a
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distribution is required to satisfy section 401(a)(9) or section 415 of the
Code. An account balance is immediately distributable if any part of the account
balance could be distributed to the Participant (or Surviving Spouse) before the
Participant attains (or would have attained if not deceased) the later of Normal
Retirement Age or age 62.
8.6 NOTICE REQUIREMENTS.
(A) In the case of a Qualified Joint and Survivor Annuity as described in
Section 8.4 (C), the Plan Administrator shall provide each
Participant within a reasonable period prior to the commencement of
benefits a written explanation of (i) the terms and conditions of a
Qualified Joint and Survivor Annuity; (ii) the Participant's right to
make and the effect of an election to waive the Qualified Joint and
Survivor Annuity form of benefit; (iii) the rights of a Participant's
Spouse; (iv) the right to make, and the effect of, a revocation of a
previous election to waive the Qualified Joint and Survivor Annuity;
(v) a general description of the eligibility conditions and other
material features of the optional forms of benefit; and (vi)
sufficient additional information to explain the relative values of
the optional forms of benefit available to them under this Plan.
(B) In the case of a Qualified Preretirement Survivor Annuity as
described in Section 8.4 (D), the Plan Administrator shall provide
each Participant within the period beginning on the first day of the
Plan Year in which the Participant age 32 and ending with the close
of the Plan Year preceding the Plan Year in which the Participant
attains age 35, a written explanation of the Qualified Preretirement
Survivor Annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements
of Section 8.6 (A) to a Qualified Joint and Survivor Annuity.
If a Participant enters the Plan after the first day of the Plan Year
in which the Participant attained age 32, the Plan Administrator
shall provide notice no later than the close of the second Plan Year
succeeding the entry of the Participant in the Plan.
If a Participant enters the Plan after he has attained age 35, the
Plan Administrator shall provide notice within a reasonable period of
time following the entry of the Participant in the Plan.
If a Participant's Termination of Employment occurs before the
Participant attains age 35, the Plan Administrator shall provide
notice within one year of such Termination of Employment.
8.7 TRANSITIONAL RULES.
(A) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous
Sections of this Article must be given the opportunity to elect to
have the prior Sections of this Article relating to the Qualified
Preretirement Survivor Annuity apply if such Participant is credited
with at least one Hour of Service under this Plan or a predecessor
plan in a Plan Year beginning on or after January 1, 1976, and such
Participant had at least 10 Years of Service for vesting purposes
when he separated from Service.
(B) Any living Participant not receiving benefits on August 23, 1984, who
was credited with at least one Hour of Service under this Plan or a
predecessor plan on or after September 2, 1974, and who is not
otherwise credited with any Service in a Plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his or
her benefits paid in accordance with Section 8.7 (D).
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(C) The respective opportunities to elect (as described in Sections 8.7
(A) and 8.7 (B) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and
ending on the date benefits would otherwise commence to said
Participants.
(D) Any Participant who has elected pursuant to Section 8.7 (B) of this
Article and any Participant who does not elect under Section 8.7 (A)
or who meets the requirements of Section 8.7 (A) except that such
Participant does not have at least 10 Years of Service for vesting
purposes when he separates from Service, shall have his benefits
distributed in accordance with all of the following requirements if
benefits would have been payable in the form of a life annuity:
(1) Automatic Joint and Survivor Annuity. If benefits in the form of
a life annuity become payable to a married Participant who:
(a) begins to receive payments under the Plan on or after Normal
Retirement Age; or
(b) dies on or after Normal Retirement Age while still working
for the Employer, or
(c) begins to receive payments on or after the Qualified Early
Retirement Age; or
(d) separates from Service on or after attaining Normal
Retirement Age (or the Qualified Early Retirement Age) and
after satisfying the eligibility requirements for the payment
of benefits under the Plan and thereafter dies before
beginning to receive such benefits;
then such benefits will be received under this Plan in the form
of a Qualified Joint and Survivor Annuity, unless the Participant
has elected otherwise during the election period. The election
period must begin at least six months before the Participant
attains Qualified Early Retirement Age and end not more than 90
days before the commencement of benefits. Any election hereunder
will be in writing and may be changed by the Participant at any
time.
(2) Election of Early Survivor Annuity: A Participant who is employed
after attaining the Qualified Early Retirement Age will be given
the opportunity to elect, during the election period, to have a
survivor annuity payable on death. If the Participant elects the
survivor annuity, payments under such Annuity must not be less
than the payments which would have been made to the Spouse under
the Qualified Joint and Survivor Annuity if the Participant had
retired on the day before his or her death. Any election under
this provision will be in writing and may be changed by the
Participant at any time. The election period begins on the later
of (1) the 90th day before the Participant attains the Qualified
Early Retirement Age, or (2) the date on which participation
begins, and ends on the date the Participant terminates
employment.
(3) For purposes of this Section 8.7 (D):
(a) Qualified Early Retirement Age is the latest of:
(i) the earliest date, under the Plan, on which the
Participant may elect to receive retirement benefits;
or
(ii) the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age; or
(iii) the date the Participant begins participation.
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(b) Qualified Joint and Survivor Annuity is an Annuity for the
life of the Participant with a survivor annuity for the life
of the Spouse as described in Section 8.4 (C).
ARTICLE IX
TERMINATION OF EMPLOYMENT
9.1 DISTRIBUTION. As of a Participant's Termination of Employment, he shall be
entitled to receive a distribution of his entire Vested Interest. Such
distribution shall be further subject to the terms and conditions of
Article VI.
If at the time of his Termination of Employment the Participant's Vesting
Percentage is not 100% and the Participant does not take a distribution
from the portion of his Vested Interest subject to the Vesting Percentage,
the non-vested portion of his Participant's Account will become a
Forfeiture upon the date the Participant incurs five consecutive One-Year
Breaks in Service.
If at the time of his Termination of Employment the Participant's Vesting
Percentage is not 100% and such Participant does take a distribution from
the portion of his Vested Interest subject to the Vesting Percentage, or if
the Participant's Vesting Percentage is 0%, the non-vested portion of his
Participant's Account will become a Forfeiture upon the date such
terminated Participant incurs a One-Year Break in Service.
If the Participant is later rehired by the Employer and re-enrolls in the
Plan, Subsection (A), (B) or (C) below, as applicable, will apply:
(A) If the Participant was 0% vested at his Termination of Employment and
did not incur five consecutive One-Year Breaks in Service after such
date, the amount of the separate account which became a Forfeiture,
if any, shall be restored by the Employer at the time such
Participant re-enrolls in the Plan.
(B) If the Participant was vested but not 100% vested at his Termination
of Employment and did not incur five consecutive One-Year Breaks in
Service after such date, the Participant shall be entitled to repay
the full amount of the distribution attributable to employer
contributions, if any, made at his Termination of Employment Such
repayment of employer contributions, however, must be made before the
Participant has incurred five consecutive One-Year Breaks in Service
following the date he received the distribution or five years after
the Participant is rehired by the Employer, whichever is earlier.
If the Participant elects to make such payment, the amount of the
separate account which became a Forfeiture, if any, shall be restored
by the Employer at the same time such repayment is made. However, if
the Participant does not elect to repay the distribution made in
accordance with this Article within the period of time specified
above, that Forfeiture shall remain a Forfeiture.
(C) If the Participant had incurred five consecutive One-Year Breaks in
Service after his Termination of Employment, the amount of the
separate account that became a Forfeiture shall remain a Forfeiture
and such Participant shall be prohibited from repaying a distribution
made at his Termination of Employment.
9.2 NO FURTHER RIGHTS OR INTEREST. A Participant shall have no further
interest in or any rights to any portion of his Participant's Account that
becomes a Forfeiture due to his Termination of Employment once the
Participant incurs five consecutive One-Year Breaks in Service in
accordance with Article II.
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9.3 APPLICATION OF FORFEITURES. Any Forfeiture arising in accordance with the
provisions of Section 9.1 shall be used by the Employer to reduce and in
lieu of the contributions made by the Employer next due under Article IV,
or to pay Plan expenses, at the earliest opportunity after such Forfeiture
becomes available.
The provisions of the preceding sentence notwithstanding, in the event
that a former Participant is rehired by the Employer and the Employer is
required by the provisions of Section 9.1 of this Plan to restore the
amount of a separate account that had been created upon such Participant's
prior Termination of Employment and later forfeited, Forfeitures, if any;
will first be used to restore such separate account to its value as of
such Participant's prior Termination of Employment date. In the event that
the available Forfeitures are not sufficient to make such restoration, the
Employer will make an additional contribution sufficient to make such
restoration.
ARTICLE X
WITHDRAWALS AND LOANS
10.1 WITHDRAWAL AFTER AGE 59-1/2. A Participant who has attained age 59-1/2,
may elect to withdraw from his Participant's Account, at any time, an
amount which is equal to any whole percentage (not exceeding 100%) of his
Vested Interest in his Participant's Account attributable to:
. Elective Deferral Contributions, including earnings.
10.2 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF ELECTIVE DEFERRAL
CONTRIBUTIONS. Distributions of Elective Deferral Contributions may be
made to a Participant in the event of a hardship. For purposes of this
section, a distribution is made on account of hardship only if the
distribution is made both on account of an immediate and heavy financial
need of the Employee and is necessary to satisfy the financial need. In
addition, any distribution on account of hardship shall be limited to the
distributable amount described in paragraph (C) of this section.
(A) The following are the only financial needs considered immediate and
heavy for purposes of this section:
(1) Expenses for medical care described in section 213(d) of the
Code previously incurred by the Employee, the Employee's Spouse,
or any dependents of the Employee (as defined in section 152 of
the Code) or necessary for these persons to obtain medical care
described in section 213(d) of the Code;
(2) Payment of tuition and related educational fees for the next 12
months of post-secondary education for the Employee, his Spouse,
children, or dependents (as defined in section 152 of the Code);
(3) Costs directly related to the purchase of a principal residence
for the Employee (excluding mortgage payments); or
(4) Payments necessary to prevent the eviction of the Employee from
the Employee's principal residence or foreclosure on the
mortgage on that residence.
(B) The Participant shall specify on the application for a hardship
withdrawal whether the Participant elects the provision of (1) or (2)
below to be used in determining the necessity of the hardship.
(1) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if all
of the following requirements are satisfied:
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(a) The hardship distribution is not in excess of the amount of
the immediate and heavy financial need of the Employee. The
amount of an immediate and heavy financial need may include
the amounts necessary to apply any federal, state, or local
income taxes or penalties reasonably anticipated to result
from the distribution.
(b) The Employee had obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of
the loan) loans currently available under all plans
maintained by the Employer.
(c) The Employee is suspended from making Elective Deferral
Contributions to the Plan for at least 12 months after
receipt of the hardship distribution In addition, the
Employee must be prohibited under the terms of the plan or
an otherwise enforceable agreement from making Elective
Deferral Contributions and Employee Contributions to all
other plans maintained by the Employer for at least 12
months after receipt of the hardship distribution.
For this purpose, the phrase "all other plans of the
Employer" means all qualified and nonqualified plans of ,
deferred compensation maintained by the Employer. The
phrase includes a stock option, stock purchase, or similar
plan, or a cash or deferred arrangement that is part of a
cafeteria plan within the meaning of section 125 of the
Code. However, it does not include the mandatory employee
contribution part of a defined benefit plan. It also does
not include a health or welfare benefit plan, including one
that is part of a cafeteria plan within the meaning of
section 125 of the Code.
(d) The Employee may not make Elective Deferral Contributions
to the Plan for the Employee's taxable year immediately
following the taxable year of the hardship distribution in
excess of the applicable limit under section 402(g) of the
Code for such taxable year less the amount of such
Employee's Elective Deferral Contributions for the taxable
year of the hardship distribution. In addition, all other
plans maintained by the Employer must limit the Employee's
Elective Deferral Contributions for the next taxable year
to the applicable limit under section 402(g) of the Code
for that year minus the Employee's Elective Deferral
Contributions for the year of the hardship distribution.
(2) A distribution will be treated as necessary to satisfy a
financial need if the Employer relies upon the Employee's
written representation, unless the Employer has actual knowledge
to the contrary, that the need cannot reasonably be relieved:
(a) Through reimbursement or compensation by insurance or
otherwise;
(b) By liquidation of the Employee's assets;
(c) By cessation of Elective Deferral Contributions under the
Plan; or
(d) By other distributions or nontaxable (at the time of the
loan) loans from plans maintained by the Employer or by any
other employer, or by borrowing from commercial sources on
reasonable commercial terms in an amount sufficient to
satisfy the need.
A need cannot reasonably be relieved by one of the actions
listed above if the effect would be to increase the amount of
the need.
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The amount of an immediate and heavy financial need may include
any amounts necessary to pay any federal, state, or local
income taxes or penalties reasonably anticipated to result from
the distribution.
(C) The distributable amount is equal to the Employee's total Elective
Deferral Contribution as of the date of distribution, reduced by
the amount of previous distributions of Elective Deferral
Contributions on account of hardship. The Employee's total Elective
Deferral Contributions shall not include income allocable to such
Elective Deferral Contributions.
10.3 WITHDRAWAL OF ROLLOVER CONTRIBUTIONS. At any time a Participant may
elect to withdraw from his Participant's Account an amount up to 100% of
the value of that portion of his account attributable to his Rollover
Contributions as defined in Article IV. Such an election shall become
effective in accordance with the Notification Section below.
10.4 NOTIFICATION. The Participant shall notify the Administrator in writing
of his election to make a withdrawal under the preceding provisions of
this Article X. Any such election shall be effective as of the date
specified in such notice, which date must in at least 15 days after such
notice is filed. Payment of the withdrawal shall be subject to the terms
and conditions of Article VI.
10.5 NON-REPAYMENT. Withdrawals made in accordance with this Article X may
not be repaid.
10.6 SPOUSAL CONSENT TO WITHDRAWAL OR LOAN. Prior to obtaining a withdrawal
or loan in accordance with this Article X, a married Participant must
obtain spousal consent in accordance with the provisions of Article VIII
unless such Participant meets the requirements set forth in Sections 8.1
(A), (B) and (C)
10.7 LOANS. Effective as of July 1, 1996, a Participant may borrow from the
Plan an amount which, when aggregated with any other loans from this
Plan does not exceed the lesser of (i) $50,000, reduced by the excess,
if any, of (A) the highest outstanding balance of loans from the Plan
during the one-year period ending on the day before the day on which
such loan was made, over (B) the oustanding balance of loans from the
Plan on the date on which such loan was made, or (ii) one-half (1/2) of
the aggregate of the Participant's Vested Interest. A loan may be
requested by a Participant only for one of the reasons set forth in
Section 10.2 and the Participant shall provide documentation of the
reason for such loan. The loan shall be funded first from the
Participant's Elective Deferrals, then the Employer's Nonelective
Contributions, and then from Employer Matching Contributions, with funds
withdrawn pro rata from all investment options other than Employer
Stock. Loans from Employer Stock are not permitted. Participants shall
be required to authorize repayment of the loan by payroll deduction,
unless the Participant is on an approved leave of absence or on layoff.
Participants who are on an approved leave of absence or on layoff must
remit payments to the Company on a monthly basis. The term of each such
loan shall be five years, unless the Participant certifies that the
proceeds of the loan are to be used to acquire a principal residence of
the Participant in which case the term of the loan shall be ten years. A
loan may be prepaid in full at any time. Upon termination of a
Participant's employment with the Company, the remaining balance of the
loan is payable in full. No more than one loan may be outstanding at any
one time. The minimum loan amount shall be $1,000. Interest on the loan
shall be charged based upon the prime rate charged by the Company's
primary commercial lender on the first business day of the month during
which the loan is made. A one-time loan fee of $50.00 shall be charged
to the Participant for each loan.
ARTICLE XI
FIDUCIARY DUTIES AND RESPONSIBILITIES
11.1 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary of the Plan shall
discharge his duties hereunder solely in the interest of the
Participants and their Beneficiaries and for the exclusive purpose of
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providing benefits to Participants and their Beneficiaries and defraying
reasonable expenses of administering the Plan. Each Fiduciary shall act
with the care, skill, prudence, and diligence under the circumstances
that a prudent man acting in a like capacity and familiar with such
matters would use in conducting an enterprise of like character and with
like aims, in accordance with the documents and instruments governing
this Plan, insofar as such documents and instruments are consistent with
this standard.
11.2 SERVICE IN MULTIPLE CAPACITIES. Any Person or group of persons may
serve in more than one fiduciary capacity with respect to this Plan.
11.3 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this Plan shall be
construed to prevent any Fiduciary from receiving any benefit to which
he may be entitled as a Participant or Beneficiary in this Plan, so long
as the benefit is computed and paid on a basis which is consistent with
the terms of this Plan as applied to all other Participants and
Beneficiaries. Nor shall this Plan be interpreted to prevent any
Fiduciary from receiving any reasonable compensation for services
rendered, or for the reimbursement of expenses properly and actually
incurred in the performance of his duties with the Plan; except that no
Person so serving who already receives full-time pay from an Employer
shall receive compensation from this Plan, except for reimbursement of
expenses properly and actually incurred.
11.4 INVESTMENT MANAGER. When an Investment Manager has been appointed he, is
required to acknowledge in writing that he has undertaken a Fiduciary
responsibility with respect to the Plan.
ARTICLE XII
THE ADMINISTRATOR
12.1 DESIGNATION AND ACCEPTANCE. The Employer shall designate a person or
persons to serve as Administrator under the Plan and such person, by
joining in the execution of this Plan and Trust Agreement accepts such
appointment and agrees to act in accordance with the terms of the Plan.
12.2 DUTIES AND AUTHORITY. The Administrator shall administer the Plan in a
nondiscriminatory manner for the exclusive benefit of Participants and
their Beneficiaries.
The Administrator shall perform all such duties as are necessary to
operate, administer, and manage the Plan in accordance with the terms
thereof, including but not limited to the following:
(A) To determine all questions relating to a Participant's coverage
under the Plan;
(B) To maintain all necessary records for the administration of the
Plan;
(C) To compute and authorize the payment of retirement income and other
benefit payments to eligible Participants and Beneficiaries;
(D) To interpret and construe the provisions of the Plan and to make
regulations which are not inconsistent with the terms thereof, and
(E) To advise or assist Participants regarding any rights, benefits, or
elections available under the Plan.
The Administrator shall take all such actions as are necessary to
operate, administer, and manage the Plan as a retirement program
which is at all times in full compliance with any law or regulation
affecting this Plan.
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The Administrator may allocate certain specified duties of plan
administration to an individual or group of individuals who, with
respect to such duties, shall have all reasonable powers necessary
or appropriate to accomplish them.
12.3 EXPENSES AND COMPENSATION. All expenses of administration may be paid
out of the Trust fund unless paid by the Employer. Such expenses shall
include any expenses incident to the functioning of the Administrator,
including, but not limited to, fees of accountants, counsel, and other
specialists and their agents, and other costs of administering the Plan.
Until paid, the expenses shall constitute a liability of the Trust fund.
However, the Employer may reimburse the Trust fund for any
administration expense incurred. Any administration expense paid to the
Trust fund as a reimbursement shall not be considered an Employer
Contribution. Nothing shall prevent the Administrator from receiving
reasonable compensation for services rendered in administering this
Plan, unless the Administrator already receives full-time pay from any
Employer adopting the Plan.
12.4 INFORMATION FROM EMPLOYER. To enable the Administrator to perform his
functions, the Employer shall supply full and timely information to the
Administrator on all matters relating to this Plan as the Administrator
may require.
12.5 ADMINISTRATIVE COMMITTEE; MULTIPLE SIGNATURES. In the event that more
than one person has been duly nominated to serve on the Administrative
Committee and has signified in writing the acceptance of such
designation, the signature(s) of one or mom persons may be accepted by
an interested party as conclusive evidence that the Administrative
Committee has duly authorized the action therein set forth and as
representing the will of and binding upon the whole Administrative
Committee. No person receiving such documents or written instructions
and acting in good faith and in reliance thereon shall be obliged to
ascertain the validity of such action under the terms of this Plan and
Trust. The Administrative Committee shall act by a majority of its
members at the time in office and such action may be taken either by a
vote at a meeting or in writing without a meeting.
12.6 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. The Administrator, or
any member of the Administrative Committee, may resign at any time by
delivering to the Employer a written notice of resignation, to take
effect at a date specified therein, which shall not be less than 30 days
after the delivery thereof, unless such notice shall be waived.
The Administrator may be removed with or without cause by the Employer
by delivery of written notice of removal, to take effect at a date
specified therein, which shall be not less than 30 days after delivery
thereof, unless such notice shall be waived.
The Employer, upon receipt of or giving notice of the resignation or
removal of the Administrator, shall promptly designate a successor
Administrator who must signify acceptance of this position in writing.
In the event no successor is appointed, the Board of Directors of the
Employer will function as the Administrative Committee until a new
Administrator has been appointed and has accepted such appointment.
12.7 INVESTMENT MANAGER. The Administrator may appoint, in writing, an
Investment Manager or Managers to whom is delegated the authority to
manage, acquire, invest, or dispose of all or any part of the Trust
assets. With regard to the assets entrusted to his care, the Investment
Manager shall provide written instructions and directions to the
Trustee, who shall in turn be entitled to rely upon such written
direction. This appointment and delegation shall be evidenced by a
signed written agreement.
12.8 DELEGATION OF DUTIES. The Administrator shall have the power, to the
extent permitted by law, to delegate the performance of such Fiduciary
and non-Fiduciary duties, responsibilities, and functions as the
Administrator shall deem advisable for the proper management and
administration of the Plan in the best interests of the Participants and
their Beneficiaries.
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ARTICLE XIII
PARTICIPANTS' RIGHTS
13.1 GENERAL RIGHTS OF PARTICIPANTS AND BENEFICIARIES. The Plan is
established and the Trust assets are held for the exclusive purpose of
providing benefits for such Employees and their Beneficiaries as have
qualified to participate under the terms of the Plan.
13.2 FILING A CLAIM FOR BENEFITS. A Participant or Beneficiary or the
Employer acting in his behalf, shall notify the Administrator of a claim
of beneficial under the Plan. Such request shall be in writing to the
Administrator and shall set forth the basis of such claim and shall
authorize the Administrator to conduct such examinations as may be
necessary to determine the validity of the claim and to take such steps
as may be necessary to facilitate the payment of any benefits to which
the Participant or Beneficiary may be entitled under the terms of the
Plan.
A decision by the Administrator shall be made promptly and not later
than 90 days after the Administrator's receipt of the claim of benefits
under the Plan, unless special circumstances require an extension of the
time for processing, in which case a decision shall be rendered as soon
as possible, but not later than 180 days after the initial receipt of
the claim of benefits.
13.3 DENIAL OF CLAIM. Whenever a claim for benefits by any Participant or
Beneficiary has been denied by a Plan Administrator, a written notice,
prepared in a manner calculated to be understood by the Participant,
must be provided, setting forth (1) the specific reasons for the denial;
(2) the specific reference to pertinent Plan provisions on which the
denial is based; (3) a description of any additional material or
information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary; and (4) an
explanation of the Plan's claim review procedure.
13.4 REMEDIES AVAILABLE TO PARTICIPANTS. A Participant or Beneficiary may (1)
request a review by a Named Fiduciary, other than the Administrator,
upon written application to the Plan; (2) review pertinent Plan
documents; and (3) submit issues and comments in writing to a Named
Fiduciary. A Participant or Beneficiary shall have 60 days after receipt
by the claimant of written notification of a denial of a claim to
request a review of a denied claim.
A decision by a Named Fiduciary shall be made promptly and not later
than 60 days after the Named Fiduciary's receipt of a request for
review, unless special circumstances require an extension of the time
for processing, in which case a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of a request for
review. The decision on review by a Named Fiduciary shall be in writing
and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific references to
the pertinent Plan provisions on which the decision is based.
A Participant or Beneficiary shall be entitled, either in his own name
or in conjunction with any other interested parties, to bring such
actions in law or equity or to undertake such administrative actions or
to seek such relief as may be necessary or appropriate to compel the
disclosure of any required information, to enforce or protect his
rights, to recover present benefits due to him, or to clarify his rights
to future benefits under the Plan.
13.5 REINSTATEMENT OF BENEFIT. In the event any portion of a distribution
which is payable to a Participant or a Beneficiary shall remain unpaid
on account of the inability of the Plan Administrator, after diligent
effort, to locate such Participant or Beneficiary, the amount so
distributable shall be treated as a Forfeiture under the Plan. If a
claim is made by the Participant or Beneficiary for any benefit
forfeited under this section, such benefit shall be reinstated.
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13.6 LIMITATION OF RIGHTS. Participation hereunder shall not grant any
Participant the right to be retained in the Service of the Employer or
any other rights or interest in the Plan or Trust fund other than those
specifically herein set forth.
13.7 PARTICIPANT CONTRIBUTIONS. Each Participant, regardless of his length of
Service with the Employer, shall be fully vested (100%) at all times in
any portion of his Participant's Account attributable to the following:
. Rollover Contributions.
13.8 MERGERS OR TRANSFERS. In the case of any merger or consolidation with or
transfer of assets or liabilities to any other qualified plan after
September 2, 1974, the following conditions must be met:
(A) The sum of the account balances in each plan shall equal the fair
market value (determined as of the date of the merger or transfer
as if the plans had then terminated) of the entire plan assets.
(B) The assets of each plan shall be combined to form the assets of the
plan as merged (or transferred).
(C) Immediately after the merger (or transfer), each Participant in the
plan merged (or transferred) shall have an account balance equal to
the sum of the account balances the Participant had in the plans
immediately prior to the merger (or transfer).
(D) Immediately after the merger (or transfer) each Participant in the
plan merged (or transferred) shall be entitled to the same optional
benefit forms as he was entitled to immediately prior to the merger
(or transfer).
In the case of any merger or consolidation with or transfer of assets
or liabilities to any defined benefit plan after September 2, 1974,
one of the plans before such merger, consolidation, or transfer shall
be converted into the other type of plan and either the rules
described above, applicable to the merger of two defined contribution
plans, or the rules applicable to the merger of two defined benefit
plans, as appropriate, shall be applied.
13.9 PARTICIPANT'S ACCOUNT AND VALUATION. A Participant's Account shall be
maintained on behalf of each Participant until such account is
distributed in accordance with the terms of this Plan. At least once per
year, as of the last day of the Plan Year, each Participant's Account
shall be adjusted for any earnings, gains, losses, contributions,
withdrawals, and expenses, attributable to such Plan Year, in order to
obtain a new valuation of the Participant's Account
ARTICLE XIII-A
INVESTMENTS
13A.1 INVESTMENT ALTERNATIVES. The Investment Committee shall determine the
investment alternatives to be made available to Participants and
Terminated Participants, but one of the investment alternatives offered
shall be Employer Stock, and up to 100% of Plan assets may be invested
in Employer Stock. Each Participant shall elect, by written notice to
the Plan Administrator, how, among such investment alternatives, such
Participant's Accounts (other than the subaccounts attributable to
Matching Contributions and Non-Elective Contributions, if any, made on
or after January 1, 1995 and earnings thereon) are to be invested. The
investment directions of a Participant or Terminated Participant shall
remain in effect until amended. Investment directions may be amended at
any time by telephonic instruction by the Participant or Terminated
Participant. The Plan Administrator shall adopt such rules and
procedures as it deems advisable with respect to all matters relating to
the selection among such investment alternatives by Participants and
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Terminated Participants. The Plan Administrator may adopt rules to
impose holding period requirements and to limit trading by Participants
of Employee Stock to designated "window periods."
Unless Employer Stock is purchased in open market transactions, the
Employer shall register the Common Stock issued to the Plan and
interests under the Plan with the Securities and Exchange Commission. No
commission shall be charged to the Plan in connection with any issuance
of Employer Stock to the Plan by the Company.
13A.2 EXPENSES. Expenses attributable to the investment of Accounts in any of
the investment alternatives, including commissions, "loads," early
withdrawal penalties, and similar charges, shall be charged to the
Account of the Participant who has directed such investment pursuant to
Section 13A.01. Any other expenses attributable to the creation,
administration or operation of the Plan and Trust which are not paid by
the Employer shall be allocated to the Accounts of each Participant and
Terminated Participant pro rata on the basis of Account balances.
--- ----
13A.3 VOTING OF EMPLOYER STOCK. The Trustee shall vote the shares allocated to
Participants' Accounts as instructed by the Voting Committee.
13A.4 SALE OF EMPLOYER STOCK. Subject to the rights of Participants in a
tender offer as described in Section 13A.5, the Trustee shall sell
shares of Employer Stock only pursuant to the investment instructions of
the Participant. To effectuate such instructions, Employer Stock may be
sold to any person, including the Employer, provided that any sale to
the Employer or other "disqualified person" within the meaning of Code
section 4975 or "party in interest" within the meaning of Section 3(14)
of ERISA is made at a price which is not less than adequate
consideration as defined in Section 3(18) of ERISA and no commission is
charged with respect to the sale.
13A.5 TENDER OFFER FOR EMPLOYER STOCK. In the event of a tender offer for
shares of Employer Stock subject to Section 14(d)(1) of the Act or
subject to Rule 13e-4 promulgated under that Act (as those provisions
may from time to time be amended or replaced by successor provisions of
Federal securities laws), the Voting Committee will advise each
Participant who has shares of Employer Stock credited to the
Participant's Accounts in writing of the terms of the tender offer as
soon as practicable after its commencement and will furnish each
Participant with a form by which he may instruct the Trustee
confidentially to tender shares credited to the Participant's Accounts.
The Trustee will tender those shares it has been properly instructed to
tender, and will not tender those shares which it has been properly
instructed not to tender or for which no instructions are properly
received. The Voting Committee's advice to Participants will include
notice that allocated shares for which no instructions are received will
not be tendered and such related documents as are prepared by any person
and provided to the shareholders of the Employer pursuant to the Act.
The Voting Committee may also provide Participants with such other
material concerning the tender offer as the Voting Committee in its
discretion determines to be appropriate. A Participant's instructions to
the Trustee to tender shares will not be deemed a withdrawal or
suspension from the Plan or a forfeiture of any portion of the
Participant's interest in the Plan. The number of shares to which a
Participant's instructions apply will be the total number of shares
credited to the Participant's Accounts, as of the close of business on
the day preceding the date on which the tender offer commences. The
Voting Committee will advise the Trustee of the commencement date of any
tender offer and, until receipt of that advice, the Trustee will not be
obligated to take any action under this Section. Funds received in
exchange for tendered stock will be credited to the Accounts of the
Participant whose stock was tendered. Pending receipt of instructions
from the Participant as to investment of such amounts, the Trustee will
invest such funds in short term investments permitted under the Trust
Agreement.
13A.6 INSIDER TRADING RULES. With respect to Employees or Participants subject
to Section 16 of the Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors
under the Act. To the extent any provision of the Plan or action by the
Employer, the Voting
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Committee, the Trustee, or an Employee or Participant fails to so
comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the party taking such action.
(a) It is intended that the Plan will comply with Sections 401(a)(4)
and 410(b) of the Code to meet the requirement of broad based
employee participation under Rule 16b-3.
(b) No Employee or Participant who is an insider may elect to purchase
or to sell Employer Stock held in such Participant's Accounts
except pursuant to an irrevocable election by the insider at least
six months in advance of the effective date of the transaction.
ARTICLE XIV
AMENDMENT OR TERMINATION OF THE PLAN
14.1 AMENDMENT OF PLAN. The Employer shall have the right from time to time
to modify or amend, in whole or in part, any or all provisions of the
Plan, provided that a Board of Directors' resolution pursuant to such
modification or amendment shall first be adopted and provided further
that the modification or amendment is signed by the Employer, the
Administrator and the Trustee. Upon any such modification or amendment
the Administrator and the Trustee shall be furnished a copy thereof. No
amendment shall deprive any Participant or Beneficiary of any Vested
Interest hereunder. Any Participant having not less than three Years of
Service shall be permitted to elect, in writing, to have his Vesting
Percentage computed under the Plan without regard to such amendment.
The period during which the election must be made by the Participant
shall begin no later than the date the Plan Amendment is adopted and end
no later than after the latest of the following dates:
(A) The date which is 60 days after the day the amendment is adopted;
or
(B) The date which is 60 days after the day the amendment becomes
effective; or
(C) The date which is 60 days after the day the Participant is issued
written notice of the amendment by the Employer or Administrator.
Such written election by a Participant shall be made to the
Administrator.
No amendment to the Plan shall decrease a Participant's Account balance
or eliminate an optional form of distribution. Notwithstanding the
preceding sentence, a Participant's Account balance may be reduced to
the extent permitted under Internal Revenue Code section 412(c)(8).
Furthermore, no amendment to the Plan shall have the effect of
decreasing a Participant's Vested Interest determined without regard to
such amendment as of the later of the date such amendment is adopted or
the date it becomes effective.
14.2 CONDITIONS OF AMENDMENT. The Employer shall not make any amendment which
would cause the Plan to lose its status as a qualified plan within the
meaning of section 401(a) of the Code.
14.3 TERMINATION OF THE PLAN. The Employer intends to continue the Plan
indefinitely for the benefit of its Employees, but reserves the right to
terminate the Plan at any time by resolution of its Board of Directors.
Upon such termination, the liability of the Employer to make
contributions hereunder shall terminate.
14.4 FULL VESTING. Upon the termination or partial termination of the Plan,
or upon complete discontinuance of Employer contributions, the rights of
all affected Participants in and to the amounts credited to each such
Participant's Account shall be 100% vested and nonforfeitable.
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14.5 DISTRIBUTIONS UPON PLAN TERMINATION. If this Plan is terminated and the
Employer does not maintain or establish another defined contribution
plan, pursuant to Code section 401(k)(10)(A)(i), each Participant shall
receive a total distribution, in the form of a lump-sum distribution as
defined in Code section 401(k)(10)(B)(ii), of his Participant's Account
in accordance with the terms and conditions of Article VI.
However, if this Plan is terminated and the Employer does maintain or
establish another defined contribution plan as discussed in the above
paragraph, or if the Plan is only partially terminated, each Participant
shall receive a total distribution of his Participant's Account,
excluding any amounts attributable to Elective Deferral Contributions
and contributions made by the Employer designated as 401(k)
contributions in accordance with the terms and conditions of Article VI.
In such a situation, any amounts in a Participant's Account attributable
to Elective Deferral Contributions and contributions made by the
Employer designated as 401(k) contributions may be distributed only upon
the occurrence of an event described in Article VI.
No Participant and/or spousal consent will be required for a
distribution where no successor plan exists. However, if the Employer
does maintain a successor plan, Participant and/or spousal consent is
required for a distribution exceeding $3,500. The Participant's Account
will be transferred to such successor plan if the required consents are
not received.
14.6 APPLICATION OF FORFEITURES. Upon the termination of the Plan, any
Forfeitures which have not been applied as of such termination to reduce
the contribution made by the Employer shall be credited on a pro rata
basis to the Participant's Account of the then Active Participants in
the same manner as the last contribution made by the Employer under the
Plan.
14.7 APPROVAL BY THE INTERNAL REVENUE SERVICE. Notwithstanding any other
provisions of this Plan, the Employer's adoption of this Plan is subject
to the condition precedent that the Employer's Plan shall be approved
and qualified by the Internal Revenue Service as meeting the
requirements of section 401(a) of the Internal Revenue Code and that the
Trust established hereunder shall be entitled to exemption under the
provisions of section 501(a). In the event the Plan initially fails to
qualify and the Internal Revenue Service issues a final ruling that the
Employer's Plan or Trust fails to so qualify as of the Effective Date,
all liability of the Employer to make further contributions hereunder
shall cease. The Plan Administrator, Trustee and any other Named
Fiduciary shall be notified immediately by the Employer, in writing, of
such failure to qualify. Upon such notification, the value of the
Participants' Accounts shall be distributed in cash to the Employer,
subject to the terms and conditions of Article VI.
That portion of such distribution which is attributable to Participant
Contributions as specified in Section 13.7, if any, shall be paid to the
Participant and the balance of such distribution shall be paid to the
Employer.
14.8 SUBSEQUENT UNFAVORABLE DETERMINATION. If the Employer is notified
subsequent to initial favorable qualification that the Plan is no longer
qualified within the meaning of section 401(a) of the Internal Revenue
Code, or that the Trust is no longer entitled to exemption under the
provisions of section 501 (a), and if the Employer shall fail within a
reasonable time to make any necessary changes in order that the Plan
and/or Trust shall so qualify, the Participants' Accounts shall be fully
vested and nonforfeitable and shall be disposed of as if the Plan had
terminated, in the manner set forth in this Article XIV.
ARTICLE XV
SUBSTITUTION OF PLANS
15.1 SUBSTITUTION OF PLANS. Subject to the provisions of Section 13.8 the
Employer may substitute an individually designed plan or a master or
prototype plan for this Plan without terminating this Plan as
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embodied herein and this shall be deemed to constitute an amendment and
restatement in its entirety of this Plan as heretofore adopted by the
Employer; provided, however, that the Employer shall have certified to
the Trustee that this Plan is being continued on a restated basis which
meets the requirements of section 401 (a) of the Internal Revenue Code
and ERISA.
15.2 TRANSFER OF ASSETS. Upon 90 days' written notification from he the
Employer and the Trustee that a different plan meeting the requirements
set forth in Section 15.1 above has been executed and entered into by
the Administrator and the Employer, and after the Trustee has been
furnished the Employer's certification in writing that the Employer
intends to continue the Plan as a qualified Plan under section 401(a) of
the Internal Revenue Code and ERISA, assets which represent the value of
all Participant's Accounts may be transferred in accordance with the
instructions received from or on behalf of the Employer. The Trustee may
rely fully on the representations or directions of the Employer with
respect to any such transfer and shall be fully protected and discharged
with respect to any such transfer made in accordance with such
representations, instructions, or directions.
ARTICLE XVI
MISCELLANEOUS
16.1 NON-REVERSION. This Plan has been established by the Employer for the
exclusive benefit of the Participants and their Beneficiaries. Except as
otherwise provided in Sections 14.7, 16.7, and 16.8, under no
circumstances shall any funds contributed hereunder, at any time, revert
to or be used by the Employer, nor shall any such funds or assets of any
kind be used other than for the benefit of the Participants or their
Beneficiaries.
16.2 GENDER AND NUMBER. When necessary to the meaning hereof, and except when
otherwise indicated by the context, either the masculine or the neuter
pronoun shall be deemed to include the masculine, the feminine, and the
neuter, and the singular shall be deemed to include the plural.
16.3 REFERENCE TO THE CODE AND ERISA. Any reference to any section of the
Internal Revenue Code, ERISA, or to any other statute or law shall be
deemed to include any successor law of similar import.
16.4 GOVERNING LAW. The Plan and Trust shall be governed and construed in
accordance with the laws of the state where the Trustee has its
principal office if the Trustee is a corporation or an association,
otherwise under the laws of the state where the Employer has its
principal office.
16.5 COMPLIANCE WITH THE CODE AND ERISA. This Plan is intended to comply with
all requirements for qualification under the Internal Revenue Code and
ERISA, and if any provision hereof is subject to more than one
interpretation or any term used herein is subject to more than one
construction, such ambiguity shall be resolved in favor of that
interpretation or construction which is consistent with the Plan being
so qualified. If any provision of the Plan is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions, and this Plan shall be construed and enforced as if
such provision had not been included.
16.6 NON-ALIENATION. It is a condition of the Plan, and all rights of each
Participant shall be subject thereto, that no right or interest of any
Participant in the Plan shall be assignable or transferable in whole or
in part, either directly or by operation of law or otherwise, including,
but without limitation, execution, levy, garnishment, attachment,
pledge, bankruptcy or in any other manner, and no right or interest of
any Participant in the Plan shall be liable for or subject to any
obligation or liability of such Participant. The preceding sentence
shall not preclude the enforcement of a federal tax levy made pursuant
to section 6331 of the Code or the collection by the United States on a
judgment resulting from an unpaid tax assessment.
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16.7 CONTRIBUTION RECAPTURE. Notwithstanding any other provisions of this
Plan, (1) in the case of a contribution which is made by an Employer by
a mistake of fact, Section 16.1 shall not prohibit the return of such
contribution to the Employer within one year after the payment of the
contribution, and (2) if a contribution is conditioned upon the
deductibility of the contribution under section 404 of the Code, then,
to the extent the deduction is disallowed, Section 16.1 shall not
prohibit the return to the Employer of such contribution (to the extent
disallowed) within one year after the disallowance of the deduction. The
amount which may be returned to the Employer is the excess of (1) the
amount contributed over (2) the amount that would have been contributed
had there not occurred a mistake of fact or a mistake in determining the
deduction. Earnings attributable to the excess contribution may not be
returned to the Employer, but losses attributable thereto must reduce
the amount to be so returned. Furthermore, if the withdrawal of the
amount attributable to the mistaken contribution would cause the balance
of the individual account of any Participant to be reduced to less than
the balance which would have been in the account had the mistaken amount
not been contributed, then the amount to be returned to the Employer
would have to be limited so as to avoid such reduction.
16.8 QUALIFIED DOMESTIC RELATIONS ORDERS. Notwithstanding any other
provisions of this Plan, the Participant's Account may be segregated and
distributed pursuant to a Qualified Domestic Relations Order within the
meaning of Internal Revenue Code section 414(p). The distribution may
occur prior to the time at which the Participant would be entitled to a
distribution under the terms of the Plan. The Plan Administrator shall
establish procedures for determining if a Domestic Relations Order is
qualified within the meaning of section 414(p).
ARTICLE XVI-A
TOP-HEAVY PROVISIONS
16A.1 DEFINITIONS. The following definitions are atypical terms used only in
this Article XVI-A.
(A) Compensation. The term Compensation, whenever used in this Article
XVI-A, means Compensation as defined in Article V of the Plan, but
includes the amount of any elective contributions made by the
Employer on the Employee's behalf to a cafeteria plan established
in accordance with the provisions of Code section 125, a qualified
cash or deferred arrangement in accordance with the provisions of
Code section 402(e)(3), a simplified employee pension plan in
accordance with the provisions of Code section 402(h), or a tax
sheltered annuity plan maintained in accordance with the provisions
of Code section 403(b).
(B) Key Employee. The term Key Employee means any Employee or former
Employee (including deceased Employees) of the Employer who at any
time during the Plan Year or the four preceding Plan Years was:
(1) An officer of the Employer, but in no event if there are more
than 500 Employees, shall more than 50 Employees be considered
Key Employees. If there are less than 500 Employees, in no
event shall the greater of three Employees or 10% of all
Employees, be taken into account under this Subsection as Key
Employees. If the number of officers is limited by the terms
of the preceding sentence, the Employees with the highest
Compensation will be considered to be officers.
In no event shall an officer whose annual Compensation is less
than 50% of the dollar limitation in effect under Code section
415(b)(1)(A) as adjusted from time to time, be a Key Employee
for any such Plan Year.
In making a determination under this Subsection, Employees who
have not completed six months of Service by the end of the
applicable Plan Year, Employees who normally work
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less than 17-1/2 hours per week, Employees who normally work
less than six months during a year, Employees who have not
attained 21, and nonresident aliens who receive no earned
income from U.S. sources, shall be excluded.
Also excluded under the above paragraph are Employees who are
covered by an agreement which the Secretary of Labor finds to
be a collective bargaining agreement. Such Employees will be
excluded only if retirement benefits were the subject of good
faith bargaining, 90% of the Employees of the Employer are
covered by the agreement, and the Plan covers only Employees
who are not covered by the agreement.
