<PAGE>
As filed with the Securities and Exchange Commission on August 1, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------
JP FOODSERVICE, INC.
(Exact name of Registrant as specified in its charter)
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<CAPTION>
<S> <C> <C>
Delaware 5141 52-1634568
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
-----------------
David M. Abramson
Senior Vice President and General Counsel
JP Foodservice, Inc.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
(410) 312-7100
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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<CAPTION>
<S> <C> <C>
Copies to:
Richard J. Parrino Edward D. Herlihy Elizabeth C. Kitslaar
Hogan & Hartson, L.L.P. Wachtell, Lipton, Rosen & Katz Jones, Day, Reavis & Pogue
555 Thirteenth Street, N.W. 51 West 52nd Street 77 West Wacker
Washington, D.C. 20004 New York, NY 10019 Chicago, Illinois 60601-1692
(202) 637-5600 (212) 403-1000 (312) 782-3939
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement and the
effective time of the merger (the "Merger") of a subsidiary of JP Foodservice,
Inc. and Rykoff-Sexton, Inc., as described in the Agreement and Plan of Merger,
dated as of June 30, 1997 (the "Merger Agreement") attached as Appendix A to
the Joint Proxy Statement/Prospectus forming a part of this Registration
Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Per Aggregate Registration
Securities to be Registered Registered Unit Offering price Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 25,680,118 (1) N.A. $ 746,252,000 (2) $ 226,137 (2)
per share............
==================================================================================================================================
</TABLE>
(Footnotes on next page)
-----------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
(1) Includes the maximum number of shares of Common Stock to be registered
hereunder that may be issuable pursuant to the Merger as described herein.
Based upon the product of (a) 30,571,569, the number of shares of Common
Stock, par value $.10 per share of Rykoff-Sexton, Inc., (the "Rykoff-Sexton
Common Shares") outstanding, assuming the exercise of all Rykoff-Sexton
stock options currently expected to be exercisable prior to January 1,
1998, and (b) 0.84, the Exchange Ratio (as defined in the Merger
Agreement).
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act. Calculated pursuant
to Rule 457(c) under the Securities Act on the basis of the average of the
high and low price per share of Rykoff-Sexton Common Shares as reported on
the New York Stock Exchange on July 30, 1997.
<PAGE>
[JP FOODSERVICE, INC. LOGO] JP Foodservice
9860 Patuxent Woods Drive
Columbia, Maryland 21046
Telephone: (410) 312-7100
Dear Stockholder:
It is my pleasure to invite you to attend a Special Meeting of Stockholders
(the "JP Foodservice Special Meeting") of JP Foodservice, Inc. ("JP
Foodservice"), which will be held on _____________ ___, 1997 at _____ a.m.,
local time, at ____________________________.
At the meeting, you will be asked to approve the issuance of JP Foodservice
Common Stock in connection with an Agreement and Plan of Merger described herein
(the "Merger Agreement") pursuant to which Rykoff-Sexton, Inc. ("Rykoff-Sexton")
will be merged with and into a wholly-owned subsidiary of JP Foodservice (the
"Merger") and will become a wholly-owned subsidiary of JP Foodservice. As
discussed in the accompanying Joint Proxy Statement/Prospectus, in the Merger
each outstanding share of Common Stock of Rykoff-Sexton will be converted into
the right to receive 0.84 of a share of JP Foodservice Common Stock. Current
stockholders of JP Foodservice and current stockholders of Rykoff-Sexton will
each own approximately one-half of JP Foodservice Common Stock outstanding
immediately after the Merger.
Rykoff-Sexton is the nation's third largest broadline distributor of food
and related non-food products. It currently offers more than 40,000 products to
over 100,000 customers in 32 service areas throughout the United States,
including many important metropolitan areas.
We believe that this business combination brings together two strong
companies with highly complementary operations, geographies, product lines and
management resources. The Merger will result in a combined enterprise that will
constitute the nation's second largest broadline foodservice distributor. JP
Foodservice after the Merger will have a nationwide distribution network capable
of serving an area covering more than 85% of the country's population.
Following the Merger, I will continue to serve as Chairman and Chief
Executive Officer of JP Foodservice. Mark Van Stekelenburg, currently Chairman
<PAGE>
and Chief Executive Officer of Rykoff-Sexton, will become Vice Chairman and
President of JP Foodservice. JP Foodservice's Board of Directors after the
Merger will consist of the nine current JP Foodservice directors, five current
Rykoff-Sexton directors, two Merrill Lynch designees and one new, independent
director to be added after closing of the Merger.
The accompanying Notice of Special Meeting of Stockholders and Joint Proxy
Statement/Prospectus contain information about the Merger and the JP Foodservice
Special Meeting. The Joint Proxy Statement/Prospectus also contains information
about Rykoff-Sexton. We urge you to give this material your complete attention.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS DETERMINED THE
MERGER TO BE IN THE BEST INTERESTS OF JP FOODSERVICE AND ITS STOCKHOLDERS.
ACCORDINGLY, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT ALL JP FOODSERVICE
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE ISSUANCE OF JP FOODSERVICE COMMON STOCK
IN CONNECTION WITH THE MERGER.
It is important that your shares be represented at the JP Foodservice
Special Meeting. Therefore, whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed postage prepaid envelope. If you attend the JP Foodservice Special
Meeting, you may vote in person if you wish, even though you previously have
returned your proxy card.
We hope you will find it possible to attend the JP Foodservice Special
Meeting. We look forward to the successful combination of JP Foodservice and
Rykoff-Sexton, and to your continued support as a stockholder of JP Foodservice.
Sincerely,
James L. Miller
Chairman, President and
Chief Executive Officer
<PAGE>
JP FOODSERVICE, INC.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on ________ ___, 1997
TO THE STOCKHOLDERS OF JP FOODSERVICE, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of JP
Foodservice, Inc., a Delaware corporation ("JP Foodservice"), will be held on
__________, 1997 at _______ a.m., local time, at _______________________________
(the "JP Foodservice Special Meeting"), or at any adjournment or postponement
thereof, for the following purposes:
1. To approve the issuance of shares of JP Foodservice Common Stock,
par value $.01 per share (the "JP Foodservice Common Shares"), in
connection with an Agreement and Plan of Merger, dated as of June 30, 1997
(the "Merger Agreement"), among JP Foodservice, Rykoff-Sexton, Inc., a
Delaware corporation ("Rykoff-Sexton"), and Hudson Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of JP Foodservice
("Merger Sub"), pursuant to which, among other things, (i) Rykoff-Sexton
will be merged with and into Merger Sub (the "Merger") and (ii) each
outstanding share of Common Stock, par value $.10 per share, of Rykoff-
Sexton will be converted into the right to receive 0.84 of a JP Foodservice
Common Share. THE MERGER IS MORE COMPLETELY DESCRIBED IN THE ACCOMPANYING
JOINT PROXY STATEMENT/ PROSPECTUS AND THE APPENDICES THERETO WHICH FORM A
PART OF THIS NOTICE, AND A COPY OF THE MERGER AGREEMENT IS ATTACHED AS
APPENDIX A THERETO.
2. To transact such other matters as may arise relating to the
conduct of the JP Foodservice Special Meeting or any one or more
adjournments or postponements thereof.
Only holders of record of JP Foodservice Common Shares at the close of
business on ________, 1997, the record date for the JP Foodservice Special
Meeting, are entitled to notice of, and to vote at, the JP Foodservice Special
Meeting and any adjournments or postponements thereof. Approval of the issuance
of JP Foodservice Common Shares in connection with the Merger will require the
affirmative vote of
<PAGE>
the holders of a majority of the JP Foodservice Common Shares present or
represented at the JP Foodservice Special Meeting and entitled to vote.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE JP FOODSERVICE SPECIAL
MEETING IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE JP FOODSERVICE SPECIAL
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE JP FOODSERVICE
SPECIAL MEETING, YOU MAY WITHDRAW THE PROXY AND VOTE IN PERSON.
By Order of the Board of Directors
David M. Abramson
Secretary
Columbia, Maryland
_____________, 1997
<PAGE>
[RYKOFF-SEXTON LOGO] Rykoff-Sexton, Inc.
613 Baltimore Drive
East Mountain Corporate Center
Wilkes-Barre, Pennsylvania 18702
Telephone: (717) 831-7500
Dear Fellow Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Rykoff-Sexton Special Meeting") of Rykoff-Sexton, Inc. ("Rykoff-Sexton"), which
will be held on ____________, 1997 at _____________ a.m. (local time) at
___________________________.
At this important meeting, you will be asked to consider and vote upon the
adoption of the Agreement and Plan of Merger (the "Merger Agreement") described
herein pursuant to which Rykoff-Sexton will be merged (the "Merger") with and
into a wholly-owned subsidiary of JP Foodservice, Inc. ("JP Foodservice"). As
discussed in the accompanying Joint Proxy Statement/Prospectus, in the Merger
each outstanding share of Rykoff-Sexton Common Stock will be converted into the
right to receive 0.84 of a share of JP Foodservice Common Stock. Current
Rykoff-Sexton stockholders will hold approximately 51.0% of JP Foodservice
Common Stock outstanding after the Merger.