(2) One of the 10 Employees who has annual Compensation greater
than the amount in effect under Internal Revenue Code section
415(c)(1)(A) and who owns (or is considered to own within the
meaning of Internal Revenue Code section 318, as modified by
section 416(i)(1)(B)(iii)) both more than 1/2% interest and
the largest interest in the Employer. If two or more Employees
own equal interests in the Employer, the ranking of ownership
share will be in descending order of such Employees'
Compensation. If the Employer is other than a corporation, the
term "interest" as used herein shall refer to capital or
profits interest.
(3) An Employee who owns (or is considered to own within the
meaning of Internal Revenue Code section 318, as modified by
section 416(i)(1)(B)(iii)) more than 5% of the outstanding
stock of the Employer or stock possessing more than 5% of the
total combined voting power of all stock of the Employer. If
the Employer is other than a corporation, an Employee who
owns, or is considered to own, more than 5% of the capital or
profits interest in the Employer. The determination of 5%
ownership shall be made separately for each member of a
controlled group of corporations (as defined in Code section
414(b)), or of a group of trades or businesses (whether or not
incorporated) that are under common control (as defined in
Code section 414(c)), or of an affiliated service group (as
defined in Code section 414(m)).
(4) An Employee who owns (or is considered to own within the
meaning of Internal Revenue Code section 318, as modified by
section 416(i)(1)(B)(iii)) more than 1% of the outstanding
stock of the Employer or stock possessing more than I % of the
total combined voting power of all stock of the Employer, and
whose annual Compensation is more than $150,000. If the
Employer is other than a corporation, an Employee who owns, or
is considered to own, more than 1% of the capital or profits
interest in the Employer, and whose annual Compensation is
more than $150,000.
For the purposes of paragraphs (2), (3) and (4) above, if an
Employee's ownership interest changes during a given Plan Year, his
ownership interest for that Plan Year is the largest interest owned
at any time during the Plan Year.
The Beneficiary of any deceased Employee who was a Key Employee
shall be considered a Key Employee for the same period as the
deceased Employee would have been so considered.
(C) Non-Key Employee. The term Non-Key Employee means any Employee or
former Employee of the Employer who is not a Key Employee. The
Beneficiary of any deceased Employee who is a Non-Key Employee
shall be considered a Non-Key Employee for the same period as the
deceased Employee would have been so considered.
(D) Determination Date. The term Determination Date means, with respect
to a Plan Year, the last day of the preceding Plan Year, or, in the
case of the first Plan Year of a plan, the last day of the first
Plan Year.
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(E) Valuation Date. The term Valuation Date means, with respect to a
Plan Year, the last day of the preceding Plan Year and is the date
on which Account Balances are valued for the purpose of determining
the Plan's Top-Heavy status.
(F) Account Balance. The term Account Balance means the value of the
Participant's Account standing to the credit of a Participant, a
former Participant, or the Beneficiary of a former Participant, as
the case may be, as of the Valuation Date. Such Account Balance
shall include any contributions due as of the Determination Date
and all distributions made to the Participant (or former
Participant or Beneficiary, as the case may be) during the Plan
Year or the preceding four Plan Years, except for distributions of
Related Rollovers. However, the Account Balance shall not include
any deductible Employee Contributions made pursuant to Internal
Revenue Code section 219 or Unrelated Rollovers made to the Plan
after December 31, 1983.
A Related Rollover is a Rollover Contribution or Transfer that
either was not initiated by the Employee or was made to a plan
maintained by the same Employer.
An Unrelated Rollover is a Rollover Contribution or Transfer that
was initiated by the Employee and was made from a plan maintained
by one employer to a plan maintained by another employer.
For purposes of this Subsection (F), the term Employer shall
include all employers that are required to be aggregated in
accordance with Internal Revenue Code sections 414(b), (c) or (m).
(G) Required Aggregation Group. The term Required Aggregation Group
means all of the plans of the Employer which cover a Key Employee,
including any such plan maintained by the Employer pursuant to the
terms of a collective bargaining agreement, and each other plan of
the Employer which enables any plan in which a Key employee
participates to satisfy the requirements of Internal Revenue Code
sections 401(a)(4) or 410.
(H) Permissive Aggregation Group. The term Permissive Aggregation Group
means all of the plans of the Employer which are included in the
Required Aggregation Group plus any plans of the Employer which
provide comparable benefits to the benefits provided by the plans
in the Required Aggregation Group and are not included in the
Required Aggregation Group, but which satisfy the requirements of
Internal Revenue Code sections 401(a)(4) and 410 when considered
together with the Required Aggregation Group, including any plan
maintained by the Employer pursuant to a collective bargaining
agreement which does not include a Key Employee.
(I) Top-Heavy Plan. The Plan is Top-Heavy if it meets the requirements
of Section 16A.2.
(J) Super Top-Heavy Plan. The Plan is Super Top-Heavy if it meets the
requirements of Section 16A.3.
(K) Terminated Plan. A plan shall be considered to be a Terminated Plan
if it:
(1) has been formally terminated;
(2) has ceased crediting service for benefit accruals and vesting;
or
(3) has been or is distributing all plan assets to Participants
(or Beneficiaries) as soon as administratively possible.
With the exception of the Minimum Employer Contribution
Requirements and the Minimum Vesting Requirements, the Top-Heavy
provisions of this Article XVI-A will apply to any
63
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Terminated Plan which was maintained at any time during the five
years ending on the Determination Date.
(L) Frozen Plan. A plan shall be considered to be a Frozen Plan if all
benefit accruals have ceased but all assets have not been
distributed to Participants or Beneficiaries. The Top-Heavy
provisions of this Article XVI-A will apply to any such Frozen
Plan.
16A.2 TOP-HEAVY PLAN STATUS. This Plan shall be determined to be Top-Heavy if,
as of the Determination Date, the aggregate of the Account Balances of
Key Employees exceeds 60% of the aggregate of the Account Balances of
all Employees covered by the Plan. The determination of whether the Plan
is Top-Heavy shall be made after aggregating all plans in the Required
Aggregation Group, and after aggregating any other plans which are in
the Permissive Aggregation Group, if such permissive aggregation thereby
eliminates the Top-Heavy status of any plan within such Required
Aggregation Group.
In determining whether this Plan is Top-Heavy, the Account Balance of a
former Key Employee who is now a Non-Key Employee will be disregarded.
Likewise, for Plan Years beginning after December 31, 1984, the Account
Balance of any Employee who has not performed an Hour of Service during
the five-year period ending on the Determination Date will be excluded.
16A.3 SUPER TOP-HEAVY PLAN STATUS. This Plan shall be determined to be Super
Top-Heavy if, as of the Determination Date, the Plan would meet the test
specified in Section 16A.2 above, if 90% were substituted for 60% in
each place where it appears. The Plan may be permissively aggregated in
order to avoid being Super Top-Heavy.
16A.4 TOP-HEAVY REQUIREMENTS. Notwithstanding anything in the Plan to the
contrary, if the Plan is Top-Heavy with respect to any Plan Year
beginning after December 31, 1983, then the Plan shall meet the
following requirements for such Plan Year:
(A) Compensation Limit. The annual Compensation of each Participant
taken into account under the Plan shall not exceed $200,000;
however, such dollar limitation shall be adjusted to take into
account any adjustments made by the Secretary of the Treasury or
his delegate pursuant to Internal Revenue Code section 416(d)(2).
(B) Minimum Employer Contribution Requirements. A Minimum Employer
Contribution of 3% of each Eligible Employee's Compensation will be
made on behalf of each Eligible Employee in the Plan.
If the actual Employer Contribution made or required to be made for
Key Employees is less than 3%, the Minimum Employer Contribution
required hereunder shall not exceed the percentage contribution
made for the Key Employee for whom the percentage of Employer
Contributions and Forfeitures relative to the first $200,000 of
Compensation is the highest for the Plan Year after taking into
account contributions or benefits under other qualified plans in
the Plan's Required Aggregation Group.
However, if a Participant in this Plan is also a participant in a
defined benefit plan maintained by the Employer, such Participant
shall receive the Top-Heavy minimum benefit under the defined
benefit plan in lieu of the Minimum Employer Contribution described
herein. Such minimum benefit will be equal to the Participant's
average yearly Compensation during his five highest-paid
consecutive years, multiplied by the lesser of 2% per Year of
Service or 20%. Compensation periods and Years of Service to be
taken into account in the calculation of this benefit shall be
subject to any limitations set forth in the defined benefit plan.
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For any Limitation Year in which this Plan is Top-Heavy but not
Super Top-Heavy, the Minimum Employer Contribution shall be
increased to 4% of each Eligible Employee's Compensation in order
to preserve the use of the factor 1.25 in the denominators of the
fractions described in Section 5.4 (B)(1) and Section 5.4 (D)(1). A
Participant who receives the Top-Heavy minimum benefit in lieu of
the Minimum Employer Contribution shall receive an increased
minimum benefit equal to the Participant's average yearly
Compensation during his five highest-paid consecutive years,
multiplied by the lesser of 3% per Year of Service or 20% plus one
percentage point (to a maximum of 10 percentage points) for each
year that this Plan is maintained. Compensation periods and Years
of Service to be taken into account in the calculation of this
increased minimum benefit shall be subject to any limitations set
forth in the defined benefit plan.
For any Limitation Year in which this Plan is Super Top-Heavy, the
factor of 1.25 in the denominators of the fractions described in
Sections 5.4 (B)(1) and 5.4(D)(1) shall be reduced to 1.0. The
Maximum Employer Contribution payable in such years shall be 3% of
each Eligible Employee's Compensation and the defined benefit Top-
Heavy minimum benefit shall be average Compensation multiplied by
the lesser of 2% per Year of Service or 20%.
Eligible Employees are all Non-Key Employees who are Participants
in the Plan as of the last day of the Plan Year regardless of
whether they had completed 1,000 Hours of Service during the Plan
Year. Also included are Non-Key Employees who would have been
Participants as of the last day of the Plan Year except:
. The Employee's Compensation was below a required minimum level; or
. The Employee chose not to make Elective Deferral Contributions when he
was eligible to do so.
Elective Deferral Contributions and Matching Contributions made to
Key Employees shall be taken into account as Employer Contributions
allocated to such Key Employees when deter-mining whether a lower
Minimum Employer Contribution is permissible for purposes of this
section. However, Elective Deferral Contributions made by Non-Key
Employees shall not be used towards satisfying the Minimum Employer
Contribution required to be allocated to Non-Key Employees pursuant
to this section.
Matching Contributions made on behalf of Non-Key Employees may, at
the option of the Employer, be used to satisfy the Minimum Employer
Contribution requirement. However, for Plan Years beginning after
December 31, 1988, to the extent that Matching Contributions are
used for this purpose, they shall not be used to satisfy the Actual
Contribution Percentage Test.
(C) Minimum Vesting Requirements. Vesting shall be determined in accordance
with the following schedule:
Years of Service Vesting Percentage
---------------- ------------------
Less than 3 0%
3 or more 100%
In the event the Plan ceases to be Top-Heavy, the vesting schedule in
this Section 16A.4 16A.5 shall continue to apply until the Plan is
amended to provide otherwise and any such amendment shall comply with
the provisions of Section 14.1.
65
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ARTICLE XVII
TRUST AGREEMENT
17.1 CREATION AND ACCEPTANCE OF TRUST. The Trustee, by joining in the
execution of the Plan and trust agreement, accepts the Trust hereby
created and agrees to act in accordance with the express terms and
conditions herein stated.
17.2 TRUSTEE CAPACITY; CO-TRUSTEES. The Trustee may be a bank, trust company
or other corporation possessing trust powers under applicable state or
federal law or one or more individuals or any combination thereof.
When two or more persons serve as Trustee, they are specifically
authorized, by a written agreement between themselves, to allocate
specific responsibilities, obligations or duties wrong themselves. An
original copy of such written agreement is to be delivered to the
Administrator.
17.3 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE. Any Trustee
may resign at any time by delivering to the Administrator a written
notice of resignation, to take effect at a date specified therein, which
shall not be less than 30 days after the delivery thereof, unless such
notice shall be waived.
The Trustee may be removed with or without cause by the Board of
Directors by delivery of a written notice of removal, to take effect at
a date specified therein, which shall not be less than 30 days after
delivery thereof, unless such notice shall be waived.
In the case of the resignation or removal of a Trustee, the Trustee
shall have the right to a settlement of its account, which may be made,
at the option of the Trustee, either (1) by judicial settlement in an
action instituted by the Trustee in a court of competent jurisdiction,
or (2) by written agreement of settlement between the Trustee and the
Administrator.
Upon such settlement, all right, title and interest of such Trustee in
the assets of the Trust and all rights and privileges under this
Agreement theretofore vested in such Trustee shall vest in the successor
Trustee, and thereupon all future liability of such Trustee shall
terminate; provided, however, that the Trustee shall execute,
acknowledge and deliver all documents and written instruments which are
necessary to transfer and convey the right, title and interest in the
Trust assets, and all rights and privileges to the successor Trustee.
The Board of Directors, upon receipt of notice of the resignation or
removal of the Trustee, shall promptly designate a successor Trustee,
whose appointment is subject to acceptance of this Trust in writing and
shall notify in writing the insurance company of such successor Trustee.
17.4 TAXES, EXPENSES AND COMPENSATION OF TRUSTEE. The Trustee shall deduct
from and charge against the Trust fund any taxes paid by it which may be
imposed upon the Trust fund or the income thereof or which the Trustee
is required to pay with respect to the interest of any person therein.
The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and the Trustee.
An individual serving as Trustee who already receives full-time pay from
the Employer shall not receive compensation from the Plan. In addition,
the Trustee shall be reimbursed for any reasonable expenses, including
reasonable counsel fees incurred by it as Trustee. Such compensation and
expenses shall be paid from the Trust fund unless paid or advanced by
the Employer.
66
<PAGE>
17.5 TRUSTEE ENTITLED TO CONSULTATION. The Trustee shall be entitled to
advice of counsel, which may be counsel for the Plan or the Employer, in
any case in which the Trustee shall deem such advice necessary. With the
exception of those powers and duties specifically allocated to the
Trustee by the express terms of this Plan, it shall not be the
responsibility of the Trustee to interpret the terms of the Plan or
Trust and the Trustee may request and is entitled to receive guidance
and written direction from the Administrator on any point requiring
construction or interpretation of the Plan documents.
17.6 RIGHTS, POWERS AND DUTIES OF TRUSTEE. The Trustee shall have the
following rights, powers, and duties:
(A) The Trustee shall be responsible for the safekeeping and
administering of the assets of this Plan and Trust in accordance
with the provisions of this Agreement and any amendments thereto.
The duties of the Trustee under this Agreement shall be determined
solely by the express provisions of this Agreement and no further
duties or responsibility shall be implied. Subject to the terms of
this Plan and Trust, the Trustee shall be fully protected and shall
incur no liability in acting in reliance upon the written
instructions or directions of the Administrator or a duly
designated Investment Manager or any other Named Fiduciary.
(B) The Trustee shall have all powers necessary or convenient for the
orderly and efficient performance of its duties hereunder,
including but not limited to those specified in this section. The
Trustee may appoint one or more administrative agents or contract
for the performance of such administrative and service functions as
it may deem necessary for the effective installation and operation
of the Plan and Trust.
(C) The Trustee shall have the power to collect and receive any and all
monies and other property due hereunder and to give full discharge
and acquittance therefor, to settle, compromise or submit to
arbitration any claims, debits or damages due or owing to or from
the Trust; to commence or defend suits or legal proceedings
wherever, in its judgment, any interest of the Trust requires it;
and to represent the Trust in all suits or legal proceedings in any
court of law or equity or before any other body or tribunal. It
shall have the power generally to do all acts, whether or not
expressly authorized, which the Trustee in the exercise of its
Fiduciary responsibility may deem necessary or desirable for the
protection of the Trust and the assets thereof.
(D) The Trustee may temporarily hold cash balances and shall be
entitled to deposit any such funds received in a bank account or
bank accounts in the name of the Trust in any bank or banks
selected by the Trustee, including the banking department of the
Trustee, pending disposition of such funds in accordance with the
Trust. Any such deposit may be made with or without interest.
(E) The Trustee shall deal with any assets of this Trust held or
received under this Plan only in accordance with the written
directions from the Administrator. The Trustee shall be under no
duty to determine any facts or the propriety of any action taken or
omitted by it in good faith pursuant to instructions from the
Administrator.
(F) If the whole or any part of the Trust shall become liable for the
payment of any estate, inheritance, income or other tax which the
Trustee shall be required to pay, the Trustee shall have full power
and authority to pay such tax out of any monies or other property
in its hands for the account of the person whose interest hereunder
is so liable. Prior to making any payment, the Trustee may require
such releases or other documents from any lawful taxing authority
as it shall deem necessary. The Trustee shall not be liable for any
nonpayment of tax when it distributes an interest hereunder on
instructions from the Administrator.
67
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(G) The Trustee shall keep a full, accurate and detailed record of all
transactions of the Trust which the Administrator shall have the
right to examine at any time during the Trustee's regular business
hours. Following the close of the fiscal year of the Trust, or as
soon as practical thereafter, the Trustee shall furnish the
Administrator with a statement of account. This account shall set
forth all receipts, disbursements and other transactions effected
by the Trustee during said year.
The Administrator shall promptly notify the Trustee in writing of
its approval or disapproval of the account. The Administrator's
failure to disapprove the account within 60 days after receipt
shall be considered an approval. The approval by the Administrator
shall be binding as to all matters embraced in any statement to the
same extent as if the account of the Trustee had been settled by
judgment or decree of a court of competent jurisdiction under which
the Trustee, Administrator, Employer and all persons having or
claiming any interest in the Trust were parties; provided, however,
that the Trustee may have its account judicially settled if it so
desires.
(H) If, at any time, there shall be a dispute as to the person to whom
payment or delivery of monies or property should be made by the
Trustee, or regarding any action to be taken by the Trustee, the
Trustee may postpone such payment, delivery or action, retaining
the funds or property involved, until such dispute shall have been
resolved in a court of competent jurisdiction or the Trustee shall
have been indemnified to its satisfaction or until it has received
written direction from the Administrator.
(I) Anything in this instrument to the contrary notwithstanding, it
shall be understood that the Trustee shall have no duty or
responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become or remain a
Participant hereunder, the amount of benefit to which any
Participant or Beneficiary shall be entitled hereunder, all such
responsibilities being vested in the Administrator. The Trustee
shall have no duty to collect any contribution from the Employer
and shall not be concerned with the amount of any contribution nor
the application of the contribution formula.
17.7 EVIDENCE OF TRUSTEE ACTION. In the event that the Trustee is comprised
of two or more Trustees, then those Trustees may designate one such
Trustee to transmit all decisions of the Trustee and to sign all
necessary notices and other reports on behalf of the Trustee. All
notices and other reports bearing the signature of the individual
Trustee so designated shall be deemed to bear the signatures of all the
individual Trustees and all parties dealing with the Trustee are
entitled to rely on any such notices and other reports as authentic and
as representing the action of the Trustee.
17.8 INVESTMENT POLICY. This Plan has been established for the sole purpose
of providing benefits to the Participants and their Beneficiaries. In
determining its investments hereunder, the Trustee shall take account of
the advice provided by the Administrator as to funding policy and the
short and long range needs of the Plan based on the evident and probable
requirements of the Plan as to the time benefits shall be payable and
the requirements therefore.
68
<PAGE>
17.9 PERIOD OF TRUST. If it shall be determined that the applicable state law
requires a limitation on the period during which the Employer's Trust
shall continue, then such Trust shall not continue for a period longer
than 21 years following the death of the last of those Participants
including future Participants who are living at the effective date
hereof. At least 180 days prior to the end of the twenty-first year as
described in the first sentence of this Section, the Employer, the
Administrator and the Trustee shall provide for the establishment of a
successor trust and transfer of Plan assets to the successor trustee. If
the applicable state law requires no such limitation, then this Section
shall not be operative.
JP Foodservice Distributors, Inc.
-----------------------------------
By:
--------------------------------
69
<PAGE>
EXHIBIT 10.22
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 9, 1997
among
JP FOODSERVICE DISTRIBUTORS, INC.
THE LENDERS PARTY HERETO,
NATIONSBANK, N.A.,
as Administrative Agent,
THE CHASE MANHATTAN BANK,
as Syndication Agent and Co-Arranger,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS...............................................................................1
SECTION 1.01. Defined Terms................................................................1
SECTION 1.02. Accounting Terms, Etc.......................................................32
SECTION 1.03. Terms Generally.............................................................32
SECTION 1.04. Directly or Indirectly......................................................32
ARTICLE II. THE LOANS..............................................................................33
SECTION 2.01. Revolving Loans.............................................................33
SECTION 2.02. Swingline Loan Subfacility..................................................35
SECTION 2.03. Letter of Credit Subfacility................................................38
SECTION 2.04 Competitive Loan Subfacility................................................42
SECTION 2.05. Termination and Reduction of Commitments....................................45
SECTION 2.06. Fees........................................................................45
ARTICLE III. ADDITIONAL PROVISIONS REGARDING LOANS.................................................47
SECTION 3.01. Default Rate................................................................47
SECTION 3.02. Prepayments.................................................................47
SECTION 3.03. Extension and Conversion....................................................49
SECTION 3.04. Alternate Rate of Interest..................................................50
SECTION 3.05. Reserve Requirements; Change in Circumstances...............................50
SECTION 3.06. Change in Legality..........................................................52
SECTION 3.07. Indemnity...................................................................52
SECTION 3.08. Mandatory Assignment; Commitment Termination................................53
ARTICLE IV. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; U.S. TAXES; EVIDENCE OF LOANS..............54
SECTION 4.01. Payments and Computations...................................................54
SECTION 4.02. Pro Rata Treatment..........................................................54
SECTION 4.03. Sharing of Payments.........................................................55
SECTION 4.04. Net Payments................................................................56
SECTION 4.05. U.S. Taxes..................................................................56
SECTION 4.06. Evidence of Loans...........................................................58
ARTICLE V. CONDITIONS PRECEDENT....................................................................59
SECTION 5.01. [INTENTIONALLY OMITTED].....................................................59
SECTION 5.02. [INTENTIONALLY OMITTED].....................................................59
SECTION 5.03. Each Extension of Credit....................................................59
SECTION 5.04. Conditions to Restatement Date..............................................60
ARTICLE VI. FINANCIAL STATEMENTS; INFORMATION......................................................61
SECTION 6.01. Reporting Requirements......................................................61
ARTICLE VII. INSPECTION OF PROPERTIES AND BOOKS....................................................66
SECTION 7.01. Inspection Rights of Administrative Agent and Lenders.......................66
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE VIII. COVENANTS............................................................................67
SECTION 8.01. Maintenance of Certain Financial Conditions.................................67
SECTION 8.02. Debt Incurrence; Restricted Subsidiary Debt.................................67
SECTION 8.03. Liens.......................................................................69
SECTION 8.04. Sale Leasebacks.............................................................72
SECTION 8.05. Restricted Payments; Restricted Investments.................................72
SECTION 8.06. Subsidiary Stock and Debt...................................................74
SECTION 8.07. Consolidation, Merger, Sale of Assets, etc..................................75
SECTION 8.08. Transactions with Affiliates; Tax Consolidation.............................78
SECTION 8.09. Nature of Business..........................................................79
SECTION 8.10. Books and Records; Fiscal Year..............................................79
SECTION 8.11. Corporate Existence; Licenses...............................................79
SECTION 8.12. Payment of Taxes, Claims for Labor and Materials, etc.......................80
SECTION 8.13. Maintenance of Properties...................................................80
SECTION 8.14. Insurance...................................................................80
SECTION 8.15. Compliance with Laws........................................................81
SECTION 8.16. Environmental Matters.......................................................81
SECTION 8.17. Maintenance of Office.......................................................82
SECTION 8.18. Future Restricted Subsidiaries..............................................82
ARTICLE IX. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.........................................83
SECTION 9.01. Organization and Authority of the Borrower, etc.............................83
SECTION 9.02. Subsidiaries................................................................83
SECTION 9.03. Qualification...............................................................84
SECTION 9.04. Financial Statement.........................................................84
SECTION 9.05. Changes, etc................................................................84
SECTION 9.06. Compliance with Laws, Other Instruments, etc................................84
SECTION 9.07. Consents and Approvals......................................................85
SECTION 9.08. Debt, etc...................................................................85
SECTION 9.09. Title to Property; Leases; Investments; Existing Affiliate Agreements.......86
SECTION 9.10. Litigation..................................................................87
SECTION 9.11. Taxes.......................................................................87
SECTION 9.12. Compliance with ERISA.......................................................87
SECTION 9.13. Use of Loan Proceeds; Margin Regulations....................................88
SECTION 9.14. Licenses, Patents, Trademarks, Authorizations, etc..........................89
SECTION 9.15. Status Under Certain Statutes; Other Regulations............................89
SECTION 9.16. Labor Matters...............................................................90
SECTION 9.17. Full Disclosure.............................................................90
SECTION 9.18. Environmental Matters.......................................................90
SECTION 9.19. Solvency....................................................................91
ARTICLE X. EVENTS OF DEFAULT.......................................................................91
SECTION 10.01. Events of Default..........................................................91
SECTION 10.02. Acceleration; Remedies.....................................................95
ARTICLE XI. ADMINISTRATIVE AGENT...................................................................96
</TABLE>
ii
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<TABLE>
<CAPTION>
<S> <C>
SECTION 11.01. Appointment and Authorization..............................................96
SECTION 11.02. General Immunity...........................................................96
SECTION 11.03. Consultation with Professionals............................................96
SECTION 11.04. Documents..................................................................96
SECTION 11.05. Rights as a Lender.........................................................97
SECTION 11.06. Responsibility of Administrative Agent.....................................97
SECTION 11.07. Action by Administrative Agent.............................................97
SECTION 11.08. Notices of Event of Default, Etc...........................................98
SECTION 11.09. Indemnification of Administrative Agent....................................98
SECTION 11.10. No Representations.........................................................98
SECTION 11.11. Resignation; Removal.......................................................99
SECTION 11.12. Syndication Agent, Documentation Agent, Co-Arranger and Co-Agent..........100
ARTICLE XII. MISCELLANEOUS........................................................................100
SECTION 12.01. Notices...................................................................100
SECTION 12.02. Survival of Agreement.....................................................101
SECTION 12.03. Binding Effect............................................................101
SECTION 12.04. Benefit of Agreement......................................................101
SECTION 12.05. No Waiver; Remedies Cumulative............................................103
SECTION 12.06. Payment of Expenses, Etc..................................................103
SECTION 12.07. Amendments, Waivers and Consents..........................................104
SECTION 12.08. Counterparts..............................................................104
SECTION 12.09. Headings..................................................................105
SECTION 12.10. Survival of Indemnification...............................................105
SECTION 12.11. Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial....105
SECTION 12.12. Severability..............................................................106
SECTION 12.13. Term......................................................................106
SECTION 12.14. Entirety..................................................................106
</TABLE>
iii
<PAGE>
SCHEDULES
---------
Schedule I Lenders, Lender Addresses and Commitment Percentages
Schedule II Existing Letters of Credit
Schedule III Form of Guarantor Joinder Agreement
Schedule IV Form of Guaranty Agreement
Schedule V Form of Notice of Borrowing
Schedule VA-1 Form of Competitive Bid Request
Schedule VA-2 Form of Notice of Receipt of Competitive Bid Request
Schedule VA-3 Form of Competitive Bid Request
Schedule VA-4 Form of Competitive Bid Accept/Reject Letter
Schedule VI Form of Notice of Extension/Conversion
Schedule VII Existing Investments of the Borrower and Subsidiaries
Schedule VIII Information Concerning Subsidiaries and Qualification
Schedule IX Existing Debt of the Borrower and Subsidiaries
Schedule X Existing Affiliate Agreements
Schedule XI Environmental Matters
Schedule XII Approvals
Schedule XIII Existing Leases of the Borrower and Subsidiaries
Schedule XIV Form of Lender Assignment Agreement
iv
<PAGE>
THIS AMENDED AND RESTATED CREDIT AGREEMENT (as amended from time to time, the
"Agreement"), dated as of June 9, 1997, is made by and among JP FOODSERVICE
DISTRIBUTORS, INC., a Delaware corporation formerly known as JP Foodservice,
Inc. (the "Borrower"); the lenders listed in Schedule I (the "Lenders");
----------
NATIONSBANK, N.A., a national banking association, as administrative agent for
the Lenders (in such capacity, the "Administrative Agent"); THE CHASE MANHATTAN
BANK, a New York state banking association, as Syndication Agent and
Co-Arranger; THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and PNC
BANK, NATIONAL ASSOCIATION, as Co-Agent.
WHEREAS, a $110 million credit facility has been established in favor of the
Borrower pursuant to the terms of that Credit Agreement dated as of November 10,
1994 (as amended and modified, the "Existing Credit Agreement") among the
Borrower, the lenders identified therein, NationsBank of North Carolina, N.A.,
as Administrative Agent, and The Chase Manhattan Bank, N.A., as Syndication
Agent and Co-Arranger;
WHEREAS, the Borrower has requested that such credit facility be increased and
otherwise modified;
WHEREAS, the Lenders have agreed to the requested increase and modification of
the credit facility pursuant to the terms of this Amended and Restated Credit
Agreement; and
WHEREAS, this Agreement is given in amendment to, restatement of and
substitution for the Existing Credit Agreement and, subject to the terms of this
Agreement, on the Restatement Date all loans, letters of credit and other
obligations of the Borrower outstanding as of such date under the Existing
Credit Agreement shall be deemed to be loans and obligations outstanding under
this Agreement;
NOW, THEREFORE, upon the terms and subject to the conditions and relying on the
representations and warranties contained in this Agreement, the parties hereto
hereby (i) agree that the Existing Credit Agreement is hereby amended, restated
in its entirety to read as provided for in this Agreement, and reaffirmed as of
the Restatement Date, (ii) further agree that all terms and provisions of the
Existing Credit Agreement are of no further force and effect except as
specifically restated herein, (iii) agree that on the Restatement Date all
loans, Existing Letters of Credit and other obligations of the Borrower to the
Lenders outstanding as of the Restatement Date under the Existing Credit
Agreement shall be renewed and deemed to be Loans, Letters of Credit, and other
obligations outstanding hereunder, and (iv) further agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
-------------
As used in this Agreement, the following terms shall have the meanings
specified below:
<PAGE>
"Additional Portion" shall have the meaning assigned to such term in
Section 8.07(f)(ii).
"Administrative Agent" shall have the meaning assigned to such term in
the heading hereof.
"Administrative Agent's Fee Letter" means that letter agreement dated
as of March 7, 1997 between the Borrower and the Administrative Agent, as
amended and modified.
"Affiliate" shall mean, with respect to any designated Person, any
other Person (a) directly or indirectly, through one or more intermediaries,
controlling or controlled by or under direct or indirect common control with
such designated Person, (b) which beneficially owns or holds 5% or more of the
shares of any class of Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of such designated Person, or
(c) 5% or more of any class of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by such designated Person; provided, however, that
-------- -------
none of the Lenders shall be deemed to be an Affiliate of the Borrower or any of
its Subsidiaries solely by reason of ownership of any obligations of the
Borrower to such Lender hereunder and under the other Credit Documents or by
reason of having the benefits of any agreements or covenants of the Borrower
contained in this Agreement. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Voting Stock (or other equity interest) or by contract or
otherwise.
"Agents' Fees" shall have the meaning assigned to such term in Section
2.06(c).
"Agreement" shall have the meaning assigned to such term in the heading
hereof.
"Alternative Assets" shall mean, in connection with any proposed sale
of assets constituting an Excluded Sale, fixed assets (whether new, additional
or replacement assets but exclusive of assets acquired in the course of regular
upkeep and maintenance) which (a) are similar in nature or purpose to other
assets owned or leased by the Borrower and/or its Restricted Subsidiaries prior
to or at the time of the acquisition of such fixed assets and useful in the
conduct of the business of the Borrower and its Restricted Subsidiaries as
permitted to be conducted pursuant to Section 8.09 and (b) have a fair market
value at least equal to the amount required pursuant to subdivision (f)(ii) of
Section 8.07 to be applied to the purchase or acquisition or construction
thereof.
"Applicable Margin" shall mean, for purposes of calculating (i) the
applicable interest rate for any day for any Eurodollar Loan, (ii) the
applicable rate for the Facility Fee for any day for purposes of Section 2.06(a)
or (iii) the Standby Letter of Credit Fee for any standby Letter of Credit for
purposes of Section 2.06(b)(i), the applicable margin corresponding to the Total
Debt Ratio described below in effect as of the most recent Determination Date:
2
<PAGE>
<TABLE>
<CAPTION>
Applicable
Applicable Margin
Margin Applicable for
for Margin Standby
Pricing Total Debt Eurodollar for Letters of
Level Ratio Loans Facility Fee Credit
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
V Greater than 3.5 to 1.0 42.5 bps 17.5 bps 42.5 bps
IV Equal to or less than 3.5 to 1.0 32.5 bps 15.0 bps 32.5 bps
but greater than 3.25 to 1.0
III Equal to or less than 3.25 to 1.0 27.5 bps 12.5 bps 27.5 bps
but greater than 2.75 to 1.0
II Equal to or less than 2.75 to 1.0 22.5 bps 10.0 bps 22.5 bps
but greater than 2.25 to 1.0
I Equal to or less than 2.25 to 1.0 17.5 bps 7.5 bps 17.5 bps
</TABLE>
Determination of the appropriate Applicable Margins based on the Total Debt
Ratio shall be made as of each Determination Date. The Total Debt Ratio to in
effect as of a Determination Date shall establish the Applicable Margins that
shall be effective as of the date designated by the Administrative Agent as the
Applicable Margin Change Date. The Administrative Agent shall determine the
Applicable Margins as of each Determination Date occurring after the Closing
Date and shall promptly notify the Borrower and the Lenders of the Applicable
Margins so determined and of the related Applicable Margin Change Date. Such
determinations by the Administrative Agent of the Applicable Margin shall be
rebuttably presumptive evidence thereof absent manifest error. As of the
Restatement Date and until the first Applicable Margin Change Date, (a) the
Applicable Margin for purposes of calculating the applicable interest rate for
any Eurodollar Loan shall be 27.5 bps, (b) the Applicable Margin for purposes of
calculating the Facility Fee shall be 12.5 bps and (c) the Applicable Margin for
purposes of calculating the Standby Letter of Credit Fee shall be 27.5 bps.
"Applicable Margin Change Date" shall mean, with respect to any
Determination Date, a date designated by the Administrative Agent that is not
more than five (5) Business Days after receipt by the Administrative Agent of
the Required Financial Information for such Determination Date.
"Application Period" shall have the meaning assigned to such term in
Section 8.07(f)(ii).
"Approvals" shall have the meaning assigned to such term in Section
5.01(f).
"Arranger" shall mean NationsBanc Capital Markets, Inc.
"Attributable Debt" shall mean, with respect to any Sale Leaseback
(other than a Sale Leaseback which shall have been entered into in compliance
with subdivision (b) of Section
3
<PAGE>
8.04), as of any date of determination, the lesser of (a) the fair market value
of the property subject to such Sale Leaseback (as determined by the Board of
Directors) at the time of sale thereof and (b) the present value (discounted in
accordance with GAAP at the debt rate implicit in the lease of such property) as
of such date of determination of all amounts (whether designated as rentals or
additional or supplemental rentals or otherwise) payable by the lessee during
the remaining term of such Sale Leaseback (including any period for which such
Sale Leaseback has been extended and any renewal periods as to which the lessor
has the option), excluding, however, amounts so payable on account of
maintenance, ordinary repairs, insurance, taxes, assessments and other similar
charges.
"Available Fund" shall having the meaning assigned to such term in
Section 3.02(b)(ii).
"Base Rate" shall mean, for any day, a rate per annum (rounded upwards,
if necessary, to the nearest whole multiple of 1/16 of 1%) equal to the greater
of (a) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% or
(b) the Prime Rate in effect on such day. For purposes hereof, (i) "Prime Rate"
shall mean the rate of interest per annum publicly announced from time to time
by NationsBank as its prime rate in effect at its principal office in Charlotte,
North Carolina; each change in the Prime Rate shall be effective on the date
such change is publicly announced as effective and (ii) "Federal Funds Effective
Rate" shall mean, for any day, the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System, or, if
such rate is not so released for any day which is a Business Day, the arithmetic
average (rounded upwards to the next 1/100th of 1%), as determined by the
Administrative Agent, of the quotations for the day of such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it. If for any reason the Administrative Agent
shall have determined (which determination shall be rebuttably presumptive
evidence thereof absent manifest error) that it is unable to ascertain the
Federal Funds Effective Rate for any reason, including the inability or failure
of the Administrative Agent to obtain sufficient quotations in accordance with
the terms hereof, the Base Rate shall be determined without regard to clause (a)
of the first sentence of this definition until the circumstances giving rise to
such inability no longer exist. Any change in the Base Rate due to a change in
the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.
"Base Rate Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Base Rate in accordance with the provisions of
Article II.
"Board of Directors" shall mean, the Board of Directors of the Borrower
or a duly authorized committee of directors lawfully exercising the relevant
powers of such Board of Directors.
"Borrower Group Member" shall mean the Borrower, each Subsidiary, and
each of their respective predecessors and (a) each corporation that is or was at
any time a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Borrower or any Subsidiary, or any
of their respective predecessors, (b) each trade or business, whether or not
incorporated, that is or was at any time under common control (within the
4
<PAGE>
meaning of Section 414(c) of the Code) with the Borrower or any Subsidiary, or
any of their respective predecessors, and (c) each trade or business, whether or
not incorporated, that is or was at any time a member of the same affiliated
service group (within the meaning of Sections 414(m) and (o) of the Code) as the
Borrower or any Subsidiary, or any of their respective predecessors.
"Borrower Premises" shall mean real property in which the Borrower, any
Subsidiary, or any Person which has been a Subsidiary at any time has or ever
had any direct or indirect interest, including, without limitation, ownership
thereof, or any arrangement for the lease, rental or other use thereof, or the
retention or claim of any mortgage or security interest therein or thereon.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of North Carolina) on which banks
are open for business in Charlotte, North Carolina; provided, however, that,
-------- -------
when used in connection with a Eurodollar Loan, the term "Business Day" shall
also exclude any day on which banks are not open for dealings in dollar deposits
in the London interbank market.
"Business or Condition", of any Person, shall mean the business,
operations, assets, properties, earnings or condition (financial or other) of
such Person, provided that, such term, when used without reference to any
--------
particular Person, shall mean the Business or Condition of the Borrower and of
the Borrower and its Restricted Subsidiaries taken as a whole.
"Capital Contribution" shall have the meaning assigned to such term in
Section 5.02(l).
"Capital Lease" shall mean, as applied to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee which would,
in accordance with GAAP, be required to be classified and accounted for as a
capital lease on the balance sheet of such Person or in the notes thereto, other
than, in the case of any Restricted Subsidiary, any such lease under which the
Borrower or a Predominantly Owned Restricted Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, as at any date, with respect to
any Capital Lease, the amount of the obligation of the lessee thereunder which
would, in accordance with GAAP, appear on a balance sheet of such lessee or in
the notes thereto in respect of such Capital Lease.
"Change of Control" shall mean any acquisition subsequent to the
Closing Date by any Person or group of Persons (within the meaning of Section 13
or 14 of the Exchange Act), other than one or more of (x) the Management Group,
or (y) any persons comprising a group controlled (as defined in Rule 12b-2 under
the Exchange Act) by the Management Group, of (a) beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) of a majority of the Voting
Stock of the Borrower or (so long as the Borrower shall be a Subsidiary of JPF)
of JPF or (b) all or substantially all of the properties and assets of the
Borrower. For purposes of this definition, "acquisition" by any Person or
Persons of the Voting Stock or properties and assets referred to in the
preceding sentence shall mean the earlier of (i) the actual possession
5
<PAGE>
thereof and (ii) the consummation of any transaction or series of transactions
which, with the passage of time, will give such Person or Persons the actual
possession thereof.
"Chase" shall mean The Chase Manhattan Bank, a New York state banking
association.
"Closing Date" shall mean the date of the original Credit Agreement,
being November 10, 1994.
"Co-Agent" shall mean PNC Bank, National Association, as identified in
the heading hereto.
"Co-Arranger" shall mean The Chase Manhattan Bank, a New York state
banking association.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time.
"Commission" shall mean the Securities and Exchange Commission and any
other similar or successor agency of the Federal government administering the
Securities Act and the Exchange Act.
"Commitment" shall mean, (i) with respect to each Lender, the
commitment of such Lender (A) to make Revolving Loans in an aggregate principal
amount at any time outstanding of up to such Lender's Commitment Percentage
multiplied by the Revolving Committed Amount (as such Revolving Committed Amount
may be reduced from time to time pursuant to Section 2.05), and (B) to purchase
Participation Interests in the Swingline Loans in accordance with the provisions
of Section 2.02(b)(iii) and in the Letters of Credit in accordance with the
provision of Section 2.03(c), (ii) with respect to the Swingline Lender, the
commitment of the Swingline Lender to make Swingline Loans in an aggregate
principal amount at any time outstanding of up to the Swingline Committed Amount
and (iii) with respect to the Issuing Lender, the commitment of the Issuing
Lender to issue Letters of Credit in an aggregate face amount at any time
outstanding (together with the amounts of any unreimbursed drawings thereon) of
up to the LOC Committed Amount.
"Commitment Percentage" shall mean, for each Lender, the percentage
identified as its Commitment Percentage opposite such Lender's name on Schedule
--------
I, as such percentage may be modified in connection with any assignment made in
- -
accordance with the terms of Section 12.04(b).
"Competitive Bid" means an offer by a Lender to make a Competitive Loan
pursuant to the terms of Section 2.04.
6
<PAGE>
"Competitive Bid Rate" means, as to any Competitive Bid made by a
Lender in accordance with the provisions of Section 2.04, the fixed rate of
interest offered by the Lender making the Competitive Bid.
"Competitive Bid Request" means a request by the Borrower for
Competitive Bids in accordance with the provisions of Section 2.04(b).
"Competitive Bid Request Fee" shall have the meaning assigned to such
term in Section 2.06(d).
"Competitive Loan" means a loan made by a Lender in its discretion
pursuant to the provisions of Section 2.04.
"Competitive Loan Lenders" means, at any time, those Lenders which have
Competitive Loans outstanding.
"Competitive Loan Maximum Amount" shall have the meaning assigned to
such term in Section 2.04(a).
"Computation Period" have the meaning assigned to such term in Section
8.05.
"Consolidated Net Income" shall mean, for any period, the net income
(or deficit) of the Borrower and its Restricted Subsidiaries for such period
(taken as a cumulative whole) after deducting, without duplication, operating
expenses, provisions for all taxes and reserves (including reserves for deferred
income taxes) and all other proper deductions (excluding amortization of
Effective Date Intangibles), all determined in accordance with GAAP on a
consolidated basis, after eliminating all inter-company items and after
deducting portions of income properly attributable to outside minority
interests, if any, in the stock and surplus of any Restricted Subsidiary;
provided, however, that there shall in any event be excluded from Consolidated
- -------- -------
Net Income (without duplication):
(a) the income (or deficit) of any Person accrued prior to
the date it becomes a Restricted Subsidiary or is merged into or
consolidated with the Borrower or a Restricted Subsidiary;
(b) any amount representing the interest of the Borrower or
any Restricted Subsidiary in the earnings of any Person other than a
Restricted Subsidiary, except to the extent that any such earnings have
been actually received by the Borrower or such Restricted Subsidiary in
the form of cash dividends or similar distributions;
(c) any portion of the net income of a Restricted Subsidiary
which for any reason is unavailable for the payment of dividends to the
Borrower or another Restricted Subsidiary;
7
<PAGE>
(d) any deferred credit (or amortization of a deferred
credit) representing the excess of the equity in any Person at the date
of acquisition thereof over the cost of the Investment in such Person;
(e) any gain during such period arising from (i) the sale,
exchange or other disposition of capital assets (such term to include
all fixed assets, whether tangible or intangible (other than trucks,
forklifts, trailers, scrubbers, sweepers, refrigerators or like
equipment disposed of by the Borrower or a Restricted Subsidiary in the
ordinary course of business), and all securities) to the extent the
aggregate gains from such transactions exceed losses during such period
from such transactions, (ii) any reappraisal, revaluation or write-up
of assets after the date of the most recent audited financial
statements referred to in Section 9.04, (iii) the acquisition of any
securities of the Borrower or a Restricted Subsidiary or (iv) the
termination of any Plan;
(f) the proceeds of any life insurance policy; and
(g) any item properly classified as extraordinary in
accordance with GAAP;
and provided further, however, that (x) in determining Consolidated Net Income
-------- ------- -------
for any period during which the Borrower shall have sold the Everett Facility,
losses from such sale or other disposition shall be disregarded to the extent
the aggregate amount of all such losses (computed without regard to Effective
Date Intangibles allocable to such facility) does not exceed $3,300,000 on an
after tax basis and (y) gains in excess of losses during any period from the
sale or other disposition by the Borrower or a Restricted Subsidiary in the
ordinary course of business of trucks, forklifts, trailers, scrubbers, sweepers,
refrigerators or like equipment shall not be excluded from Consolidated Net
Income for such period.
"Consolidated Net Tangible Assets" shall mean, as of any date, the
consolidated assets of the Borrower and its Restricted Subsidiaries appearing on
a consolidated balance sheet of the Borrower and its Restricted Subsidiaries
prepared in accordance with GAAP as of such date less the sum (without
duplication) of all amounts which would appear on such balance sheet in respect
of (a) reserves for depreciation, depletion, obsolescence and/or amortization of
properties and all other reserves properly attributable to assets set aside in
connection with the business conducted by the Borrower and its Restricted
Subsidiaries, (b) goodwill, trademarks, tradenames, copyrights, patents,
licenses, permits, franchises, unamortized debt discount and expense,
experimental and organization expense and all other assets which under GAAP are
deemed intangible, (c) any write-up in the book value of any assets subsequent
to the date of the most recent audited financial statements referred to in
Section 9.04, (d) Restricted Investments (valued at the book value thereof) and
(e) all liabilities other than deferred taxes.
"Consolidated Net Worth" shall mean, as of any date, the excess of (a)
the sum of capital stock (but excluding capital stock subscribed for but
unissued) and surplus (including retained earnings, additional paid-in capital
and the balance of the current profit and loss account not transferred to
surplus) accounts of the Borrower and its Restricted Subsidiaries appearing on a
consolidated balance sheet of the Borrower and its Restricted Subsidiaries
prepared in
8
<PAGE>
accordance with GAAP as of such date, after eliminating all intercompany
transactions and all amounts properly attributable to outside minority interests
in Restricted Subsidiaries over (b) the amount obtained by subtracting (i) the
aggregate amortization of Effective Date Intangibles in accordance with GAAP
subsequent to the Effective Date to and including such date of determination to
the extent such amortization has reduced the surplus accounts of the Borrower
and its Restricted Subsidiaries appearing on a balance sheet of the Borrower and
its Restricted Subsidiaries prepared in accordance with GAAP as of the Effective
Date (after giving effect to the consummation of the Recapitalization) from (ii)
----
the aggregate amount appearing in respect of Effective Date Intangibles on such
balance sheet as of the Effective Date (after giving effect to the consummation
of the Recapitalization).
"Credit Documents" shall mean this Agreement, the LOC Documents, the
Guaranty Agreement (including any Guarantor Joinder Agreement) and all other
related agreements and documents issued or delivered under this Agreement or
under the Guaranty Agreement (including any Guarantor Joinder Agreement) or
pursuant hereto or thereto.
"Debt" shall mean, as applied to any Person, as of any date of
determination (without duplication):
(a) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes, drafts or similar instruments,
or upon which interest payments are customarily made;
(b) all obligations of such Person for all or any part of
the deferred purchase price of property or services (other than trade
accounts payable arising in the ordinary course of business which are
not overdue by more than 30 days or which are being contested in good
faith by appropriate proceedings) or for the cost of property
constructed or of improvements;
(c) all obligations secured by any Lien ((other than a Lien
deemed to exist in connection with any Permitted Receivables Financing
(including any related filings of financing statements) provided that
(i) for purposes of Section 8.01(c), all Permitted Receivables
Financing Amounts shall be considered Debt, (ii) the Borrower or any of
its Restricted Subsidiaries may consummate a Permitted Receivables
Financing otherwise permitted by the terms of this Agreement
notwithstanding the provisions of Section 8.02, provided that the
Permitted Receivables Financing Amount in respect of such Permitted
Receivables Financing shall be considered Debt in any computation
otherwise required by (or by reference to) Section 8.02 and (iii) for
no purpose other than determination of "Total Debt Ratio" as used
herein (including as used in the definition of "Applicable Margin" and
in section 8.01(c) hereof) shall any obligation incurred by the
Borrower or any of its Restricted Subsidiaries pursuant to any
Permitted Receivables Financing be considered Debt, and it being
understood and agreed that the Permitted Receivables Financing Amount
in respect of any Permitted Receivables Financing shall be deemed to be
an obligation secured by Liens in connection with a Permitted
Receivables Financing)) on or payable out of the proceeds of production
from property owned or held by such
9
<PAGE>
Person even though such Person has not assumed or become liable for the
payment of such obligations;
(d) all Capital Lease Obligations of such Person;
(e) all preferred stock issued by such Person or required by
the terms thereof to be redeemed, or for which mandatory sinking fund
payments are due, by a fixed date;
(f) all obligations of such Person, contingent or otherwise,
in respect of any letter of credit facility, bankers' acceptance
facility or other similar credit facility, exclusive, however, of
obligations in respect of any letter of credit issued solely for the
benefit of a state agency or insurance carrier in connection with the
maintenance by such Person of casualty, medical or workers'
compensation insurance through such agency or insurance carrier;
(g) the aggregate amount of the net liability exposure of
such Person under all Hedging Agreements (which net liability exposure
in respect of any such Hedging Agreement shall, for purposes hereof, be
deemed to be an amount equal to (i) the actual net liability exposure
of such Person under such Hedging Agreement to the extent realized
(upon culmination or termination of such Hedging Agreement or
otherwise) and no longer contingent or (ii) to the extent the net
liability exposure of such Person under such Hedging Agreement has not
been actually realized and is contingent, the product of (A) the then
current notional principal amount of such Hedging Agreement multiplied
----------
by (B) the number of years (or portions thereof) then remaining to the
--
date of maturity of such Hedging Agreement multiplied by (C) 0.75%);
-------------
and
(h) all Guaranties by such Person of or with respect to
obligations of the character referred to in the foregoing clauses (a)
through (g) of another Person;
provided, however, that in determining the Debt of the Borrower, so long as the
- -------- -------
Sara Lee Offset Agreement shall remain in full force and effect and shall be
effective to permit the offset of principal and interest due under the Sara Lee
Note against principal and interest due under PYA's Note (or to establish the
Borrower's obligation in respect of the indebtedness evidenced by the Sara Lee
Note from and after a prepayment in full of PYA's Note as the remaining
principal balance of the Sara Lee Note after offset against amounts owing
thereon of the principal of and accrued and unpaid interest to the date of
prepayment on the PYA Note), the Debt evidenced by the Sara Lee Note shall be
deemed equal to the net amounts for which the Borrower is obligated under the
Sara Lee Offset Agreement.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Determination Date" shall mean each date which shall be the last day
of a fiscal quarter of the Borrower.
10
<PAGE>
"Documentation Agent" means The First National Bank of Chicago, as
identified in the heading hereto.
"Dollars", "dollars" or "$" shall mean lawful money of the United
States of America.
"Effective Date" shall mean the date (being on or about November 15,
1994) on which the conditions set forth in Section 5.02 to the making of the
initial Extension of Credit hereunder (other than the issuance of the Existing
Letters of Credit) shall have been fulfilled and on which the initial Extension
of Credit (other than the issuance of the Existing Letters of Credit) shall have
been made.
"Effective Date Intangibles" shall mean all goodwill and other
intangible assets that appear on a consolidated balance sheet of the Borrower
and its Restricted Subsidiaries prepared in accordance with GAAP as of the
Effective Date immediately after giving effect to the consummation of the
Recapitalization.
"Eligible Assignee" shall mean (i) any Lender or any Affiliate or
Subsidiary of a Lender, and (ii) any other commercial bank acceptable to the
Administrative Agent and the Borrower.
"Environmental Claims" shall have the meaning assigned to such term in
Section 9.18.
"Environmental Law" shall mean any past, present or future Federal,
state, local or foreign statutory or common law, or any regulation, ordinance,
code, plan, Order, permit, grant, franchise, concession, restriction or
agreement issued, entered, promulgated or approved thereunder, relating to (a)
the environment, human health or safety, including, without limitation,
emissions, discharges, releases or threatened releases of Hazardous Substances
into the environment, or (b) the manufacture, generation, refining, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport,
arranging for transport, or handling of Hazardous Substances.
"Environmental Permits" shall mean, collectively, any and all permits,
consents, licenses, approvals and registrations of any nature at any time
required pursuant to or in order to comply with any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"Eurocurrency Liabilities" shall have the meaning assigned to such term
in Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Loan" shall mean any Revolving Loan bearing interest at a
rate determined by reference to the Eurodollar Rate in accordance with the
provisions of Article II.
11
<PAGE>
"Eurodollar Rate" shall mean for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate equal to the per annum rate
determined by the Administrative Agent on the basis of the offered rates for
deposits in dollars for a period of time corresponding to such Interest Period
(and commencing on the first day of such Interest Period), which appear on the
Reuters Screen LIBO Page as of 11:00 a.m. (London time) two (2) Business Days
before the first day of such Interest Period (provided that, if at least two
--------
such offered rates appear on the Reuters Screen LIBO Page, the rate in respect
of such Interest Period will be the arithmetic mean of such offered rates). As
used herein, "Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuters Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks).
"Eurodollar Rate Reserve Percentage" shall mean, in respect of any
Lender and any Interest Period relating to any Eurodollar Loan of such Lender,
the reserve percentage applicable to such Lender during such Interest Period
under Regulation D of the Board of Governors of the Federal Reserve System (or,
if more than one such percentage shall be so applicable, the daily average of
such percentages for those days in such Interest Period during which any such
percentage shall be so applicable) for determining the reserve requirement
(including, without limitation, any marginal reserve requirement) for such
Lender with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (such Eurocurrency Liabilities having a term equal to
such Interest Period).
"Event of Default" shall have the meaning assigned to such term in
Section 10.01.
"Everett Facility" shall mean the facility owned by the Borrower on the
date hereof in Everett, Massachusetts.
"Excess Sale Event" shall having the meaning assigned to such term in
Section 3.02(b)(ii).
"Excess Sale Notice" shall having the meaning assigned to such term in
Section 3.02(b)(ii).
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same may be in effect from time to time.
"Excluded Sale" shall mean any sale of assets permitted pursuant to
subdivision (f)(ii) of Section 8.07 the net proceeds of which to the Borrower
and its Restricted Subsidiaries the Borrower shall be required to apply (or
cause to be applied) as provided in said subdivision.
"Existing Affiliate Agreements" shall have the meaning assigned to such
term in Section 8.08.
12
<PAGE>
"Existing Letters of Credit" shall mean each Letter of Credit issued by
NationsBank and outstanding as of the Restatement Date and more fully described
on Schedule II.
-----------
"Extension of Credit" shall mean the making of any Loan (including any
Swingline Loan) hereunder or the issuance, or the extension of the maturity
date, of any Letter of Credit hereunder.
"Facility Fee" shall have the meaning assigned to such term in Section
2.06(a).
"Federal Funds Effective Rate" shall have the meaning assigned to such
term within the definition of "Base Rate".
"Fees" shall mean all fees payable pursuant to Section 2.06.
"Fixed Charge Coverage Ratio" shall mean, as of any Determination Date,
the number obtained by dividing (a) Net Income Available for Fixed Charges for
the period ("Coverage Period") of four consecutive fiscal quarters ended on such
Determination Date by (b) Fixed Charges for such Coverage Period.
"Fixed Charges" shall mean, for any period, the sum of the following
amounts: (a) Interest Expense for such period, plus (b) the aggregate amount of
----
Operating Lease Rentals accrued (whether or not actually paid) during such
period.
"Funded Debt" shall mean, as applied to any Person, as of any date of
determination thereof, all Debt of such Person, whether secured or unsecured,
having a final maturity (or which, pursuant to the terms of a revolving credit
agreement or otherwise, is renewable or extendable at the option of such Person
for a period ending) more than one year after such date of determination,
notwithstanding the fact that (a) payments in respect thereof (whether
installment, serial maturity or sinking fund payments or otherwise) are required
to be made by such Person on demand or within one year after such date or (b)
all or any part of the amount thereof is at the time also included in current
liabilities of such Person.
"Further Period" shall have the meaning assigned to such term in
Section 8.07(f)(ii).
"GAAP" shall mean generally accepted accounting principles as from time
to time set forth in the opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board or in such opinions and statements of such
other entities as shall be approved by a significant segment of the accounting
profession in the United States of America, but subject to Section 1.02.
"Governmental Body" shall mean any Federal, state, municipal, local or
other governmental department, commission, board, bureau, agency,
instrumentality, political subdivision or taxing authority, of any country.
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<PAGE>
"Guarantor" shall mean each of the Restricted Subsidiaries of the
Borrower which is a party to the Guaranty Agreement, including each Subsidiary
of the Borrower which becomes a party to the Guaranty Agreement pursuant to a
Guarantor Joinder Agreement.
"Guarantor Joinder Agreement" shall mean a Guarantor Joinder Agreement
substantially in the form of Schedule III.
------------
"Guaranty" shall mean, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise in any manner directly or indirectly liable, including,
without limitation, any such obligation in effect guaranteed by such Person
through any agreement (contingent or otherwise) to (a) purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or (b) maintain
the solvency or any balance sheet or other financial condition of the obligor of
such obligation, or (c) make payment for any products, materials or supplies or
for any transportation or services regardless of the non-delivery or
non-furnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected against loss in respect
thereof. For purposes of all computations made under this Agreement the amount
of any Guaranty shall be equal to the amount of the obligation guaranteed or, if
not stated or determined, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Guaranty Agreement" shall mean the Guaranty Agreement in the form
attached as Schedule IV.
-----------
"Hazardous Substances" shall mean and include those substances included
within the definitions of "hazardous substances," "hazardous materials," "toxic
substances" or "solid waste" in the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. (S)9601 et seq.) , as amended
-- ---
by Superfund Amendments and Reauthorization Act of 1986 (Pub. L. (S)99-499 100
Stat. 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. (S)
6901 et seq.) and the Hazardous Materials Transportation Act, (49 U.S.C. (S)
-- ---
1801 et seq.), and in the regulations promulgated pursuant to said laws, all as
-- ---
amended; and in any event shall include medical wastes, infectious wastes,
asbestos, paint containing lead, and urea formaldehyde.
"Hedging Agreement" shall mean any agreement entered into by a Person
for protection against future fluctuations in interest rates, foreign exchange
rates, commodities prices, or the like (including, but not limited to, interest
rate and/or currency swap arrangements, interest rate, currency and/or
commodities future or option contracts, and other similar agreements) and which
14
<PAGE>
creates a contingent obligation of such Person to make any payments (other than
payments in respect of any fee or charge for contracting to provide the
protection provided by such agreement) to the holder(s) thereof or
counterparty(ies) thereunder upon the culmination or termination of such
agreement or otherwise.
"IDB Debt" shall mean Debt incurred to finance the construction or
acquisition of industrial or pollution control facilities pursuant to state or
local law, the interest borne by which is not, at the time of incurrence
thereof, subject to federal income tax and recourse to the Borrower and its
Restricted Subsidiaries in respect of which is limited solely to the property
subject to such Liens.
"Interest Expense" shall mean, as applied to any Person, for any
period, the sum of the following amounts for such Person: (a) the aggregate
amount of all interest accrued (whether or not actually paid) during such period
on Debt (including, without limitation, (i) imputed interest on Capital Lease
Obligations and (ii) all imputed interest, whether in the form of "yield",
"discount" or other similar item, that accrues in respect of the Permitted
Receivables Financing Amount of any Permitted Receivables Financing entered into
by such Person (or by any Subsidiary of such Person or any other Person
"controlled" (as such term is defined in the Securities Act of 1933 and the
rules and regulations thereunder)), together with any fees payable thereunder,
plus (b) amortization of debt discount and expense during such period, plus (c)
- ----
all fees and commissions payable in connection with any letters of credit during
such period. Unless otherwise specified, any reference to Interest Expense for
any period is intended as a reference to the sum for such period of said amounts
for the Borrower and its Restricted Subsidiaries on a consolidated basis after
eliminating all intercompany transactions.
"Interest Payment Date" shall mean (i) as to any Base Rate Loan, the
last day of each March, June, September and December, the date of repayment of
the principal of such Loan and the Maturity Date, (ii) as to any Eurodollar Loan
or Competitive Loan, the last day of each Interest Period for such Loan and the
Maturity Date, and in addition where the applicable Interest Period is more than
3 months, then also on the date 3 months from the beginning of the Interest
Period, and each 3 months thereafter and (iii) as to any Quoted Rate Swingline
Loan, the last day of the Interest Period for such Loan and the Maturity Date.
If an Interest Payment Date falls on a date which is not a Business Day, such
Interest Payment Date shall be deemed to be the next succeeding Business Day,
except that in the case of Eurodollar Loans where the next succeeding Business
Day falls in the next succeeding calendar month, then on the next preceding
Business Day.
"Interest Period" shall mean (i) as to any Eurodollar Loan, a period of
one, two, three or six months' duration, as the Borrower may elect, commencing
in each case on the date of the borrowing (including conversions, extensions and
renewals), (ii) as to any Quoted Rate Swingline Loan, a period commencing in
each case on the date of the borrowing and ending on the date agreed to by the
Borrower and the Swingline Lender in accordance with the provisions of Section
2.02(b)(i) (such ending date in any event to be not more than 7 Business Days
from the date of borrowing) , and (iii) as to any Competitive Loan, a period
commencing in each case on the date of borrowing and ending on the date
specified in the applicable Competitive Bid whereby
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<PAGE>
the offer to make such Competitive Loan was extended (such ending date in any
event to be not less than 7 nor more than 180 days from the date of borrowing);
provided, however, (A) if any Interest Period would end on a day which is not a
- -------- -------
Business Day, such Interest Period shall be extended to the next succeeding
Business Day (except that, with respect to any Eurodollar Loan, where the next
succeeding Business Day falls in the next succeeding calendar month, then on the
next preceding Business Day), (B) no Interest Period shall extend beyond the
Maturity Date and (C) in the case of Eurodollar Loans, where an Interest Period
begins on a day for which there is no numerically corresponding day in the
calendar month in which the Interest Period is to end, such Interest Period
shall, subject to clause (A) above, end on the last Business Day of such
calendar month.
"Investment" shall mean, as applied to any designated Person, any
direct or indirect purchase or other acquisition by such designated Person for
cash or other property of (a) stock, debt or other securities of any other
Person, or any direct or indirect loan, advance, extension of credit or capital
contribution by such designated Person to any other Person or any Guaranty by
such designated Person with respect to the Debt of such other Person, including
all Debt of and accounts receivable from any such other Person which are not
current assets or did not arise from sales to such other Person in the ordinary
course of business, or (b) any interest in any kind of property or assets,
whether real, personal or mixed, tangible or intangible. In computing the amount
involved in any Investment, (i) undistributed earnings of, and interest accrued
in respect of Debt owing by, any such other Person accrued after the date of
such Investment shall not be included, (ii) there shall not be deducted from the
amounts invested in any such other Person any amounts received as earnings (in
the form of dividends, interest or otherwise) on such Investment or as loans or
advances from such other Person, and (iii) unrealized increases or decreases in
value, or write-ups, write-downs or write-offs, of Investments in any such other
Person shall be disregarded.
"Issuing Lender" shall mean NationsBank, or, if NationsBank shall no
longer be the Administrative Agent, such Lender with shall become the
Administrative Agent hereunder in accordance with the provisions of Section
11.11.
"Issuing Lender Fees" shall have the meaning assigned to such term in
Section 2.06(b)(iii).
"JPF" shall mean JP Foodservice, Inc., a Delaware corporation and the
owner of all of the outstanding stock of the Borrower.
"Lenders" shall have the meaning assigned to such term in the heading
hereof. The term "Lenders" shall also include within the meaning thereof any
Person which becomes a Lender in accordance with the terms of Section 12.04(b).
"Letter of Credit" shall mean (i) any standby letter of credit or any
trade, documentary or merchandise letter of credit issued by the Issuing Lender
for the account of the Borrower in accordance with the terms of Section 2.03 and
(ii) each Existing Letter of Credit.
16
<PAGE>
"Licenses" shall have the meaning assigned to such term in Section
9.14.
"Lien" shall mean, as to any Person, any mortgage, lien (statutory or
other), pledge, assignment, hypothecation, adverse claim, charge, security
interest or other encumbrance in or on, or any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale, trust receipt or other title retention agreement or Capital Lease with
respect to, any property or asset of such Person, or the signing or filing of a
financing statement which names such Person as debtor, or the signing of any
security agreement authorizing any other party as the secured party thereunder
to file any financing statement which names such Person as debtor. For purposes
of this Agreement, a Person shall be deemed to be the owner of any property
which it has placed in trust for the benefit of holders of Debt of such Person
which Debt is deemed to be extinguished under GAAP but for which such Person
remains legally liable, and such trust shall be deemed to be a Lien.
"Loan" or "Loans" shall mean the Revolving Loans (or any Revolving Loan
bearing interest at the Base Rate or the Eurodollar Rate and referred to as a
Base Rate Loan or a Eurodollar Loan), the Swingline Loans and/or the Competitive
Loans, individually or collectively, as appropriate.
"LOC Committed Amount" shall have the meaning assigned to such term in
Section 2.03.
"LOC Documents" shall mean, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and obligations of
the parties concerned or at risk or (ii) any collateral security for such
obligations.
"LOC Obligations" means, at any time, the sum of (i) the maximum amount
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit (including without limitation Existing Letters of Credit) then
outstanding, assuming compliance with all requirements for drawings referred to
in such Letters of Credit plus (ii) the aggregate amount of all drawings under
Letters of Credit honored by the Issuing Lender but not theretofore reimbursed.
For purposes of clause (i) hereof, each trade Letter of Credit shall be deemed
to be outstanding from the date of issuance thereof until and including the
earlier of (A) the date which is thirty (30) days after the stated expiration
date of such trade Letter of Credit or (B) the date on which such trade Letter
of Credit is fully drawn.
"Management Group" shall mean the individuals who on the date hereof
hold the offices of (i) Chairman of the Board and Chief Executive Officer and
(ii) Senior Vice President and Chief Financial Officer, respectively, of JPF.
"Mandate Letter" shall mean the letter agreement dated March 7, 1997,
among the Borrower, NationsBank and NationsBanc Capital Markets, Inc.
17
<PAGE>
"Mandatory Borrowing" shall have the meaning assigned to such term in
Section 2.02(b)(iii).
"Material Adverse Change; Material Adverse Effect; Materially Adverse"
in, on or to, as appropriate, any Person, shall mean a material adverse change
in such Person's Business or Condition, a material adverse effect on such
Person's Business or Condition or an event which is materially adverse to such
Person's Business or Condition; provided that, (a) any such term, when used
--------
without reference to any particular Person, shall mean such change in or effect
on or event adverse to, as the case may be, the Borrower and its Restricted
Subsidiaries taken as a whole, and (b) any impairment in any material respect of
the ability of the Borrower and its Restricted Subsidiaries taken as a whole to
pay any principal, interest or Fees in accordance with the terms hereof and of
the other Credit Documents, any material impairment of the ability of the
Borrower and its Restricted Subsidiaries taken as a whole to perform the other
obligations of such Persons under this Agreement and the other Credit Documents,
or any circumstance or occurrence which would impair the enforceability as
against the Borrower or any Restricted Subsidiary of any material term of this
Agreement or any of the other Credit Documents, shall in any case be deemed to
have resulted in a material adverse change in, to have a material adverse effect
on, and to be materially adverse to, the Borrower's Business or Condition.
"Maturity Date" shall mean June 9, 2002.
"Memorandum" shall have the meaning assigned to such term in Section
9.04.
"Multiemployer Plan" shall mean a plan defined as such in Section 3
(37) of ERISA to which any Borrower Group Member is making or incurring an
obligation to make, or has made or incurred an obligation to make,
contributions.
"Multiple Employer Plan" shall mean a Plan to which any Borrower Group
Member, and at least one employer other than a Borrower Group Member, is making
or incurring an obligation to make contributions or has made or incurred an
obligation to make contributions.
"NationsBank" shall mean NationsBank, N.A., a national banking
association.
"Net Income Available for Fixed Charges" shall mean, for any period,
(a) the net income (or deficit) of the Borrower and its Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP after eliminating all
nonrecurring items (whether cash or non-cash and whether or not deemed
extraordinary in accordance with GAAP) for such period, plus (b) the sum of the
following amounts, in each case to the extent deducted in arriving at the amount
determined in accordance with the foregoing subdivision (a): (i) Interest
Expense, (ii) provisions for taxes imposed on or measured by income or excess
profits, (iii) Operating Lease Rentals accrued (whether or not actually paid),
and (iv) provisions for amortization of Effective Date Intangibles; provided,
--------
however, that in determining the net income (or deficit) of the Borrower and its
- -------
Restricted Subsidiaries pursuant to the foregoing subdivision (a) for any period
during which the Borrower shall have sold or otherwise disposed of the Everett
Facility, losses from
18
<PAGE>
such sale or other disposition shall be disregarded to the extent the aggregate
amount of all such losses (computed without regard to Effective Date Intangibles
attributable to such facility) does not exceed $3,300,000 on an after tax basis.
"Net Receivables" shall mean, on any day, in respect of any Permitted
Receivables Financing, the outstanding balance of accounts receivable sold,
transferred, pledged or otherwise subject to Liens, in each case, to or in favor
of a Receivables Financier (as hereinafter defined) in connection with such
Permitted Receivables Financing, excluding any accounts receivables not included
in the calculation of the Receivables Financier's percentage interest in the
Transferred Assets (as hereinafter defined) (it being understood that only the
percentage interest shall be included in this calculation) or borrowing base
(such excluded accounts receivables may include, without limiting the foregoing
in any manner, any such accounts receivables (x) not meeting the eligibility
criteria under such Permitted Receivables Financing, (y) exceeding the
applicable concentration limits set forth for such Permitted Receivables
Financing, or (z) which are or become defaulted, delinquent, charged-off or
otherwise cease to be creditworthy as set forth in, and as determined in
accordance with, such Permitted Receivables Financing).
"Net Sale Proceeds" shall mean, with respect to any sale of assets, an
amount equal to the excess of
(i) the greater of (x) the aggregate gross sale price
of the assets sold in such sale and (y) the fair market value of such
assets (as determined by the Board of Directors at the time of such
sale) over
(ii) the reasonable and customary costs and expenses
incurred by the Borrower or a Restricted Subsidiary in effecting such
sale.
"Net Worth Minimum" shall mean, as of any date, the sum of $75,000,000
plus on the last day of each fiscal quarter to occur after the Restatement Date
an amount (but not less than zero) equal to 50% of the net income of the
Borrower and its Restricted Subsidiaries for such fiscal quarter, such increases
to be cumulative, determined on a consolidated basis in accordance with GAAP
after eliminating all inter-company items and deducting portions of income
properly attributable to outside minority interests, if any, in Restricted
Subsidiaries and after adding, to the extent deducted in determining such net
income, the amount of any provision for the amortization of Effective Date
Intangibles.
"Note" shall mean any one of the 8.55% Senior Notes due 2004 issued by
the Borrower pursuant to the Note Purchase Agreements, as the same may be
restated, extended, renewed, amended, or otherwise modified and in effect from
time to time.
"Note Guaranties" shall mean those certain Guaranty Agreements, dated
as of the Effective Date, from each Subsidiary of the Borrower which as of the
Closing Date shall be a Restricted Subsidiary, substantially in the form of
Exhibit B-1 to each of the Note Purchase Agreements as originally executed and
delivered, providing among other things for the guaranty by each Restricted
Subsidiary party thereto of all amounts from time to time owing by the
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<PAGE>
Borrower under the respective Note Purchase Agreements, as such Guaranty
Agreements may be amended or otherwise modified from time to time (including by
any joinder agreement in the form of Exhibit B-2 to each of said Note Purchase
Agreements effective to constitute as a Guarantor under and within the meaning
thereof any Subsidiary which on or following the Closing Date shall be
designated or redesignated a Restricted Subsidiary and which shall be or
concurrently become a Guarantor under and within the meaning of the Guaranty
Agreement in compliance with Section 8.18).
"Note Purchase Agreement" shall mean any one of the Note Purchase
Agreements by and between the Borrower and the holder of the Note to be issued
by the Borrower and sold to such holder pursuant to the terms of such Note
Purchase Agreement, as the same may be restated, extended, renewed, amended, or
otherwise modified and in effect from time to time.
"Notice of Borrowing" shall mean a written notice of borrowing in
substantially the form of Schedule V, as required by Section 2.01(b).
----------
"Notice of Extension/Conversion" shall mean a written notice of
continuance or conversion of one or more Loans in substantially the form of
Schedule VI, as required by Section 3.03.
- -----------
"Officers' Certificate" shall mean a certificate executed on behalf of
the Borrower by two of its executive officers, one of whom shall be its Chairman
of the Board of Directors (if an officer) or its Chief Executive Officer, or
President or one of its Senior Vice Presidents, and one of whom shall be its
Chief Financial Officer or Treasurer.
"Operating Cash Flow" shall mean, for any period, (a) the net income
(or deficit) of the Borrower and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP after eliminating all nonrecurring
items (whether cash or non-cash and whether or not deemed extraordinary in
accordance with GAAP) for such period; plus (b) the sum of the following
----
amounts, in each case to the extent deducted in arriving at such the amount
determined in accordance with the foregoing subdivision (a):
(i) Interest Expense,
(ii) provisions for taxes imposed on or measured by income
or excess profits, and
(iii) provisions for depreciation and amortization (including,
without limitation, amortization of Effective Date Intangibles);
plus (c) the sum (without duplication) of the following items to the extent not
- ----
included in the amounts determined pursuant to subdivisions (a) and (b) above
(such sum being herein called the "Acquired Unit Adjustment"):
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<PAGE>
(i) the net income (or net deficit) for such period of each
Person which shall have become a Restricted Subsidiary during such
period (an "Acquired Subsidiary") after eliminating all nonrecurring
items (whether cash or non-cash and whether or not deemed extraordinary
in accordance with GAAP),
(ii) the net income (or net deficit) derived during such period
from any operating assets acquired by the Borrower or a Restricted
Subsidiary during such period ("Acquired Assets"), and
(iii) the sum (without duplication) of the following items to
the extent deducted in determining net income of any Acquired
Subsidiary or derived from any Acquired Assets for such period: (A)
Interest Expense of such Acquired Subsidiary or associated with such
Acquired Assets, (B) provisions for taxes imposed on or measured by
income or excess profits of such Acquired Subsidiary or associated with
such Acquired Assets, and (C) provisions for depreciation and
amortization of such Acquired Subsidiary or associated with such
Acquired Assets;
minus (d) the sum of the following items to the extent included in the amounts
- -----
determined pursuant to subdivisions (a), (b) and (c) above (such sum being
herein called the "Disposed Unit Adjustment"):
(i) the net income (or net deficit) for such period of each
Person which shall have ceased to be a Restricted Subsidiary during
such period (a "Disposed Subsidiary") after eliminating all
nonrecurring items (whether cash or non-cash and whether or not deemed
extraordinary in accordance with GAAP),
(ii) the net income (or net deficit) derived during such period
from any assets which were sold or otherwise disposed of by the
Borrower or a Restricted Subsidiary during such period ("Disposed
Assets"), and
(iii) the sum (without duplication) of the following items to
the extent deducted in determining net income of any Disposed
Subsidiary or derived from any Disposed Assets for such period: (A)
Interest Expense of such Disposed Subsidiary or associated with such
Disposed Assets, (B) provisions for taxes imposed on or measured by
income or excess profits of such Disposed Subsidiary or associated with
such Disposed Assets for such period, and (C) provisions for
depreciation and amortization of such Disposed Subsidiary or associated
with such Disposed Assets;
provided, however, that (1) for purposes of determining Operating Cash Flow for
- -------- -------
any period, the Acquired Unit Adjustment and the Disposed Unit Adjustment shall
be determined by the Borrower in accordance with sound financial practice (and
on the basis, to the extent available, of appropriate financial statements and
tax returns for such period) and shall be set forth in a certificate of the
principal financial officer of the Borrower accompanied by calculations in
reasonable detail showing the manner of determination thereof, which certificate
shall be furnished to the Administrative Agent and each of the Lenders not later
than the certificate
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<PAGE>
required to be furnished by the Borrower in respect of such period pursuant to
Section 6.01(c), and (2) no amount shall in any event be includable in Operating
Cash Flow pursuant to subdivision (c) of this definition for any period in
respect of any Acquired Unit Adjustment unless the amount and calculation
thereof, as set forth in the certificate for such period required by the
foregoing clause (1), shall be reasonably acceptable to the Required Lenders;
and provided further, however, that in determining the net income (or deficit)
-------- ------- -------
of the Borrower and its Restricted Subsidiaries pursuant to the foregoing
subdivision (a) for any period during which the Borrower shall have sold or
otherwise disposed of the Everett Facility, losses from such sale or other
disposition shall be disregarded to the extent the aggregate amount of all such
losses (computed without regard to Effective Date Intangibles attributable to
such facility) does not exceed $3,300,000 on an after tax basis.
"Operating Lease" shall mean any lease of property (real, personal or
mixed) having an original term (including terms of renewal or extension at the
option of the lessor or the lessee, whether or not any such option has been
exercised) of more than one year, other than (a) a Capital Lease and (b) in the
case of any Subsidiary, any such lease under which the Borrower or a
Predominantly Owned Restricted Subsidiary is the lessor.
"Operating Lease Rentals" shall mean, as applied to the Borrower and
its Restricted Subsidiaries for any period, the total amount (whether designated
as rentals or additional or supplemental rentals or otherwise) payable as lessee
under all Operating Leases during such period, including amounts so payable
during such period by reason of a lease termination or a surrender of property
but excluding amounts so payable on account of maintenance, ordinary repairs,
insurance, taxes, assessments and other similar charges.
"Order" shall mean any order, writ, injunction, decree, judgment,
award, determination, direction or demand.
"Participation Interest" shall mean the extension of credit by a Lender
by way of a purchase of a participation in any Swingline Loans as provided in
Section 2.02(b)(iii), in Letters of Credit or LOC Obligations as provided in
Section 2.03(c) or in any Loans as provided in Section 4.03.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
"Permitted Receivables Financing" shall mean any transaction involving
one or more sales, contributions or other conveyances by the Borrower and/or any
Restricted Subsidiary of any accounts receivable (together with certain related
property relating thereto and the right to collections thereon, being the
"Transferred Assets") to a Subsidiary (including a Subsidiary which is a
Restricted Subsidiary) or Affiliate of the Borrower (with respect to any such
transaction, the "Receivables Financing SPC"), which Receivables Financing SPC
then either (x) sells (as determined in accordance with GAAP) such Transferred
Assets (or percentage interests therein) to any Person that is not a Subsidiary
or Affiliate of the Borrower (with respect to any such transaction, the
"Receivables Financier"), (y) borrows from such Receivables Financier and
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<PAGE>
secures such borrowings by a pledge of such Transferred Assets and/or (z)
otherwise finances its acquisition of such Transferred Assets and, in connection
therewith, conveys an interest in such Transferred Assets to the Receivables
Financier, provided that (i) such receivables financing shall not involve any
--------
recourse to the Borrower or any Restricted Subsidiary (other than the
Receivables Financing SPC) for any reason other than (A) repurchases of
non-eligible receivables, (B) indemnifications for losses (including any
adjustments for dilutions), other than credit losses related to the receivables
sold in such financing, and (C) payment of all costs, fees, expenses and
indemnities relating to such receivables financing, (ii) such receivables
financing shall not include any Guaranty by the Borrower or any Restricted
Subsidiary, it being understood that payment by the Borrower or any Restricted
Subsidiary of any amount of the type described in the immediately preceding
clause (i) which is owing by it to the Receivables Financing SPC shall not be
deemed to be a Guaranty notwithstanding that an identical amount may be owing by
the Receivables Financing SPC to the Receivables Financier, (iii) in the case of
any such transaction other than the transaction contemplated by the Transfer and
Administration Agreement among Enterprise Funding Corporation, JPFD Funding
Company, JP Foodservice Distributors, Inc., NationsBank, N.A. and certain
investors party thereto (which transaction is hereby specifically approved and
consented to by each of the Required Lenders), the Administrative Agent shall be
reasonably satisfied with the structure of and documentation for any such
transaction and that the terms of such transaction, including the discount at
which receivables are sold to the Receivables Financier and any termination
events, shall be (in the good faith understanding of the Administrative Agent)
consistent with those prevailing in the market for similar transactions
involving receivables and originators of similar credit quality and a
receivables pool of similar characteristics or which are otherwise reasonably
acceptable to the Administrative Agent, (iv) the documentation for such
transaction shall not be amended or modified to modify the calculation of the
Net Receivables thereunder, to permit the acquisition of interests in the
Transferred Assets by the Receivables Financier in excess of the Permitted
Receivables Financing Over-Collateralization Amount, to change or modify any
provision of the Subordinated Intercompany Revolving Note or any provision of
any agreement relating to the calculation of any amount due or to become due in
respect thereof, or in any other manner which is materially inconsistent with
the terms and provisions hereof (and/or any other amendment which deals with the
requirements for a Permitted Receivables Financing) (other than, in each case,
for the requirement that any such amendment or modification (or any of the
relevant documents affected thereby) satisfy the requirements set forth in the
immediately preceding clause (iii)) without the prior written approval of the
Administrative Agent (which approval shall not be unreasonably withheld), (v) at
no time in connection with any particular receivables financing shall the
applicable Receivables Financier's interest in the outstanding face amount of
Net Receivables sold, transferred or pledged pursuant thereto (it being
understood that if such interest is a percentage interest, only that percentage
thereof shall be included in this calculation) exceed 130% of the aggregate
outstanding balance of all fundings, financings or purchases made by such
Receivables Financier to the Receivables Financing SPC and (vi) the maximum
principal amount of all fundings, financings and purchases of accounts
receivables by the Receivables Financier to the Receivables Financing SPC under
all such receivables financings shall not at any time exceed $50,000,000 in the
aggregate.
23
<PAGE>
"Permitted Receivables Financing Amount" shall mean at any time with
respect to any Permitted Receivables Financing, the aggregate balance of all
cash received by the Receivables Financing SPC from the Receivables Financier in
respect of purchase proceeds or principal under such financing minus the
aggregate amount of all payments received by the Receivables Financier and
applied to the repayments of such amounts; it being understood and agreed that
any amounts previously applied as aforesaid which are subsequently required to
be repaid, disgorged or otherwise returned by the Receivables Financier shall be
deemed to have never been received and applied by the Receivables Financier.
"Permitted Receivables Financing Over-Collateralization Amount" shall
mean, with respect to any Permitted Receivables Financing, the excess from time
to time of (x) the outstanding face amount of the Net Receivables subject to the
Receivables Financier's interest in connection with such financing (it being
understood that if such interest is a percentage interest only that percentage
of such Net Receivables shall be included in this calculation) over (y) the
Permitted Receivables Financing Amount of such Permitted Receivables Financing.
"Person" shall mean any individual, corporation, association,
partnership, joint venture, trust or estate, organization, business, government
or agency or political subdivision thereof, or any other entity.
"Plan" shall mean any employee pension benefit plan (as defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, subject to Title IV of
ERISA or the minimum funding standards under Section 412 of the Code or Section
302 of ERISA and established, maintained or contributed to at any time by any
Borrower Group Member.
"Predominantly Owned Restricted Subsidiary" shall mean any Restricted
Subsidiary at least 80% of all of the equity interests of each class of which
and at least 80% of the voting interests of which shall at the time be owned by
the Borrower either directly or through one or more other Predominantly Owned
Restricted Subsidiaries.
"Prime Rate" shall have the meaning assigned to such term within the
definition of "Base Rate".
"Priority Debt Amount" shall mean, as of any date, an amount equal to
the sum (without duplication) of (a) all Attributable Debt of the Borrower and
its Restricted Subsidiaries as of such date, plus (b) the aggregate principal
----
amount outstanding on such date of all Debt of the Borrower and its Restricted
Subsidiaries secured by Liens (other than Liens permitted by subdivisions (a)
through (j) of Section 8.03), plus the aggregate amount of all Permitted
Receivables Financing Over-Collateralization Amounts, plus (c) the aggregate
principal amount outstanding on such date of all Debt of Restricted Subsidiaries
(exclusive of (x) Debt of any Restricted Subsidiary owing to the Borrower or a
Predominantly Owned Restricted Subsidiary, (y) Debt of any Restricted Subsidiary
pursuant to the Guaranty Agreement and (z) to the extent not exceeding in
aggregate principal amount for all Restricted Subsidiaries the aggregate
original principal amount of the Notes, Debt of any Restricted Subsidiary
pursuant to the Note Guaranties).
24
<PAGE>
"Pro Forma Financial Statements" shall have the meaning assigned to
such term in Section 9.04.
"Pro Rata Prepayment Share" shall have the meaning assigned to such
term in Section 3.02(b)(ii).
"PYA" shall mean PYA/Monarch, Inc., a Delaware corporation.
"PYA's Note" shall mean that certain promissory note of PYA, dated
March 10, 1989, in the original principal amount of $110,000,000, and payable to
the Borrower, which bears interest at rates between 10.35% and 10.8% per annum,
as such note shall be in effect on the Closing Date.
"Quoted Rate" shall mean, with respect to any Quoted Rate Swingline
Loan, the fixed percentage rate per annum offered by the Swingline Lender and
accepted by the Borrower with respect to such Swingline Loan as provided in
accordance with the provisions of Section 2.02.
"Quoted Rate Swingline Loan" shall mean a Swingline Loan bearing
interest at a Quoted Rate.
"Recapitalization" shall have the meaning assigned to such term in
Section 5.02(m).
"Receivables Financier" shall have the meaning assigned to such term in
the definition of "Permitted Receivables Financing" set forth in this Section
1.01.