JP Foodservice is the nation's fifth largest broadline distributor of food
and related products to restaurants and institutional foodservice
establishments. JP Foodservice markets and distributes 30,000 national, private
and signature brand items to over 34,000 foodservice customers, including
restaurants, hotels, healthcare facilities, cafeterias and schools, in the Mid-
Atlantic, Midwestern and Northeastern regions of the United States and in Las
Vegas, Nevada. JP Foodservice's diverse customer base encompasses both
independent and chain businesses, including Old Country Buffet, Perkins Family
Restaurants, Subway, Eurest Dining Services, Ruby Tuesday and Pizzeria Uno.
We believe that the strategic combination between Rykoff-Sexton and JP
Foodservice offers a significant opportunity for our stockholders, customers and
employees. The merger of Rykoff-Sexton and JP Foodservice will result in a
combined enterprise with annual sales of more than $5.2 billion, constituting
the nation's second largest broadline foodservice distribution company. It will
enhance our nationwide distribution capabilities and create a company with a
customer base of more than 130,000 restaurant, hotel and institutional
foodservice customers throughout the United States. Following completion of the
Merger, the combined company will be known as JP Foodservice, Inc. and will be
headquartered in
<PAGE>
Columbia, Maryland. Its Common Stock will continue to trade on the New York
Stock Exchange under the JPF symbol.
As a result of the Merger, we expect to build upon the progress that we
have made in recent years in sharpening our strategic focus, improving our
operational efficiency, and positioning the company for sustained, profitable
growth. We are pleased to be a part of a combined enterprise whose product mix
will include a broad range of domestic and imported offerings, and whose
distribution, technological and marketing skills will form a strong foundation
for enhanced growth.
Following the Merger, Jim Miller, current Chairman, President and Chief
Executive Officer of JP Foodservice, will be Chairman and Chief Executive
Officer of the combined company, and I will become Vice Chairman and President
and a director of the combined company. After the Merger, the company's Board
of Directors will consist of the nine current JP Foodservice directors, five
current Rykoff-Sexton directors, two Merrill Lynch designees and one new,
independent director to be added after completion of the Merger.
The accompanying Notice of Special Meeting of Stockholders and Joint Proxy
Statement/Prospectus contain information about the Merger and the Rykoff-Sexton
Special Meeting. The Joint Proxy Statement/Prospectus also contains information
regarding JP Foodservice. We urge you to give this material your complete
attention.
The adoption of the Merger Agreement requires the affirmative vote of the
holders of a majority of shares of Rykoff-Sexton Common Stock outstanding on
_______________, 1997, the record date for the Rykoff-Sexton Special Meeting.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF RYKOFF-SEXTON HAS
DETERMINED THAT THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF RYKOFF-
SEXTON, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT
RYKOFF-SEXTON STOCKHOLDERS VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT.
It is important that your shares be represented at the Rykoff-Sexton
Special Meeting. Therefore, whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed postage prepaid envelope. If you attend the Rykoff-Sexton Special
Meeting, you may vote in person if you wish, even though you previously have
returned your proxy card.
<PAGE>
We hope you will find it possible to attend the Rykoff-Sexton Special
Meeting. As fellow stockholders, we are excited by the opportunities created by
the Merger. We believe that the combined company will be a larger, more diverse
company with increased financial stability that will be well-positioned to
capitalize on strategic and other opportunities. We therefore urge you to return
your proxy card promptly.
Sincerely yours,
Mark Van Stekelenburg
Chairman, President and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN AND DATE AND RETURN
THE ENCLOSED PROXY CARD.
<PAGE>
RYKOFF-SEXTON, INC.
613 Baltimore Drive
East Mountain Corporate Center
Wilkes-Barre, Pennsylvania 18702
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on __________, 1997
TO THE STOCKHOLDERS OF RYKOFF-SEXTON, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Rykoff-
Sexton, Inc., a Delaware corporation ("Rykoff-Sexton"), will be held at
___________________, on ___________, ________________, 1997 at ________ a.m.
(local time) (the "Rykoff-Sexton Special Meeting"), or at any adjournment or
postponement thereof, for the following purposes:
1. To consider and vote upon the adoption of the Agreement and Plan
of Merger, dated as of June 30, 1997 (the "Merger Agreement"), by and among
Rykoff-Sexton, JP Foodservice, Inc., a Delaware corporation ("JP
Foodservice"), and Hudson Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of JP Foodservice ("Merger Sub"), pursuant to
which, among other things (a) Rykoff-Sexton will be merged with and into
Merger Sub (the "Merger"), and (b) each outstanding share of Rykoff-Sexton
Common Stock, par value $.10 per share (the "Rykoff-Sexton Common Shares"),
will be converted into the right to receive 0.84 of a share of JP
Foodservice Common Stock, par value $.01 per share (the "JP Foodservice
Common Shares"). THE MERGER IS MORE COMPLETELY DESCRIBED IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE APPENDICES THERETO
THAT FORM A PART OF THIS NOTICE, AND A COPY OF THE MERGER AGREEMENT IS
ATTACHED AS APPENDIX A THERETO.
2. To transact such other matters as may arise relating to the
conduct of the Rykoff-Sexton Special Meeting or any one or more
adjournments or postponements thereof.
Only holders of record of Rykoff-Sexton Common Shares at the close of
business on _____________, 1997, the record date for the Rykoff-Sexton Special
Meeting, are entitled to receive notice of, and to vote at, the Rykoff-Sexton
Special Meeting and any adjournments or postponements thereof.
The adoption of the Merger Agreement requires the affirmative vote of the
holders of record of a majority of Rykoff-Sexton Common Shares outstanding on
_________________, 1997, the record date for the Rykoff-Sexton Special Meeting.
<PAGE>
Pursuant to the Delaware General Corporation Law, Rykoff-Sexton
stockholders are not entitled to appraisal rights in connection with the Merger,
because the Rykoff-Sexton Common Shares are listed on the New York Stock
Exchange and such stockholders will receive as consideration in the Merger only
JP Foodservice Common Shares, which are listed on the New York Stock Exchange,
and cash in lieu of fractional shares.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE RYKOFF-SEXTON SPECIAL
MEETING IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE RYKOFF-SEXTON SPECIAL
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE RYKOFF-SEXTON
SPECIAL MEETING, YOU MAY WITHDRAW THE PROXY AND VOTE IN PERSON.
By Order of the Board of Directors
Robert J. Harter, Jr.
Secretary
Wilkes-Barre, Pennsylvania
___________, 1997
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement becomes+
+effective. This prospectus shall not constitute an offer to sell or the +
+solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated August 1, 1997
JP FOODSERVICE, INC.
AND
RYKOFF-SEXTON, INC.
JOINT PROXY STATEMENT
---------------
PROSPECTUS OF JP FOODSERVICE, INC.
__________ SHARES OF COMMON STOCK
---------------
This Joint Proxy Statement/Prospectus is being furnished to the
stockholders of JP Foodservice, Inc., a Delaware corporation ("JP Foodservice"),
in connection with the solicitation of proxies by the JP Foodservice Board of
Directors for use at a Special Meeting of JP Foodservice stockholders (including
any adjournments or postponements thereof, the "JP Foodservice Special Meeting")
to be held on ___________, 1997 at ____ a.m., local time, at
__________________________________ ___________________________________________,
for the purposes set forth in the accompanying Notice to the stockholders of JP
Foodservice.
This Joint Proxy Statement/Prospectus is also being furnished to the
stockholders of Rykoff-Sexton, Inc., a Delaware corporation ("Rykoff-Sexton"),
in connection with the solicitation of proxies by the Rykoff-Sexton Board of
Directors for use at a Special Meeting of Rykoff-Sexton stockholders (including
any adjournments or postponements thereof, the "Rykoff-Sexton Special Meeting")
to be held on _____________, 1997 at ____ a.m., local time, at
__________________________ ___________________________________________, for the
purposes set forth in the accompanying Notice to the stockholders of Rykoff-
Sexton.
This Joint Proxy Statement/Prospectus also constitutes the prospectus of JP
Foodservice relating to 25,680,118 shares of its Common Stock, par value $.01
per share (the "JP Foodservice Common Shares"), to be issued by JP Foodservice
in accordance with the terms of the Agreement and Plan of Merger, dated as of
June 30, 1997 (the "Merger Agreement"), described in this Joint Proxy
Statement/Prospectus and attached hereto as Appendix A, by and among JP
Foodservice, Hudson Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of JP Foodservice ("Merger Sub"), and Rykoff-Sexton. Pursuant to the
Merger Agreement, Rykoff-Sexton will be merged with and into Merger Sub (the
"Merger") and each outstanding share of Common Stock, par value $.10 per share,
of Rykoff-Sexton (the "Rykoff-Sexton Common Shares") will be converted into the
right to receive 0.84 of a JP Foodservice Common Share.
See "RISK FACTORS" beginning on page 30 for a discussion of certain risks.
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of JP Foodservice and Rykoff-Sexton on or
about ___________________, 1997.
This Joint Proxy Statement/Prospectus does not cover any resales of JP
Foodservice Common Shares to be received by Rykoff-Sexton stockholders upon
consummation of the Merger, and no person is authorized to make use of this
Joint Proxy Statement/Prospectus in connection with any such resale.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS JOINT PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Joint Proxy Statement/Prospectus is _________, 1997.
<PAGE>
TABLE OF CONTENTS
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Page
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AVAILABLE INFORMATION....................................................................1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..........................................1
FORWARD-LOOKING STATEMENTS...............................................................4
SUMMARY..................................................................................6
The Companies.........................................................................6
Special Meetings of Stockholders......................................................7
The Merger............................................................................9
Dividends and Market Prices of JP Foodservice and Rykoff-Sexton Common
Shares............................................................................23
Summary Unaudited Combined and Pro Forma Consolidated Financial Data of JP
Foodservice and Rykoff-Sexton.....................................................26
Summary Historical Consolidated Financial Data of JP Foodservice......................27
Summary Historical Consolidated Financial Data of Rykoff-Sexton.......................28
Comparative Unaudited Per Share Data..................................................29
RISK FACTORS.............................................................................30
Uncertainties in Integrating Business Operations and Achieving Cost Savings...........30
Significant Indebtedness..............................................................31
Offer to Purchase Rykoff-Sexton Senior Subordinated Notes.............................31
Shares Eligible for Future Sale.......................................................32
Potential Influence by and Relationship with ML Investors.............................33
Factors Relating to Future Acquisitions...............................................34
JP Foodservice Dividend Policy........................................................34
Fixed Exchange Ratio..................................................................35
THE JP FOODSERVICE SPECIAL MEETING.......................................................36
Date, Time and Place of Meeting.......................................................36
Record Date and Outstanding Shares....................................................36
Voting of Proxies.....................................................................36
Vote Required.........................................................................36
Quorum; Broker Non-Votes..............................................................37
Solicitation of Proxies and Expenses..................................................38
THE RYKOFF-SEXTON SPECIAL MEETING........................................................39
Date, Time and Place of Meeting.......................................................39
Record Date and Outstanding Shares....................................................39
Voting of Proxies.....................................................................39
Vote Required.........................................................................39
Quorum; Broker Non-Votes..............................................................40
Solicitation of Proxies and Expenses..................................................40
THE MERGER...............................................................................42
General...............................................................................42
Background of the Merger..............................................................43
Recommendation of the JP Foodservice Board of Directors; Reasons for the
Merger............................................................................49
Recommendation of the Rykoff-Sexton Board of Directors; Reasons for the
Merger............................................................................52
Potential Cost Savings and Operating Synergies........................................55
Opinions of Financial Advisors to JP Foodservice......................................56
Opinions of Financial Advisors to Rykoff-Sexton.......................................65
Interests of Certain Persons in the Merger............................................73
</TABLE>
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Certain Federal Income Tax Consequences...............................................77
Restrictions on Resale of JP Foodservice Common Shares by Affiliates..................79
Amendments to Rights Plans............................................................80
Clearance Under Federal Antitrust Laws................................................81
Accounting Treatment..................................................................82
Listing of JP Foodservice Common Shares on the NYSE...................................82
Absence of Dissenters' Rights.........................................................82
Exchange of Certificates..............................................................82
THE MERGER AGREEMENT.....................................................................84
General...............................................................................84
Effective Time........................................................................86
Representations and Warranties........................................................86
Business of Rykoff-Sexton Pending the Merger..........................................88
Business of JP Foodservice Pending the Merger.........................................90
No Solicitation.......................................................................91
Certain Other Covenants...............................................................92
Conditions; Waivers...................................................................95
Amendment; Termination................................................................97
Termination Fees......................................................................99
Expenses..............................................................................100
OTHER AGREEMENTS.........................................................................100
Support Agreement.....................................................................100
Stock Option Agreements...............................................................103
Standstill Agreement..................................................................108
Registration Rights Agreement.........................................................115
UNAUDITED PRO FORMA COMBINING CONSOLIDATED FINANCIAL STATEMENTS FOR THE
MERGER................................................................................118
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF RYKOFF-SEXTON
EXCLUDING THE MERGER..................................................................123
UNAUDITED COMBINING HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS FOR THE
MERGER................................................................................126
DESCRIPTION OF PROPOSED NEW FINANCING ARRANGEMENTS.......................................132
New Credit Facility...................................................................132
Receivables Securitization............................................................134
OWNERSHIP OF JP FOODSERVICE COMMON SHARES................................................135
MANAGEMENT OF JP FOODSERVICE AFTER THE MERGER............................................139
Executive Officers....................................................................139
Directors.............................................................................139
Executive Compensation................................................................145
DESCRIPTION OF JP FOODSERVICE............................................................155
DESCRIPTION OF RYKOFF-SEXTON.............................................................157
DESCRIPTION OF JP FOODSERVICE CAPITAL STOCK..............................................159
General...............................................................................159
Common Shares, Rights and Series A Preferred Stock....................................159
Preferred Stock.......................................................................164
WARRANTS.................................................................................165
DESCRIPTION OF RYKOFF-SEXTON CAPITAL STOCK...............................................167
General...............................................................................167
Common Shares, Rights and Series A Preferred Stock....................................167
Preferred Stock.......................................................................172
COMPARATIVE RIGHTS OF JP FOODSERVICE STOCKHOLDERS AND RYKOFF-SEXTON
STOCKHOLDERS..........................................................................173
Authorized Shares of Capital Stock; Dividend Rights...................................173
Voting Rights.........................................................................174
</TABLE>
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Supermajority Voting Requirements; Business Combinations..............................174
Appraisal Rights......................................................................177
Special Meetings of Stockholders......................................................177
Stockholder Action Without a Meeting..................................................178
Stockholder Proposal Procedures.......................................................178
Stockholder Rights Plan...............................................................178
Classified Board of Directors.........................................................178
Nominations of Directors..............................................................179
Removal of Directors..................................................................180
Vacancies in the Board of Directors...................................................180
Indemnification.......................................................................180
Limitation of Personal Liability of Directors.........................................180
Amendment of Charter Documents........................................................181
Amendment of By-Laws..................................................................181
LEGAL MATTERS............................................................................183
EXPERTS..................................................................................183
STOCKHOLDER PROPOSALS....................................................................184
OTHER MATTERS............................................................................184
</TABLE>
APPENDIX A - Agreement and Plan of Merger
APPENDIX B - Opinion of Goldman, Sachs & Co.
APPENDIX C - Opinion of Smith Barney Inc.
APPENDIX D - Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
APPENDIX E - Opinion of Wasserstein Perella & Co., Inc.
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AVAILABLE INFORMATION
JP Foodservice and Rykoff-Sexton are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Copies of
such reports, proxy statements and other information filed by JP Foodservice and
Rykoff-Sexton can be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's Regional Offices located at Citicorp Center, 500 West Madison, 14th
Floor, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such documents may also be obtained, at
prescribed rates, from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, DC 20549. The SEC also maintains a Web site (http//:
www.sec.gov) that contains reports, proxy statements and other information
regarding registrants such as JP Foodservice and Rykoff-Sexton that file
electronically with the SEC. This Joint Proxy Statement/Prospectus was filed
electronically with the SEC. In addition, material filed by JP Foodservice and
Rykoff-Sexton can be inspected at the offices of the New York Stock Exchange
(the "NYSE"), 20 Broad Street, New York, New York 10005, on which the JP
Foodservice Common Shares and the Rykoff-Sexton Common Shares are listed.
JP Foodservice has filed with the SEC a registration statement on Form S-4
(herein, together with any amendments, supplements and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the JP Foodservice Common Shares to be issued
in connection with the transactions contemplated by the Merger Agreement. This
Joint Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statement. Statements contained in
this Joint Proxy Statement/Prospectus as to the contents of any contract or
other document referred to herein are necessarily summaries of such documents,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Joint Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. JP Foodservice or Rykoff-
Sexton, as applicable, will provide without charge to each person to whom this
Joint Proxy Statement/Prospectus is delivered a copy of any or all of such
documents which are incorporated
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herein by reference (other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into the documents that this Joint
Proxy Statement/Prospectus incorporates). Oral or written requests for JP
Foodservice documents should be directed to JP Foodservice, Inc., 9830 Patuxent
Woods Drive, Columbia, Maryland 21046, telephone number (410) 312-7100,
attention: David M. Abramson, Senior Vice President and General Counsel. Oral or
written requests for Rykoff-Sexton documents should be directed to Rykoff-
Sexton, Inc., 613 Baltimore Drive, East Mountain Corporate Center, Wilkes-Barre,
Pennsylvania 18702, telephone number (717) 831-7500, attention: David F.