"Receivables Financing SPC" shall have the meaning assigned to such
term in the definition of "Permitted Receivables Financing" set forth in this
Section 1.01.
"Registration Statement" shall have the meaning assigned to such term
in Section 5.02(k).
"Related Entity" shall mean any partnership, corporation, trust,
unincorporated association or organization, joint venture or any other entity
other than the Borrower or any of its Subsidiaries in which any current officer
or director of any member of the Borrower or any of its Subsidiaries has a
financial interest or the ability to control its management or affairs;
provided, however, that the ownership by any such officer or director of not
more than five percent (5%) of the voting shares (or share equivalents) of a
public company listed or traded on NASDAQ or a national exchange shall not be
deemed to make such company a "Related Entity" within the meaning of this
definition.
"Replaced Warehouse Sale" shall mean a sale by the Borrower or a
Restricted Subsidiary of assets consisting solely of a warehouse facility and
related assets, including, without limitation, fixtures, equipment and other
property required to operate such warehouse as theretofore operated ("Replaced
Warehouse") which shall occur within two years following the
25
<PAGE>
construction or acquisition (other than from the Borrower or a Restricted
Subsidiary) by the Borrower or a Restricted Subsidiary of another warehouse
facility and related assets, including, without limitation, fixtures, equipment
and other property required to operate such warehouse ("Replacement Warehouse");
provided that, no such sale of a Replaced Warehouse following the construction
- --------
or acquisition of a Replacement Warehouse shall constitute a Replaced Warehouse
Sale unless (a) the net book value of such Replaced Warehouse (determined as of
the date of sale thereof), when taken together with the aggregate net book value
of each other warehouse facility (so determined) the sale of which has been or
is concurrently determined to constitute a Replaced Warehouse Sale on the basis
of the construction or acquisition of such Replacement Warehouse, shall not
exceed the net book value of such Replacement Warehouse less the aggregate
principal amount of all Debt, if any, secured by any Lien on such Replacement
Warehouse, and (b) such Replacement Warehouse shall not at any time have been
deemed Alternative Assets on the basis of the purchase, acquisition or
construction of which any other sale of assets shall have been determined to
constitute an Excluded Sale.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Required Financial Information" shall mean, with respect to the
applicable Determination Date, (i) the financial statements of the Borrower
required to be delivered pursuant to Section 6.01 for the fiscal period or
quarter ending as of such Determination Date, and (ii) the Officers' Certificate
required by Section 6.01 to be delivered with the financial statements described
in clause (i) above.
"Required Lenders" shall mean, at any time, Lenders which are then in
compliance with their obligations hereunder (as determined by the Administrative
Agent) and holding in the aggregate at least 51% of (i) the Commitments to make
Revolving Loans or (ii) if the Commitments have been terminated, the outstanding
Loans and Participation Interests.
"Responsible Officer" shall mean any officer of the Borrower who shall
be permitted to sign an Officers' Certificate (as provided in the definition of
that term set forth in this Section) and any other officer of the Borrower who
shall at any time hereafter perform substantially the same duties as are
performed on the date hereof by any such officer permitted to sign an Officers'
Certificate.
"Restatement Date" means the date of this Amended and Restated Credit
Agreement.
"Restricted Investments" shall mean all Investments other than:
(a) Investments in (i) readily marketable direct obligations
of the United States of America or of any agency or instrumentality
thereof the obligations of which are backed by the full faith and
credit of the United States of America or readily marketable
obligations unconditionally guaranteed by the United States of America
or by any such agency or instrumentality, in each case maturing within
three years from the date of acquisition thereof, (ii) U.S. dollar
denominated certificates of deposit, time deposits or
26
<PAGE>
bankers' acceptances maturing within 270 days from the date of
acquisition thereof of any commercial bank (x) which is organized under
the laws of and located in the United States of America or a State
thereof ("U.S. Bank") or Canada, Japan or a member country of the
European Economic Community ("Foreign Bank"), (y) which has combined
capital, surplus and undivided profits of at least, in the case of a
U.S. Bank, $100,000,000 and, in the case of a Foreign Bank,
$500,000,000, and (z) the long-term debt obligations of which are rated
at least A3 by Moody's Investors Service Inc. ("Moody's") or A- by
Standard & Poor's Corporation ("S&P"), (iii) money-market preferred
stock or auction rate preferred stock, in each case maturing or
redeemable at the option of the holder thereof no more than one year
after the date of acquisition thereof and having a rating of at least
A-2 by Moody's or A by S&P; (iv) obligations of any state of the United
States or any political subdivision thereof, the interest with respect
to which is exempt from federal income taxation under Section 103 of
the Code, having a long term rating of at least Aa-3 or AA- by Moody's
or S&P, respectively, and maturing within three years from the date of
acquisition thereof; (v) open market commercial paper of United States
corporations maturing not later than 270 days after the issuance
thereof and having a rating of at least P-2 by Moody's or A-2 by S&P,
and (vi) Investments, classified in accordance with GAAP as current
assets, in money market investment programs registered under the
Investment Company Act of 1940, as amended, which are administered by
reputable financial institutions having capital of at least
$100,000,000 and the portfolios of which are limited to Investments of
the character described in the foregoing subdivisions (a)(i) through
(a)(v);
(b) Investments in Subsidiaries of the Borrower existing
on the date hereof, and other Investments existing on the date hereof
and described in Schedule VII;
------------
(c) Investments in any Restricted Subsidiary or in any
Person which simultaneously therewith becomes a Restricted Subsidiary;
(d) Investments consisting of stock, obligations,
securities or other property received by the Borrower or a Restricted
Subsidiary in settlement of accounts receivable (created in the
ordinary course of business) from bankrupt obligors;
(e) Investments consisting of Guaranties by the Borrower
and its Restricted Subsidiaries of the obligations of other Persons so
long as at the time of and immediately after giving effect to each such
Investment, the Borrower is in compliance with Section 8.01(c) and
Section 8.02;
(f) Investments by the Borrower and its Restricted
Subsidiaries in property to be used in the ordinary course of their
business as permitted to be conducted pursuant to Section 8.09; and
(g) Investments in addition to those described in the
foregoing subdivisions (a) through (f) of this definition, provided
--------
that, the amount of all such additional Investments shall not exceed
$10,000,000 in the aggregate.
27
<PAGE>
"Restricted Payment" shall mean any payment or distribution or the
incurrence of any liability to make any payment or distribution, in cash,
property or other assets (other than shares of common stock of the Borrower)
upon or in respect of any share of any class of capital stock of the Borrower or
any warrants, rights or options evidencing a right to purchase or acquire any
securities of the Borrower, including, without limiting the generality of the
foregoing, payments or distributions as dividends and payments or distributions
for the purpose of purchasing, acquiring, retiring or redeeming any such shares
of stock (or any warrants, rights or options to purchase or acquire any such
securities) or the making of any other distribution in respect of any such
shares of stock (or any warrants, rights or options evidencing a right to
purchase or acquire any such securities).
"Restricted Subsidiary" shall mean each Subsidiary existing on the date
hereof which is not designated as an Unrestricted Subsidiary in Schedule VIII,
-------------
each other Subsidiary which is not hereafter designated by the Board of
Directors as an Unrestricted Subsidiary, and each Unrestricted Subsidiary which
is hereafter designated by the Board of Directors as a Restricted Subsidiary;
provided, however, that (a) any Restricted Subsidiary may be redesignated an
- -------- -------
Unrestricted Subsidiary as and to the extent provided in the definition of
"Unrestricted Subsidiary" set forth in this Section 1.01; (b) any Subsidiary
which shall be an Unrestricted Subsidiary at the commencement of any period of
30 consecutive months and which shall have been redesignated a Restricted
Subsidiary during such period may, following such redesignation, be further
redesignated an Unrestricted Subsidiary during such period but may not,
following such further redesignation, again be redesignated a Restricted
Subsidiary during such period; and (c) notwithstanding any provision hereof to
the contrary, no Person which hereafter becomes a Subsidiary may be designated a
Restricted Subsidiary and no Subsidiary which is designated an Unrestricted
Subsidiary may be redesignated a Restricted Subsidiary unless:
(i) immediately after giving effect to such
designation or redesignation, no Default or Event of Default shall have
occurred and be continuing,
(ii) in the case of any such redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary, no property or
assets of such Subsidiary shall at the time of such redesignation be
subject to any Liens which would not have been permitted to be created
by such Subsidiary pursuant to Section 8.03, and
(iii) such Subsidiary shall have become, in compliance
with Section 8.18, a Guarantor under and within the meaning of the
Guaranty Agreement.
"Revolving Committed Amount" shall have the meaning assigned to such
term in Section 2.01(a).
"Revolving Loans" shall have the meaning assigned to such term in
Section 2.01(a).
"Sale Leaseback" shall mean any transaction or arrangement or series of
transactions or arrangements pursuant to which the Borrower or any Restricted
Subsidiary shall become
28
<PAGE>
obligated as lessee under any lease of property, whether real, personal or mixed
(except for (i) leases for a term of not more than three years, (ii) any lease
by a Restricted Subsidiary under which the Borrower or a Predominantly Owned
Restricted Subsidiary is lessor and (iii) leases of property executed prior to,
at the time of or within 180 days after the later to occur of the acquisition or
the commencement of commercial operation of such property) which property (a) is
now owned or hereafter acquired by the Borrower or a Restricted Subsidiary (or
which the Borrower or any Restricted Subsidiary intends to use for substantially
the same purpose as any other property now owned or hereafter acquired by the
Borrower or a Restricted Subsidiary) and (b) has been or is to be sold or
transferred to any other Person.
"Sara Lee" shall mean Sara Lee Corporation, a Maryland corporation.
"Sara Lee Note" shall mean that certain promissory note of the
Borrower, dated August 19, 1989, issued in the original principal amount of
$112,000,000 and payable to PYA, which bears interest at the rate of 11% per
annum, as such note shall be in effect on the Closing Date.
"Sara Lee Offset Agreement" shall mean the Amended and Restated Note
Offset Agreement, dated as of July 3, 1989, by and between PYA and the Borrower,
providing, among other things, for the settlement of maturities of principal and
accrued interest under the Sara Lee Note, on the one hand, and under PYA's Note,
on the other hand, by offsetting the respective amounts due thereunder.
"Securities Act" shall mean the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect from time to time.
"Standby Letter of Credit Fee" shall have the meaning assigned to such
term in Section 2.06(b)(i).
"Subordinated Debt" shall mean any Debt of the Borrower or any
Restricted Subsidiary which is subordinated in right of payment to any other
Debt of such Person.
"Subordinated Intercompany Revolving Note" shall mean, with respect to
any Permitted Receivables Financing, any note issued by a Receivables Financing
SPC in favor of the Borrower or any Restricted Subsidiary in connection
therewith.
"Subsidiary" shall mean, with respect to any Person, any corporation
more than 50% of the Voting Stock of which is at the time owned by such Person
and/or one or more of its other Subsidiaries. Unless otherwise specified, any
reference to a Subsidiary is intended as a reference to a Subsidiary of the
Borrower.
"Substantial Sale" shall have the meaning assigned to such term in
Section 8.07(f)(ii).
"Swingline Committed Amount" shall have the meaning assigned to such
term in Section 2.02.
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<PAGE>
"Swingline Lender" shall mean NationsBank, or, if NationsBank shall no
longer be the Administrative Agent, such Lender which shall become the
Administrative Agent hereunder in accordance with the provisions of Section
11.11.
"Swingline Loan" shall have the meaning assigned to such term in
Section 2.02.
"Syndication Agent" means The Chase Manhattan Bank, as identified in
the heading hereto.
"Termination Event" shall mean (a) with respect to any Plan, the
occurrence of a Reportable Event or an event described in Section 4062(e) of
ERISA, or (b) the withdrawal of any Borrower Group Member from a Multiple
Employer Plan during a plan year in which it was a substantial employer (as such
term is defined in Section 4001(a)(2) of ERISA), or the termination of a
Multiple Employer Plan, or (c) the distribution of a notice of intent to
terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A
of ERISA or the treatment of a Plan amendment as a termination under Section
4041 or 4041A of ERISA, or (d) the institution of proceedings to terminate a
Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA, or (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan or (f) the complete or partial withdrawal of any
Borrower Group Member from a Multiemployer Plan.
"Total Debt" shall mean, as of any date, the aggregate amount of all
Debt of the Borrower and its Restricted Subsidiaries outstanding on such date
(including, without limitation, Debt evidenced by the Notes), determined on a
consolidated basis.
"Total Debt Ratio" shall mean, as of any date, the number obtained by
dividing (a) Total Debt as of such date by (b) Operating Cash Flow for the
period ("Cash Flow Period") of four consecutive fiscal quarters ended on such
date or (if such date shall not be a Determination Date) most recently prior to
such date; provided that for purposes for determining the Total Debt Ratio as of
--------
any date, in computing Operating Cash Flow for any Cash Flow Period occurring in
whole or in part prior to the Effective Date, it shall be assumed that all Debt
of the Borrower (including, without limitation, Debt arising hereunder or under
the other Credit Documents) incurred by the Borrower on the Effective Date had
been incurred on, and all Debt of the Borrower retired through the application
on the Effective Date of the proceeds of the initial borrowings hereunder, the
Notes or the Capital Contribution had been retired immediately prior to, the
first day of such Cash Flow Period and not on the Effective Date, and that all
such incurred Debt, and no such retired Debt, remained outstanding during the
portion of such Cash Flow Period which occurred prior to the Effective Date.
"Trade Letter of Credit Fee" shall have the meaning assigned to such
term in Section 2.06(b)(ii).
30
<PAGE>
"Transferred Assets" shall have the meaning assigned to such term in
the definition of "Permitted Receivables Financing" set forth in this Section
1.01.
"Unfunded Current Liability" of any Plan shall mean the amount, if any,
by which the present value of the accrued benefits under such Plan (based on
those assumptions used to fund such Plan) as of the close of its most recent
plan year exceeds the then current value of the assets of such Plan allocable to
such benefits.
"Unrestricted Subsidiary" shall mean each Subsidiary designated as an
Unrestricted Subsidiary in Schedule VIII and each other Subsidiary which is
-------------
hereafter designated by the Board of Directors as an Unrestricted Subsidiary;
provided, however, that (a) any Unrestricted Subsidiary may be redesignated a
- -------- -------
Restricted Subsidiary as and to the extent provided in the definition of
"Restricted Subsidiary" set forth in this Section 1.01; (b) any Subsidiary which
shall be a Restricted Subsidiary at the commencement of any period of 30
consecutive months and which shall have been redesignated an Unrestricted
Subsidiary during such period may, following such redesignation, be further
redesignated a Restricted Subsidiary during such period but may not, following
such further redesignation, again be redesignated an Unrestricted Subsidiary
during such period; and (c) notwithstanding any provision hereof to the
contrary, no Subsidiary which is a Restricted Subsidiary may be redesignated an
Unrestricted Subsidiary unless
(i) immediately after giving effect to such
redesignation, no Default or Event of Default shall have occurred and
be continuing, and
(ii) such Subsidiary does not own (directly or through
its Subsidiaries) any shares of stock or other securities of (or
warrants, rights or options to acquire stock or other securities of)
any Restricted Subsidiary or hold any Debt of the Borrower or any
Restricted Subsidiary and, at the time of such redesignation, all Debt
and shares of stock of such Subsidiary which are owned by the Borrower
and its Restricted Subsidiaries could be sold in compliance with
Section 8.06 (in which case, such redesignation shall be deemed a
disposition of assets for purposes of Section 8.07).
Any Subsidiary of any Person which shall at any time be an Unrestricted
Subsidiary shall itself be an Unrestricted Subsidiary for so long as such Person
shall remain an Unrestricted Subsidiary (and thereafter for so long as such
Subsidiary shall not have been redesignated as a Restricted Subsidiary in
compliance with the definition herein of that term).
"Voting Stock" shall mean capital stock of a corporation the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or persons performing similar functions) of
such corporation.
"Weighted Average Life to Maturity" shall mean, as applied to any
indebtedness at any date, the number of years (or portions of years) obtained by
dividing (a) the then outstanding principal amount of such indebtedness into (b)
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required
31
<PAGE>
payment of principal, including payment at final maturity, in respect thereof,
by (ii) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the date on which such payment is to be made.
"Wholly Owned Restricted Subsidiary" shall mean any Restricted
Subsidiary 100% of all of the equity interests (except directors' qualifying
shares) and voting interests of which shall at the time be owned by the Borrower
either directly or through one or more other Wholly Owned Subsidiaries.
SECTION 1.02. Accounting Terms, Etc.
---------------------
Except as specifically provided herein, all accounting terms used
herein which are not expressly defined in this Agreement have the meanings given
to them in accordance with GAAP and all computations made pursuant to this
Agreement shall be made in accordance with GAAP. All balance sheets and other
financial statements delivered pursuant to Section 6.01 shall be prepared in
accordance with GAAP. If any changes in accounting principles from those used in
the preparation of the most recent financial statements referred to in Section
6.01 are hereafter required or permitted by the rules, regulations,
pronouncements and opinions of the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors thereto) and
are adopted by the Borrower with the agreement of its independent certified
public accountants and such changes result or could result (for any present or
future period) in a change in the method of calculation of any of the financial
covenants, standards or terms in or relating to Article VIII, the parties hereto
agree to enter into discussions with a view to amending such provisions so as to
equitably reflect such changes with the desired result that the criteria for
evaluating the financial condition of the Borrower and its Restricted
Subsidiaries shall be the same after such changes as if such changes had not
been made, provided that, no change in GAAP that would affect or could affect
(for any present or future period) the method of calculation of any of said
financial covenants, standards or terms shall be given effect in such
calculations until such provisions are amended, in a manner satisfactory to the
Borrower and the Required Lenders, to so reflect such change in GAAP.
SECTION 1.03. Terms Generally.
---------------
The definitions in Section 1.01 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation." All references herein to
Articles, Sections and Schedules shall be deemed references to Articles and
Sections of, and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP.
SECTION 1.04. Directly or Indirectly.
----------------------
32
<PAGE>
Where any provision of this Agreement refers to actions to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether the action in question is taken directly or indirectly by
such Person.
ARTICLE II.
THE LOANS
SECTION 2.01. Revolving Loans.
---------------
(a) Revolving Commitment. Subject to and upon the terms and conditions
--------------------
and relying upon the representations and warranties herein set forth, each
Lender agrees, severally and not jointly, at any time and from time to time from
the Restatement Date until the Maturity Date, to make revolving credit loans
(each a "Revolving Loan" and, collectively, "Revolving Loans") to the Borrower
for the purposes set forth in Section 9.13; provided, however, (i) with regard
-------- -------
to each Lender individually, such Lender's pro rata share of outstanding
Revolving Loans shall not exceed such Lender's Commitment Percentage of the
Revolving Committed Amount, (ii) with regard to the Lenders collectively, the
aggregate amount of Revolving Loans outstanding shall not exceed ONE HUNDRED
SEVENTY-FIVE MILLION DOLLARS ($175,000,000), as such maximum amount may be
reduced from time to time as provided in Section 2.05 or as otherwise provided
herein (such amount, as so reduced from time to time, the "Revolving Committed
Amount"), and (iii) in addition to the limitations set forth in the preceding
subparagraphs (i) and (ii), in no event shall the sum of Revolving Loans
outstanding plus Swingline Loans outstanding plus the LOC Obligations
---- ----
outstanding plus Competitive Loans outstanding exceed the Revolving Committed
----
Amount. Revolving Loans hereunder may consist of Base Rate Loans or Eurodollar
Loans (or a combination thereof) as the Borrower may request, and may be repaid
and reborrowed in accordance with the provisions hereof.
(b) Advances.
--------
(i) Notices. Whenever the Borrower desires a Revolving Loan advance
-------
hereunder, it shall give an appropriate Notice of Borrowing to the
Administrative Agent by hand delivery, telex or telecopy not later than
1:00 P.M. (Charlotte, North Carolina time) on the Business Day of the
requested advance in the case of Base Rate Loans, and on the third
Business Day prior to the requested advance in the case of Eurodollar
Loans. Each such Notice of Borrowing shall be irrevocable and shall
specify (A) that a Revolving Loan is requested, (B) the date of the
requested advance (which shall be a Business Day), (C) the aggregate
principal amount of the Revolving Loan requested, and (D) whether the
Revolving Loan requested shall consist of Base Rate Loans, Eurodollar
Loans or a combination thereof, and if Eurodollar Loans are requested,
the Interest Periods with respect thereto. If the Borrower shall fail
to specify in any such Notice of Borrowing (i) an applicable Interest
Period in the case of a Eurodollar Loan, then such notice shall be
deemed to be a request for an Interest Period of one month, or (ii) the
type of Revolving Loan requested, then such notice shall be deemed to
be a request for a Base Rate Loan
33
<PAGE>
hereunder. The Administrative Agent shall as promptly as practicable
give each Lender notice of each requested Revolving Loan advance, of
such Lender's pro rata share thereof and of the other matters covered
in the applicable Notice of Borrowing.
(ii) Minimum Amounts. Each Revolving Loan shall be in an aggregate
---------------
principal amount that is not less than the lesser of $1,000,000 or the
remaining amount available to be borrowed with respect to the Revolving
Loans in accordance with the terms of Section 2.01(a). Any Revolving
Loan requested in excess of $1,000,000 shall be in an integral multiple
of $1,000,000.
(iii) Funding of Advances. Each Lender will make its pro rata share
-------------------
of each Revolving Loan available to the Administrative Agent by 3:00
P.M. (Charlotte, North Carolina time) on the date specified in the
applicable Notice of Borrowing by deposit in dollars of immediately
available funds at the offices of the Administrative Agent in
Charlotte, North Carolina, or at such other address as the
Administrative Agent may designate in writing, and the Administrative
Agent shall, by 4:00 P.M. (Charlotte, North Carolina time) on the same
day, credit the amount so received to the general deposit account of
the Borrower with the Administrative Agent. All Revolving Loans shall
be made by the Lenders pro rata on the basis of each Lender's
Commitment Percentage. No Lender shall be responsible for the failure
or delay by any other Lender in its obligation to make Revolving Loans
hereunder; provided, however, that the failure of any Lender to fulfill
-------- -------
its Commitment hereunder shall not relieve any other Lender of its
Commitment hereunder. Unless the Administrative Agent shall have been
notified by any Lender prior to the date of any Revolving Loan advance
that such Lender does not intend to make available to the
Administrative Agent its portion of the Revolving Loan advance to be
made on such date, the Administrative Agent may assume that such Lender
has made such amount available to the Administrative Agent on the date
of such Revolving Loan advance, and the Administrative Agent, in
reliance upon such assumption, may (in its sole discretion without any
obligation to do so) make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to
the Administrative Agent, the Administrative Agent shall be entitled to
recover such corresponding amount from such Lender. If such Lender does
not pay such corresponding amount forthwith upon the Administrative
Agent's demand therefor, the Administrative Agent will promptly notify
the Borrower and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also
be entitled to recover from such Lender or the Borrower, as the case
may be, interest on such corresponding amount in respect of each day
from the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such corresponding
amount is recovered by the Administrative Agent, at a per annum rate
equal to, with respect to the Borrower, the then applicable rate
calculated in accordance with Section 2.01(d) and, with respect to such
Lender, the Federal Funds Effective Rate.
(c) Repayment. The Borrower hereby promises to pay to the Lenders the
---------
principal amount of all Revolving Loans outstanding hereunder on the Maturity
Date.
34
<PAGE>
(d) Interest. (i) Interest Rates. Subject to the provisions of Section
-------- --------------
3.01, Revolving Loans shall bear interest as follows:
(A) Base Rate Loans. During such periods as Revolving Loans
---------------
shall consist of Base Rate Loans, at a per annum rate (computed on the
basis of the actual number of days elapsed over a year of 360 days for
each applicable day on which the Base Rate shall be determined on the
basis of the Federal Funds Effective Rate and over a year of 365/66
days for each applicable day on which the Base Rate shall be determined
on the basis of the Prime Rate) equal to the Base Rate in effect from
time to time.
(B) Eurodollar Loans. During such periods as Revolving Loans
----------------
shall consist of Eurodollar Loans, at a per annum rate (computed on the
basis of the actual number of days elapsed over a year of 360 days)
equal to the sum of the Eurodollar Rate for the Interest Period in
effect for such Eurodollar Loan plus the Applicable Margin in effect
from time to time.
(ii) Payment of Interest. (A) The Borrower hereby promises to
-------------------
pay to the Lenders on each applicable Interest Payment Date (or at such
other times as may be specified herein) accrued interest on the
Revolving Loans.
(B) In addition to amounts payable with respect to accrued
interest on Eurodollar Loans pursuant to subsection (d)(i)(B) above,
the Borrower hereby promises to pay to each Lender which is subject to
a reserve requirement in respect of Eurocurrency Liabilities and which
has notified the Administrative Agent and the Borrower as provided
below, on each date on which interest is payable on any Eurodollar Loan
pursuant to such subsection (d)(i)(B), additional interest on the
Eurodollar Loans of such Lender at a rate per annum equal at all times
during each Interest Period of such Eurodollar Loan to the remainder
obtained by subtracting (1) the Eurodollar Rate for the Interest Period
for such Eurodollar Loan from (2) the rate obtained by dividing the
Eurodollar Rate for the Interest Period for such Eurodollar Loan by a
percentage equal to 1.00 minus the Eurodollar Rate Reserve Percentage
(expressed as a decimal) actually incurred by such Lender for the
Interest Period for such Eurodollar Loan as specified in a certificate
signed by a duly authorized officer of such Lender delivered to the
Administrative Agent and the Borrower setting forth reasonable details
of such Lender's computation. Each determination by a Lender under this
Section 2.01(d)(ii)(B) shall be rebuttably presumptive evidence thereof
absent manifest error.
SECTION 2.02. Swingline Loan Subfacility.
--------------------------
(a) Swingline Commitment. Subject to and upon the terms and conditions
--------------------
and relying upon the representations and warranties herein set forth, the
Swingline Lender, in its individual capacity, agrees to make certain revolving
credit loans to the Borrower (each a "Swingline Loan" and, collectively, the
"Swingline Loans") from time to time from the Restatement Date until the
Maturity Date for the purposes hereinafter set forth; provided,
--------
35
<PAGE>
however, (i) the aggregate amount of Swingline Loans outstanding at any time
- -------
shall not exceed FIFTEEN MILLION DOLLARS ($15,000,000) (the "Swingline Committed
Amount"), and (ii) in no event shall the sum of Revolving Loans outstanding plus
----
Swingline Loans outstanding plus LOC Obligations outstanding plus Competitive
---- ----
Loans outstanding exceed the Revolving Committed Amount. Swingline Loans
hereunder shall be made as Base Rate Loans or Quoted Rate Swingline Loans as the
Borrower may request in accordance with the provisions of this Section 2.02, and
may be repaid and reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Advances.
-----------------------
(i) Notices; Disbursement. Whenever the Borrower desires a
---------------------
Swingline Loan advance hereunder it shall give written notice (or
telephone notice promptly confirmed in writing) to the Swingline Lender
not later than 1:00 P.M. (Charlotte, North Carolina time) on the
Business Day of the requested Swingline Loan advance. Each such notice
shall be irrevocable and shall specify (A) that a Swingline Loan
advance is requested, (B) the date of the requested Swingline Loan
advance (which shall be a Business Day) and (C) the principal amount of
the Swingline Loan advance requested. Each Swingline Loan shall be made
as a Base Rate Loan or a Quoted Rate Swingline Loan and shall have such
maturity date as the Swingline Lender and the Borrower shall agree by
telephone, promptly confirmed in writing, upon receipt by the Swingline
Lender of any such notice from the Borrower. The Swingline Lender shall
credit the amount representing the Swingline Loan advance to the
general deposit account of the Borrower by 3:00 P.M. (Charlotte, North
Carolina time) on the Business Day of the requested borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall be in a
---------------
minimum principal amount of $500,000 and in integral multiples of
$100,000 in excess thereof.
(iii) Repayment of Swingline Loans. The Borrower hereby promises
----------------------------
to pay to the Swingline Lender the principal amount of each Swingline
Loan on the earlier of (A) the maturity date agreed to by the Swingline
Lender and the Borrower with respect to such Loan (which maturity date
shall not be a date more than 7 Business Days from the date of advance
thereof) or (B) the Maturity Date. The Swingline Lender may, at any
time, in its sole discretion, by written notice to the Borrower and the
Lenders, demand repayment of its Swingline Loans by way of a Revolving
Loan advance (each such Revolving Loan advance made for the purpose of
repaying any Swingline Loans as provided herein being hereinafter
referred to as a "Mandatory Borrowing"), in which case the Borrower
shall be deemed to have requested a Revolving Loan advance comprised
solely of Base Rate Loans in the amount of such Swingline Loans;
provided, however, that any such demand shall be deemed to have been
-------- -------
given one Business Day prior to the Maturity Date and on the date of
the occurrence of any Event of Default described in Section 10.01(g) or
(h) and upon acceleration of the indebtedness hereunder and the
exercise of remedies in accordance with the provisions of Section
10.02. Each Lender hereby irrevocably agrees to make its pro rata share
of each Revolving Loan constituting
36
<PAGE>
a Mandatory Borrowing in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (I) the amount of
---------------
Mandatory Borrowing may not comply with the minimum amount for advances
of Revolving Loans otherwise required hereunder, (II) whether any
conditions specified in Section 5.03 are then satisfied, (III) whether
a Default or an Event of Default then exists, (IV) failure of any such
request or deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (V) whether the date of such Mandatory
Borrowing is a date on which Revolving Loans are otherwise permitted to
be made hereunder or (VI) any termination of the Commitments relating
thereto immediately prior to or contemporaneously with such Mandatory
Borrowing. In the event that any Mandatory Borrowing cannot for any
reason be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the
U.S. Bankruptcy Code with respect to the Borrower), then each Lender
hereby agrees that it shall forthwith purchase (as of the date the
Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to
such purchase) from the Swingline Lender such participations in the
outstanding Swingline Loans as shall be necessary to cause each such
Lender to share in such Swingline Loans ratably based upon its
Commitment Percentage of the Revolving Committed Amount (determined
before giving effect to any termination of the Commitments pursuant to
Section 10.02), provided that (A) all interest payable on the Swingline
Loans shall be for the account of the Swingline Lender until the date
as of which the respective participation is purchased and (B) at the
time any purchase of participations pursuant to this sentence is
actually made, the purchasing Lender shall be required to pay to the
Swingline Lender interest on the principal amount of participation
purchased for each day from and including the day upon which the
Mandatory Borrowing would otherwise have occurred to but excluding the
date of payment for such participation, at a per annum rate (computed
on the basis of the actual number of days elapsed over a year of 360
days) equal to the Federal Funds Effective Rate.
(c) Interest on Swingline Loans. (i) Subject to the provisions of
---------------------------
Section 3.01, each Swingline Loan shall bear interest as follows:
(A) Base Rate Loans. If such Swingline Loan is a Base Rate
---------------
Loan, at a per annum rate (computed on the basis of the actual number
of days elapsed over a year of 360 days for each applicable day on
which the Base Rate shall be determined on the basis of the Federal
Funds Effective Rate and over a year of 365/66 days for each applicable
day on which the Base Rate shall be determined on the basis of the
Prime Rate) equal to the Base Rate.
(B) Quoted Rate Swingline Loans. If such Swingline Loan is a
---------------------------
Quoted Rate Swingline Loan, at a per annum rate (computed on the basis
of the actual number of days elapsed over a year of 360 days) equal to
the Quoted Rate applicable thereto.
Notwithstanding any other provision to the contrary set forth in this Agreement,
in the event that the principal amount of any Quoted Rate Swingline Loan is not
repaid on the last day of the
37
<PAGE>
Interest Period for such Loan, then such Loan shall be automatically converted
into a Base Rate Loan at the end of such Interest Period.
(ii) Payment of Interest. The Borrower hereby promises to pay to the
-------------------
Swingline Lender on each applicable Interest Payment Date (or at such other
times as may be specified herein) accrued interest on the Swingline Loans.
SECTION 2.03. Letter of Credit Subfacility.
----------------------------
(a) Issuance. Subject to the terms and conditions hereof, the Lenders
--------
will participate (i) in the Existing Letters of Credit and (ii) in the issuance
by the Issuing Lender from time to time of such standby and trade Letters of
Credit from the Restatement Date until the Maturity Date as the Borrower may
request in a form acceptable to the Issuing Lender; provided, however, that (i)
-------- -------
the LOC Obligations outstanding shall not at any time exceed TWENTY-FIVE MILLION
DOLLARS ($25,000,000) (the "LOC Committed Amount") and (ii) in no event shall
--------------------
the sum of Revolving Loans outstanding plus Swingline Loans outstanding plus LOC
----
Obligations outstanding plus Competitive Loans outstanding exceed the Revolving
----
Committed Amount. Except as otherwise expressly agreed upon by all the Lenders,
no standby Letter of Credit shall have an original expiry date more than one
year from the date of issuance and no trade Letter of Credit shall have an
original expiry date more than 90 days following the date of issuance thereof;
provided, further, that no Letter of Credit, as originally issued or as
- -------- -------
extended, shall have an expiry date extending beyond the Maturity Date except
------
that prior to the Maturity Date a Letter of Credit may be issued or extended
- ----
with an expiry date extending beyond the Maturity Date if, and to the extent
that, the Borrower shall provide cash collateral to the Issuing Lender on the
date of issuance or extension in an amount equal to the maximum amount available
to be drawn under such Letter of Credit. The obligation of the Issuing Lender to
issue any Letter of Credit shall be conditioned upon delivery to the Issuing
Lender of the Issuing Lender's customary application for a letter of credit,
containing information necessary to issue the Letter of Credit. If such
application form contains any terms or conditions, such terms or conditions
(other than any terms or conditions contained in any application for a trade
Letter of Credit regarding any lien or security interest of the Issuing Lender
in goods to be purchased with the use of such Letter of Credit) shall have no
force and effect, it being understood by the parties hereto that the issuance
and payment of Letters of Credit, and all other matters between the Issuing
Lender and the Lenders and the Borrower with respect to Letters of Credit and
the credit relationship of the Issuing Lender and the Lenders and the Borrower
shall be governed exclusively by this Agreement and applicable law. The issuance
and expiry date of each Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a Letter of
------------------
Credit shall be submitted to the Issuing Lender at least three (3) Business Days
in the case of standby Letters of Credit and one (1) Business Day in the case of
trade Letters of Credit, prior to the requested date of issuance. The Issuing
Lender will, at least quarterly and more frequently upon request, disseminate to
the Lenders a detailed report specifying the Letters of Credit which are then
issued and outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein, among other
things, the account party, the
38
<PAGE>
beneficiary, the face amount, expiry date as well as any payment or expirations
which may have occurred.
(c) Participations. (i) Each Lender, upon issuance of a Letter of
--------------
Credit shall be deemed to have purchased without recourse a risk participation
from the Issuing Lender in such Letter of Credit and the obligations arising
thereunder and any collateral relating thereto, in each case in an amount equal
to its pro rata share of the obligations under such Letter of Credit (based on
the respective Commitment Percentages of the Lenders) and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as surety,
and be obligated to pay to the Issuing Lender therefor and discharge when due,
its pro rata share of the obligations arising under such Letter of Credit.
(ii) On the Restatement Date, (A) each Lender shall be deemed to have
purchased without recourse a risk participation from the Issuing Lender in each
Existing Letter of Credit and the obligations arising thereunder and any
collateral relating thereto, in each case in an amount equal to its pro rata
share of the obligations under such Existing Letter of Credit (based on the
respective Commitment Percentages of the Lenders) and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as surety,
and be obligated to pay to the Issuing Lender therefor and discharge when due,
its pro rata share of the obligations arising under such Existing Letter of
Credit and (B) each Existing Letter of Credit shall be deemed for all purposes
of this Agreement and the other Credit Documents to be a Letter of Credit.
(iii)Without limiting the scope and nature of each Lender's
participation in any Letter of Credit, to the extent that the Issuing Lender has
not been reimbursed as required hereunder or under any such Letter of Credit,
each such Lender shall pay to the Issuing Lender its pro rata share of such
unreimbursed drawing in same day funds on the day of notification by the Issuing
Lender of an unreimbursed drawing pursuant to the provisions of subsection (d)
hereof. The obligation of each Lender to so reimburse the Issuing Lender shall
be absolute and unconditional and shall not be affected by the occurrence of a
Default, an Event of Default or any other occurrence or event. Any such
reimbursement shall not relieve or otherwise impair the obligation of the
Borrower to reimburse the Issuing Lender under any Letter of Credit, together
with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any Letter of
-------------
Credit, the Issuing Lender will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Lender of its intent to otherwise
reimburse the Issuing Lender, the Borrower shall be deemed to have requested a
Revolving Loan in the amount of the drawing as provided in subsection (e)
hereof, the proceeds of which will be used to satisfy the reimbursement
obligations. The Borrower shall reimburse the Issuing Lender on the day of
drawing under any Letter of Credit (either with the proceeds of a Revolving Loan
obtained hereunder or otherwise) in same day funds. If the Borrower shall fail
to reimburse the Issuing Lender as provided hereinabove, the unreimbursed amount
of such drawing shall bear interest at a per annum rate (computed on the basis
of the actual number of days elapsed over a year of 360 days for each applicable
day on which the Base Rate shall be determined on the basis of the Federal Funds
Effective Rate and over a year of 365/66 days for each applicable day on which
the Base Rate
39
<PAGE>
shall be determined on the basis of the Prime Rate) equal to the Base Rate plus
two percent (2%). The Borrower's reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any rights of
set-off, counterclaim or defense to payment the Borrower may claim or have
against the Issuing Lender, the Administrative Agent, the Lenders, the
beneficiary of the Letter of Credit drawn upon or any other Person, including
without limitation any defense based on any failure of the Borrower or any
Restricted Subsidiary to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit. The Issuing Lender will
promptly notify the other Lenders of the amount of any unreimbursed drawing and
each Lender shall promptly pay to the Administrative Agent for the account of
the Issuing Lender in Dollars and in immediately available funds, the amount of
such Lender's pro rata share of such unreimbursed drawing. Such payment shall be
made on the day such notice is received by such Lender from the Issuing Lender
if such notice is received at or before 2:00 p.m., Charlotte, North Carolina
time, otherwise such payment shall be made at or before 12:00 noon, Charlotte,
North Carolina time, on the Business Day next succeeding the day such notice is
received. If such Lender does not pay such amount to the Issuing Lender in full
upon such request, such Lender shall, on demand, pay to the Administrative Agent
for the account of the Issuing Lender interest on the unpaid amount during the
period from the date of such drawing until such Lender pays such amount to the
Issuing Lender in full at a rate per annum equal to, if paid within two (2)
Business Days of the date of drawing, the Federal Funds Effective Rate (computed
on the basis of the actual number of days elapsed over a year of 360 days) and
thereafter at a rate equal to the Base Rate (computed on the basis of the actual
number of days elapsed over a year of 360 days for each applicable day on which
the Base Rate shall be determined on the basis of the Federal Funds Effective
Rate and over a year of 365/66 days for each applicable day on which the Base
Rate shall be determined on the basis of the Prime Rate). Each Lender's
obligation to make such payment to the Issuing Lender, and the right of the
Issuing Lender to receive the same, shall be absolute and unconditional, shall
not be affected by any circumstance whatsoever and without regard to the
termination of this Agreement or the Commitments hereunder, the existence of a
Default or Event of Default or the acceleration of the obligations of the
Borrower hereunder and shall be made without any offset, abatement, withholding
or reduction whatsoever. Simultaneously with the making of each such payment by
a Lender to the Issuing Lender, such Lender shall, automatically and without any
further action on the part of the Issuing Lender or such Lender, acquire a
participation in an amount equal to such payment (excluding the portion of such
payment constituting interest owing to the Issuing Lender) in the related
unreimbursed drawing portion of the LOC Obligation and in the interest thereon
and in the related LOC Documents, and shall have a claim against the Borrower
with respect thereto.
(e) Modification, Extension. The issuance of any supplement, modification,
-----------------------
amendment, renewal, or extension to any Letter of Credit shall, for purposes
hereof, be treated in all respects the same as the issuance of a new Letter of
Credit hereunder.
(f) Uniform Customs and Practices. Except as otherwise expressly stated
-----------------------------
herein, any Letter of Credit shall be subject to The Uniform Customs and
Practice for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), and to such extent the UCP shall
be incorporated therein and deemed in all respects to be a part
40
<PAGE>
thereof as to matters governed by this Agreement or by the UCP, each Letter of
Credit shall be construed in accordance with and governed by the laws of the
State of New York.
(g) Provisions Relating to Trade Letters of Credit.
----------------------------------------------
(i) The Borrower agrees to procure or to cause the beneficiaries of
each trade Letter of Credit to procure promptly any necessary import and export
or other licenses for the import or export or shipping of any goods referred to
in or pursuant to a trade Letter of Credit and to comply and to cause the
beneficiaries to comply with all foreign and domestic governmental regulations
with respect to the shipment and warehousing of such goods or otherwise relating
to or affecting such trade Letter of Credit, including governmental regulations
pertaining to transactions involving designated foreign countries or their
nationals, and to furnish such certificates in that respect as the Issuing
Lender thereof may at any time reasonably require, and to keep such goods
adequately covered by insurance in amounts, with carriers and for such risks as
shall be customary in the industry and to cause the Issuing Lender's interest to
be endorsed on such insurance and to furnish the Issuing Lender at its request
with reasonable evidence thereof. Should such insurance (or lack thereof) upon
said goods for any reason not be reasonably satisfactory to such Issuing Lender,
the Issuing Lender may (but is not obligated to) obtain, at the Borrower's
expense, insurance satisfactory to the Issuing Lender.
(ii) In connection with each trade Letter of Credit, neither any
Issuing Lender nor any of their correspondents shall be responsible for: (A) the
existence, character, quality, quantity, condition, packing, value or delivery
of the property purporting to be represented by documents; (B) any difference in
character, quality, quantity, condition or value of the property from that
expressed in documents; (C) the time, place, manner or order in which shipment
of the property is made; (D) partial or incomplete shipment referred to in such
credit; (E) the character, adequacy or responsibility of any insurer, or any
other risk connected with insurance; (F) any deviation from instructions, delay,
default or fraud by the beneficiary or any one else in connection with the
property or the shipping thereof; (G) the solvency, responsibility or
relationship to the property of any party issuing any documents in connection
with the property; (H) delay in arrival or failure to arrive of either the
property or any of the documents relating thereto; (I) delay in giving or
failure to give notice of arrival or any other notice; (J) any breach of
contract between the shippers or vendors and the Borrower or any applicable
Restricted Subsidiary; (K) any laws, customs, and regulations which may be
effective in any jurisdiction where any negotiation and/or payment of such trade
Letter of Credit occurs; (L) failure of documents (other than documents required
by the terms of the trade Letter of Credit) to accompany any draft at
negotiation; or (M) failure of any person to note the amount of any document or
drafts on the reverse of such trade Letter of Credit or to surrender or to take
up such trade Letter of Credit or to forward documents other than documents
required by the terms of the trade Letter of Credit. In connection with each
trade Letter of Credit, the Lender shall not be responsible for any error,
neglect or default of any of their correspondents. Nothing set forth in the
above shall affect, impair or prevent the vesting of any of the Issuing Lender's
rights or powers hereunder. If a trade Letter of Credit provides that payment is
to be made by the Issuing Lender's correspondent, neither the Issuing Lender nor
such correspondent shall be responsible for the failure of any of the documents
specified in such trade Letter of Credit to come into the Issuing Lender's
hands, or for any delay in connection
41
<PAGE>
therewith, and the Borrower's obligation to make reimbursements shall not be
affected by such failure or delay in the receipt of any such documents.