McAnally, Senior Vice President and Chief Financial Officer. To ensure timely
delivery of the documents, any request should be made by _________, 1997.
The following documents or portions of documents filed by JP Foodservice
with the SEC pursuant to the Exchange Act or the Securities Act are incorporated
herein by reference:
1. JP Foodservice's Annual Report on Form 10-K for the fiscal year ended
June 29, 1996, including the information incorporated by reference from
JP Foodservice's 1996 Annual Report to Stockholders and its Proxy
Statement for the Annual Meeting of Stockholders held on November 15,
1996 (the "JP Foodservice Annual Report on Form 10-K");
2. JP Foodservice's Quarterly Reports on Form 10-Q for the fiscal quarters
ended September 28, 1996, December 28, 1996 and March 29, 1997;
3. JP Foodservice's Current Reports on Form 8-K filed for reportable
events dated June 28, 1996, July 17, 1996, August 5, 1996, August 30,
1996, August 31, 1996, October 22, 1996, November 13, 1996, November
26, 1996, January 2, 1997, April 23, 1997, May 15, 1997 and June 30,
1997;
4. the description of the JP Foodservice Common Shares which is contained
in JP Foodservice's Registration Statement on Form 8-A filed pursuant
to the Exchange Act on December 19, 1996, including any amendments or
reports filed for the purpose of updating such description;
5. the description of the preferred share purchase rights attached to the
JP Foodservice Common Shares which is contained in JP Foodservice's
Registration Statement on Form 8-A filed pursuant to the Exchange Act
on December 19, 1996, including any amendments or reports filed for the
purpose of updating such description; and
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6. the audited consolidated balance sheets of JP Foodservice as of July 1,
1995 and June 29, 1996 and the consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the fiscal years
ended July 2, 1994, July 1, 1995 and June 29, 1996 contained in JP
Foodservice's Prospectus dated November 26, 1996 filed pursuant to Rule
424(b) of the Securities Act.
All documents filed by JP Foodservice pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the date
of the JP Foodservice Special Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date any such document is
filed.
The following documents previously filed by Rykoff-Sexton with the SEC
pursuant to the Exchange Act or the Securities Act are incorporated herein by
reference:
1. Rykoff-Sexton's Annual Report on Form 10-K for the year ended April 27,
1996, including the information incorporated by reference from Rykoff-
Sexton's 1996 Annual Report to Stockholders and its Proxy Statement for
the Annual Meeting of Stockholders held on September 5, 1996 (the
"Rykoff-Sexton Annual Report on Form 10-K");
2. Rykoff-Sexton's Quarterly Reports on Form 10-Q for the periods ended
June 29, 1996, September 28, 1996, December 28, 1996 and March 29,
1997; and
3. Rykoff-Sexton's Current Reports on Form 8-K dated May 16, 1996 and June
30, 1997;
4. the audited consolidated balance sheets of US Foodservice Inc. ("US
Foodservice") and subsidiaries as of December 31, 1994 and December 30,
1995 and the consolidated statements of operations, mandatory
redeemable preferred stock and stockholders' equity (deficit) and cash
flows of US Foodservice and subsidiaries for the fiscal years ended
January 1, 1994, December 31, 1994 and December 30, 1995 contained in
Rykoff-Sexton's Proxy Statement/Prospectus dated April 3, 1996 filed
with the SEC pursuant to Rule 424(b) of the Securities Act; and
5. the audited consolidated financial statements of H&O Foods, Inc. ("H&O
Foods") as of October 31, 1995 and December 31, 1994 and for the ten
months ended October 31, 1995 and the year ended December 31, 1994
contained in Rykoff-Sexton's Current Report on Form 8-K dated
November 1, 1995, as amended by Rykoff-Sexton's Current Report on Form
8-K/A-1 dated November 1, 1995.
All documents filed by Rykoff-Sexton pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the date
of the
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Rykoff-Sexton Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date any such document is filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed modified or superseded for
purposes of this Joint Proxy Statement/Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document that also is
incorporated by reference herein) modifies or supersedes such statement.
Statements herein shall be deemed to be modified or superseded for purposes of
this Joint Proxy Statement/Prospectus to the extent that a statement contained
in any subsequently filed document that is incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part of this Joint Proxy
Statement/Prospectus except as so modified or superseded. All information
appearing in this Joint Proxy Statement/Prospectus is qualified in its entirety
by the information and financial statements (including notes thereto) appearing
in the documents incorporated herein by reference, except to the extent set
forth in the immediately preceding statement.
No person is authorized to give any information or to make any
representations with respect to the matters described in this Joint Proxy
Statement/Prospectus other than those contained herein or in the documents
incorporated by reference herein. Any information or representations with
respect to such matters not contained herein or therein must not be relied upon
as having been authorized by JP Foodservice or Rykoff-Sexton. This Joint Proxy
Statement/Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Joint Proxy Statement/Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of JP Foodservice or Rykoff-Sexton since the date hereof
or that the information in this Joint Proxy Statement/Prospectus or in the
documents incorporated by reference herein is correct as of any time subsequent
to the date hereof or thereof. All information regarding JP Foodservice and
Merger Sub, and all pro forma financial information, in this Joint Proxy
Statement/Prospectus has been supplied by JP Foodservice, and all information
regarding Rykoff-Sexton herein has been supplied by Rykoff-Sexton.
FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus includes forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
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Exchange Act. All statements regarding JP Foodservice, Rykoff-Sexton or the
combined company's expected future financial position, business strategy, cost
savings and operating synergies, projected costs and plans, and objectives of
management for future operations are forward-looking statements. Although JP
Foodservice and Rykoff-Sexton believe their respective expectations reflected in
such forward-looking statements are based on reasonable assumptions, no
assurance can be given that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
expectations reflected in the forward-looking statements herein include, among
others, the factors set forth under the caption "Risk Factors," general economic
and business and market conditions, changes in federal laws, difficulties in
achieving expected cost savings and operating synergies from the Merger,
increased competitive pressure in the combined company's industry, costs or
difficulties relating to the integration of the businesses of JP Foodservice and
Rykoff-Sexton, and the ability of JP Foodservice and Rykoff-Sexton to achieve
the goals described under the caption "The Merger."
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SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus and the Appendices hereto. This summary
is not intended to be complete and is qualified in its entirety by reference to
the more detailed information contained elsewhere in this Joint Proxy
Statement/Prospectus, the Appendices and the documents incorporated herein by
reference. References to Rykoff-Sexton after the Effective Time (as defined
herein) refer to Merger Sub, which will be the surviving corporation in the
Merger and will be renamed Rykoff-Sexton, Inc. as of the Effective Time. Unless
otherwise indicated or the context otherwise requires, references to the number
of JP Foodservice Common Shares to be issued in connection with the Merger are
based upon the number of Rykoff-Sexton Common Shares and Performance Share
Awards (as defined herein) outstanding on June 28, 1997 and assume no JP
Foodservice Common Shares have been issued pursuant to the exercise of any
Assumed Options or Assumed Warrants (as defined herein). Stockholders of JP
Foodservice and Rykoff-Sexton are urged to read this Joint Proxy
Statement/Prospectus and the Appendices hereto in their entirety.
The Companies
JP Foodservice. JP Foodservice is a leading broadline distributor of food
and related products to restaurants and other institutional foodservice
establishments in the Mid-Atlantic, Midwestern and Northeastern regions of the
United States and in Las Vegas, Nevada. JP Foodservice ranks as the nation's
fifth largest broadline distributor based on pro forma 1996 calendar year net
sales, including the results of foodservice distribution businesses acquired by
it in fiscal 1997. JP Foodservice markets and distributes from its 13 full-
service distribution centers over 30,000 national, private and signature brand
items to over 34,000 foodservice customers, including restaurants, hotels,
healthcare facilities, cafeterias and schools. This diverse customer base
encompasses both independent (or "street") and multi-unit (or "chain")
businesses. JP Foodservice's comprehensive product line provides its customers
with a single source to satisfy substantially all of their foodservice needs.
The principal executive offices of JP Foodservice are located at 9830 Patuxent
Woods Drive, Columbia, Maryland 21046, and JP Foodservice's telephone number is
(410) 312-7100. See "Description of JP Foodservice."
Rykoff-Sexton. Rykoff-Sexton is a leading distributor and manufacturer of
high-quality food and related non-food products for the foodservice industry
throughout the United States. Rykoff-Sexton distributes its product line of more
than 40,000 items to over 100,000 foodservice customers, including restaurants,
industrial cafeterias, healthcare facilities, schools and colleges, supermarket
service delicatessen departments, hotels, airlines and other segments of the
travel and
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leisure markets. It also offers equipment and supplies and design and
engineering services for all types of foodservice operations. Established in
1911, Rykoff-Sexton has grown from a regional distributor to its present
position as the third largest broadline foodservice distributor in the nation.