(iii) Notwithstanding anything to the contrary set forth in this
Agreement, a trade Letter of Credit issued hereunder may contain a statement to
the effect that such Letter of Credit is issued for the account of any
Subsidiary of the Borrower, provided that notwithstanding such statement, the
--------
Borrower shall be the actual account party for all purposes of this Agreement
for such Letter of Credit and such statement shall not affect the Borrower's
obligations hereunder with respect to such Letter of Credit.
(h) Nature of Issuing Lender's Duties.
---------------------------------
(i) As between the Borrower and the Issuing Lender, the Borrower
shall assume all risks of the acts, omissions or misuse of any Letter of Credit
by the beneficiary thereof. The Issuing Lender shall not be responsible: (A) for
the validity, accuracy, genuineness or legal effect of drafts, required
statements or documents, even if such drafts, statements or documents should in
fact prove to be in any or all respects invalid, inaccurate, fraudulent or
forged; (B) for any defect in a draft, payment request or other document unless
such defect is readily apparent upon the face of the draft, payment request or
other document; (C) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; or (D) for any consequences arising
from causes beyond the control of the Issuing Lender, including, without
limitation, any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental Authority. None of the
above shall affect, impair, or prevent the vesting of the Issuing Lender's
rights or powers hereunder.
(ii) If the Borrower consents to any overdrafts under any Letter of
Credit or authorizes in writing payment under any Letter of Credit with
irregular accompanying documents or authorizes or consents to any departure from
the terms of such Letter of Credit, this Agreement shall be fully binding upon
the Borrower with respect to such overdrafts, irregularities or both and
Lenders' rights shall be, in every respect, the same as if this Agreement and
such Letter of Credit expressly provided for such overdraft or irregularity or
both. If at the request of the Borrower there is any extension of time for
presentation of any payment request or any document under a Letter of Credit,
this Agreement shall be fully binding upon the Borrower with regard to any
payment request and documents presented within such extended time.
(iii) Nothing in this subsection (i) is intended to limit the
reimbursement obligation of the Borrower contained in subsection (d) above. No
act or omissions of any current or prior beneficiary of a Letter of Credit shall
in any way affect or impair the rights of the Issuing Lender to enforce any
right, power or benefit under this Agreement.
SECTION 2.04 Competitive Loan Subfacility.
----------------------------
(a) Competitive Loans. Subject to and upon the terms and conditions and
-----------------
relying upon the representations and warranties herein set forth, the Borrower
may, from time to time until the
42
<PAGE>
Termination Date, request and each Lender may, in its sole discretion, agree to
make, Competitive Loans in Dollars to the Borrower; provided, however, that (i)
-----------------
the aggregate principal amount of outstanding Competitive Loans shall not at any
time exceed the lesser of (a) ONE HUNDRED SEVENTY-FIVE MILLION DOLLARS
------
($175,000,000) or (b) the Revolving Committed Amount (the "Competitive Loan
----------------
Maximum Amount"), and (ii) the sum of Revolving Loans outstanding plus Swingline
- -------------- ----
Loans outstanding plus the LOC Obligations outstanding plus Competitive Loans
---- ----
outstanding shall not at any time exceed the Revolving Committed Amount. Each
Competitive Loan shall be not less than $5,000,000 in the aggregate and integral
multiples of $1,000,000 in excess thereof (or the remaining portion of the
Competitive Loan Maximum Amount, if less).
(b) Competitive Bid Requests. The Borrower may solicit Competitive Bids
------------------------
by delivery of a Competitive Bid Request substantially in the form of Schedule
--------
VA-1 to the Administrative Agent by 12:00 Noon (Charlotte, North Carolina time)
- ----
on a Business Day not less than one (1) nor more than four (4) Business Days
prior to the date of a requested Competitive Loan borrowing. A Competitive Bid
Request shall specify (i) the date of the requested Competitive Loan borrowing
(which shall be a Business Day), (ii) the amount of the requested Competitive
Loan borrowing and (iii) the applicable Interest Periods requested and shall be
accompanied by payment of the Competitive Bid Request Fee. The Administrative
Agent shall, promptly following its receipt of a Competitive Bid Request under
this subsection (b), notify the Lenders of its receipt and the contents thereof
and invite the Lenders to submit Competitive Bids in response thereto. A form of
such notice is provided in Schedule VA-2. No more than two (2) Competitive Bid
-------------
Requests (e.g., the Borrower may request Competitive Bids for no more than two
(2) different Interest Periods at a time) shall be submitted at any one time and
Competitive Bid Requests may be made no more frequently than once every five (5)
Business Days.
(c) Competitive Bid Procedure. Each Lender may, in its sole discretion,
-------------------------
make one or more Competitive Bids to the Borrower in response to a Competitive
Bid Request. Each Competitive Bid must be received by the Administrative Agent
not later than 10:00 A.M. (Charlotte, North Carolina time) on the Business Day
next succeeding the date of receipt by the Administrative Agent of the related
Competitive Bid Request. A Lender may offer to make all or part of the requested
Competitive Loan borrowing and may submit multiple Competitive Bids in response
to a Competitive Bid Request. The Competitive Bid shall specify (i) the
particular Competitive Bid Request as to which the Competitive Bid is submitted,
(ii) the minimum (which shall be not less than $1,000,000 and integral multiples
of $1,000,000 in excess thereof) and maximum principal amounts of the requested
Competitive Loan or Loans as to which the Lender is willing to make, and (iii)
the applicable interest rate or rates and Interest Period or Periods therefor. A
form of such Competitive Bid is provided in Schedule VA-3. A Competitive Bid
-------------
submitted by a Lender in accordance with the provisions hereof shall be
irrevocable. The Administrative Agent shall promptly notify the Borrower by no
later than 10:30 A.M. (Charlotte, North Carolina time) on the Business Day
succeeding the date of receipt by the Administrative Agent of the related
Competitive Bid Request of all Competitive Bids made and the terms thereof. The
Administrative Agent shall send a copy of each of the Competitive Bids to the
Borrower for its records as soon as practicable.
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(d) Submission of Competitive Bids by Administrative Agent. If the
------------------------------------------------------
Administrative Agent, in its capacity as a Lender, elects to submit a
Competitive Bid in response to any Competitive Bid Request, it shall submit such
Competitive Bid directly to the Borrower one-half of an hour earlier than the
latest time at which the other Lenders are required to submit their Competitive
Bids to the Administrative Agent in response to such Competitive Bid Request
pursuant to subsection (c) above.
(e) Acceptance of Competitive Bids. The Borrower may, in its sole and
------------------------------
absolute discretion, subject only to the provisions of this subsection (e),
accept or refuse any Competitive Bid offered to it. To accept a Competitive Bid,
the Borrower shall give written notification (or telephonic notice promptly
confirmed in writing) substantially in the form of Schedule VA-4 of its
-------------
acceptance of any or all such Competitive Bids to the Administrative Agent by
11:00 A.M. (Charlotte, North Carolina time) on the date on which notice of
election to make a Competitive Bid is to be given to the Administrative Agent by
the Lenders; provided, however, (i) the failure by the Borrower to give timely
-------- -------
notice of its acceptance of a Competitive Bid shall be deemed to be a refusal
thereof, (ii) the Borrower may accept Competitive Bids only in ascending order
of rates, (iii) the aggregate amount of Competitive Bids accepted by the
Borrower shall not exceed the principal amount specified in the Competitive Bid
Request, (iv) the Borrower may accept a portion of a Competitive Bid in the
event, and to the extent, acceptance of the entire amount thereof would cause
the Borrower to exceed the principal amount specified in the Competitive Bid
Request, subject however to the minimum amounts provided herein (and provided
that where two or more Lenders submit such a Competitive Bid at the same
Competitive Bid Rate, then pro rata between or among such Lenders) and (v) no
bid shall be accepted for a Competitive Loan unless such Competitive Loan is in
a minimum principal amount of $1,000,000 and integral multiples of $1,000,000 in
excess thereof, except that where a portion of a Competitive Bid is accepted in
accordance with the provisions of subsection (iv) hereof, then in a minimum
principal amount of $1,000,000 and integral multiples of $1,000,000 in excess
thereof (but not in any event less than the minimum amount specified in the
Competitive Bid), and in calculating the pro rata allocation of acceptances of
portions of multiple bids at a particular Competitive Bid Rate pursuant to
subsection (iv) hereof, the amounts shall be rounded to integral multiples of
$1,000,000 in a manner which shall be in the discretion of the Borrower. A
notice of acceptance of a Competitive Bid given by the Borrower in accordance
with the provisions hereof shall be irrevocable. The Administrative Agent shall,
not later than 12:00 Noon (Charlotte, North Carolina time) on the date of
receipt by the Administrative Agent of a notification from the Borrower of its
acceptance and/or refusal of Competitive Bids, notify each affected Lender of
its receipt and the contents thereof. Upon its receipt from the Administrative
Agent of notification of the Borrower's acceptance of its Competitive Bid in
accordance with the terms of this subsection (e), each successful bidding Lender
will thereupon become bound, subject to the other applicable conditions hereof,
to make the Competitive Loan in respect of which its bid has been accepted.
(f) Funding of Competitive Loans. Each Lender which is to make a
----------------------------
Competitive Loan shall make its Competitive Loan borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified herein by 1:30 P.M. (Charlotte, North Carolina
time) on the date specified in the Competitive Bid Request in Dollars and in
funds immediately available to the Administrative Agent. Such borrowing will
then be made available to
44
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the Borrower by crediting the account of the Borrower on the books of such
office with the aggregate of the amount made available to the Administrative
Agent by the applicable Competitive Loan Lenders and in like funds as received
by the Administrative Agent.
(g) Maturity of Competitive Loans. Each Competitive Loan shall mature
-----------------------------
and be due and payable in full on the last day of the Interest Period applicable
thereto. Unless the Borrower shall give notice to the Administrative Agent
otherwise, the Borrower shall be deemed to have requested a Revolving Loan
borrowing in the amount of the maturing Competitive Loan, the proceeds of which
will be used to repay such Competitive Loan.
(h) Interest on Competitive Loans. Subject to the provisions of Section
-----------------------------
3.1, Competitive Loans shall bear interest in each case at the Competitive Bid
Rate applicable thereto. Interest on Competitive Loans shall be payable in
arrears on each Interest Payment Date.
SECTION 2.05. Termination and Reduction of Commitments.
----------------------------------------
(a) Voluntary. The Borrower may from time to time permanently reduce or
---------
terminate the aggregate Revolving Committed Amount in whole or in part (in
minimum aggregate amounts of the lesser of $1,000,000 or the full remaining
amount of the Revolving Committed Amount) upon three Business Days' prior
written notice to the Administrative Agent; provided, however, no such
termination or reduction shall be made which would reduce the Revolving
Committed Amount to an amount less than the sum of Revolving Loans outstanding
plus Swingline Loans outstanding plus LOC Obligations outstanding. The
commitments of the Lenders to make, extend or convert Revolving Loans shall
automatically terminate on the Maturity Date. The Administrative Agent shall
promptly notify each of the Lenders of receipt by the Administrative Agent of
any notice from the Borrower pursuant to this Section 2.05.
(b) Mandatory. At the option of the Required Lenders (evidenced by
---------
prompt written notice thereof from the Administrative Agent, on behalf of the
Required Lenders, to the Borrower), the aggregate Revolving Committed Amount
shall be permanently reduced by the amount of any mandatory payment, prepayment
or other reduction of the Loans and LOC Obligations made in accordance with the
terms of Section 3.02(b)(ii)(A).
SECTION 2.06. Fees.
----
(a) Facility Fee. In consideration of the Commitments hereunder, the
------------
Borrower agrees to pay to the Administrative Agent for the account of the
Lenders a facility fee (the "Facility Fee") on the aggregate Revolving Committed
Amount computed from the Restatement Date at a per annum rate equal to the
Applicable Margin for each day during the applicable period. The Facility Fee
shall be payable quarterly in arrears on the fifteenth (15th) day of each
January, April, July and October and on the Maturity Date for the immediately
preceding fiscal quarter (or portion thereof).
(b) Letter of Credit Fees.
---------------------
45
<PAGE>
(i) Standby Letter of Credit Fee. In consideration of the issuance of
----------------------------
standby Letters of Credit hereunder, the Borrower agrees to pay to the Issuing
Lender a fee (the "Standby Letter of Credit Fee") equal to the Applicable Margin
for Letters of Credit plus one-eighth of one percent (1/8%) per annum on the
average daily maximum amount available to be drawn under each such Letter of
Credit from the date of issuance to the date of expiration. Of such Standby
Letter of Credit Fee, the Issuing Lender shall retain for its own account
without sharing by the other Lenders one-eighth of one percent (1/8%) per annum
thereon and shall promptly pay over to the Administrative Agent for the ratable
benefit of the Lenders (including the Issuing Lender) the remainder of amounts
paid on the Standby Letter of Credit Fee; provided, however, that the Lenders
-------- -------
shall not be entitled to any such fee in respect of a standby Letter of Credit
which is an Existing Letter of Credit if such fee has been deemed to be earned
during the period prior to the Closing Date (it being understood and agreed by
each of the Lenders that any such fee in respect of a standby Letter of Credit
which is an Existing Letter of Credit shall be deemed to be earned evenly
throughout the period for which it is paid regardless of when it was paid). The
Standby Letter of Credit Fee will be payable quarterly in arrears on the 15th
day of each January, April, July and October.
(ii) Trade Letter of Credit Fee. In consideration of the issuance of
--------------------------
trade Letters of Credit hereunder, the Borrower agrees to pay to the Issuing
Lender a fee (the "Trade Letter of Credit Fee") equal to one-quarter of one
percent (1/4%) of the amount of each drawing under any such Letter of Credit or
such lesser amount as may be agreed upon by the Issuing Lender and the Borrower.
Of such Trade Letter of Credit Fee, the Issuing Lender shall pay over to the
Administrative Agent for the ratable benefit of the Lenders (including the
Issuing Lender) one-eighth of one percent (1/8%) thereof and the Issuing Lender
may retain for its own account without sharing by the other Lenders the amount
in excess thereof, if any. The Trade Letter of Credit Fee will be collected by
the Issuing Lender on the date of each drawing, the Lenders' portion of which
will be paid over to the Administrative Agent quarterly on the 15th day of each
January, April, July and October for distribution to the Lenders (including the
Issuing Lender).
(iii) Issuing Lender Fees. In addition to the Standby Letter of Credit
-------------------
Fees and Trade Letter of Credit Fees payable pursuant to clauses (i) and (ii)
above, the Borrower shall pay to the Issuing Lender for its own account without
sharing by the other Lenders the customary charges from time to time of the
Issuing Lender with respect to the issuance, amendment, transfer,
administration, cancellation and conversion of, and drawings under, such Letters
of Credit (collectively, the "Issuing Lender Fees").
(c) Agents' Fees. The Borrower agrees to pay to the Administrative
------------
Agent and Arranger, for their own account, such structuring, syndication,
administrative and other fees (collectively, the "Agents' Fees") as provided in
the Mandate Letter, the Administrative Agent's Fee Letter.
(d) Competitive Bid Request Fee. The Borrower shall pay to the
---------------------------
Administrative Agent concurrently with each Competitive Bid Request such
administrative fee as provided in the Administrative Agent's Fee Letter (the
"Competitive Bid Request Fee").
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<PAGE>
ARTICLE III.
ADDITIONAL PROVISIONS REGARDING LOANS
SECTION 3.01. Default Rate.
------------
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate 2% greater than the
rate which would otherwise be applicable.
SECTION 3.02. Prepayments.
-----------
(a) Voluntary.
---------
(i) Revolving Loans and Competitive Loans. The Borrower shall have
-------------------------------------
the right to prepay Revolving Loans and Competitive Loans in whole or in part
from time to time without premium or penalty; provided, however, that (A) each
-------- -------
such partial prepayment shall be a minimum principal amount of $1,000,000 or an
integral multiple of $500,000 in excess thereof and (B) no Eurodollar Loan or
Competitive Loan may be prepaid prior to the last day of the Interest Period
applicable thereto unless accompanied by payment of amounts specified in Section
3.07. Amounts prepaid on the Revolving Loans may be reborrowed in accordance
with the provisions hereof.
(ii) Swingline Loans. The Borrower shall have the right to prepay
---------------
Swingline Loans which are Base Rate Loans in whole or in part from time to time
without premium or penalty; provided, however, that each such partial prepayment
-------- -------
shall be a minimum principal amount of $100,000 or an integral multiple of
$100,000 in excess thereof. Swingline Loans which are Quoted Rate Swingline
Loans may not be prepaid unless accompanied by payments of amounts specified in
Section 3.07. Amounts prepaid on the Swingline Loans may be reborrowed in
accordance with the provisions hereof.
(iii) Application. Amounts prepaid hereunder shall be applied to the
-----------
Revolving Loans and the Swingline Loans as the Borrower may elect, provided that
--------
if the Borrower shall fail to specify its application, prepayments shall be
applied, first, to the Swingline Loans (and with respect to Base Rate Loans and
Quoted Rate Swingline Loans comprising such Loans, first to Base Rate Loans and
then to Quoted Rate Swingline Loans in direct order of Interest Period
maturities), second, to Revolving Loans (and with respect to Base Rate Loans and
Eurodollar Loans comprising such Loans, first to Base Rate Loans and then to
Eurodollar Loans in direct order of Interest Period maturities) and, third, to
Competitive Loans in direct order of Interest Period maturities.
(b) Mandatory.
---------
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(i) Revolving Committed Amount Limitation. If at any time (A) the sum
-------------------------------------
of Revolving Loans outstanding plus Swingline Loans outstanding plus LOC
---- ----
Obligations outstanding plus Competitive Loans outstanding shall exceed (B) the
----
Revolving Committed Amount, then in any such instance the Borrower shall pay,
prepay or otherwise reduce so much of the outstanding Loans and LOC Obligations
as shall be necessary to eliminate such excess.
(ii) Excess Sale Events. In the event that there shall occur any Excess
------------------
Sale Event, the Borrower will give the Administrative Agent and each of the
Lenders, not later than the date of such Excess Sale Event (which, in the case
of an Excess Sale Event consisting of a Sale Leaseback, shall be deemed to be
the date of the sale of the assets subject thereto), written notice thereof
("Excess Sale Notice"). Each Excess Sale Notice shall set forth (i) the date of
such Excess Sale Event and a description of the facts or circumstances giving
rise thereto and (ii) the amount of the Available Fund resulting from such
Excess Sale Event and the Pro Rata Prepayment Share thereof (together with
computations showing the calculation of such amount and such Pro Rata Prepayment
Share). On the thirty-fifth day following the giving of any Excess Sale Notice,
the Borrower shall pay, prepay or otherwise reduce the outstanding Loans and LOC
Obligations by an amount equal to the Pro Rata Prepayment Share of the Available
Fund resulting from the Excess Sale Event to which such Excess Sale Notice
relates.
For purposes hereof:
(A) "Excess Sale Event" shall mean (1) any Sale Leaseback to
the extent such Sale Leaseback is not consummated in compliance with
subdivision (a) of Section 8.04 or (2) the expiration of the
Application Period for any Substantial Sale as to which the sum of (I)
the amount applied (or caused to be applied) by the Borrower during
such Application Period by reason of such Substantial Sale to the
purchase, acquisition or construction of Additional Assets plus (II)
----
the Additional Portion, if any, of such Net Sale Proceeds to be so
applied during the Further Period immediately following such
Application Period, as specified in the Officers' Certificate furnished
pursuant to subdivision (ii)(B) of Section 8.07 in connection with such
Substantial Sale, shall not be at least equal to the amount of such Net
Sale Proceeds during which an amount equal to the Net Sale Proceeds of
such Substantial Sale shall not have been applied (or caused to be
applied) by the Borrower, by reason of such Substantial Sale, to the
purchase, acquisition or (in the case of real estate) construction of
Alternative Assets;
(B) "Available Fund" resulting from any Excess Sale Event
shall mean (1) if such Excess Sale Event shall consist of a Sale
Leaseback, an amount equal to the Net Sale Proceeds of the assets sold
by the Borrower or a Restricted Subsidiary, as the case may be, in
connection with such Sale Leaseback or (2) if such Excess Sale Event
shall consist of the expiration of the Application Period for a
Substantial Sale, an amount equal to the excess of (I) the Net Sale
Proceeds of such Substantial Sale over (II) the sum of (x) the
aggregate amount applied (or caused to be applied) by the Borrower
during such Application Period, by reason of such Substantial Sale, to
the purchase, acquisition or (in the case of real estate) construction
of Alternative Assets plus (y) the Additional Portion, if any, of such
----
Net Sale Proceeds to be so applied during the Further Period
immediately
48
<PAGE>
following such Application Period, as specified in the Officers'
Certificate furnished pursuant to subdivision (ii)(B) of Section 8.07
in connection with such Substantial Sale; and
(C) "Pro Rata Prepayment Share" of any Available Fund
resulting from any Excess Sale Event shall mean a percentage of such
Available Fund (rounded to the nearest one-hundredth of one percent)
determined as of the date that the Excess Sale Notice with respect to
the related Excess Sale Event is required to be given under this
Section 3.02(b)(ii) obtained by dividing (1) the sum (without
duplication) of Revolving Loans then outstanding plus Swingline Loans
----
then outstanding plus LOC Obligations then outstanding plus Competitive
---- ----
Loans then outstanding by (2) the sum of (x) the aggregate then
outstanding principal amount of all Revolving Loans then outstanding
plus Swingline Loans then outstanding plus LOC Obligations then
---- ----
outstanding plus Competitive Loans then outstanding plus (y) the amount
---- ----
determined pursuant to clause (1) above in respect of such Available
Fund.
(iii) Payments and prepayments pursuant to this Section 3.02(b)
shall be applied, first, to Swingline Loans (and with respect to Base Rate Loans
-----
and Quoted Rate Swingline Loans comprising such Loans, first to Base Rate Loans
and then to Quoted Rate Swingline Loans in direct order of Interest Period
maturities), until all Swingline Loans have been repaid or prepaid in full;
second, to Revolving Loans (and with respect to Base Rate Loans and Eurodollar
- ------
Loans comprising such Loans, first to Base Rate Loans and then to Eurodollar
Loans in direct order of Interest Period maturities), until all Revolving Loans
have been repaid or prepaid in full; third, to Competitive Loans in direct order
-----
of Interest Period maturities; and fourth, to the extent necessary, to the
------
payment to the Administrative Agent of additional amounts of cash, to be held by
the Administrative Agent, for the benefit of the Issuing Lender and the other
Lenders, in a cash collateral account as additional security for the Borrower's
LOC Obligations for subsequent drawings under then outstanding Letters of
Credit.
(c) General. All prepayments of Loans shall be subject to Section 3.07
-------
but otherwise without premium or penalty and shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment and all
other amounts due and payable hereunder with respect to such Loans.
SECTION 3.03. Extension and Conversion.
The Borrower shall have the option, on any Business Day, to extend
existing Loans into a subsequent Interest Period or to convert Loans into Loans
of another type; provided, however, that (i) except as provided in Section 3.06,
-------- -------
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if no Default
or Event of Default is in existence on the date of extension or conversion,
(iii) Loans extended as, or converted into, Eurodollar Loans shall be in such
minimum amounts as provided in Section 2.01(b), (iv) any request for extension
or conversion of a Eurodollar Loan which shall fail to specify an Interest
Period shall be deemed to be a request for an Interest Period of one month and
49
<PAGE>
(v) Swingline Loans may not be converted or extended pursuant to this Section
3.03. Each such extension or conversion shall be effected by the Borrower by
giving a Notice of Extension/Conversion (or telephone notice promptly confirmed
in writing) to the Administrative Agent prior to 1:00 P.M. (Charlotte, North
Carolina time) on the Business Day of, in the case of the conversion of a
Eurodollar Loan into a Base Rate Loan and on the third Business Day prior to, in
the case of the extension of a Eurodollar Loan as, or conversion of a Base Rate
Loan into, a Eurodollar Loan, the date of the proposed extension or conversion,
specifying the date of the proposed extension or conversion, the Loans to be so
extended or converted, the types of Loans into which such Loans are to be
converted and, if appropriate, the applicable Interest Periods with respect
thereto. Each request for extension or conversion shall constitute a
representation and warranty by the Borrower of the matters specified in Section
5.03(b), (c), (d) and (e). In the event the Borrower fails to request extension
or conversion of any Eurodollar Loan in accordance with this Section, or any
such conversion or extension is not permitted or required by this Section, then
such Loans shall be automatically converted into Base Rate Loans at the end of
their Interest Period. The Administrative Agent shall give each Lender notice as
promptly as practicable of any such proposed extension or conversion affecting
any Loan.
SECTION 3.04. Alternate Rate of Interest.
--------------------------
In the event, and on each occasion, that on the day two Business Days
prior to the commencement of any Interest Period for a Eurodollar Loan the
Administrative Agent shall have determined in good faith (i) that dollar
deposits in the principal amounts of such Eurodollar Loan are not generally
available in the London interbank market or (ii) that reasonable means do not
exist for ascertaining the Eurodollar Rate as practicable thereafter, give telex
or telecopy notice of such determination to the Borrower and the Lenders. In the
event of any such determination under clause (i) or (ii) above, until the
Administrative Agent shall have advised the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (A) any request by the
Borrower for a Eurodollar Loan pursuant to Section 2.01(b) shall be deemed to be
a request for a Base Rate Loan and (B) any request by the Borrower for
conversion into or extension of a Eurodollar Loan pursuant to Section 3.03 shall
be deemed to be a request for conversion into or extension of a Base Rate Loan.
Each determination by the Administrative Agent hereunder shall be in good faith
and shall be rebuttably presumptive evidence thereof absent manifest error.
SECTION 3.05. Reserve Requirements; Change in Circumstances.
---------------------------------------------
(a) Notwithstanding any other provision herein, if after the Relevant
Date (as defined in paragraph (c) below) any change in applicable law or
regulation or in the interpretation or administration thereof by any
Governmental Body charged with the interpretation or administration thereof
(whether or not having the force of law) shall impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of, deposits
with or for the account of or credit extended by such Lender (including without
limitation the Swingline Lender and the Issuing Lender), or shall impose on such
Lender or the London interbank market any other condition affecting this
Agreement, such Lender's Commitment, any Loan made by such Lender, any Letter of
Credit issued by such Lender or any Participation Interest held by such Lender
(other than the imposition of or change in the rate of any Taxes as defined in
Section
50
<PAGE>
4.04 or the imposition of or change in the rate of any item specifically
excluded from such definition of Taxes pursuant to the terms of such Section),
and the result of any of the foregoing shall be to increase the cost to such
Lender of making, issuing or maintaining such Loan, Letter of Credit or
Participation Interest, as the case may be, or to reduce the amount of any sum
received or receivable by such Lender hereunder (whether of principal, interest
or otherwise) by an amount deemed by such Lender to be material, then the
Borrower will pay to such Lender in accordance with paragraph (d) below upon
demand such additional amount or amounts as will compensate such Lender for any
such additional costs incurred or reduction suffered after delivery to the
Borrower of a certificate relating to such additional costs or such reduction as
contemplated by such paragraph (d).
(b) If any Lender (including without limitation the Swingline Lender,
the Issuing Lender and any Competitive Lender) shall have determined that after
the Relevant Date the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards," or the
adoption after the date hereof of any other law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any Governmental
Body, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any lending office of
such Lender) or any Lender's holding company with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender's capital or on the capital of such
Lender's holding company, if any, as a consequence of this Agreement, such
Lender's Commitment or any Loan made by such Lender pursuant hereto, any Letter
of Credit issued by such Lender pursuant hereto or any Participation Interest
held by such Lender pursuant hereto to a level below that which such Lender or
such Lender's holding company could have achieved but for such adoption, change
or compliance (taking into consideration such Lender's policies and the policies
of such Lender's holding company with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time after delivery to
the Borrower of a certificate relating to such additional cost or costs as
contemplated by paragraph (d) below, the Borrower shall pay to such Lender in
accordance with such paragraph (d) such additional amount or amounts as will
compensate such Lender or such Lender's holding company for any such reduction
suffered.
(c) For purposes of this Section 3.05, "Relevant Date" shall mean, in
the case of a Lender that is a Lender on the date hereof and, in the case of a
Lender that becomes a Lender after the date hereof as provided in Section
12.04(b), the date on which such Lender becomes a Lender under such Section.
(d) A certificate signed by a duly authorized officer of a Lender
setting forth such amount or amounts (including computation of such amount or
amounts) as shall be necessary to compensate such Lender or its holding company
as specified in paragraph (a) or (b) above, as the case may be, shall be
delivered to the Borrower and the Administrative Agent, and the Borrower
51
<PAGE>
shall pay to such Lender, within 30 Business Days after receipt by the Borrower
of such certificate delivered by the Lender, the amount shown as due on any such
certificate.
(e) The protection of this Section shall be available to each Lender
(including without limitation the Swingline Lender and the Issuing Lender)
regardless of any possible contention of the invalidity or inapplicability of
the law, rule, regulation, guideline or other change or condition which shall
have occurred or been imposed. Each determination by a Lender (including without
limitation the Swingline Lender and the Issuing Lender) under this Section 3.05
shall be in good faith and shall be rebuttably presumptive evidence thereof
absent manifest error.
SECTION 3.06. Change in Legality.
------------------
(a) Notwithstanding any other provision herein, if any change in any
law or regulation or in the interpretation thereof by any Governmental Body
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
30 days' (or such shorter period as shall be required in order to comply with
applicable law) written notice to the Borrower and to the Administrative Agent,
such Lender may:
(i) declare that Eurodollar Loans, and conversions into or
extensions of Eurodollar Loans, will not thereafter be made by such
Lender hereunder, whereupon any request by the Borrower for, or for
conversion into or extension of, a Eurodollar Loan shall, as to such
Lender only, be deemed a request for, or for conversion into or
extension of, a Base Rate Loan, unless such declaration shall be
subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to Base Rate Loans, in which event all such Eurodollar Loans
shall be automatically converted to Base Rate Loans as of the effective
date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
Base Rate Loans made by such Lender in lieu of, or resulting from the conversion
of, such Eurodollar Loans.
(b) For purposes of this Section 3.06, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day
of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower. Each determination by a Lender under this Section 3.06 shall be in
good faith and shall be rebuttably presumptive evidence thereof absent manifest
error.
SECTION 3.07. Indemnity.
---------
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The Borrower shall indemnify each Lender (including without limitation
the Swingline Lender) against any loss, cost or expense which such Lender may
sustain or incur as a consequence of (a) any failure by the Borrower to borrow
or to refinance, convert or extend any Loan hereunder after notice of such
borrowing, refinancing, conversion or extension has been given pursuant to
Section 2.01, 2.02 or 3.03, or (b) any payment, prepayment or conversion by the
Borrower of a Eurodollar Loan, Quoted Rate Swingline Loan or a Competitive Loan
required by any other provision of this Agreement or otherwise made or deemed
made on a date other than the last day of the Interest Period, if any,
applicable thereto. In the case of any such event, the Borrower shall, upon
demand by such Lender (with a copy of such demand to the Administrative Agent),
pay to such Lender any amounts required to compensate such Lender for any
reasonable loss, cost or expense which such Lender may incur as a result of such
action or inaction by the Borrower, including without limitation any reasonable
loss, cost or expense incurred by reason, of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund or maintain such Loan or
proposed Loan. Each determination by a Lender under this Section 3.07 shall be
in good faith and shall be rebuttably presumptive evidence thereof absent
manifest error.
SECTION 3.08. Mandatory Assignment; Commitment Termination.
--------------------------------------------
In the event that any Lender delivers to the Administrative Agent or
the Borrower, as appropriate, a certificate in accordance with Section 3.05(d)
or a notice in accordance with Section 3.06 or in the event that any Lender
fails to fulfill its Commitment to make any Revolving Loan, then, provided that
no Default or Event of Default has occurred and is continuing at such time, the
Borrower may, at its own expense (such expense to include any transfer fee
payable to the Administrative Agent under Section 12.04(b)), and in its sole
discretion (a) require such Lender to transfer and assign in whole or in part,
without recourse (in accordance with and subject to the terms and conditions of
Section 12.04(b)), all or part of its interests, rights and obligations under
this Agreement to an Eligible Assignee which shall assume such assigned
obligations (which Eligible Assignee may be another Lender, if a Lender accepts
such assignment); provided that (i) such assignment shall not relieve the
Borrower from its obligations to pay such additional amounts that may be due in
accordance with Section 3.05(b), (ii) such assignment shall not conflict with
any law, rule or regulation or order of any court or other Governmental Body and
(iii) the Borrower or such Eligible Assignee shall have paid to the assigning
Lender in immediately available funds the principal of and interest accrued to
the date of such payment on the Loans made by it hereunder and all accrued Fees
and other amounts owed to it hereunder or (b) terminate the Commitment of such
Lender, prepay all outstanding Loans of such Lender and cash collateralize such
Lender's Participation Interests in Swingline Loans and LOC Obligations then
outstanding; provided that (i) such termination of the Commitment of such Lender
shall not relieve the Borrower from its obligations to pay such additional
amounts that may be due in accordance with Section 3.05(b), (ii) such
termination of the Commitment of such Lender, prepayment of Loans and cash
collateralization of such Participation Interests in Swingline Loans and LOC
Obligations does not conflict with any law, rule or regulation or order of any
court or other Governmental Body and (iii) the Borrower shall have paid to such
Lender in immediately available funds the principal of and interest accrued to
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the date of such payment on the Loans made by it hereunder and all other amounts
owed to it hereunder and shall have cash collateralized such Lender's
Participation Interests in outstanding Swingline Loans and LOC Obligations.
ARTICLE IV.
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; U.S. TAXES; EVIDENCE OF LOANS
SECTION 4.01. Payments and Computations.
-------------------------
Except as otherwise specifically provided herein, all payments hereunder shall
be made to the Administrative Agent in dollars in immediately available funds,
without offset, deduction or withholding of any kind, at its offices at
NationsBank Corporate Center, Charlotte, North Carolina not later than 2:00 P.M.
(Charlotte, North Carolina time) on the date when due. The Administrative Agent
may (but shall not be obligated to) debit the amount of any such payment which
is not made by such time to any ordinary deposit account of the Borrower
maintained with the Administrative Agent (with notice to the Borrower). The
Borrower shall, at the time it makes any payment under this Agreement, specify
to the Administrative Agent the Loans, LOC Obligations, Fees or other amounts
payable by the Borrower hereunder to which such payment is to be applied (and in
the event that it fails so to specify, or if such application would be
inconsistent with the terms hereof, the Administrative Agent shall distribute
such payment to the Lenders (including without limitation the Swingline Lender
and the Issuing Lender) in such manner as the Administrative Agent may determine
to be appropriate in respect of obligations owing by the Borrower hereunder,
subject to the terms of Sections 3.02 and 4.02). The Administrative Agent will
thereafter cause to be distributed promptly on the same day like funds relating
to the payment of principal or interest or Fees ratably to the Lenders entitled
to receive such payments in accordance with the terms of this Agreement.
Whenever any payment hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day (subject to accrual of interest and Fees for the period of such
extension), except that in the case of Eurodollar Loans, if the extension would
cause the payment to be made in the next following calendar month, then such
payment shall instead be made on the next preceding Business Day. Except as
expressly provided otherwise herein, all computations of interest and fees shall
be made on the basis of actual number of days elapsed over a year of 360 days.
Interest shall accrue from and include the date of advance, but exclude the date
of payment.
SECTION 4.02. Pro Rata Treatment.
------------------
(i) Except to the extent otherwise provided herein, each Revolving
Loan, each payment or prepayment of principal of any Revolving Loan, each
payment of interest on the Revolving Loans, each payment of Unused Fees, each
reduction of the Revolving Committed Amount and each conversion or extension of
any Revolving Loan, shall be allocated pro rata among the Lenders in accordance
with their respective Commitment Percentages (or if the Commitments
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have expired or been terminated, in accordance with the respective principal
amounts of outstanding Revolving Loans and Participation Interests of the
Lenders).
(ii) Each payment of unreimbursed drawings in respect of LOC
Obligations shall be allocated to each Lender entitled thereto pro rata in
accordance with the respective Commitment Percentages of the Lenders; provided
--------
that, if any Lender shall have failed to pay its pro rata share of any drawing
under any Letter of Credit, then any amount to which such Lender would otherwise
be entitled pursuant to this clause (ii) shall instead be payable to the Issuing
Lender; provided further, that in the event any amount paid to any Lender
-------- -------
pursuant to this clause (ii) is rescinded or must otherwise be returned by the
Issuing Lender, each Lender shall, upon the request of the Issuing Lender, repay
to the Administrative Agent for the account of the Issuing Lender the amount so
paid to such Lender, with interest for the period commencing on the date such
payment is returned by the Issuing Lender until the date the Issuing Lender
receives such repayment at a rate per annum equal to, during the period to but
excluding the date two (2) Business Days after such request, the Federal Funds
Effective Rate (computed on the basis of the actual number of days elapsed over
a year of 360 days), and thereafter, the Base Rate plus two percent (2%)
(computed on the basis of the actual number of days elapsed over a year of 360
days for each applicable day on which the Base Rate shall be determined on the
basis of the Federal Funds Effective Rate and over a year of 365/66 days for
each applicable day on which the Base Rate shall be determined on the basis of
the Prime Rate).
SECTION 4.03. Sharing of Payments.
-------------------
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, unreimbursed drawing with respect
to any LOC Obligation or other obligation owing to such Lender under this
Agreement through the exercise of a right of set-off, banker's lien,
counterclaim or otherwise in excess of its pro rata share as provided for in
this Agreement, such Lender shall promptly purchase from the other Lenders a
participation in such Loans, LOC Obligations and other obligations in such
amounts, and make such other adjustments from time to time, as shall be
equitable to the end that all Lenders share such payment in accordance with
their respective ratable shares as provided for in this Agreement. The Lenders
further agree among themselves that if payment to a Lender obtained by such
Lender through the exercise of a right of set-off, banker's lien, counterclaim
or otherwise as aforesaid shall be rescinded or must otherwise be restored, each
Lender which shall have shared the benefit of such payment shall, by repurchase
of a participation theretofore sold, return its share of that benefit (together
with its share of any accrued interest payable with respect thereto) to each
Lender whose payment shall have been rescinded or otherwise restored. The
Borrower agrees that any Lender so purchasing such a participation may, to the
fullest extent permitted by law, exercise all rights of payment, including
set-off, banker's lien or counterclaim, with respect to such participation as
fully as if such Lender were a holder of such Loan, LOC Obligation or other
obligation in the amount of such participation. Except as otherwise expressly
provided in this Agreement, if any Lender or the Administrative Agent shall fail
to remit to the Administrative Agent or any other Lender an amount payable by
such Lender or the Administrative Agent to the Administrative Agent or such
other Lender pursuant to this Agreement on the date when such amount is due,
such payments shall be made together with
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interest thereon for each date from the date such amount is due until the date
such amount is paid to the Administrative Agent or such other Lender at a rate
per annum equal to the Federal Funds Effective Rate.
SECTION 4.04. Net Payments.
------------
All payments made by the Borrower hereunder will be made without
set-off or counterclaim. All payments by the Borrower hereunder shall be made
free and clear of and without deduction or withholding for any Taxes (as
hereinafter defined), except to the extent that such deduction or withholding is
required by law. For purposes of this Section 4.04, "Taxes" shall mean any
present or future license, registration or other fees, taxes or other amounts
for or on account of levies, imposts, duties, deductions, withholdings or other
charges of whatsoever nature, imposed, levied, collected, withheld or assessed
by any governmental or taxing authority, excluding income and franchise taxes
imposed on a Lender (i) by a jurisdiction under which such Lender is organized
or operating in connection with this Agreement or any political subdivision
thereof or (ii) as a result of a present or former connection between the
jurisdiction of the governmental or taxing authority imposing such taxes and the
Lender. If the Borrower shall be required to withhold or deduct Taxes (other
than U.S. Taxes as defined in Section 4.05) from any sum payable hereunder, (i)
the sum payable shall be increased as may be necessary so that the amount
received is equal to the sum which would have been received had no withholdings
or deductions been made, (ii) the Borrower shall make such necessary
withholdings or deductions and (iii) the Borrower shall pay the full amount
withheld or deducted to the relevant authority according to applicable law so
that the Lenders shall not be required to make any deduction or payment of
Taxes.
SECTION 4.05. U.S. Taxes.
----------
(a) The Borrower agrees to pay to each Lender that is not a U.S. Person
(a "Foreign Lender") such additional amounts as are necessary in order that the
net payment of any amount due to such Foreign Lender hereunder after deduction
for or withholding in respect of any U.S. Taxes imposed with respect to such
payment (or in lieu thereof, payment of such U.S. Taxes by such Foreign Lender),
will not be less than the amount stated herein to be then due and payable,
provided that the foregoing obligation to pay such additional amounts shall not
- --------
apply:
(i) to any payment to any Foreign Lender hereunder unless
such Foreign Lender (A) on the date hereof (or on the date it becomes a
Lender as provided in Section 12.04(b)) and on the date of any change
in the applicable lending office of such Foreign Lender, is entitled to
submit either a Form 1001 (relating to such Foreign Lender and
entitling it to a complete exemption from withholding on all interest
to be received by it hereunder in respect of the Loans) or Form 4224
(relating to all interest to be received by such Foreign Lender
hereunder in respect of the Loans) and (B) timely delivers such Form in
duplicate to the Borrower, with a copy to the Administrative Agent at
such time;
(ii) to any payment to any Foreign Lender hereunder unless
such Foreign Lender delivers to the Borrower an updated copy of a Form
1001 and a Form
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4224 on or before the date of expiration or obsolescence of, or the
date of the occurrence of any event requiring a change in, the most
recent Form 1001 and/or Form 4224 previously delivered to the Borrower
by such Foreign Lender pursuant to this Section 4.05 (and such
extensions or renewals of such Forms as may reasonably be requested by
the Borrower from time to time), unless an event has occurred prior to
the date on which delivery of any such updated Form 1001 and/or Form
4224 would otherwise be required which has rendered such Form or Forms
inapplicable to any payment to a Foreign Lender hereunder subsequent to
such date; or
(iii) to any U.S. Tax imposed solely by reason of the failure
by such Foreign Lender to comply with applicable certification,
information, documentation or other reporting requirements concerning
the nationality, residence, identity, or connections with the United
States of America of such Foreign Lender if such compliance is required
by statute or regulation of the United States of America as a
precondition to relief or exemption from such U.S. Taxes; and
provided further that the Borrower shall not be required pursuant to this
- -------- -------
Section 4.05 to pay additional amounts to any Foreign Lender to the extent that
such additional amounts relate to any payment to such Foreign Lender required
hereunder prior to the date that is 90 days after the date that the Borrower
first receives notice from such Foreign Lender requesting payment of any such
additional amounts.
For the purposes of this Section 4.05(a), (w) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of
America, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof or
therein.