The principal executive offices of Rykoff-Sexton are located at 613 Baltimore
Drive, East Mountain Corporate Center, Wilkes-Barre, Pennsylvania 18702, and
Rykoff-Sexton's principal telephone number is (717) 831-7500. See "Description
of Rykoff-Sexton."
Merger Sub. Merger Sub, a wholly-owned subsidiary of JP Foodservice, was
formed by JP Foodservice solely for the purpose of effecting the Merger. The
mailing address of Merger Sub's executive offices is c/o JP Foodservice, Inc.,
9830 Patuxent Woods Drive, Columbia, Maryland 21046, and Merger Sub's telephone
number is (410) 312-7100.
Special Meetings of Stockholders
Date, Time and Place
JP Foodservice Special Meeting. The JP Foodservice Special Meeting will be
held on ________, 1997 at _____ a.m., local time, at __________________________.
Rykoff-Sexton Special Meeting. The Rykoff-Sexton Special Meeting will be
held on ________, 1997 at _____ a.m., local time, at __________________________.
Matters to be Considered at Special Meetings
JP Foodservice Special Meeting. At the JP Foodservice Special Meeting,
stockholders of record of JP Foodservice as of the close of business on the JP
Foodservice Record Date (as defined herein) will be asked to (i) consider and
vote upon a proposal to approve the issuance of JP Foodservice Common Shares in
connection with the Merger (the "JP Foodservice Proposal") and (ii) transact
such other matters as may arise relating to the conduct of the JP Foodservice
Special Meeting.
JP Foodservice stockholders must approve the issuance of the JP Foodservice
Common Shares in connection with the Merger in order to comply with requirements
of the NYSE, on which the JP Foodservice Common Shares are listed. Stockholder
approval is required if a company whose common stock is listed on the NYSE
issues common stock in a transaction such as the Merger in an amount equal to or
greater than 20% of the number of shares of common stock outstanding prior to
such issuance.
Rykoff-Sexton Special Meeting. At the Rykoff-Sexton Special Meeting,
stockholders of record of Rykoff-Sexton as of the close of business on the
Rykoff-
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Sexton Record Date (as defined herein) will be asked to (i) consider and
vote upon the adoption of the Merger Agreement (the "Rykoff-Sexton Proposal")
and (ii) transact such other matters as may arise relating to the conduct of the
Rykoff-Sexton Special Meeting.
Record Dates; Outstanding Shares
JP Foodservice Special Meeting. Holders of record of JP Foodservice Common
Shares at the close of business on ________, 1997 (the "JP Foodservice Record
Date") are entitled to notice of and to vote at the JP Foodservice Special
Meeting. At the close of business on the JP Foodservice Record Date, there were
___________ JP Foodservice Common Shares outstanding, each of which will be
entitled to one vote on each matter to be acted upon at the JP Foodservice
Special Meeting.
Rykoff-Sexton Special Meeting. Holders of record of Rykoff-Sexton Common
Shares at the close of business on ____________, 1997 (the "Rykoff-Sexton Record
Date") are entitled to notice of and to vote at the Rykoff-Sexton Special
Meeting. At the close of business on the Rykoff-Sexton Record Date, there were
________ Rykoff-Sexton Common Shares issued and outstanding, each of which will
be entitled to one vote on each matter to be acted upon at the Rykoff-Sexton
Special Meeting.
Quorum
The required quorum for the transaction of business at the JP Foodservice
Special Meeting is a majority of the issued and outstanding JP Foodservice
Common Shares. The required quorum for the transaction of business at the
Rykoff-Sexton Special Meeting is a majority of the issued and outstanding
Rykoff-Sexton Common Shares. Abstentions and broker non-votes each will be
counted for purposes of determining the presence of a quorum.
Vote Required
JP Foodservice Special Meeting. The JP Foodservice Proposal will be
approved upon receipt of the affirmative vote of the holders of a majority of
the JP Foodservice Common Shares present or represented at the JP Foodservice
Special Meeting and entitled to vote, assuming a quorum is present. Abstentions
will have the same effect as votes against the JP Foodservice Proposal. On the
JP Foodservice Record Date, directors and executive officers of JP Foodservice,
together with their affiliates as a group, beneficially owned approximately ___%
of the issued and outstanding JP Foodservice Common Shares. It is currently
expected that each director and executive officer of JP Foodservice will vote
the JP Foodservice Common Shares beneficially owned by such director or
executive officer for approval of the JP Foodservice Proposal. See "Ownership of
JP Foodservice Common Shares."
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Rykoff-Sexton Special Meeting. The Rykoff-Sexton Proposal will be approved
upon receipt of the affirmative vote of the holders of a majority of the Rykoff-
Sexton Common Shares outstanding on the Rykoff-Sexton Record Date. Abstentions
and broker non-votes will have the same effect as votes against the Rykoff-
Sexton Proposal. On the Rykoff-Sexton Record Date, directors and executive
officers of Rykoff-Sexton, together with their affiliates as a group (other than
the ML Entities (as defined herein) and their designees on the Rykoff-Sexton
Board Directors), beneficially owned approximately ____% of the issued and
outstanding Rykoff-Sexton Common Shares. It is currently expected that each
director and executive officer of Rykoff-Sexton will vote the Rykoff-Sexton
Common Shares beneficially owned by such director or executive officer for
approval of the Rykoff-Sexton Proposal. The ML Investors (as defined herein),
who hold in the aggregate approximately 36% of the Rykoff-Sexton Common Shares
outstanding as of the Rykoff-Sexton Record Date, have agreed to vote the Rykoff-
Sexton Common Shares beneficially owned by them for approval of the Rykoff-
Sexton Proposal. See "Other Agreements--Support Agreement." The ML Investors are
entities affiliated with Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), an international investment banking and advisory firm. See
"The Merger -- Interests of Certain Persons in the Merger." The ML Entities
consist of the ML Investors and Merrill Lynch Capital Partners, Inc. ("MLCP"),
the general partner of certain of the ML Investors. See "Other Agreements--
Standstill Agreement--ML Entities."
The Merger
Effect of the Merger
Pursuant to the terms of the Merger Agreement, Rykoff-Sexton will be merged
with and into Merger Sub, a wholly-owned subsidiary of JP Foodservice, at the
Effective Time. Merger Sub will be the surviving corporation ("the Surviving
Corporation") in the Merger, will be renamed Rykoff-Sexton, Inc. as of the
Effective Time and will continue to be a wholly-owned subsidiary of JP
Foodservice.
Conversion of Rykoff-Sexton Common Shares
The Merger Agreement provides that, upon the terms and subject to the
conditions thereof, at the Effective Time, each issued and outstanding Rykoff-
Sexton Common Share (other than such shares, if any, owned by JP Foodservice,
Merger Sub or Rykoff-Sexton, which will be canceled) will be converted into the
right to receive 0.84 (the "Exchange Ratio") of a JP Foodservice Common Share.
The Exchange Ratio is fixed pursuant to the Merger Agreement and will not be
subject to increase or decrease based on changes in the market values of the JP
Foodservice Common Shares or the Rykoff-Sexton Common Shares. If, prior to the
Effective Time, the outstanding Rykoff-Sexton Common Shares or JP Foodservice
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Common Shares are changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities is declared thereon with a
record date within such period, the Exchange Ratio will be adjusted accordingly
to provide the holders of Rykoff-Sexton Common Shares with the same economic
effect as contemplated by the Merger Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange or dividend.
In connection with the Merger, the holders of Rykoff-Sexton Common Shares
immediately before the Merger will receive an aggregate of 23,532,016 JP
Foodservice Common Shares, which is expected to represent approximately 51.0% of
the outstanding JP Foodservice Common Shares immediately after the Merger. The
ML Investors will receive an aggregate of 8,463,843 JP Foodservice Common
Shares, which is expected to represent approximately 18.3% of the outstanding JP
Foodservice Common Shares immediately after the Merger. See "Description of the
Merger Agreement--General--Conversion of Rykoff-Sexton Common Shares."
Assumption of Stock Options and Warrants
As of June 28, 1997, Rykoff-Sexton had outstanding options (the "Options")
to purchase 2,195,118 Rykoff-Sexton Common Shares under certain director and
employee stock plans (the "Rykoff-Sexton Stock Plans") and outstanding warrants
(the "Warrants") to purchase 331,761 Rykoff-Sexton Common Shares. The Merger
Agreement provides that, at the Effective Time, each Option which is outstanding
immediately prior to the Effective Time (collectively, the "Assumed Options")
and each Warrant which is outstanding immediately prior to the Effective Time
(collectively, the "Assumed Warrants") will be assumed by JP Foodservice. Each
Assumed Option and each Assumed Warrant will be converted into an option or
warrant, as the case may be, to purchase, on the same terms and conditions as
were applicable to such Options (subject to certain adjustments) and Warrants,
an adjusted number of JP Foodservice Common Shares based on the Exchange Ratio.