(b) Within thirty (30) days after paying any amount to the
Administrative Agent or any Foreign Lender from which it is required by law to
make any deduction or withholding, and within thirty (30) days after it is
required by law to remit such deduction or withholding to any relevant taxing or
other authority, the Borrower shall deliver to the Administrative Agent for
delivery to such Foreign Lender evidence satisfactory to such Foreign Lender of
such deduction, withholding or payment (as the case may be).
(c) In the event that any Lender requests payment by the Borrower of
any additional amounts pursuant to subsection (a) of this Section 4.05, then,
provided that no Default or Event
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of Default has occurred and is continuing at such time, the Borrower may, at its
own expense (such expense to include any transfer fee payable to the
Administrative Agent under Section 12.04(b)), and in its sole discretion (a)
require such Lender to transfer and assign in whole or in part, without recourse
(in accordance with and subject to the terms and conditions of Section
12.04(b)), all or part of its interests, rights and obligations under this
Agreement to an Eligible Assignee which shall assume such assigned obligations
(which Eligible Assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) such assignment shall not relieve the Borrower
from its obligations to pay such additional amounts that may be due in
accordance with subsection (a) of this Section 4.05, (ii) such assignment shall
not conflict with any law, rule or regulation or order of any court or other
Governmental Body and (iii) the Borrower or such Eligible Assignee shall have
paid to the assigning Lender in immediately available funds the principal of and
interest accrued to the date of such payment on the Loans made by it hereunder
and all accrued Fees and other amounts owed to it hereunder or (b) terminate the
Commitment of such Lender, prepay all outstanding Loans of such Lender and cash
collateralize such Lender's Participation Interests in Swingline Loans and LOC
Obligations then outstanding; provided that (i) such termination of the
Commitment of such Lender shall not relieve the Borrower from its obligations to
pay such additional amounts that may be due in accordance with subsection (a) of
this Section 4.05, (ii) such termination of the Commitment of such Lender,
prepayment of Loans and cash collateralization of such Participation Interests
in Swingline Loans and LOC Obligations does not conflict with any law, rule or
regulation or order of any court or other Governmental Body and (iii) the
Borrower shall have paid to such Lender in immediately available funds the
principal of and interest accrued to the date of such payment on the Loans made
by it hereunder and all other amounts owed to it hereunder and shall have cash
collateralized such Lender's Participation Interests in outstanding Swingline
Loans and LOC Obligations.
SECTION 4.06. Evidence of Loans.
-----------------
(a) Each Lender shall maintain an account or accounts evidencing (i)
each Loan made by such Lender to the Borrower from time to time, (ii) any
amounts paid other than as Loans by such Lender to or for the account of the
Swingline Lender pursuant to Section 2.02(b)(iii) from time to time and (iii)
any amounts paid other than as Loans by such Lender to or for the account of the
Issuing Lender pursuant to Section 2.03(c) from time to time, including in each
case the amounts of principal and interest payable and paid to such Lender from
time to time under this Agreement. Each Lender will make reasonable efforts to
maintain the accuracy of its account or accounts and to promptly update its
account or accounts from time to time, as necessary.
(b) The Administrative Agent shall maintain a register and a
subaccount for each Lender, in which register and subaccounts (taken together)
shall be recorded (i) the amount, type and Interest Period of each Loan
hereunder, (ii) the maximum amount available to be drawn under each outstanding
Letter of Credit, (iii) the amount of any principal or interest due and payable
or to become due and payable to each Lender hereunder, (iv) the amount of any
sum received by the Administrative Agent hereunder from or for the account of
the Borrower and each Lender's share thereof and (v) the amount of each payment
received by the Issuing Lender from the Borrower in reimbursement of any LOC
Obligations. The Administrative Agent will
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make reasonable efforts to maintain the accuracy of the subaccounts referred to
in the preceding sentence and to promptly update such subaccounts from time to
time, as necessary.
(c) The entries made in the accounts, register and subaccounts
maintained pursuant to paragraphs (a) and (b) of this Section 4.06 shall, to the
extent permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Borrower therein recorded; provided, however,
-------- -------
that the failure of any Lender or the Administrative Agent to maintain any such
account, such register or such subaccount, as applicable, or any error therein,
shall not in any manner affect the obligations of the Borrower hereunder.
ARTICLE V.
CONDITIONS PRECEDENT
SECTION 5.01. [INTENTIONALLY OMITTED].
SECTION 5.02. [INTENTIONALLY OMITTED].
SECTION 5.03. Each Extension of Credit.
The obligations of each Lender (including the Swingline Lender and the
Issuing Lender) to make any Extension of Credit or to convert or extend any
Revolving Loan are subject to satisfaction of the following conditions in
addition to satisfaction on the Restatement Date of the conditions set forth in
Section 5.04:
(a) (i) In the case of any Revolving Loan, the
Administrative Agent shall have received an appropriate Notice of
Borrowing or Notice of Extension/Conversion; (ii) in the case of any
Swingline Loan, the Swingline Lender shall have received an appropriate
notice of borrowing in accordance with the provisions of Section
2.02(b)(i); and (iii) in the case of any Letter of Credit the Issuing
Lender shall have received an appropriate request for issuance of a
Letter of Credit pursuant to Section 2.03(b);
(b) The representations and warranties set forth in Article
IX shall be true and correct in all material respects as of such date
(except to the extent that any such representations and warranties
expressly relate to an earlier date);
(c) There shall not have been commenced against the Borrower
an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or any case, proceeding
or other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Borrower or for any substantial part of its Property or for the winding
up or liquidation of its affairs, and such involuntary case or other
case, proceeding or other action shall remain undismissed, undischarged
or unbonded;
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(d) No Default or Event of Default shall exist and be
continuing either prior to or immediately after giving effect thereto;
and
(e) Immediately after giving effect to the making of such
Loan (and the application of the proceeds thereof) or to the issuance
of such Letter of Credit, as the case may be, (i)(A) the sum of
Revolving Loans outstanding plus Swingline Loans outstanding plus LOC
---- ----
Obligations outstanding plus Competitive Loans outstanding, shall not
----
exceed (B) the Revolving Committed Amount; (ii) the Swingline Loans
outstanding shall not exceed the Swingline Committed Amount; (iii) the
LOC Obligations shall not exceed the LOC Committed Amount; and (iv) the
Competitive Loans outstanding shall not exceed the Competitive Loan
Maximum Amount.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion,
each request for a Swingline Loan pursuant to Section 2.02(b)(i) and each
request for issuance of Letter of Credit pursuant to Section 2.03(b) and for a
Competitive Bid pursuant to Section 2.04(b) shall constitute a representation
and warranty by the Borrower of the correctness of the matters specified in
subsections (b), (c), (d) and (e) above.
SECTION 5.04. Conditions to Restatement Date.
------------------------------
The effectiveness of the amendments and modifications provided in this
Amended and Restated Credit Agreement are subject to satisfaction of the
following conditions, in addition to satisfaction of the conditions set forth in
Section 5.03:
(a) Receipt by the Administrative Agent of the following
financial information.
(i) Annual audited consolidated financial statements for
the Borrower and its Subsidiaries for fiscal year 1996 (ending June 29,
1996), including a consolidated balance sheet, and related consolidated
statements of operations, changes in stockholders' equity and cash
flows, setting forth in each case such information in comparative form
for the previous fiscal year and accompanied by an opinion of
independent certified public accountants of recognized national
standing as provided in Section 6.01(b) for annual audited financial
statements; and
(ii) Company-prepared quarterly consolidated financial
statements for the Borrower and its Subsidiaries for the second fiscal
quarter of 1997 (ending December 28, 1996), including a consolidated
balance sheet, and related consolidated statements of operations,
changes in stockholders' equity and cash flows, setting forth in each
case such information in comparative form for such periods during the
previous fiscal year as provided in Section 6.01(a) for company-
prepared quarterly financial statements.
(b) Receipt by the Administrative Agent of multiple counterparts
of this Agreement and the Guaranty Agreement executed by each of the
parties.
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(c) Receipt by the Administrative Agent of certified copies of
articles of incorporation, bylaws, resolutions and the like for the
Borrower and each of the Guarantors.
(d) Receipt by the Administrative Agent of legal opinions of
counsel to the Borrower and the Restricted Subsidiaries on or before
the Restatement Date in form and substance satisfactory to the
Administrative Agent and the Lenders.
(e) Payment to the Administrative Agent, the other Agents and
the Lenders all fees payable in connection with this Amended and
Restated Credit Agreement.
ARTICLE VI.
FINANCIAL STATEMENTS; INFORMATION
SECTION 6.01. Reporting Requirements.
----------------------
The Borrower hereby covenants and agrees that, so long as this
Agreement is in effect or any Letter of Credit or under any amounts payable
hereunder or any of the other Credit Documents shall remain outstanding, and
until all of the Commitments shall have been terminated, the Borrower will
furnish, or cause to be furnished, to the Administrative Agent and each Lender:
(a) Quarterly Statements. As soon as available and in any event
--------------------
within 45 days after the end of each quarterly fiscal period in each
fiscal year of the Borrower, (i) a consolidated balance sheet of the
Borrower and its Restricted Subsidiaries as at the end of such
quarterly fiscal period and the related consolidated statements of
operations, changes in stockholders' equity and cash flows of the
Borrower and its Restricted Subsidiaries for such quarterly fiscal
period and (in the case of the second and third such quarterly fiscal
period in each fiscal year) for the portion of the fiscal year ended
with the last day of such quarterly fiscal period, setting forth in
each case in comparative form the respective figures for the
corresponding period of the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and certified by the
principal financial officer of the Borrower as fairly presenting, in
all material respects, the financial position of the companies being
reported on and the results of their operations and cash flows except
as to the absence of footnotes and subject to changes resulting from
normal year-end audit adjustments and (ii) comparable consolidated
financial statements of JPF and its Subsidiaries as at the end of and
for such quarterly period, prepared in the same manner as such
consolidated financial statements of the Borrower and its Restricted
Subsidiaries and similarly certified by the principal financial officer
of JPF; provided that, (A) delivery within the time period specified
--------
above (or, if later, within five days of timely filing with the
Commission) of copies of JPF's Quarterly Report on Form 10-Q for any
quarterly fiscal period prepared in compliance with the requirements
therefor and filed with the Commission shall be deemed to satisfy the
requirements of subdivision (ii) of
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this Section 4(a) for such period so long as such Quarterly Report
contains the applicable information required by this Section 4(a), and
(B) together with the consolidated financial statements of the Borrower
and its Restricted Subsidiaries furnished pursuant to this Section 4(a)
in respect of each quarterly fiscal period, the Borrower will also
furnish comparable consolidated financial statements as of the end of
and for such period, prepared and certified in the same manner, of the
Borrower and all of its Subsidiaries;
(b) Annual Statements. As soon as available and in any event
-----------------
within 90 days after the end of each fiscal year of the Borrower, (i) a
consolidated balance sheet of the Borrower and its Restricted
Subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, changes in stockholders' equity
and cash flows of the Borrower and its Restricted Subsidiaries for such
fiscal year, setting forth in each case in comparative form the
respective figures as of the end of and for the previous fiscal year,
all in reasonable detail and accompanied by an opinion thereon of
independent certified public accountants of recognized national
standing selected by the Borrower and reasonably satisfactory to the
Required Lenders, which opinion shall not be made in reliance upon the
opinion of any other accountant (except for opinions of other
independent certified public accountants in respect of financial
statements of a Person which shall have become a Subsidiary or the
assets of which shall have been acquired by the Borrower or a
Subsidiary during such fiscal year), shall not contain any
qualification as to scope, and shall state that such financial
statements present fairly, in all material respects, the financial
position of the companies being reported on and their results of
operations and their cash flows in conformity with GAAP, that the audit
of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards and
that such accountants believe such audit provides a reasonable basis
for such opinion and (ii) comparable consolidated financial statements
of JPF and its Subsidiaries as at the end of and for such fiscal year,
prepared in the same manner as such consolidated financial statements
of the Borrower and its Restricted Subsidiaries and accompanied by an
opinion thereon of independent certified public accountants meeting the
requirements therefor, mutatis mutandis, set forth in the foregoing
------- --------
subdivision (b)(i); provided that, (A) the delivery within the time
--------
period specified above (or, if later, within five days of timely filing
with the Commission) of JPF's Annual Report on Form 10-K (together with
JPF's annual report to shareholders, if any, prepared pursuant to Rule
14a-3 under the Exchange Act) for any fiscal year prepared in
compliance with the requirements therefor and filed with the Commission
shall be deemed to satisfy the requirements of subdivision (ii) of this
Section 4(b) for such year so long as such Annual Report contains the
applicable opinions and other information required by this Section
4(b), and (B) together with the consolidated financial statements of
the Borrower and its Restricted Subsidiaries furnished pursuant to this
Section 4(b) in respect of each fiscal year, the Borrower will also
furnish comparable consolidated financial statements as at the end of
and for such year (which need not be accompanied by an opinion thereon
of independent accountants), prepared in accordance with GAAP and
certified by the principal financial officer of the Borrower as fairly
presenting, in all material respects, the financial position of the
companies being reported
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on and the results of their operations and cash flows except as to the
absence of footnotes, of the Borrower and all of its Subsidiaries;
(c) Officers' Certificates. Concurrently with each delivery of
----------------------
financial statements of the Borrower and its Restricted Subsidiaries
pursuant to subdivision (a) or (b) of this Section, an Officers'
Certificate, addressed to the Administrative Agent and the Lenders:
(i) stating that the signatories thereto have reviewed
the terms of this Agreement and have made, or caused to be made
under their supervision, a review in reasonable detail of the
transactions and conditions of the Borrower and its Restricted
Subsidiaries during the accounting period covered by such
financial statements, and that such review has not disclosed the
existence during or at the end of such accounting period, and that
such signatories do not have knowledge of the existence as at the
date of such Officers' Certificate, of any condition or event
which constitutes a Default or an Event of Default, or, if to
their knowledge any such condition or event existed or exists,
specifying the nature and period of existence thereof and what
action the Borrower has taken or is taking or proposes to take
with respect thereto;
(ii) setting forth (A) as of the date of the consolidated
balance sheet included in such financial statements, the Fixed
Charge Coverage Ratio and the Total Debt Ratio, and the respective
amounts of Total Debt, Consolidated Net Worth, the Net Worth
Minimum, Consolidated Net Tangible Assets, Priority Debt,
Attributable Debt, and the aggregate principal amount outstanding
of all Debt of Restricted Subsidiaries, (B) the respective amounts
of Net Income Available for Fixed Charges, Consolidated Fixed
Charges and Operating Cash Flow for the period of four consecutive
fiscal quarters of the Borrower ended on such date, and (C) the
amount available as at the conclusion of the accounting period
ended on such date for the making of Restricted Payments and
Restricted Investments in compliance with Section 8.05 and the
aggregate unliquidated amount as of such date of all Investments
of the Borrower and its Restricted Subsidiaries of the character
described in subdivision (g) of the definition of "Restricted
Investments" set forth in Section 1.01; and
(iii) setting forth facts or computations in reasonable
detail demonstrating compliance during and at the end of such
accounting period with the covenants and restrictions contained in
Section 8.01, Section 8.02, Section 8.03, Section 8.04, Section
8.05 and Section 8.07(f);
(d) Accountant's Certificates. Concurrently with each delivery
-------------------------
of annual financial statements pursuant to subdivision (b) of this
Section, a written statement, addressed to the Administrative Agent and
the Lenders from the independent certified public accountants referred
to in said subdivision (b) who have reported on such financial
statements, substantially to the following effects (with only such
variations as reflect the
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then current generally applicable policy of such accountants with
respect to statements of the same or a similar import required pursuant
to comparable financing documents and which do not materially alter the
substantive import of such statement):
(i) that their audit has included a reading of the terms
of this Agreement sufficient to enable them to make the statement
referred to in subdivision (d)(iii) of this Section (it being
understood that no audit procedures, other than those required by
generally accepted auditing standards, shall be required);
(ii) that, in connection with their audit, except as set
forth in such written statement, nothing came to their attention
which caused them to believe that there exists at the date of such
written statement any condition or event which constitutes an
Event of Default or Default, insofar as related to accounting
matters reflected in the financial statements that were subject to
auditing procedures during the course of the audit required
pursuant to subdivision (b) of this Section and, in the case of
any such Event of Default or Default which shall have come to
their attention, specifying, to the extent determined by such
accountants in connection with such audit, the nature and period
of existence thereof (it being understood that such accountants
shall not be liable, directly or indirectly, for any failure to
obtain knowledge of any Event of Default or Default or the period
of existence thereof unless such accountants should have obtained
knowledge thereof in making an audit in accordance with generally
accepted auditing standards or did not make such an audit); and
(iii) that they have read the Officers' Certificate
delivered by the Borrower in connection with such financial
statements pursuant to subdivision (c) of this Section and that,
in connection with their audit, except as set forth in such
written statement, nothing came to their attention that caused
them to believe that the matters set forth in such Officers'
Certificate pursuant to clauses (ii) and (iii) of said subdivision
(c), insofar as they relate to accounting matters reflected in the
financial statements that were subject to auditing procedures
during the course of the audit required pursuant to said
subdivision (b), have not been properly stated in accordance with
the terms of this Agreement;
(e) Commission and Other Reports. Promptly (and in any event
----------------------------
within five Business Days) after they become available, copies of (i)
all financial statements, reports, notices, proxy statements and other
information sent or made available generally by JPF or the Borrower to
any class of its security holders (other than, in the case of the
Borrower, JPF) or by any Restricted Subsidiary of the Borrower to any
class of its security holders (other than the Borrower or another such
Subsidiary), (ii) all regular and periodic reports (including reports
on Form 8-K) and all registration statements (other than those on Form
S-8 or a successor form relating to the registration of securities
pursuant to an employee benefit plan) and prospectuses filed by JPF,
the Borrower or any Restricted Subsidiary of the Borrower with any
securities exchange, the National
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Association of Securities Dealers or with the Commission, and (iii) all
press releases and other statements made available generally by JPF,
the Borrower or any Restricted Subsidiary of the Borrower to the public
concerning material developments in the business of JPF, the Borrower
or any such Restricted Subsidiary;
(f) Audit Reports. Promptly (and in any event within five
-------------
Business Days) after receipt thereof, copies of all reports submitted
to the Borrower or any of its Restricted Subsidiaries by independent
certified public accountants in connection with any annual, interim or
special audit of the Borrower or any Restricted Subsidiary made by such
accountants, including, without limitation, any comment letter
submitted by such accountants in connection with any such audit;
(g) Defaults, etc. Promptly (and in any event within five
-------------
Business Days) after any Responsible Officer of the Borrower obtains
knowledge of any condition or event which constitutes a Default or an
Event of Default, or that the Administrative Agent or any Lender has
given any notice to the Borrower or any of its Restricted Subsidiaries
or taken any other action with respect to a claimed default under or in
respect of any Debt referred to in Section 10.01(e) or 10.01(f) or with
respect to the occurrence or existence of any event or condition of the
type referred to in Section 10.01(g) or 10.01(h), an Officers'
Certificate specifying in reasonable detail the nature and period of
existence of such actual or claimed Default, Event of Default, default,
event or condition, and what action the Borrower has taken or is taking
or proposes to take with respect thereto;
(h) ERISA. Promptly (and in any event within five Business
-----
Days) after any Borrower Group Member (i) knows of the occurrence of
any Termination Event, (ii) receives with respect to any Multiemployer
Plan notice as prescribed in ERISA of any withdrawal liability assessed
against any Borrower Group Member or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the
meaning of Title IV of ERISA), (iii) knows that a prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the
Code) for which a statutory or administrative exemption is not
available or a breach of fiduciary responsibility has occurred in
connection with which any Borrower Group Member could reasonably be
subject to any material liability under Section 406, 409, 502(i) or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which such Borrower Group Member has
agreed or is required to indemnify any Person against any such
liability or (iv) knows that there has been a material adverse change
in the funding status of any Plan or Multiemployer Plan, a description
of such event or a copy of such notice and a statement by the principal
financial officer of the Borrower briefly setting forth the details
regarding such event or condition and the action, if any, which has
been or is being taken or is proposed to be taken by the Borrower or
any Borrower Group Member with respect thereto;
(i) Litigation, etc. Promptly (and in any event within five
---------------
Business Days) after any Responsible Officer of the Borrower obtains
knowledge of any litigation, administrative proceeding or judgment (i)
relating to the Borrower or any of its Restricted
65
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Subsidiaries (whether or not considered by the Borrower to be covered
by insurance) which could, if adversely determined, have a Material
Adverse Effect, or (ii) relating in any way to this Agreement or any of
the other Credit Documents, an Officers' Certificate specifying in
reasonable detail the facts and circumstances surrounding such
litigation, proceeding or judgment;
(j) Subsidiary Designation. Promptly (and in any event within
----------------------
five Business Days) after the designation by the Board of Directors of
any Subsidiary as an Unrestricted Subsidiary, or any redesignation by
the Board of Directors of a Restricted Subsidiary as an Unrestricted
Subsidiary or of an Unrestricted Subsidiary as a Restricted Subsidiary,
notice thereof accompanied by an Officers' Certificate stating that
such designation or redesignation has been made in compliance with the
definition of "Restricted Subsidiary" or "Unrestricted Subsidiary",
whichever shall be applicable, set forth in Section 1.01, and, in the
case of any designation or redesignation of a Subsidiary as an
Unrestricted Subsidiary, setting forth the name of each other
Subsidiary which has become an Unrestricted Subsidiary as a result
thereof;
(k) Modifications to Note Purchase Agreements or Notes.
--------------------------------------------------
Promptly (and in any event within five Business Days) after the date on
which any amendment or modification of any term or provision of any of
the Note Purchase Agreements or any of the Notes, or any waiver of
compliance with any such term or provision, has become effective,
copies of the instruments pursuant to which such amendment,
modification or waiver was effected; and
(l) Requested Information. Promptly upon request therefor, such
---------------------
other information as to the Business or Condition of the Borrower or
its Restricted Subsidiaries as may from time to time be reasonably
requested by the Administrative Agent or the Required Lenders.
ARTICLE VII.
INSPECTION OF PROPERTIES AND BOOKS
SECTION 7.01. Inspection Rights of Administrative Agent and Lenders.
-----------------------------------------------------
The Borrower hereby covenants and agrees that, so long as this
Agreement is in effect or any Letter of Credit or any amounts payable hereunder
or under any of the other Credit Documents shall remain outstanding, and until
all of the Commitments shall have been terminated, officers or designated
representatives of the Administrative Agent or any Lender may visit and inspect
any of the properties of the Borrower and its Restricted Subsidiaries, including
their respective books of account, records, reports and other papers, make
copies and extracts therefrom, and discuss their affairs, finances and accounts
with their respective officers and employees and, so long as a Responsible
Officer is present, with their independent public accountants (and the Borrower
hereby authorizes and directs each such officer, employee and
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independent public accountant to engage in such discussions and hereby
undertakes to cause a Responsible Officer to be present at all reasonable times
for purposes of such discussions with said accountants), all at such reasonable
times and as often as may be reasonably requested. All expenses incurred in
connection with any such visit, inspection or other exercise of rights by
officers or designated representatives of the Administrative Agent or any
Lender, as applicable, pursuant to this Section shall be borne by the Borrower
except that, if such visit, inspection or other exercise of rights is undertaken
at a time when no Default or Event of Default shall be continuing, all such
expenses incurred by the Administrative Agent or such Lender, as applicable, in
connection therewith shall, subject to the terms of Section 11.09, be for the
account of the Administrative Agent or such Lender, as applicable (it being
understood and agreed that the fees of any attorney, accountant or other
professional employed by the Borrower in connection with any such visit,
inspection or other exercise shall in any event be for the Borrower's account).
ARTICLE VIII.
COVENANTS
The Borrower hereby covenants and agrees that from and after the
Restatement Date and so long as this Agreement is in effect or any Letter of
Credit or any amounts payable hereunder or under any of the other Credit
Documents shall remain outstanding, and until all of the Commitments shall have
been terminated:
SECTION 8.01. Maintenance of Certain Financial Conditions.
-------------------------------------------
(a) Fixed Charge Coverage Ratio. The Borrower will not permit the
---------------------------
Fixed Charge Coverage Ratio as of any Determination Date to be less than 1.75.
(b) Consolidated Net Worth. The Borrower will not permit
----------------------
Consolidated Net Worth as of any date to be less than the Net Worth Minimum as
of such date.
(c) Total Debt Ratio. The Borrower will not permit the Total Debt
----------------
Ratio as of any Determination Date to exceed 3.75 (provided that unless and
--------
until the Note Purchase Agreement relating to the $85,000,000 8.55% Senior Notes
due 2004 is amended to require a Total Debt Ratio of 3.75, rather than 3.5, for
fiscal periods after September 30, 1997, the required Total Debt Ratio for
purposes of this Agreement shall continue to be 3.5 for fiscal periods after
September 30, 1997).
SECTION 8.02. Debt Incurrence; Restricted Subsidiary Debt.
-------------------------------------------
(a) The Borrower will not, and will not permit any Restricted
Subsidiary to, incur any Debt on any date if immediately after giving effect to
such incurrence and the incurrence or retirement by the Borrower and its
Restricted Subsidiaries of any other Debt on such date the Total Debt Ratio
would exceed the amount applicable under Section 8.01(c) for the period during
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which such date occurs, except that the Borrower or any Restricted Subsidiary
may, on any date (other than a Determination Date) occurring in any period
specified in the following table, incur and (subject to Section 8.01(c)) remain
liable in respect of Debt for working capital purposes if (i) immediately after
giving effect to such incurrence and the incurrence or retirement by the
Borrower and its Restricted Subsidiaries of any other Debt on such date the
Total Debt Ratio shall not exceed 3.75 (provided that unless and until the Note
--------
Purchase Agreement relating to the $85,000,000 8.55% Senior Notes due 2004 is
amended to require a Total Debt Ratio of 3.75, rather than 3.5, for fiscal
periods after September 30, 1997, the required Total Debt Ratio for purposes of
this Agreement shall continue to be 3.5 for fiscal periods after September 30,
1997)); and (ii) in the event such Debt is to be incurred by a Restricted
Subsidiary, such Restricted Subsidiary shall be permitted to incur such Debt on
such date pursuant to and in compliance with Section 8.02(b); provided that,
--------
nothing contained in this Section 8.02(a) shall permit the incurrence by the
Borrower or any Restricted Subsidiary of any Debt on a Determination Date if,
after giving effect to such incurrence, the Borrower would not be in compliance
with Section 8.01(c).
(b) The Borrower will not permit any Restricted Subsidiary to incur any
Debt, except that any Restricted Subsidiary may incur and (subject to Section
8.01(c)) remain liable in respect of Debt if, on and as of the date on which
such Restricted Subsidiary proposes to incur such Debt and immediately after
giving effect to such incurrence and the incurrence or retirement by the
Borrower and its Restricted Subsidiaries of any other Debt on such date, and to
the application of the proceeds of all such incurred Debt, the Priority Debt
Amount shall not exceed 10% of Consolidated Net Tangible Assets (the amount of
Consolidated Net Tangible Assets for purposes hereof being determined (i) as of
such date, if an Officers' Certificate dated as of such date shall have been
provided to the Administrative Agent and the Lenders providing facts or
computations in reasonable detail demonstrating compliance with the terms of
this Section 8.02(b) in connection with the proposed incurrence of Debt on such
date, or (ii) if no such Officers' Certificate shall have been provided to the
Administrative Agent and the Lenders in connection with the incurrence of such
Debt, as of the most recent Determination Date prior to the date of incurrence
of such Debt with respect to which the Borrower shall have delivered the
Required Financial Information).
(c) For purposes of the foregoing subdivisions (a) and (b) of this
Section 8.02, (i) the term "incur", when used with respect to any Debt, shall
mean to directly or indirectly create, incur, assume, agree to purchase or
provide funds in respect of, or otherwise become liable (by way of Guaranty or
otherwise) in respect of such Debt, and the term "incurrence" shall have a
correlative meaning, (ii) in the event the Borrower or any Restricted Subsidiary
shall extend, renew, refund or refinance any Debt, the Borrower or such
Restricted Subsidiary shall be deemed to have incurred such Debt at the time of
such extension, renewal, refunding or refinancing, and (iii) any Person
designated, redesignated or otherwise becoming a Restricted Subsidiary at any
time after the date of this Agreement shall be deemed to have incurred all of
its outstanding Debt at such time.
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<PAGE>
SECTION 8.03. Liens.
-----
The Borrower will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume or permit to exist any Lien on
or with respect to any property or asset of any character of the Borrower or any
of its Restricted Subsidiaries (whether held on the date hereof or hereafter
acquired) or any interest therein or any income or profits therefrom except:
(a) Liens (other than Liens created or imposed under ERISA)
for taxes, assessments or governmental charges or levies either not yet
due or the payment of which is not at the time required by Section
8.12;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons incurred
in the ordinary course of business for sums either not yet due or the
payment of which is not at the time required by Section 8.12;
(c) Liens (other than Liens created or imposed under ERISA)
incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, bids, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive in any
case of obligations incurred in connection with the borrowing of money
or the obtaining of advances or credit);
(d) Liens incidental to the conduct of business or to the
ownership of property of a character which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit, and which do not,
individually or in the aggregate, interfere with the ordinary conduct
of the business of the Borrower or any of its Restricted Subsidiaries
or detract from the value or use of the properties subject to any such
Liens;
(e) any attachment, judgment or other similar Lien arising in
connection with court proceedings, so long as (i) the execution or
other enforcement of such Lien is effectively stayed and the claims
secured thereby are being actively contested in good faith and by
appropriate proceedings diligently conducted and effective to prevent
the forfeiture or sale of any property of the Borrower or any
Restricted Subsidiary or any interference with the ordinary use thereof
by the Borrower or any Restricted Subsidiary, and (ii) such reserve or
other appropriate provision, if any, in the amount and of the type as
shall be required by GAAP shall be maintained therefor;
(f) Liens on assets of any Restricted Subsidiary securing Debt
or other obligations of such Restricted Subsidiary owing to the
Borrower or to a Predominantly Owned Restricted Subsidiary;
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<PAGE>
(g) Liens described on Schedule IX existing on the date of this
-----------
Agreement and securing the Debt described thereon as being secured by such
Liens; provided that (i) no such Lien shall at any time be extended to or
--------
cover any property of the Borrower or any Restricted Subsidiary other than
the property subject thereto on the date hereof and (ii) the principal
amount of the Debt secured by such Liens shall not be extended, renewed,
refunded or refinanced;
(h) Liens securing IDB Debt, provided that no such Lien shall at any
--------
time extend to or cover any property of the Borrower or any Restricted
Subsidiary other than the equipment and facilities acquired or constructed
with the proceeds of such IDB Debt, real property appurtenant to such
facilities, and proceeds of such equipment, facilities and real property;
(i) Liens (including Capital Leases) created solely to secure the
deferred purchase price of fixed assets useful and intended to be used in
carrying on the business of the Borrower and its Restricted Subsidiaries
acquired or constructed by the Borrower or any Restricted Subsidiary after
the date hereof, or any Lien (including a Capital Lease) created to secure
Debt incurred solely for the purpose of financing the acquisition or
construction, as the case may be, of any such asset (if such Debt is
incurred at the time of or within 90 days after such acquisition or the
completion of such construction) or any Lien existing on acquired assets at
the time of acquisition thereof, or, in the case of any Person which
hereafter becomes a Restricted Subsidiary, any Lien in respect of its
assets existing at the time such Person becomes a Restricted Subsidiary,
provided that:
--------
(i) in the case of an acquisition of assets or a Person
becoming a Restricted Subsidiary, such Lien was not created in
contemplation of such event,
(ii) no such Lien shall at any time extend to or cover any
asset of the Borrower or any of its Restricted Subsidiaries other than
the acquired assets on which it was originally imposed and
improvements thereto and proceeds thereof, and
(iii) at the time of and immediately after giving effect to the
creation or incurrence of each such Lien, the aggregate principal
amount of all Debt secured by all such Liens on any such asset shall
not exceed an amount equal to the lesser of (x) the purchase price of
such asset (including, for purposes of determining such purchase
price, the principal amount of any pre-existing Debt secured by any
such Liens, whether or not the Borrower or a Restricted Subsidiary has
any personal liability with respect thereto) and (y) the fair market
value of such asset (as determined by the Board of Directors) at such
time;
(j) Liens in favor of a Receivables Financing SPC or Receivables
Financier created or deemed to exist in connection with a Permitted
Receivables Financing
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<PAGE>
(including any related filings of any financing statements), but only to
the extent that any such Lien relates to the applicable receivables and
related property (or percentage interests therein) actually sold,
contributed, financed or otherwise conveyed or pledged pursuant to such
transaction; and
(k) Liens in addition to those permitted by the foregoing provisions
of this Section 8.03 securing Debt of the Borrower or a Restricted
Subsidiary or satisfying cash collateral requirements hereunder; provided
--------
that, immediately after giving effect to the creation, incurrence or
assumption of each such additional Lien, the Priority Debt Amount shall not
exceed 10% of Consolidated Net Tangible Assets (the amount of Consolidated
Net Tangible Assets for purposes hereof being determined (i) as of the date
of creation, incurrence or assumption of such Lien, if an Officers'
Certificate dated as of such date shall have been provided to the
Administrative Agent and the Lenders providing facts or computations in
reasonable detail demonstrating compliance with the terms of this Section
8.03(j) in connection with the proposed creation, incurrence or assumption
of such Lien on such date, or (ii) if no such Officers' Certificate shall
have been provided to the Administrative Agent and the Lenders in
connection with the creation, incurrence or assumption of such Lien, as of
the most recent Determination Date prior to the date of creation,
incurrence or assumption of such Lien with respect to which the Borrower
shall have delivered the Required Financial Information).
For all purposes of this Section 8.03, (A) Liens existing on or with
respect to any property of any Person at the time it is designated or
redesignated or otherwise becomes a Restricted Subsidiary shall be deemed to
have been created at the time it becomes a Restricted Subsidiary, (B) any
extension, renewal, refunding or refinancing of any Lien by the Borrower or any
Restricted Subsidiary shall be deemed to be an incurrence of such Lien at the
time of such extension, renewal, refunding or refinancing, and (C) any Lien
existing on any property at the time it is acquired by the Borrower or any
Restricted Subsidiary shall be deemed to have been created at the time of such
acquisition.
In the event that any property of the Borrower or any Restricted Subsidiary
shall become or be subject to a Lien not permitted by the foregoing subdivisions
(a) through (k) of this Section 8.03, the Borrower shall make or cause to be
made effective provision satisfactory to the Lenders whereby the obligations of
the Borrower and the Restricted Subsidiaries to the Lenders hereunder and under
the other Credit Documents will be secured equally and ratably with all other
obligations secured by such Lien, and in any event, such obligations of the
Borrower and the Restricted Subsidiaries to the Lenders hereunder and under the
other Credit Documents shall have the benefit, to the full extent that (and with
such priority as) the Lenders may be entitled under applicable law, of an
equitable Lien on such property; provided, however, that any violation of this
-------- -------
Section shall constitute a Default whether or not the Borrower shall have made
effective provision to secure the obligations of the Borrower and the Restricted
Subsidiaries to the Lenders hereunder and under the other Credit Documents
equally and ratably with any such other obligations or the Lenders shall be
entitled to such equal and ratable security or any such equitable Lien.
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SECTION 8.04. Sale Leasebacks.
---------------
The Borrower will not, and will not permit any Restricted Subsidiary to,
enter into any Sale Leaseback unless
(a) immediately after giving effect to such Sale Leaseback, the
Priority Debt Amount shall not exceed 10% of Consolidated Net Tangible
Assets (the amount of Consolidated Net Tangible Assets for purposes hereof
being determined (i) as of the date of such Sale Leaseback, if an Officers'
Certificate dated as of such date shall have been provided to the
Administrative Agent and the Lenders providing facts or computations in
reasonable detail demonstrating compliance with the terms of this Section
8.04(a) in connection with such Sale Leaseback, or (ii) if no such
Officers' Certificate shall have been provided to the Administrative Agent
and the Lenders in connection with such Sale Leaseback, as of the most
recent Determination Date prior to the date of such Sale Leaseback with
respect to which the Borrower shall have delivered the Required Financial
Information), or
(b) the Borrower shall (i) in compliance with Section 3.02(b)(ii),
give an Excess Sale Notice with respect to such Sale Leaseback and
thereafter pay, prepay or otherwise reduce the outstanding Loans and LOC
Obligations in the manner and to the extent required by such Section
3.02(b)(ii), and (ii) to the extent that the Available Fund resulting from
such Sale Leaseback shall exceed the amount of the payments, prepayments
and other reductions of Loans and LOC Obligations required by such Section
3.02(b)(ii), (A) apply an amount equal to such excess, within 180 days
after the consummation of such Sale Leaseback, to the retirement of an
equivalent principal amount of Funded Debt (other than Subordinated Debt)
of the Borrower and its Restricted Subsidiaries and (B) pending such
application, cause an amount equal to such excess to be invested in
Investments of the character described in subdivision (a) of the definition
of "Restricted Investments" set forth in Section 1.01.
SECTION 8.05. Restricted Payments; Restricted Investments.
-------------------------------------------
The Borrower will not, directly or indirectly (through a Restricted
Subsidiary or otherwise), declare, order, pay, distribute, make, or set apart
any sum or property for any Restricted Payment, and the Borrower will not, and
will not permit any Restricted Subsidiary to, make or become obligated to make
any Restricted Investment, unless, both at the time of and immediately after
effect has been given to any such proposed action:
(a) no Default or Event of Default shall have occurred and be
continuing and a Restricted Subsidiary shall be permitted to incur at least
$1.00 of additional Debt pursuant to Section 8.02; and
(b) the aggregate amount of
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(i) all sums and property included in all Restricted Payments
directly or indirectly declared, ordered, paid, distributed, made or
set apart by the Borrower during the period (taken as one accounting
period) from and including the Closing Date to and including the date
of such proposed action (the "Computation Period"), plus
----
(ii) the aggregate amount (at original cost) of all Restricted
Investments of the Borrower and all Restricted Subsidiaries made
during the Computation Period and all commitments for such Restricted
Investments made by the Borrower or any Restricted Subsidiary
outstanding on such date,
shall not exceed the sum of
(A) $1,000,000, plus
----
(B) 50% (or, in the case of a net loss for the Computation
Period taken as a whole, minus 100%) of Consolidated Net Income for
-----
the Computation Period, plus
(C) the aggregate amount of the net cash proceeds received by
the Borrower during the Computation Period from the sale of capital
stock of the Borrower, from contributions to the common equity capital
of the Borrower, and as consideration for the issuance during the
Computation Period of Debt of the Borrower convertible into its
capital stock, but only to the extent that any such Debt has been
converted into such capital stock during the Computation Period, plus
----
(D) to the extent not included in Consolidated Net Income for
the Computation Period, the aggregate amount of the cash payments
received by the Borrower and its Restricted Subsidiaries during the
Computation Period representing net returns of capital on Restricted
Investments made during the Computation Period.
For all purposes of this Section 8.05, (1) the amount involved in any
Restricted Payment directly or indirectly declared, ordered, paid, distributed,
made or set apart in property, and the amount of any Restricted Investment made
through the transfer of property, shall be deemed to be the greater of (x) the
fair market value of such property (as determined by the Board of Directors) at
the time of such action and (y) the net book value thereof on the books of the
Borrower or any of its Restricted Subsidiaries (as determined in accordance with
GAAP), in each case as determined on the date such Restricted Payment is
declared, ordered, paid, distributed, made or set apart or the date such
Restricted Investment is made or committed to be made, as the case may be, and
(2) all Investments of any Person existing immediately after such Person becomes
a Restricted Subsidiary which would be Restricted Investments if made by such
Person while subject to the provisions of this Agreement shall be deemed to be
Restricted Investments and to have been made at the time such Person becomes a
Restricted Subsidiary.
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The Borrower will not pay any dividend which it has not declared nor will
it declare any dividend (other than dividends payable solely in shares of its
common stock) on any shares of any class of its capital stock which is payable
more than 60 days after the date of declaration thereof.
SECTION 8.06. Subsidiary Stock and Debt.
-------------------------
The Borrower will not, and will not permit any Restricted Subsidiary to,
issue, sell, assign or otherwise dispose of or part with control of, any shares
of stock, Debt or other securities (or warrants, rights or options to acquire
stock or other securities), in each case of any Restricted Subsidiary, except to
the Borrower or a Predominantly Owned Restricted Subsidiary and except that:
(a) all shares of stock and all Debt and other securities of any
Restricted Subsidiary at the time owned by or owed to the Borrower and all
Restricted Subsidiaries may be sold as an entirety for a consideration
which represents the fair market value (as determined by the Board of
Directors) at the time of sale of the shares of stock and Debt and other
Securities so sold; or
(b) less than all shares of stock of any Restricted Subsidiary at the
time owned by the Borrower and all Restricted Subsidiaries may be sold, or
a Restricted Subsidiary may issue shares of its stock to a Person other
than the Borrower or a Predominantly Owned Restricted Subsidiary, in either
case for a consideration which represents the fair market value thereof (as
determined by the Board of Directors) at the time of sale or issuance, as
the case may be, of such shares, if, immediately after giving effect to
such transaction, such Restricted Subsidiary shall be a Predominantly Owned
Restricted Subsidiary, or
(c) Debt of a Restricted Subsidiary at the time owed to the Borrower
or a Restricted Subsidiary may be sold to a third Person in a transaction
not described in subdivision (a) of this Section 8.06 for a consideration
at least equal to the principal amount of such Debt plus interest accrued
and payable thereon (to the extent such interest is not payable to the
Borrower or a Restricted Subsidiary following such sale);
provided, however, that it shall be a condition to the consummation by the
- -------- -------
Borrower or any Restricted Subsidiary of any transaction described in the
foregoing subdivisions (a), (b) and (c) of this Section 8.06 that (i) in the
case of any sale or issuance of stock of a Restricted Subsidiary described in
said subdivision (a) or (b), the assets of such Restricted Subsidiary
represented by the equity interest to be so sold or issued are such that the
sale of such assets would then be permitted by Section 8.07 (in which case such
transaction shall be considered and deemed a disposition of assets for purposes
of Section 8.07), and (ii) in the case of any such transaction described in said
subdivision (a), (b) or (c), immediately after giving effect to such transaction
(x) no Default or Event of Default shall have occurred and be continuing and (y)
a Restricted
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Subsidiary shall be permitted to incur at least $1.00 of additional Debt
pursuant to Section 8.02(b).
SECTION 8.07. Consolidation, Merger, Sale of Assets, etc.