Based on the Options and the Warrants outstanding as of June 28, 1997, 2,122,578
JP Foodservice Common Shares will be reserved for issuance upon the exercise of
the Assumed Options and the Assumed Warrants. See "The Merger Agreement--
General--Assumption of Options and Warrants" and "Warrants."
Recommendations of the Boards of Directors
JP Foodservice Board of Directors. On June 29, 1997, the JP Foodservice
Board of Directors unanimously determined that the Merger is in the best
interests of JP Foodservice and its stockholders, approved the Merger Agreement
and the Merger and the issuance of the JP Foodservice Common Shares in
connection with the Merger and recommended that the stockholders of JP
Foodservice vote "for" approval of the issuance of the JP Foodservice Common
Shares in connection with
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the Merger. In making this recommendation, the JP Foodservice Board of Directors
carefully considered the factors discussed under "The Merger--Background of the
Merger," "--Recommendation of the JP Foodservice Board of Directors; Reasons for
the Merger" and "--Opinions of Financial Advisors to JP Foodservice."
Rykoff-Sexton Board of Directors. On June 29, 1997, the Rykoff-Sexton Board
of Directors unanimously determined that the Merger and the other transactions
contemplated by the Merger Agreement are fair to and in the best interests of
the stockholders of Rykoff-Sexton, approved the Merger Agreement and recommended
that the stockholders of Rykoff-Sexton vote "for" adoption of the Merger
Agreement. In making this recommendation, the Rykoff-Sexton Board of Directors
carefully considered the factors discussed under "The Merger--Background of the
Merger," "--Recommendation of the Rykoff-Sexton Board of Directors; Reasons for
the Merger" and "--Opinions of Financial Advisors to Rykoff-Sexton."
Opinions of Financial Advisors
Opinions of Financial Advisors to JP Foodservice. JP Foodservice retained
Goldman, Sachs & Co. ("Goldman Sachs") and Smith Barney Inc. ("Smith Barney") to
act as financial advisors to JP Foodservice in connection with the proposed
Merger. Goldman Sachs and Smith Barney have each delivered to the Board of
Directors of JP Foodservice a written opinion dated June 30, 1997 to the effect
that, as of such date and based upon and subject to certain matters stated
therein and such other matters as Goldman Sachs and Smith Barney considered
relevant, the Exchange Ratio was fair (in the case of Smith Barney, from a
financial point of view) to JP Foodservice. The full texts of the written
opinions of Goldman Sachs and Smith Barney dated June 30, 1997, which set forth
the assumptions made, matters considered and limitations on the review
undertaken, are attached as Appendix B and Appendix C, respectively, to this
Joint Proxy Statement/Prospectus and should be read carefully in their entirety.
The opinions of Goldman Sachs and Smith Barney are directed to the Board of
Directors of JP Foodservice and relate only to the fairness of the Exchange
Ratio (in the case of Smith Barney, from a financial point of view) to JP
Foodservice, do not address any other aspect of the Merger or related
transactions and do not constitute a recommendation to any stockholder as to how
such stockholder should vote at the JP Foodservice Special Meeting. See "The
Merger--Opinions of Financial Advisors to JP Foodservice."
Opinions of Financial Advisors to Rykoff-Sexton. In deciding to approve the
Merger, the Rykoff-Sexton Board of Directors considered, among other things,
separate, but substantially identical, opinions of its financial advisors,
Merrill Lynch and Wasserstein Perella & Co., Inc. ("Wasserstein Perella"), as to
the fairness of the Exchange Ratio from a financial point of view to the
stockholders of Rykoff-Sexton (other than JP Foodservice and its affiliates).
The opinion of Merrill
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Lynch (the "Merrill Lynch Opinion") and the opinion of Wasserstein Perella (the
"Wasserstein Perella Opinion" and together with the Merrill Lynch Opinion, the
"Rykoff-Sexton Fairness Opinions") are attached to this Joint Proxy
Statement/Prospectus as Appendix D and Appendix E, respectively. Rykoff-Sexton
stockholders are encouraged to read these opinions in their entirety as they
contain the assumptions made, the procedures followed, the other matters
considered and the limits of the review conducted by each of Merrill Lynch and
Wasserstein Perella in arriving at their respective opinions. See "The Merger--
Opinions of Financial Advisors to Rykoff-Sexton" and "--Interests of Certain
Persons in the Merger."
Interests of Certain Persons in the Merger; Management and Operations of JP
Foodservice After the Merger
Certain members of the Boards of Directors and management of JP Foodservice
and Rykoff-Sexton and certain holders of Rykoff-Sexton Common Shares have
certain interests in the Merger that are different from, or in addition to, the
interests generally of stockholders of JP Foodservice or Rykoff-Sexton, as
applicable. The JP Foodservice Board of Directors and the Rykoff-Sexton Board of
Directors were each aware of these interests of their respective directors and
officers and, in the case of Rykoff-Sexton, certain stockholders and considered
them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby.
Employment, Change in Control and Severance Agreements. The consummation of
the Merger will constitute a "change in control" of Rykoff-Sexton under various
compensation agreements and arrangements between Rykoff-Sexton and certain of
its executive officers, including Mark Van Stekelenburg, Chairman and Chief
Executive Officer of Rykoff-Sexton. As a result of such change in control
provisions, Mr. Van Stekelenburg will, and certain of such other executive
officers following termination of employment under certain circumstances could,
receive specified payments and other benefits upon or after consummation of the
Merger. In addition, the Merger Agreement provides that JP Foodservice will
enter into an employment agreement with Mr. Van Stekelenburg, pursuant to which
he will become the Vice Chairman and President of JP Foodservice as of the
Effective Time. See "The Merger--Interests of Certain Persons in the Merger" and
"Management of JP Foodservice after the Merger--Executive Compensation."
Merrill Lynch Advisory Services. Rykoff-Sexton retained Merrill Lynch to
act as one of Rykoff-Sexton's financial advisors in connection with the proposed
business combination with JP Foodservice. Merrill Lynch is an affiliate of the
ML Investors, who beneficially owned approximately 36% of the Rykoff-Sexton
Common Shares outstanding as of the Rykoff-Sexton Record Date. See "The Merger--
Opinions of Financial Advisors to Rykoff-Sexton" for a discussion of amounts
payable to Merrill Lynch for such financial advisory services.
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Board Designations; Directors. JP Foodservice has agreed in the Merger
Agreement that, prior to the Effective Time, it will increase the size of the JP
Foodservice Board of Directors from nine to 17 directors. In addition, the
Merger Agreement provides that the JP Foodservice Board of Directors,
immediately following the Effective Time, will consist of (i) nine individuals,
including each of the incumbent members of the JP Foodservice Board of Directors
(or their replacements), no fewer than five of whom will be outside directors,
as selected by JP Foodservice prior to the Effective Time, (ii) seven
individuals, two of whom will be individuals designated by MLCP, one of whom
will be Mr. Van Stekelenburg and four of whom will be current incumbents of the
Rykoff-Sexton Board of Directors who are not employees of Rykoff-Sexton or its
subsidiaries or affiliated with MLCP and (iii) one additional person to be
designated by the Chairman of JP Foodservice following the Merger.
Combined Company Management. See "Management of JP Foodservice After the
Merger" for information concerning the expected composition of the senior
management of JP Foodservice after the Effective Time.
Registration Rights Agreement. In connection with the acquisition by
Rykoff-Sexton of US Foodservice on May 17, 1996 (the "US Foodservice
Acquisition"), Rykoff-Sexton entered into an agreement (the "Registration
Rights Agreement"), pursuant to which the ML Investors were granted certain
"demand" and "piggyback"' rights, and the Equitable Entities named therein and
Frank H. Bevevino, former President of Rykoff-Sexton, were granted certain
"piggyback" rights, requiring Rykoff-Sexton to register under the Securities Act
the transfer of all or a portion of the Rykoff-Sexton Common Shares issued to
them pursuant to the US Foodservice Acquisition (the "Registrable Securities").
Pursuant to the Support Agreement, JP Foodservice has agreed, as of the
Effective Time, to assume Rykoff-Sexton's rights and obligations under the
Registration Rights Agreement and will be required, for a specified period and
subject to certain limitations and qualifications, to register under the
Securities Act the transfer of all or a portion of the JP Foodservice Common
Shares that will be issued in the Merger in exchange for Registrable Securities
to holders thereof who have rights under the Registration Rights Agreement. See
"Other Agreements--Registration Rights Agreement."