------------------------------------------
The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, voluntarily liquidate or dissolve, or consolidate or merge with
or into any other Person, or permit any other Person to consolidate with or
merge with or into it, or participate in a share exchange with or sell, lease,
transfer, contribute or otherwise dispose of any of its assets to any other
Person, except that, subject in any event to compliance with the last paragraph
of this Section 8.07:
(a) the Borrower and/or any Restricted Subsidiary may sell or
otherwise dispose of its assets (i) in the ordinary course of its business
as such business is permitted to be conducted in compliance with Section
8.09 and (ii) in a Permitted Receivables Financing; or
(b) (i) any Restricted Subsidiary may (A) consolidate with or merge
into the Borrower or a Wholly Owned Restricted Subsidiary if the Borrower
or such Wholly Owned Restricted Subsidiary shall be the continuing or
surviving corporation or (B) consolidate or merge with any other
corporation if such Restricted Subsidiary shall be the continuing or
surviving corporation and (ii) any Wholly Owned Restricted Subsidiary may
consolidate with or merge into any other Wholly Owned Restricted
Subsidiary; or
(c) any Restricted Subsidiary may sell, lease, transfer, contribute
or otherwise dispose of its assets in whole or in part to the Borrower or a
Wholly Owned Restricted Subsidiary or any other Restricted Subsidiary and
may, following any such disposition in whole, liquidate and dissolve; or
(d) the Borrower may consolidate or merge with any other Person if
the Borrower shall be the continuing or surviving corporation; or
(e) the Borrower may consolidate with or merge into, or sell,
transfer or otherwise dispose of its assets as an entirety or substantially
as an entirety, to any other Person (a "Successor"; any such consolidation,
merger or disposition of assets being hereinafter referred to as a
"Successor Transaction"), but only if such Successor (i) is a solvent
corporation duly organized, validly existing and in good standing under the
laws of the United States of America or a state thereof and (ii) expressly
assumes, not later than the consummation of such Successor Transaction,
pursuant to a written instrument satisfactory in form, scope and substance
to the Lenders, the due and punctual payment of all principal, interest and
Fees in accordance with the terms hereof and of the other Credit Documents
to which the Borrower is a party, and the due and punctual performance and
observance of all other obligations of the Borrower under this Agreement,
an executed counterpart of which instrument shall have been furnished to
each of the Lenders together with a favorable opinion of counsel
satisfactory to each Lender covering such legal
75
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matters relating to such Successor, the Successor Transaction, such
assumption and such instrument as such holder may reasonably request; or
(f) the Borrower or any Restricted Subsidiary, in addition to making
any sale or other disposition permitted by the foregoing provisions of this
Section, may sell any of its assets for a consideration at least equal to
the fair market value thereof (as determined by the Board of Directors) at
the time of such sale; provided that no such sale of any assets shall be
--------
permitted under this subdivision (f) unless
(i) the assets so sold, when taken together with all other
assets of the Borrower and its Restricted Subsidiaries then being or
theretofore so sold (including deemed dispositions pursuant to Section
8.06 but excluding (x) Excluded Sales and (y) Replaced Warehouse
Sales) during the period of twelve consecutive months ending on the
date of such sale ("Sale Date") shall not have an aggregate net book
value (determined in the case of any such asset as of the date of sale
thereof) which shall exceed 10% of Consolidated Net Tangible Assets
(the amount of Consolidated Net Tangible Assets for purposes hereof
being determined (1) as of such Sale Date, if an Officers' Certificate
dated as of such date shall have been provided to the Administrative
Agent and the Lenders providing facts or computations in reasonable
detail demonstrating compliance with the terms of this Section
8.07(f)(i) in connection with such sale, or (2) if no such Officers'
Certificate shall have been provided to the Administrative Agent and
the Lenders in connection with such sale, as of the most recent
Determination Date prior to the date of such Sale Date with respect to
which the Borrower shall have delivered the Required Financial
Information), or
(ii) such sale shall not constitute a Replaced Warehouse Sale and
shall not meet the requirements of, and shall not be permitted
pursuant to, the immediately foregoing subdivision (f)(i) (any such
sale, a "Substantial Sale") but
(A) prior to consummating such Substantial Sale, the
Borrower shall give notice to the Administrative Agent and each
of the Lenders specifying the anticipated or actual Sale Date,
briefly describing the assets sold or to be sold and setting
forth the net book value of such assets and the aggregate
consideration and the Net Sale Proceeds to be received for such
assets in connection with such sale,
(B) the Borrower shall (1) during the period of 150 days
following the consummation of such sale (the "Application
Period"), apply (or cause to be applied) an amount equal to such
Net Sale Proceeds from such Substantial Sale to the purchase,
acquisition or (in the case of real property) construction of
Alternative Assets, or (2) if an amount equal to such Net Sale
Proceeds shall not have been applied during the Application
Period in accordance with the immediately foregoing clause
(B)(1), then not later than the expiration of such Application
Period, (aa)
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furnish the Administrative Agent and each of the Lenders an
Officers' Certificate specifying the portion of such Net Sale
Proceeds that were so applied to the purchase, acquisition or
construction of Alternatives Assets and specifying any additional
portion of such Net Sale Proceeds (the "Additional Portion") that
will be so applied to the purchase, acquisition or construction
of Alternative Assets during the period (the "Further Period") of
30 days next following the expiration of the applicable
Application Period and (bb) unless the sum of the amount so
applied during the Application Period to the purchase,
acquisition or construction of Alternative Assets plus the
----
Additional Portion, if any, specified in such Officers'
Certificate shall be at least equal to the amount of such Net
Sale Proceeds, give an Excess Sale Notice with respect to such
Substantial Sale in compliance with Section 3.02(b)(2) and
thereafter (x) pay, prepay or otherwise reduce the outstanding
Loans and LOC Obligations in the manner and to the extent
required by such Section 3.02(b)(ii), and (y) to the extent that
the Available Fund resulting from such sale shall exceed the
amount of the payments, prepayments and other reductions of Loans
and LOC Obligations required by such Section 3.02(b)(ii), apply
an amount equal to such excess to the retirement (no later than
the forty-fifth day following the day fixed for such payments,
prepayments and/or other reductions of Loans and LOC Obligations
under Section 3.02(b)(ii)) of an equivalent principal amount of
Funded Debt (other than Subordinated Debt) of the Borrower and
its Restricted Subsidiaries,
(C) if in the Officers' Certificate required to be
furnished to the immediately foregoing clause (B) the Borrower
shall have specified an Additional Portion of such Net Sale
Proceeds to be applied to the purchase, acquisition or
construction of Alternative Assets during the Further Period, the
Borrower shall in fact so apply an amount equal to such
Additional Portion during such Further Period, and
(D) pending application of an amount equal to such Net
Sale Proceeds to the purchase, acquisition or construction of
Alternative Assets, to the payment, prepayment or other reduction
of the Loans and LOC Obligations and/or the retirement of Debt in
accordance with the immediately foregoing clauses (B) and (C),
the Borrower shall cause an amount equal to Net Sale Proceeds (or
so much thereof as shall not have been theretofore so applied) to
be invested in Investments of the character described in
subdivision (a) of the definition of "Restricted Investments" set
forth in Section 1.01, or
(iii) such sale shall constitute a Replaced Warehouse Sale;
and provided further that, in the event the assets to be sold in any
--- -------- -------
proposed sale referred to in this subdivision (f) may not be sold as an
entirety pursuant to any one of the
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foregoing clauses (i) through (iii) hereof, such assets may nevertheless be
sold by the Borrower or a Restricted Subsidiary, as the case may be, if and
to the extent that such sale could be effected pursuant to, and is in fact
effected in compliance with, a combination of two or more of said clauses
(i) through (iii).
No consolidation, merger, sale, lease, transfer, contribution or other
disposition referred to in subdivisions (b) through (f) of this Section shall be
permitted unless (x) immediately after giving effect to such transaction, (1) no
Default or Event of Default shall have occurred and be continuing and (2) a
Restricted Subsidiary shall be permitted to incur at least $1.00 of additional
Debt pursuant to Section 8.02 and (y) upon giving effect to any such transaction
(to the extent required in the definition of "Operating Cash Flow" set forth in
Section 1.01) as of the first day of the four consecutive fiscal quarters ended
as of the most recent Determination Date occurring prior to the date of such
proposed transaction with respect to which the Borrower shall have delivered the
Required Financial Information, no Default or Event of Default would have
occurred as the result of a violation of Section 8.01(c) on such Determination
Date. Nothing contained in this Section shall permit (i) the disposition of
assets consisting of Debt, stock or similar interests or other securities (or
warrants, rights or options to acquire stock or other securities) of any
Restricted Subsidiary unless such disposition, if subject to Section 8.06, is
also permitted by Section 8.06, or (ii) the disposition of any Transferred
Assets (or any interest therein) by the Borrower or any Restricted Subsidiary to
any Unrestricted Subsidiary except in connection with a Permitted Receivables
Financing.
SECTION 8.08. Transactions with Affiliates; Tax Consolidation.
-----------------------------------------------
(a) The Borrower will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into or be a party to any transaction or
arrangement (including, without limitation, the contribution, transfer,
purchase, sale or exchange of property, or the rendering of any service, or the
payment of management or other service fees) with any Affiliate unless such
transaction or arrangement is entered into upon terms that are fair and
reasonable and no less favorable to the Borrower or such Restricted Subsidiary,
as the case may be, than those which might be obtained at the time on an arm's-
length basis from any Person which is not such an Affiliate; provided that,
--------
subject to the terms of Section 9.13, the foregoing restrictions shall not apply
to (i) any transaction between the Borrower and a Wholly Owned Restricted
Subsidiary or between one Wholly Owned Restricted Subsidiary and another Wholly
Owned Restricted Subsidiary or (ii) transactions effected pursuant to and in
compliance with the terms of the agreements listed on Schedule X, in the case of
----------
each thereof, as the same shall be in effect on and as of the Closing Date
(collectively, the "Existing Affiliate Agreements"). Nothing contained in this
Section shall permit the disposition of any accounts receivable (or any interest
therein) by the Borrower or any Restricted Subsidiary to any Unrestricted
Subsidiary except in connection with a Permitted Receivables Financing.
(b) The Borrower will not, and will not permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with JPF or
any other Person (other than a Subsidiary of the Borrower) except that the
Borrower or any such Subsidiary may file or consent to the filing of a
consolidated United States federal income tax return with JPF if (but
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only if) JPF shall have entered into a valid and binding agreement to reimburse
to the Borrower, or to allow the Borrower to retain, a sum equal to the amount
by which the income taxes of the consolidated group of corporations of which the
Borrower is a part are reduced as a result of the inclusion of the Borrower in
the consolidated return of such group; provided that, the Borrower may agree to
--------
pay JPF an amount not to exceed the amount of income taxes which would have been
payable by the Borrower if it had filed its income tax return on a basis not
consolidated with JPF, subject to appropriate adjustment in the event that the
amount of such income taxes is increased or reduced by reason of any audit by a
taxing authority or any successful claim for a refund, any such payment or
reimbursement to be computed in accordance with GAAP and applicable tax law,
rules and regulations, and to be made at the time of payment or refund of any
such income taxes.
SECTION 8.09. Nature of Business.
------------------
The Borrower and its Restricted Subsidiaries will remain principally
engaged in the business of broadline distribution of food and related products
to restaurants and other food service establishments, and will not engage in any
line of business in which they are not currently engaged to such an extent that
the business of the Borrower and its Restricted Subsidiaries taken as a whole
would be fundamentally different in nature from the business of the Borrower and
its Restricted Subsidiaries on the date hereof.
SECTION 8.10. Books and Records; Fiscal Year.
------------------------------
The Borrower will, and will cause each of its Subsidiaries to, (a) keep
proper books of record and account in which full, true and correct entries will
be made of all its material business dealings and transactions in accordance
with GAAP applied on a consistent basis and (b) maintain a system of accounting
established and administered in accordance with GAAP, and set aside on its books
from its earnings for each fiscal period all proper reserves, accruals and
provisions which, in accordance with GAAP, should be set aside from such
earnings in connection with its business, including, without limitation,
provisions for depreciation, obsolescence and/or amortization, and accruals for
taxes for such period. The Borrower will give the Administrative Agent and each
of the Lenders advance written notice of any change in the basis on which the
fiscal year of the Borrower or any Restricted Subsidiary is determined, provided
--------
that no such change shall result in the Borrower having a fiscal year longer
than twelve (12) fiscal months.
SECTION 8.11. Corporate Existence; Licenses.
-----------------------------
The Borrower will, and will cause each of its Restricted Subsidiaries to,
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence (except as otherwise permitted by Section
8.07) and its rights (charter and statutory) and Licenses; except that, subject
to compliance with Sections 8.06 and 8.07 and the next succeeding sentence of
this Section, the rights and Licenses of the Borrower or any of its Restricted
Subsidiaries may be abandoned, modified or terminated if in the judgment of the
Board of Directors such abandonment, modification or termination is in the best
interests of the Borrower
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and its Restricted Subsidiaries and is not disadvantageous to the Lenders. The
Borrower will, and will cause each of its Restricted Subsidiaries to, in any
event maintain the validity of all Licenses necessary in any material respect
for the conduct of the business of the Borrower and its Restricted Subsidiaries
as now conducted and as proposed to be conducted.
SECTION 8.12. Payment of Taxes, Claims for Labor and Materials, etc.
-----------------------------------------------------
The Borrower will, and will cause each of its Restricted Subsidiaries to,
promptly pay and discharge or cause to be promptly paid and discharged when due
and before the same shall become delinquent (a) all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
upon any of its franchises, Licenses, business or property, or upon any part
thereof, and (b) all claims of landlords, carriers, warehousemen, mechanics,
materialmen and other similar Persons for labor, materials, supplies and rentals
which, if unpaid, might by law become a Lien or charge upon any of its property;
provided, however, that the failure of the Borrower or any of its Restricted
- -------- -------
Subsidiaries to pay any such tax, assessment, charge, levy or claim shall not
constitute a Default hereunder if and for so long as the amount, applicability
or validity thereof shall concurrently be contested in good faith by appropriate
and timely actions or proceedings diligently pursued, and if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor and the consequences of such failure shall not have, either
alone or taken together with the consequences of all other such failures, a
Material Adverse Effect.
SECTION 8.13. Maintenance of Properties.
-------------------------
The Borrower will, and will cause each of its Restricted Subsidiaries to,
maintain and keep, or cause to be maintained and kept, in good repair, working
order and condition (ordinary wear and tear excepted) all properties (whether
owned or leased) used or useful in the business of the Borrower and its
Restricted Subsidiaries, and from time to time make or cause to be made all
necessary and proper repairs, renewals, replacements and improvements thereof so
that the business carried on in connection therewith may be properly and
advantageously conducted consistent with past practices of the Borrower.
SECTION 8.14. Insurance.
---------
The Borrower will, and will cause each of its Restricted Subsidiaries to,
keep adequately insured, by financially sound and reputable insurers, all of its
property of a character customarily insured against by prudent corporations
engaged in the same or a similar business and similarly situated against loss or
damage of the kinds and in amounts customarily insured against by such
corporations, and with deductibles or coinsurance no greater than is customary,
and carry (or cause its suppliers to carry, under arrangements pursuant to which
the Borrower or its applicable Restricted Subsidiary is named an additional
insured), with such insurers in customary amounts, such other insurance,
including public liability insurance and insurance against claims for any
violation of applicable law, as is customarily carried by prudent corporations
of established reputation engaged in the same or a similar business and
similarly situated; provided, however, that the Borrower and its Restricted
-------- -------
Subsidiaries may, consistently with their practices prior to
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the date hereof, self-insure with respect to certain categories of insurance
(including, but not limited to, property and workers' compensation claims) so
long as (i) the respective amounts of such categories of self insurance for the
Borrower and all Restricted Subsidiaries shall not exceed the amounts thereof
from time to time recommended to the Borrower by an independent firm of risk
management consultants of recognized standing and (ii) all reserves required in
accordance with GAAP to be maintained by the Borrower and its Restricted
Subsidiaries in respect of all such self insurance (including self insurance in
effect resulting from co-insurance, deductibility or similar clauses) shall be
maintained through a security arrangement as required by the respective insurer
(which may include the procurement by the Borrower, as account party, of Letters
of Credit issued hereunder), or other arrangements, not to include cash
collateral, in compliance with Section 8.03.
SECTION 8.15. Compliance with Laws.
--------------------
The Borrower will, and will cause each of its Restricted Subsidiaries to,
promptly comply in all material respects with all laws, statutes, rules,
regulations and ordinances and all Orders of, and restrictions imposed by, any
court, arbitrator or Governmental Body in respect of the conduct of its business
and the ownership of its properties (including, without limitation, applicable
laws, statutes, rules, regulations, ordinances and Orders relating to
occupational health and safety standards, consumer protection and equal
employment opportunities), except to the extent that the applicability or
validity of any such law, statute, rule, regulation, ordinance or Order is being
contested in good faith by appropriate and timely actions or proceedings
diligently pursued, and for which such reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made, so long as such
actions or proceedings are effective to prevent the imposition of any material
penalty on the Borrower or such Restricted Subsidiary and the consequences of
the failure to comply with such contested law, statute, rule, regulation,
ordinance or Order and of the conduct of such action or proceeding shall not
have, either alone or taken together with the consequences of all other such
failures, actions and proceedings, a Material Adverse Effect.
SECTION 8.16. Environmental Matters.
---------------------
(a) The Borrower will, and will cause each of its Restricted Subsidiaries
to, (i) obtain and maintain in full force and effect all Environmental Permits
that may be required from time to time under any Environmental Laws applicable
to the Borrower or any Restricted Subsidiary and (ii) be and remain in
compliance in all material respects with all terms and conditions of all such
Environmental Permits and with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in all applicable Environmental Laws.
(b) The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, (i) cause or allow (A) any Hazardous Substance to be present at
any time on, in, under or above the Borrower Premises or any part thereof or (B)
the Borrower Premises or any part thereof to be used at any time to manufacture,
generate, refine, process, distribute, use, sell, treat, receive, store, dispose
of, transport, arrange for transport of, handle, or be involved in any other
activity involving, any Hazardous Substance, or (ii) conduct any such activities
described in the
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foregoing clause (i)(B) on the Borrower Premises or anywhere else, except, in
each case referred to in the foregoing clauses (i) and (ii), in a manner that is
in compliance in all material respects with all applicable Environmental Laws
and Environmental Permits and to an extent that will not have a Material Adverse
Effect; provided, however, that the existence of the circumstances described on
-------- -------
Schedule XI with respect to the Everett Facility shall not be deemed to
- -----------
constitute a default by the Borrower in the performance of its obligations under
this Section 8.16(b) so long as neither such circumstances nor any claim or
liability asserted against the Borrower in connection therewith nor any action
required to be taken by the Borrower with respect thereto shall have had a
Material Adverse Effect.
SECTION 8.17. Maintenance of Office.
---------------------
The Borrower will maintain its principal office at a location in the United
States of America where notices, presentations and demands in respect of this
Agreement may be made upon it, and will notify the Administrative Agent and each
of the Lenders in writing of any change of location of such office reasonably
promptly following the occurrence of such change. Such office shall first be
maintained at the address of the Borrower set forth in Section 12.01.
SECTION 8.18. Future Restricted Subsidiaries.
------------------------------
The Borrower will cause each Subsidiary (other than Squeri Cash & Carry,
Inc. (which corporation shall be dissolved or liquidated and Nevada Baking
Company, Inc., which shall execute a Guaranty Joinder Agreement, or whose assets
and liabilities shall be acquired by the Borrower or a Restricted Subsidiary, in
either case no later than June 30, 1997) and any Subsidiary created in
connection with any Permitted Receivables Financing for the sole purpose of, and
whose business activities are (and at all times remain) limited to, purchasing
accounts receivable (or any interests therein) from the Borrower or any of its
Restricted Subsidiaries and selling, transferring or otherwise conveying such
accounts receivable (or any interests therein) to the Receivables Financier for
such Permitted Receivables Financing) which at any time on or following the
Closing Date shall be designated or redesignated in accordance with the terms of
this Agreement as a Restricted Subsidiary, not later than the time of
effectiveness of such designation or redesignation, to guarantee pursuant to the
Guaranty Agreement the obligations of the Borrower under this Agreement and the
other Credit Documents to which the Borrower is a party. In furtherance of the
above, the Borrower shall notify the Administrative Agent and the Lenders in
accordance with Section 6.01(j) upon any Subsidiary being designated or
redesignated in accordance with the terms of this Agreement as a Restricted
Subsidiary and shall cause such Subsidiary (i) to execute a Guarantor Joinder
Agreement and (ii) to deliver such other documentation as the Administrative
Agent may reasonably request in connection with the foregoing, including without
limitation certified corporate resolutions and other corporate documents of such
Subsidiary and favorable opinions of counsel to such Subsidiary (which shall
cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to above), all in form, content and
scope reasonably satisfactory to the Administrative Agent.
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Notwithstanding any provision of this Agreement or the Guaranty Agreement
to the contrary, in the event that any Guarantor shall cease to be a Restricted
Subsidiary in accordance with the terms of this Agreement, then (1) such
Guarantor, automatically and without further act on the part of the
Administrative Agent or the Lenders, shall be released from its obligations
under the Guaranty Agreement and (2) promptly upon the request of the Borrower,
the Administrative Agent (on behalf of the Lenders) shall execute such documents
and take such other action reasonably requested by the Borrower to cause such
Guarantor to be released from its obligations arising under the Guaranty
Agreement.
ARTICLE IX.
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower hereby represents and warrants to each Lender that:
SECTION 9.01. Organization and Authority of the Borrower, etc.
-----------------------------------------------
The Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite legal
right, power and authority to own or hold under lease the property it purports
to own or hold under lease, to carry on its business as now conducted and as
proposed to be conducted, and to enter into and carry out the terms of this
Agreement and the other Credit Documents to which it is a party. As of the
Restatement Date, the Borrower has, by all necessary corporate action (including
all action of its shareholders required in connection therewith), duly
authorized the execution and delivery of, and the performance of its obligations
under, this Agreement and the other Credit Documents to which it is a party.
SECTION 9.02. Subsidiaries.
------------
Schedule VIII lists all existing Subsidiaries of the Borrower as of the
-------------
Restatement Date and correctly sets forth, as to each Subsidiary (a) its name,
(b) its jurisdiction of organization, (c) the percentage of its issued and
outstanding shares of capital stock of each class owned by the Borrower or one
of its Subsidiaries (specifying each such Subsidiary), and (d) the name of each
Person, if any, other than the Borrower or one of its Subsidiaries owning
outstanding shares of capital stock of any class of such Subsidiary and the
percentage of each such class of stock owned by such Person. The Borrower does
not, as of the date of this Agreement, and will not, as of the Restatement Date,
have any Unrestricted Subsidiaries; and each Subsidiary listed on Schedule VIII
-------------
is initially designated as a Restricted Subsidiary. Each such Restricted
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has all
requisite legal right, power and authority to own or hold under lease the
property it purports to own or hold under lease, to carry on its business as now
conducted and as proposed to be conducted, and to enter into and carry out the
terms of the Guaranty Agreement. Each such Restricted Subsidiary has, by all
necessary corporate action (including all action of its shareholders required in
connection therewith), duly authorized the
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execution and delivery of, and the performance of its obligations under the
Agreement. All of the outstanding shares of capital stock of each such
Restricted Subsidiary have been duly authorized and validly issued and are fully
paid and non-assessable and all shares of capital stock indicated on Schedule
--------
VIII as owned by the Borrower or any other such Restricted Subsidiary as of the
- ----
Closing Date are owned beneficially and of record by the Borrower or such other
Restricted Subsidiary, as the case may be; and immediately after giving effect
to the transactions to be consummated on the Restatement Date such shares will
be so owned, free and clear of any Lien. Except as otherwise permitted by
Section 8.06, there are no outstanding rights, options, warrants, conversion
rights or agreements for the purchase or acquisition from the Borrower or any of
its Subsidiaries of any shares of capital stock or similar interests or other
securities of any Subsidiary.
SECTION 9.03. Qualification.
-------------
The Borrower is, and each of its Restricted Subsidiaries is, duly qualified
or licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction (other than the jurisdiction of its organization)
in which the nature of its activities or the character of the properties it owns
or leases makes such qualification or licensing necessary and in which the
failure to so qualify or be licensed would have a Material Adverse Effect.
Schedule VIII sets forth as to the Borrower and each of its Restricted
- -------------
Subsidiaries the jurisdictions (other than the jurisdiction of its organization)
in which, as of the Restatement Date, it is qualified or licensed to do business
or in which any substantial part of its tangible assets is located.
SECTION 9.04. Financial Statement.
-------------------
The financial statements referenced in Section 5.04(a) have been prepared
in accordance with GAAP, are complete and correct in all material respects and
present fairly the financial position and results of operations and cash flows
of the entities for the periods specified, subject in the case of interim
company-prepared statements to normal year-end adjustments and the absence of
footnotes.
SECTION 9.05. Changes, etc.
------------
Since the date of the balance sheet included in the most recent audited
financial statements referred to in Section 5.04(a), (a) there have been no
changes in the Business or Condition of the Borrower and its Subsidiaries which
has been, either in any one case or in the aggregate, Materially Adverse, and
(b) there has been no occurrence or development, whether or not insured against,
which has had or could reasonably be expected to have a Material Adverse Effect.
SECTION 9.06. Compliance with Laws, Other Instruments, etc.
--------------------------------------------
(a) Neither the Borrower nor any of its Subsidiaries is in violation of
any term of its corporate charter or by-laws. Neither the Borrower nor any of
its Subsidiaries is in violation of any term of any agreement, indenture,
mortgage or instrument to which it is a party or by which
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it or any of its properties may be bound or affected or any existing statute,
law, governmental rule, regulation or ordinance, or any Order of any court,
arbitrator or Governmental Body applicable to it (including, without limitation,
any statute, law, rule, regulation, ordinance or Order relating to occupational
health and safety standards, consumer protection or equal employment practice
requirements and applicable regulations of the Department of Agriculture, the
Food and Drug Administration and state and local health departments), the
consequences of which violation, either alone or taken together with the
consequences of all other such violations, have had or could reasonably be
expected to have a Material Adverse Effect.
(b) Neither the execution and delivery of this Agreement or any of the
other Credit Documents nor the performance of the terms and provisions hereof or
thereof nor the consummation of the transactions contemplated hereby or thereby
will result in any breach of or be in conflict with or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in a loss of any benefit to which the Borrower or any
of its Subsidiaries is entitled under, or result in (or require) the creation of
any Lien upon any property of the Borrower under, any term of, the corporate
charter or by-laws of the Borrower or any of its Subsidiaries or any agreement,
indenture, mortgage or instrument to which the Borrower or any of its
Subsidiaries is a party or by which the Borrower, any such Subsidiary or any of
their respective properties may be bound or affected, or any existing statute,
law, rule, regulation or ordinance or any Order of any court, arbitrator or
Governmental Body applicable to the Borrower, any such Subsidiary or any of
their respective properties.
SECTION 9.07. Consents and Approvals.
----------------------
No Approval by, from or with, and no other action in respect of, any
Governmental Body or any other Person (including any trustee, or any holder of
any indebtedness, securities or other obligations of the Borrower or any
Restricted Subsidiary) is required (a) for or in connection with the valid
execution and delivery by the Borrower or any Restricted Subsidiary of or the
performance by the Borrower or any Restricted Subsidiary of its obligations
under this Agreement or any of the other Credit Documents or the consummation by
the Borrower or any Restricted Subsidiary of the transactions contemplated
hereby and thereby, or (b) as a condition to the legality, validity or
enforceability as against the Borrower or any Restricted Subsidiary of this
Agreement or any of the other Credit Documents, in each case, other than (i)
routine filings before and after the Restatement Date with the Commission and
state Blue Sky authorities, and (ii) the Approvals described on Schedule XII,
------------
all of which have been duly obtained or made and are in full force and effect
and true and correct copies of instruments evidencing which have been furnished
to the Administrative Agent.
SECTION 9.08. Debt, etc.
---------
Schedule IX correctly lists all secured and unsecured Debt of the Borrower
-----------
and each of its Subsidiaries outstanding on the date hereof (except as otherwise
noted thereon) and shows, as to each item of Debt listed thereon, the obligor
and obligee, the aggregate principal amount outstanding as of the Restatement
Date. No default or event of default or basis for acceleration
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exists (nor in the case of Permitted Receivables Financings, has any termination
event occurred) or, immediately after giving effect to the initial borrowings
hereunder on the Restatement Date and the other transactions to occur on the
Restatement Date as contemplated hereby, will exist (or, but for the permanent
waiver thereof, would exist) under any instrument or agreement evidencing,
providing for the issuance or securing of, or otherwise relating to any such
Debt due to (a) nonpayment of any obligations thereunder or (b) any failure to
duly perform or observe any other covenant, provision, agreement or condition
contained therein, the consequences of which failure, either alone or taken
together with the consequences of all other such failures, have had or could
reasonably be expected to have a Material Adverse Effect. As of the Closing
Date, the Effective Date and the Restatement Date, neither the Borrower nor any
Restricted Subsidiary is a party to or bound by any charter provision, by-law,
agreement, indenture, mortgage, lease, instrument or License (other than this
Agreement and the other Credit Documents) which contains any restriction on the
incurrence by it of any Debt, except for the Note Purchase Agreements, a true
and correct copy of each of which has been delivered to the Administrative Agent
and pursuant to each of which the Borrower or such Restricted Subsidiary, as
applicable, either is permitted to incur Debt hereunder and/or under the other
Credit Documents to which it is a party or has duly obtained in writing and
delivered to the Administrative Agent all such Approvals as are or will be
necessary or appropriate to permit such incurrence.
SECTION 9.09. Title to Property; Leases; Investments; Existing Affiliate
----------------------------------------------------------
Agreements.
- ----------
(a) The Borrower and its Restricted Subsidiaries have good and marketable
title to their real properties and good title to the other properties they
purport to own, including those reflected in the balance sheet included in the
most recent audited financial statements referred to in Section 9.04 or
purported to have been acquired by the Borrower or any of its Restricted
Subsidiaries after the date of such balance sheet (other than any such
properties disposed of since such date in the ordinary course of business),
subject in the case of all such property to no Liens other than Liens permitted
by Section 8.03. The Borrower and its Restricted Subsidiaries enjoy peaceful and
undisturbed possession under all leases of all personal and all real property
necessary in any material respect to their respective operations, all such
leases are valid and subsisting and in full force and effect, and neither the
Borrower nor any such Subsidiary is in default in any material respect in the
performance or observance of its obligations thereunder. Schedule VIII includes
-------------
a general description of each Operating Lease existing as of the date hereof
under which the Borrower or a Restricted Subsidiary is a lessee and under which
the annual rental obligations exceed $100,000, and sets forth with respect to
each such lease, (i) the name of the lessor thereunder, (ii) a general
description of the property leased, and (iii) the annual rental obligations
payable thereunder.
(b) Schedule VIII correctly lists all Investments of the Borrower and its
-------------
Restricted Subsidiaries of the character described in subdivision (a) of the
definition of "Investment" set forth in Section 1.01 (other than Investments in
Subsidiaries) which are existing on the date hereof.
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(c) The Borrower has delivered to the Administrative Agent a true and
correct copy of each of the Existing Affiliate Agreements, in the case of each
thereof as the same shall have been amended and be in effect on and as of the
Closing Date.
SECTION 9.10. Litigation.
----------
There are no actions, suits or proceedings pending or, to the knowledge of
the Borrower, threatened against the Borrower or any of its Restricted
Subsidiaries or any of their respective properties (and no basis therefor is
known to the Borrower) in any court or before any arbitrator of any kind or
before or by any Governmental Body, which (a) question the validity or legality
of this Agreement or any of the other Credit Documents or any action taken or to
be taken pursuant hereto or thereto or (b) either alone or taken together with
all other such actions, suits and proceedings, have had or could reasonably be
expected to have a Material Adverse Effect.
SECTION 9.11. Taxes.
-----
The Borrower and its Restricted Subsidiaries have filed all tax returns
which are required by law to have been filed by them in any jurisdiction (other
than tax returns (i) which may be required to be filed with state or local
taxing authorities which have not advised the Borrower or any Restricted
Subsidiary of such requirement, and (ii) with respect to which, neither the
failure to file the same nor the failure to pay any taxes, assessments or
charges which might be shown to be owing thereon has had or could reasonably be
expected to have a Material Adverse Effect) and have paid all taxes,
assessments, fees and charges of each Governmental Body shown to be owing on
such filed returns to the extent the same have become due and payable and before
they have become delinquent other than those presently payable without penalty
or interest and those being contested in good faith by appropriate and timely
actions or proceedings diligently pursued and with respect to which reserves
have been provided for in the Borrower's financial statements to the extent
required by GAAP. The Borrower does not know of any additional assessment or
proposed assessment for any fiscal year, and no material controversy in respect
of additional federal or state income taxes is pending or to the knowledge of
the Borrower is threatened except any with respect to which reserves have been
provided for in the Borrower's financial statements to the extent required by
GAAP. In the opinion of the Borrower, all tax liabilities (including taxes for
all open years and for its current fiscal period) are adequately provided for on
the books of the Borrower and its Restricted Subsidiaries in accordance with
GAAP.
SECTION 9.12. Compliance with ERISA.
---------------------
(a) No Termination Event has occurred, and no event or condition has
occurred or exists as a result of which any Termination Event could reasonably
be expected to occur, with respect to any Plan. No accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, has occurred with respect to any Plan or, to the best of
the Borrower's knowledge, any Multiemployer Plan. Except as set forth in the
immediately succeeding sentence, the present value of all accrued benefits under
each Plan (based on those assumptions used to fund such Plan, which assumptions
are reasonable) did not, as of the most recent valuation date prior to the
Closing Date, which for any such Plan or
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Multiemployer Plan was not earlier than twelve months prior to the date as of
which this representation is made, exceed the then current value of the assets
of such Plan allocable to such benefits. The present value of the accrued
benefits under the JP Foodservice - Monarch Des Moines, Iowa Warehouse and
Transportation Employees' Pension Plan and the JP Foodservice - Monarch Fort
Wayne, Indiana Warehouse and Transportation Employees' Pension Plan (based on
those assumptions used to fund such Plans, which assumptions are reasonable)
exceeded, as of July 1, 1993 (the most recent valuation date for which
calculations are available), the then current value of the assets of such Plans
allocable to such benefits by $291,415 and $293,627, respectively (and the
Borrower is not aware of any event or circumstance which could cause such
amounts to increase materially as of July 3, 1994).
(b) No Borrower Group Member has incurred, or, to the best of the
Borrower's knowledge, is reasonably expected to incur, any withdrawal liability
to any Multiemployer Plan. No Borrower Group Member has received any
notification that any Multiemployer Plan is in reorganization (as defined in
Section 4241 of ERISA), is insolvent (as defined in Section 4245 of ERISA) or
has been terminated, within the meaning of Title IV of ERISA, and no
Multiemployer Plan is, to the best of the Borrower's knowledge, reasonably
expected to be in reorganization, insolvent or to be terminated.
(c) No prohibited transaction (as defined in Section 406 of ERISA or
Section 4975 of the Code) or breach of fiduciary responsibility has occurred
which has subjected or may subject any Borrower Group Member to any liability
under Section 406, 409, 502(i) or 502(l) of ERISA or Section 4975 of the Code,
or under any agreement or other instrument pursuant to which such Borrower Group
Member has agreed or is required to indemnify any Person against any such
liability. No Borrower Group Member has incurred, or is reasonably expected to
incur, any liability to the PBGC (other than for insurance premiums, which have
been paid when due).
(d) Full payment has been made on or before the due date (including
extensions) thereof of all amounts which any Borrower Group Member is or was
required under the terms of any Plan or any Multiemployer Plan to have paid as
contributions to such Plan as of the date hereof.
(e) No Lien imposed under the Code or ERISA on the assets of any Borrower
Group Member exists or is reasonably likely to arise on account of any Plan or
any Multiemployer Plan.
(f) No welfare plan (as defined in Section 3(1) of ERISA) maintained by
any Borrower Group Member provides medical or death benefits with respect to
current or former employees beyond their termination of employment (other than
coverage mandated by law). Each such plan to which Sections 601-609 of ERISA and
Section 4980B of the Code apply has been administered in compliance in all
material respects with such sections.
SECTION 9.13. Use of Loan Proceeds; Margin Regulations.
----------------------------------------
The Borrower will apply the proceeds of the Loans for working capital and
general corporate purposes, including without limitation acquisitions, of the
Borrower and its Restricted
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Subsidiaries. No part of the proceeds of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any "margin stock" within
the meaning of Regulation G of the Board of Governors of the Federal Reserve
System (12 CFR 207, as amended), or for the purpose of purchasing or carrying or
trading in any securities, under such circumstances as to involve the Borrower
in a violation of Regulation X of said Board (12 CFR 224, as amended) or to
involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220, as amended). No Debt being reduced or retired out of the proceeds of
the Loans was or will be incurred for the purpose of purchasing or carrying any
margin stock within the meaning of such Regulation G or any "margin security"
within the meaning of such Regulation T. As of the date hereof and as of the
Restatement Date, such margin stock does not constitute more than 25% of the
value of the consolidated assets of the Borrower and its Subsidiaries; and the
Borrower does not have any present intention that such margin stock will
constitute more than 25% of the value of such assets. None of the transactions
contemplated by this Agreement (including, without limitation, the direct or
indirect use of the proceeds of the Loans) will violate or result in a violation
of Section 7 of the Exchange Act or any regulations issued pursuant thereto,
including, without limitation, said Regulation G, Regulation T and Regulation X.
SECTION 9.14. Licenses, Patents, Trademarks, Authorizations, etc.
--------------------------------------------------
The Borrower and each of its Restricted Subsidiaries owns, possesses or has
the right to use (without any known conflict with the rights of others) all
permits, franchises, patents, trademarks, service marks, trade names,
copyrights, licenses, permits and governmental or other authorizations or the
like (collectively, "Licenses") which are necessary in any material respect to
the conduct of its businesses as conducted on the date hereof and as proposed to
be conducted. All such necessary Licenses or rights therein purported to be
owned by the Borrower or any Restricted Subsidiary are so owned free and clear
of any Liens, other than Liens permitted by subdivisions (a), (d) and (g) of
Section 8.03. Each such necessary License is in full force and effect, and no
default in the performance or observance by the Borrower or any such Subsidiary
of its obligations thereunder has occurred, the consequences of which default,
either alone or taken together with the consequences of all other such defaults,
have had or could reasonably be expected to have a Material Adverse Effect.
SECTION 9.15. Status Under Certain Statutes; Other Regulations.
------------------------------------------------
The Borrower is not an "investment company" or a Person directly or
indirectly "controlled" by or "acting on behalf of" an "investment company"
within the meaning of the Investment Borrower Act of 1940, as amended. The
Borrower is not a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," as such terms are defined in the Public Utility Holding
Borrower Act of 1935, as amended. The Borrower is not a "public utility," as
such term is defined in the Federal Power Act, as amended. The Borrower is not
subject to regulation under any federal or state law, statute, rule, regulation
or ordinance which limits its ability to incur Debt.
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SECTION 9.16. Labor Matters.
-------------
There are no labor disputes between the Borrower or any of its Restricted
Subsidiaries on the one hand and any of their respective employees or
representatives of such employees on the other hand which in the aggregate have
had or could reasonably be expected to have a Material Adverse Effect, and the
Borrower and its Restricted Subsidiaries are in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment, tax withholding on behalf of
employees and wages and hours, and are not engaged in any unfair labor practice
which, either alone or taken together with all other such practices, have had or
could reasonably be expected to have a Material Adverse Effect.
SECTION 9.17. Full Disclosure.
---------------
This Agreement, the Registration Statement and the other documents,
certificates and instruments delivered to the Administrative Agent and/or the
Lenders by or on behalf of the Borrower in connection with the transactions
contemplated by this Agreement, taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein, in light of the
circumstances under which the same were made (including without limitation, the
respective dates on or as of which such statements were made), not misleading.
There is no fact known to the Borrower which has had a Material Adverse Effect
since July 3, 1994 or in the future may (so far as the Borrower can now
reasonably foresee) have a Material Adverse Effect which has not been set forth
or reflected in this Agreement, the Registration Statement or in the other
documents, certificates and instruments referred to herein and delivered to the
Administrative Agent and/or the Lenders by or on behalf of the Borrower on or
prior to the date hereof in connection with the transactions contemplated by
this Agreement.
SECTION 9.18. Environmental Matters.
---------------------
(a) The Borrower and its Restricted Subsidiaries currently hold and at all
times heretofore the Borrower and its Restricted Subsidiaries held all
Environmental Permits required under all Environmental Laws except to the extent
failure to have any such Environmental Permit, either alone or considered
together with all other such failures, has not had and can not reasonably be
expected to have a Material Adverse Effect.
(b) The Borrower and its Restricted Subsidiaries currently are, and at all
times heretofore the Borrower and its Restricted Subsidiaries have been, in
compliance with all terms and conditions of all such Environmental Permits and
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in all applicable
Environmental Laws except to the extent failure to comply therewith, either
alone or considered together with all other such failures, has not had and can
not reasonably be expected to have a Material Adverse Effect.
(c) Except as set forth in Schedule XI, neither the Borrower nor any of
-----------
its Restricted Subsidiaries has ever received, and, so far as is known to the
Borrower, no predecessor in interest
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of the Borrower or any such Subsidiary in respect of any of the Borrower
Premises has ever received, from any Governmental Body or other Person any
notice of, and the Borrower has no knowledge of, any events, conditions or
circumstances that could prevent continued compliance in all material respects
with the Environmental Permits referred to in subdivision (b) of this Section or
any scheduled renewals thereof or any applicable Environmental Laws currently in
effect, or that could give rise to any liability on the part of the Borrower or
any such Restricted Subsidiary or otherwise form the basis of any claim, action,
demand, request, notice, suit, proceeding, hearing, study or investigation
(collectively, "Environmental Claims") involving the Borrower or any of its
Restricted Subsidiaries, based on or related to (i) a violation of any
applicable Environmental Laws currently in effect or (ii) the manufacture,
generation, refining, processing, distribution, use, sale, treatment, receipt,
storage, disposal, transport, arranging for transport or handling, or the
emission, discharge, release or threatened release into the environment, of any
Hazardous Substance in violation of any applicable Environmental Laws currently
in effect, other than any liability or Environmental Claim referred to in this
subdivision (c) which, either alone or considered together with all other such
liabilities and Environmental Claims, has not had and can not reasonably be
expected to have a Material Adverse Effect. Neither the matters set forth in
Schedule XI nor the resolution thereof nor any action required to be taken by
- -----------
Borrower in connection therewith have had or, in the Borrower's good faith
judgment, will have a Material Adverse Effect.
SECTION 9.19. Solvency.
--------
The Borrower and each Restricted Subsidiary is, and upon giving effect to
the initial borrowings hereunder on the Restatement Date will be, a "solvent
institution", as said term is used in Section 1405(c) of the New York Insurance
Law, whose "obligations are not in default as to principal or interest", as said
terms are used in said Section 1405(c).
ARTICLE X.
EVENTS OF DEFAULT
SECTION 10.01. Events of Default.
-----------------
Each of the following shall be an event of default (each an "Event of
Default") hereunder:
(a) default shall be made in the due and punctual payment of any
principal of any of the Loans or LOC Obligations when and as the same shall
become due and payable; or
(b) default shall be made in the due and punctual payment of any
interest on any of the Loans or LOC Obligations when and as such interest
shall become due and payable, and such default shall have continued for a
period of five Business Days; or
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(c) default shall be made in the due performance or observance of any
covenant, provision, agreement or condition contained in Section 8.01(c),
Section 8.02, Section 8.03, Section 8.04, Section 8.05, Section 8.06, or
Section 8.07, or the Borrower or a Restricted Subsidiary shall create,
incur, assume or otherwise become liable in respect of any Debt the
incurrence of which is not permitted by Section 8.02(a) or Section 8.02(b)
or immediately after giving effect to the incurrence of which the Borrower
would not be in compliance with Section 8.02(c); or
(d) default shall be made in the due performance or observance of any
other covenant, provision, agreement or condition contained in this
Agreement (other than any default referred to in the foregoing subdivisions
(a), (b) and (c) of this Section 10.01), including, without limitation, any
covenant, provision, agreement or condition contained in Section 8.01(c) or
Section 8.02, and such default shall have continued for a period of 30 days
after the earlier of (x) the date on which any Responsible Officer of the
Borrower first has knowledge of such default, through notice or otherwise
and (y) the giving of notice to the Borrower of such default by the
Administrative Agent or any of the Lenders; or
(e) (i) default shall be made in the payment of any amount due,
whether on an interest payment date or on a date fixed for prepayment, at
stated maturity, by acceleration or declaration or otherwise, under or in
respect of any Debt of the Borrower (including, without limitation, Debt
evidenced by any of the Notes, but excluding (x) Debt arising hereunder or
under any of the other Credit Documents and (y) so long as the Borrower
shall hold PYA's Note and the Sara Lee Offset Agreement shall remain in
full force and effect and shall be effective to permit the offset of
principal and interest due under the Sara Lee Note against principal and
interest due under PYA's Note (or to establish the Borrower's obligation in
respect of the indebtedness evidenced by the Sara Lee Note from and after a
prepayment in full of PYA's Note as the remaining principal balance of the
Sara Lee Note after offset against amounts owing thereon of the principal
of and accrued and unpaid interest to the date of prepayment on the PYA
Note), Debt evidenced by the Sara Lee Note) or of any Restricted Subsidiary
which is outstanding in a principal amount of more than $5,000,000, and
such default shall continue beyond the period of grace, if any, provided
with respect thereto; or (ii) default shall be made in the due performance
or observance of any covenant, provision, agreement or condition contained
in any document evidencing or providing for the issuance or securing of any
such Debt (other than Debt excluded as aforesaid), if the effect of any
such default referred to in this clause (ii) is to have caused such Debt to
become due prior to its stated maturity or prior to its regularly scheduled
dates of payment; or
(f) default shall be made in the due performance or observance of any
financial or negative covenant or agreement contained in any of the Note
Purchase Agreements beyond the period of grace, if any, provided for such
performance or observance in such Note Purchase Agreement (other than any
default arising from or consisting of a condition or event which (x) also
constitutes a default referred to in the foregoing subdivision (c) or (d)
of this Section 10.01 or (y) shall have become an Event
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of Default under subdivision (e) of this Section 10.01) and such default (a
"Noteholder Default") shall have continued for a period of 30 consecutive
days without having been cured, either by the Borrower or by virtue of a
waiver granted under or an amendment or other modification of the
provisions of the applicable Note Purchase Agreements; provided that, in
determining whether a Noteholder Default shall have occurred or shall
exist, and in determining the period during which any Noteholder Default
shall have continued, no effect shall be given to any waiver in respect of
any provision of the applicable Note Purchase Agreements or any consent to
a departure by the Borrower or a Subsidiary from any such provision or to
any amendment or modification of the terms of the applicable Note Purchase
Agreements or to any agreement entered into following, or in contemplation
of, the occurrence or coming into existence of any condition or event which
upon notice or lapse of time or both would constitute a Noteholder Default,
if such waiver, consent, amendment, modification or agreement is given or
entered into directly or indirectly in exchange for (i) monetary or other
consideration (other than the payment by the Borrower or a Subsidiary of
(x) waiver, modification or similar fees to the holders of the Notes not
exceeding, in the case of any such fee payable to any one such holder in
respect of the waivers, consents, amendments, modifications or agreements
given or entered into at any one time, $10,000 and (y) amounts in
reimbursement of the out-of-pocket costs of any of the holders of the
Notes, (ii) any increase in the rate of interest, premium or fees
theretofore payable under the applicable Note Purchase Agreements or (iii)
any decrease in the term to final maturity or the Weighted Average Life to
Maturity of any Debt of the Borrower or a Restricted Subsidiary under the
applicable Note Purchase Agreements; or
(g) the Borrower or any Restricted Subsidiary shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part
of its property, (ii) become insolvent or be generally unable to or shall
generally fail or admit in writing its inability to pay its debts as such
debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code
(as now or hereafter in effect), (v) file a petition seeking to take
advantage of any bankruptcy, insolvency, moratorium, reorganization or
other similar law affecting the enforcement of creditors' rights generally,
(vi) acquiesce in writing to, or fail to controvert in a timely or
appropriate manner, any petition filed against it in an involuntary case
under such Bankruptcy Code, (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing, or
(viii) take any corporate action in furtherance of any of the foregoing; or
(h) a proceeding or case shall be commenced in respect of the
Borrower or any Restricted Subsidiary, without its application or consent,
in any court of competent jurisdiction, seeking (i) the liquidation,
reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part
of its assets, or (iii) similar relief in respect of it under any law
providing for the relief of debtors, and such proceeding or case described
in clause (i), (ii) or (iii) shall continue undismissed, or
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unstayed and in effect, for a period of 45 days, or an order for relief
shall be entered in an involuntary case under the Federal Bankruptcy Code
(as now or hereafter in effect) against the Borrower or any Restricted
Subsidiary or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to
the Borrower or any Restricted Subsidiary and shall continue undismissed,
or unstayed and in effect, for a period of 45 days; or
(i) a final judgment or decree for the payment of money shall be
rendered by a court of competent jurisdiction against the Borrower or any
Restricted Subsidiary which, either alone or together with other
outstanding judgments or decrees against the Borrower or any one or more
Restricted Subsidiaries, shall aggregate more than $5,000,000, and the
Borrower or such Subsidiary, as the case may be, shall not discharge the
same or provide for its discharge in accordance with its terms within 60
days from the date of entry thereof or within such longer period
(including, without limitation, any period during which the Borrower shall
be contesting a denial of coverage of its liability in respect of such
judgment by a reputable insurance carrier) during which execution of such
judgment shall have been stayed; or
(j) any representation or warranty made by the Borrower or a
Restricted Subsidiary in this Agreement or the Guaranty Agreement or in any
certificate or other instrument delivered hereunder or thereunder or
pursuant hereto or thereto or in connection with any provision hereof shall
prove to have been false or incorrect or breached in any material respect
on the date as of which made; or
(k) (i) any Borrower Group Member shall fail to pay when due any
amount which it shall have become liable to pay to the PBGC or to a Plan or
Multiemployer Plan under Title IV of ERISA; (ii) any Borrower Group Member
shall withdraw from a Multiple Employer Plan during a plan year in which it
is a substantial employer (as such term is defined in Section 4001(a)(2) of
ERISA), or shall be treated as having so withdrawn under Section 4062(e) of
ERISA, or any Multiple Employer Plan shall be terminated; (iii) notice of
intent to terminate any Plan or Multiemployer Plan shall be filed under
Title IV of ERISA by any Borrower Group Member, any plan administrator or
any combination of the foregoing; (iv) the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed
to administer any Plan or Multiemployer Plan; (v) any Borrower Group Member
shall withdraw from any Multiemployer Plan ; (vi) any Plan shall have an
Unfunded Current Liability; or (vii) any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which may subject any Borrower Group Member to
any liability under Section 406, 409, 502(i) or 502(l) of ERISA or Section
4975 of the Code, or under any agreement or other instrument pursuant to
which such Borrower Group Member has agreed or is required to indemnify any
Person against any such liability; and there shall result from any such
event or events referred to in the foregoing subdivisions (k)(i) through
(k)(vii) a material risk of incurring a liability in excess of $5,000,000;
or
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(l) a Change of Control shall occur; or
(m) the Guaranty given by any Restricted Subsidiary pursuant to the
Guaranty Agreement shall cease to be in full force and effect other than by
reason of the release of such Restricted Subsidiary pursuant to Section
8.18 from its obligations under the Guaranty Agreement, or any Restricted
Subsidiary or any Person acting by or on behalf of such Restricted
Subsidiary shall deny or disaffirm such Restricted Subsidiary's obligations
under the Guaranty Agreement; or default shall be made by any Restricted
Subsidiary in the performance or observance of any covenant, provision,
agreement or condition contained in the Guaranty Agreement, and such
default (i) shall have continued for a period of 30 days after the earlier
of (x) the date on which any Responsible Officer of the Borrower first has
knowledge of such default, through notice or otherwise, and (y) the giving
of notice to the Borrower of such default by the Administrative Agent or
any of the Lenders, and (ii) either alone or considered together with all
such defaults, shall have or shall be reasonably likely to have a Material
Adverse Effect;
SECTION 10.02. Acceleration; Remedies.
----------------------
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Lenders or cured
to the satisfaction of the Lenders (pursuant to the voting procedures in Section
12.07), the Administrative Agent, upon the request of the Required Lenders,
shall, by written notice to the Borrower, take any of the following actions
without prejudice to the rights of the Administrative Agent or any Lender to
enforce its claims against the Borrower, except as otherwise specifically
provided for herein:
(i) Termination of Commitments. Declare the Commitments terminated
--------------------------
whereupon the Commitments shall be immediately terminated.
(ii) Acceleration of Obligations. Declare the unpaid principal of
---------------------------
and any accrued interest in respect of all Loans, any reimbursement
obligations arising from drawings under Letters of Credit and any and all
other indebtedness or obligations of any and every kind owing by the
Borrower to any of the Lenders hereunder to be due whereupon the same shall
be immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
(iii) Cash Collateral. Contemporaneously with or subsequent to the
---------------
exercise of its right under clause (ii) of this Section 10.02, direct the
Borrower to pay (and the Borrower agree that upon receipt of such
direction, or upon the occurrence of an Event of Default under Section
10.01(g) or (h), it will immediately pay) to the Administrative Agent
additional cash, to be held by the Administrative Agent, for the benefit of
the Lenders, in a cash collateral account as additional security for the
LOC Obligations in respect of subsequent drawings under all then
outstanding Letters of Credit in an amount equal to the maximum aggregate
amount which may be drawn under all Letters of Credits then outstanding.
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(iv) Enforcement of Rights. Enforce (A) any and all rights and
---------------------
interests created and existing under the Credit Documents and (B) all
rights of set-off to the extent available under, and to the extent
exercised in accordance with, applicable law.
Notwithstanding the foregoing, if an Event of Default specified in Section
10.01(g) or (h) shall occur, then the Commitments shall automatically terminate
and all Loans, reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Lenders hereunder automatically
shall immediately become due and payable without the giving of any notice or
other action by the Administrative Agent.
ARTICLE XI.
ADMINISTRATIVE AGENT
SECTION 11.01. Appointment and Authorization.
-----------------------------
Each Lender hereby irrevocably appoints and authorizes the Administrative
Agent to take such action on its behalf and to exercise such powers under this
Agreement and the other Credit Documents as are delegated to the Administrative
Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto.
SECTION 11.02. General Immunity.
----------------
In performing its duties to the Lenders as Administrative Agent hereunder,
the Administrative Agent will take the same care as it takes in connection with
credit transactions in which it alone is interested. However, neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable to the Lenders for any action taken or omitted to be taken by it
or them hereunder or in connection herewith except for its own or their own
gross negligence or willful misconduct.
SECTION 11.03. Consultation with Professionals.
-------------------------------
The Administrative Agent may consult with legal counsel and other
professionals selected by it and shall not be liable to the Lenders for any
action taken or suffered in good faith by it in accordance with the advice of
such counsel and professionals in their respective areas of expertise.
SECTION 11.04. Documents.
---------
The Administrative Agent shall not be under any duty to examine or pass
upon the effectiveness, genuineness or validity of this Agreement or any of the
other Credit Documents or any other instrument or document furnished pursuant
hereto or in connection herewith, and the
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Administrative Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be.
SECTION 11.05. Rights as a Lender.
------------------
With respect to their respective Commitments, the Administrative Agent
shall have the same rights and powers hereunder as any Lender and may exercise
the same as though it were not the Administrative Agent, as the case may be, and
the terms "Lender" and "Lenders" shall, as applicable and unless the context
otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent may accept deposits from, lend money to and
generally engage in any kind of banking or trust business with the Borrower as
if it were not the Administrative Agent as the case may be.
SECTION 11.06. Responsibility of Administrative Agent.
--------------------------------------
It is expressly understood and agreed that the obligations of the
Administrative Agent hereunder to the Lenders are only those expressly set forth
in this Agreement and the other Credit Documents and that the Administrative
Agent shall be entitled to assume that no Default or Event of Default has
occurred and is continuing unless the Administrative Agent has actual knowledge
of such fact or has received notice from a Lender or the Borrower that such
Lender or the Borrower considers that a Default or an Event of Default has
occurred and is continuing and specifying the nature thereof.
SECTION 11.07. Action by Administrative Agent.
------------------------------
So long as the Administrative Agent shall be entitled, pursuant to Section
11.06, to assume that no Default or Event of Default has occurred and is
continuing, the Administrative Agent shall be entitled to use its discretion
with respect to exercising or refraining from exercising any rights that may be
vested in it by, or with respect to taking or refraining from taking any action
or actions that it may be able to take under or in respect of, this Agreement or
any of the other Credit Documents. The Administrative Agent shall incur no
liability to the Lenders under or in respect of this Agreement or any of the
other Credit Documents by acting upon any notice, consent, certificate, warranty
or other paper or instrument believed by it to be genuine or authentic or to be
signed by the proper party or parties, or with respect to anything that it may
do or refrain from doing in the reasonable exercise of its judgment, or that may
seem to it to be necessary or desirable under the circumstances.
Without limiting the generality of the foregoing provisions of this Section
11.07, the Administrative Agent shall be conclusively entitled to assume that
the conditions precedent set forth in Section 5.03 have been satisfied unless it
shall have acquired actual knowledge that any such condition precedent has not
been satisfied.
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SECTION 11.08. Notices of Event of Default, Etc..
---------------------------------
In the event that the Administrative Agent shall have acquired actual
knowledge of any Default or Event of Default, the Administrative Agent shall
promptly give notice thereof to the Lenders, and the Administrative Agent may
take such action and assert such rights with respect to taking or refraining
from taking any action or actions that it may be able to take under or in
respect of, this Agreement or any of the other Credit Documents, as it deems to
be advisable in its discretion for the protection of the interests of the
Lenders, including, without limitation, the exercise of rights and remedies
under Article X and under any of the other Credit Documents; provided that, as
between the Administrative Agent and the Lenders only, after the occurrence of
an Event of Default, the Administrative Agent (i) shall not exercise any rights
or remedies granted to it hereunder, under any other of the Credit Documents, or
otherwise available to it at law or in equity, without the approval of the
Required Lenders (or all of the Lenders, if otherwise required by this
Agreement) and (ii) upon the direction of the Required Lenders (or all of the
Lenders, if otherwise required by this Agreement), shall exercise such rights
and remedies as so directed; provided further that, notwithstanding the above,
the Administrative Agent shall not be required to take any action which would
expose the Administrative Agent to personal liability or which is contrary to
law unless it shall be indemnified to its satisfaction against any and all
amounts, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature which
may be imposed on, incurred by or asserted against the Administrative Agent by
reason of taking or continuing to take any such action.
SECTION 11.09. Indemnification of Administrative Agent.
---------------------------------------
The Lenders agree to indemnify the Administrative Agent (to the extent not
reimbursed by the Borrower), ratably according to their respective Commitment
Percentages, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of this
Agreement or any of the other Credit Documents or any action taken or omitted by
the Administrative Agent under this Agreement or any of the other Credit
Documents; provided that, no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. Without limitation to the foregoing, each
Lender agrees to reimburse the Administrative Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred by
the Administrative Agent in connection with the preparation, execution,
delivery, modification, amendment or enforcement (whether through negotiations,
legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any of the other Credit Documents, to
the extent not reimbursed by the Borrower.
SECTION 11.10. No Representations.
------------------
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Each Lender expressly acknowledges that neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Administrative Agent or any of its directors, employees, agents, attorneys-
in-fact or affiliates hereafter taken, including any review of the affairs of
the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to such Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigations into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to make
Loans hereunder and to enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Credit Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. The Administrative Agent agrees
that (i) it shall promptly deliver to each Lender copies of all notices, reports
and other documents expressly required to be furnished to the Administrative
Agent by the Borrower or any Restricted Subsidiary pursuant to any of the Credit
Documents and (ii) upon the reasonable request of any Lender, it shall promptly
deliver to such Lender such other information as the Administrative Agent shall
receive regarding the Borrower or any Restricted Subsidiary or the performance
of the respective obligations of the Borrower and the Restricted Subsidiaries
under the Credit Documents; otherwise, the Administrative Agent shall have no
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness of the Borrower which may come into the possession
of the Administrative Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
SECTION 11.11. Resignation; Removal.
--------------------
Subject to the appointment and acceptance of a successor as provided below,
the acting Administrative Agent may resign at any time by notifying the Lenders
and the Borrower or may be removed by the Borrower in its sole discretion at any
time by notifying the Administrative Agent and the other Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor acceptable to the Borrower, which successor shall be a Lender that is
a bank having a combined capital and surplus of at least $500,000,000 or an
affiliate of any such bank. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the delivery of notice of resignation by or removal of the existing
Administrative Agent pursuant to the first sentence of this Section 11.11, then
the existing Administrative Agent (in the case of resignation by the existing
Administrative Agent) or the Borrower (in the case of removal by the Borrower of
the existing Administrative Agent) may, on behalf of the Lenders, appoint a
successor satisfying the requirements set forth above. Upon the acceptance of
any appointment hereunder by a successor Lender, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed
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Administrative Agent, and the retiring or removed Administrative Agent shall be
discharged from its duties and obligations hereunder. After an Administrative
Agent's resignation or removal hereunder, the provisions of this Article and
Section 12.06 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent.
SECTION 11.12. Syndication Agent, Documentation Agent, Co-Arranger and
-------------------------------------------------------
Co-Agent.
- --------
The Syndication Agent, Documentation Agent, Co-Arranger and Co-Agent, in
their capacities as such, shall have no rights, powers, duties or obligations
under this Agreement or any of the other Credit Documents.
ARTICLE XII.
MISCELLANEOUS
SECTION 12.01. Notices.
-------
Notices and other communications provided for herein shall be in writing
and shall be delivered by hand or overnight courier service, mailed or sent by
telex, telecopy, graphic scanning or other telegraphic communications equipment
of the sending party, as follows:
(a) if to the Borrower, to it at 9830 Patuxent Woods Drive, Columbia,
Maryland 21046, Attention of Vice President-Finance and Controller (Facsimile
No. 410-309-6296);
(b) if to the Administrative Agent to it at:
(i) with respect to operational matters, 101 North Tryon Street,
Independence Center, 15th Floor, NC1-001-15-02, Charlotte, North Carolina
28255, Attention of Kathy Mumpower, Agency Services (Facsimile No. 704-386-
9923); and
(ii) in all other cases, 6610 Rockledge Drive, 6th Floor, MD2-600-06-
05, Bethesda, Maryland 20817-1876, Attention of Michael Heredia, Vice
President (Facsimile No. 301-571-0719);
(c) if to a Lender, to it at its address (or telecopy number) set forth in
Schedule I or in the assignment agreement pursuant to which such Lender became a
- ----------
party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telex, telecopy, graphic scanning or other telegraphic communications equipment
of the sender, or on the date five (5) Business Days after dispatch by certified
or registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 12.01 or at such other
address or
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telex, telecopy or other number as shall be designated by such party in a notice
to each other party complying with the terms of this Section 12.01.
SECTION 12.02. Survival of Agreement.
---------------------
All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the Lenders and shall survive the making of Loans by
the Lenders hereunder regardless of any investigation made by the Lenders or on
their behalf, and shall continue in full force and effect as long as any Loans
or any amounts are outstanding under this Agreement or any of the other Credit
Documents and so long as the Commitments have not been terminated.
SECTION 12.03. Binding Effect.
--------------
This Agreement shall become effective when it shall have been executed by
the Borrower and the Administrative Agent, and when the Administrative Agent
shall have received copies hereof (telefaxed or otherwise) which, when taken
together, bear the signatures of each Lender, and when the other conditions set
out in Section 5.04 shall have been satisfied or waived, and thereafter this
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Administrative Agent and each Lender and their respective successors and
assigns.
SECTION 12.04. Benefit of Agreement.
--------------------
(a) Generally. This Agreement shall be binding upon and inure to the
---------
benefit of and be enforceable by the respective successors and assigns of the
parties hereto; provided that the Borrower may not assign or transfer any of its
--------
interests without prior written consent of the Lenders; provided further that
-------- -------
the rights of each Lender to transfer, assign or grant participations in its
rights and/or obligations hereunder shall be limited as set forth in this
Section 12.04, provided, however, that nothing herein shall prevent or prohibit
-------- -------
any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank, or
(ii) granting assignments or participations in such Lender's Loans and/or
Commitments hereunder to its parent company and/or to any affiliate of such
Lender which is at least 50% owned by such Lender or its parent company. To the
extent required in connection with a pledge of Loans by any Lender to a Federal
Reserve Bank, the Borrower agrees that, upon request of any such Lender, it will
promptly provide such Lender a promissory note evidencing the repayment
obligations of the Borrower with respect to the principal of and interest on the
Loans of such Lender arising under Section 2.01, such promissory note to be in a
form reasonably satisfactory to the Borrower and the applicable Lender.
(b) Assignments by Lenders. Each Lender may assign all or a portion of its
----------------------
rights and obligations hereunder pursuant to an assignment agreement
substantially in the form of Schedule XIV to one or more Eligible Assignees,
------------
provided that any such assignment shall be in a minimum aggregate amount of
- --------
$5,000,000 of the Commitments and in integral multiples of $1,000,000 above such
amount, and that each such assignment shall be of a constant, and not a
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varying, percentage of all of the assigning Lender's rights and obligations
under this Agreement. Any assignment hereunder shall be effective upon delivery
to the Administrative Agent of written notice of the assignment together with a
transfer fee of $2,500 payable to the Administrative Agent for its own account.
The assigning Lender will give prompt notice to the Administrative Agent and the
Borrower of any such assignment. Upon the effectiveness of any such assignment
(and after notice to the Borrower as provided herein), the assignee shall become
a "Lender" for all purposes of this Agreement and the other Credit Documents
and, to the extent of such assignment, the assigning Lender shall be relieved of
its obligations hereunder to the extent of the Loans, Participation Interests
and Commitments being assigned. By executing and delivering an assignment
agreement in accordance with this Section 12.04(b), the assigning Lender
thereunder and the assignee thereunder shall be deemed to confirm to and agree
with each other and the other parties hereto as follows: (i) such assigning
Lender warrants that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim; (ii) except as set forth
in clause (i) above, such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement, any of the other
Credit Documents or any other instrument or document furnished pursuant hereto
or thereto, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any of the other Credit Documents or any
other instrument or document furnished pursuant hereto or thereto or the
financial condition of the Borrower or any Restricted Subsidiary or the
performance or observance by the Borrower or any Restricted Subsidiary of any of
its obligations under this Agreement, any of the other Credit Documents or any
other instrument or document furnished pursuant hereto or thereto; (iii) such
assignee represents and warrants that it is legally authorized to enter into
such assignment agreement; (iv) such assignee confirms that it has received a
copy of this Agreement, the other Credit Documents and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such assignment agreement; (v) such assignee will
independently and without reliance upon the Administrative Agent, such assigning
Lender or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Credit Documents;
(vi) such assignee appoints and authorizes the Administrative Agent to take such
action on its behalf and to exercise such powers under this Agreement or any
other Credit Document as are delegated to the Administrative Agent by the terms
hereof or thereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of this Agreement and the
other Credit Documents are required to be performed by it as a Lender.
(c) Participations. Each Lender may sell, transfer, grant or assign
--------------
participations in all or any part of such Lender's interests and obligations
hereunder; provided that (i) such selling Lender shall remain a "Lender" for all
--------
purposes under this Agreement and the other Credit Documents (such selling
Lender's obligations under this Agreement remaining unchanged) and the
participant shall not constitute a Lender hereunder, (ii) no such participant
shall have, or be granted, rights to approve any amendment or waiver relating to
this Agreement or any of the other Credit Documents except with respect to any
such amendment or waiver which would, under the terms of Section 12.07 (i), (ii)
or (v), require the consent of all of the Lenders, (iii) sub-
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participations by the participant (except to an affiliate, parent company or
affiliate of a parent company of the participant) shall be prohibited and (iv)
any such participations shall be in an integral multiple of $5,000,000 of the
Commitments. In the case of any such participation, the participant shall not
have any rights under this Agreement or under any of the other Credit Documents
(the participant's rights against the selling Lender in respect of such
participation to be those set forth in the participation agreement with such
Lender creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such participation,
provided, however, that such participant shall be entitled to receive additional
- -------- -------
amounts under Sections 3.05 and 3.07 on the same basis as if it were a Lender,
except that all claims and petitions for payment and all payments made pursuant
to such Sections shall be made through such selling Lender and except that a
participant shall not be entitled to receive pursuant to such provisions an
amount larger than its share of the amount of which the selling Lender would
have been entitled.
SECTION 12.05. No Waiver; Remedies Cumulative.
------------------------------
No failure or delay on the part of the Administrative Agent or any Lender
in exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrower and the Administrative
Agent or any Lender shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Administrative Agent or any Lender would otherwise have. No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Administrative Agent or the Lenders to
any other or further action in any circumstances without notice or demand.
SECTION 12.06. Payment of Expenses, Etc.
------------------------
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Administrative Agent in connection with the negotiation,
preparation, execution and delivery and administration of this Agreement and the
other Credit Documents and the documents and instruments referred to therein and
any amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Borrower under this Agreement and (B) of the Administrative Agent and the
Lenders in connection with enforcement of the Credit Documents and the documents
and instruments referred to therein and/or collection of the obligations of any
of the Borrower and the Restricted Subsidiaries pursuant to the Credit Documents
(including, without limitation, in connection with any such enforcement or
collection, the reasonable fees and disbursements of counsel for the
Administrative Agent and each of the Lenders); (ii) pay and hold each of the
Lenders harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission (other than to the extent
103
<PAGE>
attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender
(including the Issuing Lender), its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or reasonable out-of-pocket expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding (whether
or not any Lender is a party thereto) related to the entering into and/or
performance of any Credit Document, to the use of proceeds of any Loans
hereunder, to the use of or any drawings under any Letters of Credit issued
hereunder, to the consummation of any other transactions contemplated in any
Credit Document or to the Reorganization, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of gross negligence or willful misconduct on the part of the Person to be
indemnified).
SECTION 12.07. Amendments, Waivers and Consents.
--------------------------------
Neither this Agreement nor any other Credit Document nor any of the terms
hereof or thereof may be amended, changed, waived, discharged or terminated
unless such amendment, change, waiver, discharge or termination is in writing
signed by the Required Lenders, provided that no such amendment, change, waiver,
--------
discharge or termination shall, without the consent of each Lender, (i) extend
the scheduled maturities (including the final maturity and any mandatory
prepayments) of any Revolving Loan or LOC Obligation, or any portion thereof, or
reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) thereon or fees hereunder or reduce the principal amount thereof, or
increase the Commitment of any Lender over the amount thereof in effect (it
being understood and agreed that a waiver of any Default or Event of Default
shall not constitute a change in the terms of any Commitment of any Lender),
(ii) except as otherwise permitted by Section 8.18, release any Guarantor from
its obligations under the Guaranty Agreement, (iii) amend, modify or waive any
provision of this Section or Section 3.05, 3.07, 4.02, 4.03, 4.04, 4.05,
10.01(a) or (b), (iv) reduce any percentage specified in, or otherwise modify,
the definition of "Required Lenders" or (v) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Credit Documents. No provision of Section 2.02 may be
amended, modified or waived without the consent of the Swingline Lender and no
provision of Article XI may be amended without the consent of the Administrative
Agent.
SECTION 12.08. Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
constitute one and the same instrument. It shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
104
<PAGE>
SECTION 12.09. Headings.
--------
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.
SECTION 12.10. Survival of Indemnification.
---------------------------
All indemnities set forth herein, including, without limitation, in
Section 3.05, 3.07, 4.05, 11.09 or 12.06 shall survive the execution and
delivery of this Agreement, and the making of the Loans, the repayment of the
Loans and other obligations and the termination of the Commitments hereunder.
SECTION 12.11. Governing Law; Submission to Jurisdiction; Venue;
------------------------------------------------
Waiver of Jury Trial.
- --------------------
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND ALL AMENDMENTS,
SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW RULES OTHER THAN SECTIONS
5-1401 OR 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK.
(b) THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR
ANY OF THE OTHER CREDIT DOCUMENTS MAY BE LITIGATED IN SUCH COURTS, AND THE
BORROWER WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM
-----
NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES
- --------------
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AS PROVIDED IN
SECTION 12.01 AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT OR FIVE BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN
MAILED TO THE BORROWER IN ACCORDANCE HEREWITH. NOTHING CONTAINED IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR THE LENDERS TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR
PROCEEDING IN THE COURTS OF ANY JURISDICTION AGAINST THE BORROWER OR TO ENFORCE
A JUDGMENT OBTAINED IN THE COURTS OF ANY OTHER JURISDICTION. THE BORROWER
ACKNOWLEDGES THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED THE
TIME AND EXPENSE FOR A BENCH TRIAL AND HEREBY WAIVES, TO THE
105
<PAGE>
EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 12.12. Severability.
------------
If any provision of this Agreement is determined to be illegal, invalid
or unenforceable, such provision shall be fully severable and the remaining
provisions shall remain in full force and effect and shall be construed without
giving effect to the illegal, invalid or unenforceable provisions.
SECTION 12.13. Term.
----
The term of this Agreement shall be until no Loans, LOC Obligations or
any other amounts payable hereunder shall remain outstanding and until all of
the Commitments hereunder shall have terminated.
SECTION 12.14. Entirety.
--------
This Agreement and the other Credit Documents represent the entire
agreement of the parties hereto and supersede all prior agreements and
understandings, oral or written, if any, including any commitment letters or
correspondence, relating to this Agreement or any of the other Credit Documents
or the transactions contemplated herein and therein.
[Remainder of page intentionally left blank.]
106
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
JP FOODSERVICE DISTRIBUTORS, INC.
By /s/ George T. Megas
----------------------------------
Title Vice President
-------------------------------
NATIONSBANK, N.A.,
as Administrative Agent and a Lender
By
----------------------------------
Title
-------------------------------
THE CHASE MANHATTAN BANK,
as Syndication Agent and a Lender
By
----------------------------------
Title
-------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent and a Lender
By
----------------------------------
Title
-------------------------------
PNC BANK, NATIONAL ASSOCIATION,
as Co-Agent and a Lender
By
----------------------------------
Title
-------------------------------
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
JP FOODSERVICE DISTRIBUTORS, INC.
By
----------------------------------
Title
-------------------------------
NATIONSBANK, N.A.,
as Administrative Agent and a Lender
By /s/ Michael R. Heredia
----------------------------------
Title Senior Vice President
-------------------------------
THE CHASE MANHATTAN BANK,
as Syndication Agent and a Lender
By
----------------------------------
Title
-------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent and a Lender
By
---------------------------------
Title
-------------------------------
PNC BANK, NATIONAL ASSOCIATION,
as Co-Agent and a Lender
By
----------------------------------
Title
-------------------------------
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
JP FOODSERVICE DISTRIBUTORS, INC.
By
----------------------------------
Title
-------------------------------
NATIONSBANK, N.A.,
as Administrative Agent and a Lender
By
----------------------------------
Title
-------------------------------
THE CHASE MANHATTAN BANK,
as Syndication Agent and a Lender
By /s/ Karen M. Sharf
----------------------------------
Title Vice President
-------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent and a Lender
By
----------------------------------
Title
-------------------------------
PNC BANK, NATIONAL ASSOCIATION,
as Co-Agent and a Lender
By
----------------------------------
Title
-------------------------------
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
JP FOODSERVICE DISTRIBUTORS, INC.
By
----------------------------------
Title
-------------------------------
NATIONSBANK, N.A.,
as Administrative Agent and a Lender
By
----------------------------------
Title
-------------------------------
THE CHASE MANHATTAN BANK,
as Syndication Agent and a Lender
By
----------------------------------
Title
-------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent and a Lender
By /s/ Amy L. Golz
----------------------------------
Title Vice President
-------------------------------
PNC BANK, NATIONAL ASSOCIATION,
as Co-Agent and a Lender
By
----------------------------------
Title
-------------------------------
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
JP FOODSERVICE DISTRIBUTORS, INC.
By
----------------------------------
Title
-------------------------------
NATIONSBANK, N.A.,
as Administrative Agent and a Lender
By
----------------------------------
Title
-------------------------------
THE CHASE MANHATTAN BANK,
as Syndication Agent and a Lender
By
----------------------------------
Title
-------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent and a Lender
By
----------------------------------
Title
-------------------------------
PNC BANK, NATIONAL ASSOCIATION,
as Co-Agent and a Lender
By [SIGNATURE APPEARS HERE]
----------------------------------
Title Vice President
-------------------------------
<PAGE>
BANK OF AMERICA, NT & SA
By [SIGNATURE APPEARS HERE]
----------------------------------
Title
-------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By
----------------------------------
Title
-------------------------------
THE FUJI BANK, LIMITED, New York Branch
By
----------------------------------
Title
-------------------------------
<PAGE>
BANK OF AMERICA, NT & SA
By
----------------------------------
Title
-------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By /s/ David Wynde
----------------------------------
Title SENIOR ViCE PRESIDENT
-------------------------------
THE FUJI BANK, LIMITED, New York Branch
By
----------------------------------
Title
-------------------------------
<PAGE>
BANK OF AMERICA, NT & SA
By
----------------------------------
Title
-------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By
----------------------------------
Title
-------------------------------
THE FUJI BANK, LIMITED, New York Branch
By /s/ Toshiaki Yakura
----------------------------------
Title Senior Vice President
-------------------------------
<PAGE>
EXHIBIT 10.30
SECOND AMENDMENT TO TRANSFER AND ADMINISTRATION AGREEMENT
This SECOND AMENDMENT TO TRANSFER AND ADMINISTRATION AGREEMENT (this
"Amendment"), dated as of May 19, 1997 is among ENTERPRISE FUNDING CORPORATION,
a Delaware corporation (the "Company"), JPFD FUNDING COMPANY, a Delaware
corporation (the "Transferor"), JP Foodservice Distributors, Inc., a Delaware
corporation (the "Collection Agent"), THE FINANCIAL INSTITUTIONS FROM TIME TO
TIME PARTIES THERETO (collectively, the "Bank Investors" and each a "Bank
Investor"), and NATIONSBANK, N.A. as agent for the Company and the Bank
Investors (in such capacity, the "Agent") and as a Bank Investor.
PRELIMINARY STATEMENTS:
1. The Company, the Transferor, the Collection Agent, the Bank Investors,
and the Agent have entered into a Transfer and Administration
Agreement dated as of May 30, 1996, as amended on July 1, 1996, (as so
amended, the "Transfer and Administration Agreement"; capitalized
terms used and not otherwise defined herein have the meanings assigned
to such terms in the Transfer and Administration Agreement).
2. The Transferor has requested certain amendments to the Transfer and
Administration Agreement.
3. The Company is, on the terms and conditions stated below, willing to
grant such requests of the Transferor.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Transfer and Administration Agreement. Effective as
---------------------------------------------------
of the date hereof and subject to the satisfaction of the conditions precedent
set forth in Section 2 hereof, the Transfer and Administration Agreement is
hereby amended as follows:
(a) In Section 1.1 the definition of "Commitment Termination Date" shall be
amended such that the reference to the date appearing in such definition
shall be amended to read "November 24, 1997.";
(b) The third and fourth lines of Section 6.2(c) shall be amended by inserting
after the words "a firm of independent public accountants", the words ",
the Business Credit Field Exam Group of NationsBank, N.A. or such other
Person as may be approved by the Agent".
(c) Section 7.1(r)(iii) shall be deleted in its entirety and replaced with the
following:
On any Determination Date occurring during any period specified in the
following table, the Total Debt and Investment Ratio shall exceed 3.75
to 1.0; or;
(d) In Annex 1 to the Transfer and Administration Agreement, the definition of
"Net Worth Minimum" shall be deleted in its entirety and replaced with the
following:
<PAGE>
"Net Worth Minimum" shall mean as of any date, the sum of (i)
$78,000,000 plus, on the last date of each fiscal quarter occurring
----
after the date of this Amendment, (ii) the greater of (x) zero and (y)
50% of the net income of Distributors and its Restricted Subsidiaries
for such preceding fiscal year, determined on a consolidated basis in
accordance with GAAP after eliminating all intercompany items and
deducting portions of income properly attributable to outside minority
interests, if any, in Restricted Subsidiaries and after adding, to the
extent deducted in determining such net income, the amount of any
provision for the amortization of Effective Date intangibles.
Section 2. Conditions to Effectiveness. This Amendment shall become effective
---------------------------
when the Company has executed this Amendment and has received counterparts of
this Amendment executed by the Transferor, the Collection Agent, the Bank
Investors, and the Agent.
Section 3. Representations and Warranties.
------------------------------
(a) Authority. The Transferor, the Collection Agent, the Bank
---------
Investors, and the Agent each has the requisite corporate power and authority to
execute and deliver this Amendment and to perform its obligations hereunder and
under the Transfer and Administration Agreement (as modified hereby) to which it
is a party. The execution, delivery and performance by the Transferor, the
Collection Agent, the Bank Investors, and the Agent of this Amendment and the
performance of the Transfer and Administration Agreement as modified hereby)
have been duly approved by all necessary corporate action and not other
corporate proceedings are necessary to consummate such transactions.
(b) Enforceability. This Amendment has been duly executed and
--------------
delivered by the Transferor, the Collection Agent, the Bank Investors, and the
Agent. This Amendment (as modified hereby) is the legal, valid and binding
obligation of the Transferor, the Collection Agent, the Bank Investors, and the
Agent, enforceable against the Transferor, the Collection Agent, the Bank
Investors, and the Agent in accordance with its terms, and is in full force and
effect.
(c) Representations and Warranties. The representations and
------------------------------
warranties contained in the Transfer and Administration Agreement (other than
any such representations or warranties that, by their terms, are specifically
made as of a date other than the date hereof) are correct on and as of the date
hereof as though made on and as of the date hereof.
(d) No Termination Event. No event has occurred and is continuing that
--------------------
constitutes a Termination Event.
Section 4. Reference to and Effect on the Transfer and Administration
----------------------------------------------------------
Agreement.
---------
(a) Except as specifically amended and modified above, the Transfer
and Administration Agreement is and shall continue to be in full force and
effect and is hereby in all respects ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment shall
not operate as waiver of any right, power or remedy of the Company under the
Transfer and Administration Agreement, nor constitute a waiver of any provision
of the Transfer and Administration Agreement.
<PAGE>
Section 5. Execution in Counterparts. This amendment may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart or a signature page to this Amendment by
telefacsimile shall be effective as delivery of a manually executed counterpart
of this Amendment.
Section 6. Successors and Assigns.
----------------------
This Amendment shall bind, and the benefits hereof shall inure to the parties
hereof and their respective successors and permitted assigns; provided, however,
-------- -------
the Transferor may not assign any of its rights or delegate any of its duties
under this Amendment without the prior written consent of the Company.
Section 7. Governing Law.
-------------
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. EACH OF THE TRANSFEROR, THE COLLECTION AGENT, AND THE
GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 8. Severability.
------------
Any provisions of this Amendment which are prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
ENTERPRISE FUNDING CORPORATION,
as Company, a Delaware corporation
By: /s/ Stewart L. Cutler
----------------------------------
Name: STEWART L. CUTLER
Title: VICE PRESIDENT
<PAGE>
JPFD FUNDING COMPANY
as Transferor, a Delaware corporation
By: /s/ George T. Megas
----------------------------------
Name: George T. Megas
Title: Vice President, Finance
JP FOODSERVICE DISTRIBUTORS, INC.
as Collection Agent, a Delaware corporation
By: /s/ James L. Miller
----------------------------------
Name: James L. Miller
Title: President & CEO
NATIONSBANK, N.A.
as Agent and Bank Investor
By: /s/ Brian C. Blakely
----------------------------------
Name: Brian C. Blakely
Title: Investment Banking Officer
THE FIRST NATIONAL BANK OF CHICAGO
as Bank Investor
By: /s/ J. Gregory Micken
----------------------------------
Name: J. Gregory Micken
Title:
UNITED STATES NATIONAL BANK OF OREGON
as Bank Investor
By: /s/ Douglas A. Rich
----------------------------------
Name: Douglas A. Rich
Title: Vice President
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
------------------------------
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
JP Foodservice Distributors, Inc. (1) Delaware
Sky Bros., Inc. (2) Pennsylvania
Illinois Fruit & Produce Corp. (2) Illinois
</TABLE>
- ----------------------------------------
(1) Conducts business in Maryland as JP Broadline Distributors, Inc.
(2) Second-tier wholly-owned subsidiary of JP Foodservice Distributors, Inc.
<PAGE>
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-88140, 33-88142, 33-88144 and 33-81011) and Form
S-3 (No. 333-27275) 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 on page F-2 of JP
Foodservice, Inc.'s Annual Report on Form 10-K for the year ended June 28, 1997.
/s/ PRICE WATERHOUSE LLP
Baltimore, Maryland
September 22, 1997
<PAGE>
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-88140, 33-88142, 33-88144 and 33-81011) and Form
S-3 (No. 333-27275) of JP Foodservice, Inc. of our report dated August 11, 1997
relating to the consolidated balance sheet of JP Foodservice, Inc. and
Subsidiaries as of June 28, 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended and all
related schedules, which report appears on page F-1 in this Annual Report on
Form 10-K.
/s/ KPMG Peat Marwick LLP
Baltimore, Maryland
September 22, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
FDS FOR JP FOODSERVICE, INC. AS OF AND FOR THE YEAR ENDED JUNE 28, 1997
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-29-1996 JUN-28-1997
<PERIOD-START> JUL-02-1995 JUN-30-1996
<PERIOD-END> JUN-29-1996 JUN-28-1997
<CASH> 12,224 11,139
<SECURITIES> 0 0
<RECEIVABLES> 156,952 142,284
<ALLOWANCES> 2,547 3,530
<INVENTORY> 84,138 110,030
<CURRENT-ASSETS> 260,323 271,869
<PP&E> 167,365 227,938
<DEPRECIATION> 63,107 86,214
<TOTAL-ASSETS> 448,279 524,148
<CURRENT-LIABILITIES> 139,457 118,445
<BONDS> 0 0
0 0
0 0
<COMMON> 189 225
<OTHER-SE> 127,960 228,721
<TOTAL-LIABILITY-AND-EQUITY> 448,279 524,148
<SALES> 1,449,303 1,691,913
<TOTAL-REVENUES> 1,449,303 1,691,913
<CGS> 1,198,797 1,396,223
<TOTAL-COSTS> 205,291 235,353
<OTHER-EXPENSES> 16,704 21,922
<LOSS-PROVISION> 2,048 2,253
<INTEREST-EXPENSE> 15,187 16,522
<INCOME-PRETAX> 28,511 38,415
<INCOME-TAX> 11,598 16,167
<INCOME-CONTINUING> 16,913 22,248
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 16,913 22,248
<EPS-PRIMARY> 0.90 1.02
<EPS-DILUTED> 0.90 1.02
</TABLE>