Stock Options and Other Rights. Of the 2,195,118 Options outstanding under
the Rykoff-Sexton Stock Plans as of June 28, 1997, 1,743,812 were fully vested
and exercisable as of that date. Of the remaining Options, 402,452 will
automatically become fully vested upon stockholder approval of the Rykoff-Sexton
Proposal. As of June 28, 1997, executive officers of Rykoff-Sexton held
1,034,601 Options that are expected to be Assumed Options.
13
<PAGE>
As of June 28, 1997, 99,252 Rykoff-Sexton Common Shares were issued and
outstanding under the Rykoff-Sexton Stock Plans and subject to a risk of
forfeiture and restrictions on transfer (the "Restricted Shares") and 553,000
Rykoff-Sexton Common Shares were subject to outstanding performance share awards
(the "Performance Share Awards") granted under the Rykoff-Sexton Stock Plans. As
of June 28, 1997, executive officers of Rykoff-Sexton held 597,149 Restricted
Shares and Performance Share Awards. Subsequent to June 28, 1997, the number of
outstanding Performance Share Awards was reduced to 405,000. Upon stockholder
approval of the Rykoff-Sexton Proposal, all Restricted Shares then outstanding
will automatically become nonforfeitable and freely transferable (subject to any
transfer restrictions under applicable securities laws), and all Rykoff-Sexton
Common Shares subject to Performance Share Awards then outstanding will become
issuable. All of such Rykoff-Sexton Common Shares will thereafter be converted,
at the Effective Time, into the right to receive JP Foodservice Common Shares at
the Exchange Ratio.
Indemnification; Insurance. Pursuant to the Merger Agreement, JP
Foodservice has agreed to maintain in effect in accordance with their terms all
rights to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time existing as of the date of the
Merger Agreement in favor of the current or former directors or officers of
Rykoff-Sexton and its subsidiaries (and any of their respective predecessors,
including, without limitation, US Foodservice) as provided in their respective
certificates of incorporation or by-laws (or comparable organizational
documents) and any indemnification agreements of Rykoff-Sexton or in Section
7.13 of the merger agreement governing the US Foodservice Acquisition. In
addition, the Merger Agreement provides that, from and after the Effective Time,
directors and officers of Rykoff-Sexton who become directors or officers of JP
Foodservice will be entitled to the same indemnity rights and protections, and
directors' and officers' liability insurance, as are afforded from time to time
to other directors and officers of JP Foodservice.
Certain Other Agreements
Support Agreement. Under an agreement (the "Support Agreement") among JP
Foodservice and the ML Investors entered into concurrently with the Merger
Agreement, each ML Investor has agreed, among other things, (i) to vote its
Rykoff-Sexton Common Shares for adoption of the Merger Agreement and (ii) not to
engage in certain activities relating to business combinations involving JP
Foodservice, Rykoff-Sexton or their respective subsidiaries other than the
Merger. See "Other Agreements--Support Agreement."
Stock Option Agreements. Concurrently with their execution of the Merger
Agreement, JP Foodservice and Rykoff-Sexton entered into reciprocal stock option
14
<PAGE>
agreements (the "Stock Option Agreements") with substantially identical terms.
The Stock Option Agreements are intended to increase the likelihood that the
Merger will be consummated in accordance with its terms and to compensate the
holder of the option for certain expenses, losses and costs that may be incurred
by it in connection with the proposed transaction if the Merger is not
consummated under certain circumstances involving an acquisition or proposed
acquisition by a third party of more than a specified level of voting securities
or assets of the issuer of the option.
Rykoff-Sexton has granted JP Foodservice an option (the "Rykoff-Sexton
Option") to purchase up to 5,564,140 Rykoff-Sexton Common Shares, representing
approximately 19.9% of the Rykoff-Sexton Common Shares outstanding as of the
date of the Rykoff-Sexton Option, at an exercise price of $25.305 per Rykoff-
Sexton Common Share, which is the product of (x) the closing sale price of the
JP Foodservice Common Shares on the NYSE on June 27, 1997, the last trading day
preceding public announcement of the execution of the Merger Agreement, and (y)
the Exchange Ratio. The Rykoff-Sexton Option is exercisable by JP Foodservice
upon the occurrence of certain specified events or transactions, including the
acquisition of (or the initiation of a tender offer or exchange offer for) more
than 20% of the outstanding Rykoff-Sexton Common Shares by a third party and the
agreement by Rykoff-Sexton to engage in a business combination other than the
Merger or to sell all or a material portion of its assets to a third party.
JP Foodservice has granted Rykoff-Sexton an option (the "JP Foodservice
Option") to purchase up to 4,495,149 JP Foodservice Common Shares, representing
approximately 19.9% of the JP Foodservice Common Shares outstanding as of the
date of the JP Foodservice Option, at an exercise price of $30.125 per JP
Foodservice Common Share, which is the closing sale price of the JP Foodservice
Common Shares on the NYSE on the last trading day preceding public announcement
of the execution of the Merger Agreement. The JP Foodservice Option is
exercisable by Rykoff-Sexton upon the occurrence of certain specified events or
transactions, including the acquisition of (or the initiation of a tender offer
or exchange offer for) more than 20% of the outstanding JP Foodservice Common
Shares by a third party and the agreement by JP Foodservice to engage in a
business combination other than the Merger or to sell all or a material portion
of its assets to a third party. See "Other Agreements--Stock Option Agreements."
Standstill Agreement. In connection with the US Foodservice Acquisition,
Rykoff-Sexton and the ML Entities entered into an agreement (the "Standstill
Agreement"), which imposes certain standstill, voting and transfer restrictions
on the ML Entities and provides for representation on the Rykoff-Sexton Board of
Directors and certain committees thereof by individuals selected by the ML
Entities. From and after the Effective Time, the Standstill Agreement will be
for
15
<PAGE>
the benefit of, and will be enforceable by, JP Foodservice to the same extent
and in the same manner as the Standstill Agreement benefits and is enforceable
by Rykoff-Sexton prior to the Merger. See "Other Agreements--Standstill
Agreement."
Registration Rights Agreement. Pursuant to the Support Agreement, as of the
Effective Time, JP Foodservice will assume the rights and obligations of Rykoff-
Sexton under the Registration Rights Agreement. See "Other Agreements--Support
Agreement" and "--Registration Rights Agreement."
New Credit Facility
In connection with the Merger and effective as of the Closing Date, JP
Foodservice proposes to obtain funding of up to $800 million through a new
revolving credit facility (the "New Credit Facility"). Borrowings under the New
Credit Facility will be used primarily to refinance indebtedness of JP
Foodservice and Rykoff-Sexton outstanding under their existing senior bank
credit facilities (collectively, the "Existing Bank Credit Facilities"), which
totaled approximately $479 million as of June 28, 1997, to pay estimated fees
and expenses of approximately $33 million incurred in connection with the Merger
and to finance capital expenditures and on-going working capital needs. The
availability of financing under the New Credit Facility or otherwise is not a
condition to consummation of the Merger. Such financing will be subject to
certain terms and conditions, which will include the negotiation, execution and
delivery of definitive credit documents. There can be no assurance as to
whether, or the definitive terms on which, the New Credit Facility actually will
be available to JP Foodservice. See "Description of Proposed New Financing
Arrangements--New Credit Facility."
Risk Factors
The matters set forth under the caption "Risk Factors" should be carefully
considered by JP Foodservice stockholders in deciding whether to approve the
issuance of JP Foodservice Common Shares in connection with the Merger and by
Rykoff-Sexton stockholders in deciding whether to adopt the Merger Agreement.
Clearance Under Federal Antitrust Laws
The Merger is subject to the applicable provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (collectively, the "HSR Act"), which provide that certain acquisition
transactions (including the Merger) may not be consummated until certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC")
and certain waiting period requirements have been satisfied. JP Foodservice and
Rykoff-Sexton filed the required information and material with respect to the
16
<PAGE>
Merger with the Antitrust Division and the FTC on July 3, 1997. The required
waiting period under the HSR Act with respect to such filings will expire on
August 2, 1997, unless extended by a request for additional information or
documentary material or unless early termination of the waiting period is
granted. Merrill Lynch & Co., Inc., Merrill Lynch Capital Appreciation
Partnership No. B-XVIII, L.P. and Merrill Lynch Capital Appreciation Partnership
No. XIII, L.P. filed the required information with the Antitrust Division and
the FTC on ________, 1997. The required waiting period under the HSR Act with
respect to such filing will expire on __________, 1997, unless extended. ML
Offshore LBO Partnership No. B-XVIII filed the required information with the
Antitrust Division and the FTC on _____________, 1997. The required waiting
period under the HSR Act with respect to such filing will expire on ________,
1997, unless extended. Satisfaction or termination of the waiting period
requirement with respect to any such filing does not preclude the Antitrust
Division, the FTC or any other party either before or after the Effective Time
from challenging or seeking to delay or enjoin the Merger on antitrust or other
grounds. There can be no assurance that such a challenge will not be made or,
if made, would not succeed.
Effective Time of the Merger
The Merger will be consummated and become effective at the time (the
"Effective Time") of the filing of the certificate of merger pursuant to the
DGCL with the Secretary of State of the State of Delaware (or at such later date
and time as JP Foodservice and Rykoff-Sexton may specify in such certificate),
which will be as soon as practicable on the closing date of the transactions
contemplated by the Merger Agreement (the "Closing Date"). See "The Merger
Agreement--Effective Time."
Exchange of Certificates in the Merger
As soon as reasonably practicable after the Effective Time, _____ (the
"Exchange Agent") will mail a transmittal letter and instructions to each holder
of record (other than JP Foodservice, Merger Sub or Rykoff-Sexton) of
certificates which immediately prior to the Effective Time represented
outstanding Rykoff-Sexton Common Shares. Such transmittal letter and
instructions are to be used in forwarding such certificates for surrender and
exchange for (i) certificates representing that number of whole JP Foodservice
Common Shares that such holder has the right to receive pursuant to the Merger
Agreement and (ii) cash for any fractional JP Foodservice Common Shares to which
such holder otherwise would be entitled (the "Merger Consideration"). RYKOFF-
SEXTON STOCKHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR
EXCHANGE UNTIL SUCH TRANSMITTAL FORM AND INSTRUCTIONS ARE RECEIVED. Following
the Effective Time, holders of certificates formerly representing Rykoff-Sexton
Common Shares will not be
17
<PAGE>
entitled to receive dividends, if any, or any other distributions from JP
Foodservice until such certificates are so surrendered, and in any event will
not be entitled to receive interest on such dividends or other distributions.
Upon consummation of the Merger, the Rykoff-Sexton Common Shares will cease to
be traded on the NYSE, and there will be no further market for the Rykoff-Sexton
Common Shares. See "The Merger--Exchange of Certificates."
Listing of JP Foodservice Common Shares on the NYSE
It is a condition to each party's obligation to consummate the Merger that
the JP Foodservice Common Shares to be issued in connection with the Merger
(including shares issuable upon exercise of the Assumed Options and Assumed
Warrants) be approved for listing on the NYSE, subject only to official notice
of issuance. JP Foodservice has agreed to use its best efforts to cause such
shares to be so approved for listing, subject only to official notice of
issuance, prior to the Effective Time.
Business of Rykoff-Sexton and JP Foodservice Pending the Merger
Each of Rykoff-Sexton and JP Foodservice has agreed that, prior to the
Effective Time or earlier termination of the Merger Agreement, it and its
subsidiaries will each conduct its operations according to its ordinary course
of business consistent with past practice, with certain exceptions permitted by
the Merger Agreement. In addition, unless the other party agrees in writing or
except as otherwise permitted pursuant to the Merger Agreement or as previously
disclosed to the other party, none of Rykoff-Sexton, JP Foodservice or any of
their respective subsidiaries is permitted to engage prior to the Effective Time
in any of a number of actions specified in the Merger Agreement. See "The Merger
Agreement--Business of Rykoff-Sexton Pending the Merger" and "--Business of JP
Foodservice Pending the Merger."
Conditions of the Merger; Termination
The consummation of the Merger is conditioned upon the fulfillment or
waiver (where permissible) of certain conditions set forth in the Merger
Agreement. The Merger Agreement may be terminated (i) by mutual consent of JP
Foodservice and Rykoff-Sexton, (ii) by either JP Foodservice or Rykoff-Sexton if
the Merger has not been consummated by April 1, 1998 and (iii) under certain
other circumstances. See "The Merger Agreement--Amendment; Termination."
Termination Fees
JP Foodservice and Rykoff-Sexton each have agreed to pay the other a
termination fee of $30 million (a "Termination Fee") in substantially identical
18
<PAGE>
circumstances that result in the termination of the Merger Agreement and
abandonment of the Merger.
Each company has agreed to pay the other company (the "Terminating Party")
a Termination Fee in the event that: (i) the Terminating Party terminates the
Merger Agreement and abandons the Merger as a result of a willful breach or
failure by the other company to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in the
Merger Agreement, which breach or failure (x) has or is likely to have,
individually or in the aggregate, a material adverse effect on the other
company, and (y) is incapable of being cured or is not cured within 45 days of
written notice; (ii) the Terminating Party terminates the Merger Agreement and
abandons the Merger because the Board of Directors of the other company shall
have (A) failed to make its recommendation to stockholders in favor of the JP
Foodservice Proposal (in the case of JP Foodservice) or the Rykoff-Sexton
Proposal (in the case of Rykoff-Sexton), (B) withdrawn such recommendation or
(C) modified or changed such recommendation in a manner adverse to the interests
of the Terminating Party; or (iii) either company terminates the Merger
Agreement and abandons the Merger as a result of the failure of the other
company's stockholders to approve the applicable proposal if at the time of such
failure any event has occurred that would give the Terminating Party the right
to exercise the Rykoff-Sexton Option (in the case of JP Foodservice) or the JP
Foodservice Option (in the case of Rykoff-Sexton), including an acquisition or
proposed acquisition by a third party of 20% or more of the outstanding Common
Shares of the other party or a material portion of the assets of the other
party.
If JP Foodservice exercises the Rykoff-Sexton Option or Rykoff-Sexton
exercises the JP Foodservice Option, any Termination Fee payable by JP
Foodservice or Rykoff-Sexton, as applicable, pursuant to the Merger Agreement
will be reduced by the amount of any profit realized by JP Foodservice or
Rykoff-Sexton, as the case may be, upon the sale or other disposition by such
company of any shares acquired by it pursuant to exercise of the applicable
Option. A Termination Fee payment by JP Foodservice or Rykoff-Sexton will reduce
the amount of any cash payment required to be made by such company in
cancellation of the Option granted by it under the circumstances specified in
the applicable Stock Option Agreement. See "The Merger Agreement--Termination
Fees" and "Other Agreements--Stock Option Agreements."
Expenses
Each of JP Foodservice and Rykoff-Sexton will bear its own expenses
incurred in connection with the transactions contemplated by the Merger
Agreement, except with respect to the Termination Fee payable by each party and
19
<PAGE>
except that each party will pay one-half of (i) the costs of registering the JP
Foodservice Common Shares issuable pursuant to the Merger Agreement and of
printing and mailing this Joint Proxy Statement/Prospectus and (ii) the costs of
all filings under the HSR Act related to the Merger. See "The Merger Agreement--
Expenses."
Absence of Dissenters' Rights
Both JP Foodservice and Rykoff-Sexton are incorporated under the laws of
the State of Delaware, and, accordingly, are governed by the provisions of the
DGCL. Pursuant to Section 262(b)(1) of the DGCL, the stockholders of Rykoff-
Sexton are not entitled to appraisal rights in connection with the Merger
because Rykoff-Sexton Common Shares are listed on the NYSE and such stockholders
will receive as consideration in the Merger only shares of JP Foodservice Common
Shares, which shares will be listed on the NYSE upon the closing of the Merger,
and cash in lieu of fractional shares. In addition, JP Foodservice stockholders
are not entitled to appraisal rights under Section 262 of the DGCL because, even
though approval of such stockholders is required for the issuance of JP
Foodservice Common Shares in connection with the Merger pursuant to the
requirements of the NYSE, JP Foodservice is not a constituent corporation in the
Merger.
Resale of JP Foodservice Common Shares
The issuance of the JP Foodservice Common Shares to Rykoff-Sexton
stockholders in connection with the Merger has been registered under the
Securities Act. Such shares may be traded freely and without restriction by
those Rykoff-Sexton stockholders who are not deemed to be "affiliates" of
Rykoff-Sexton within the meaning of the Securities Act. Any subsequent transfer
of JP Foodservice Common Shares issued in the Merger by any person who is an
affiliate of Rykoff-Sexton at the time adoption of the Merger Agreement is
submitted for stockholder approval at the Rykoff-Sexton Special Meeting will,
under existing law, require either (i) the registration of such transfer under
the Securities Act, (ii) compliance with Rule 145 promulgated under the
Securities Act (which permits limited sales under certain circumstances) or
(iii) the availability of another exemption from registration. The foregoing
restrictions are expected to apply to, among other persons, directors and
executive officers of Rykoff-Sexton and the holders of 10% or more of the
Rykoff-Sexton Common Shares converted in the Merger, including the ML Investors.
See "The Merger--Restrictions on Resale of JP Foodservice Common Shares by
Affiliates."
From and after the Effective Time, the ML Investors will have the right
under the Registration Rights Agreement to require JP Foodservice, for a
specified period and subject to certain limitations and qualifications, to
register under the Securities Act the transfer of all or a portion of the JP
Foodservice Common Shares
20
<PAGE>
issued to them in the Merger in exchange for Registrable Securities, thus
permitting the sale of such Rykoff-Sexton Common Shares to the general public in
the circumstances and subject to the conditions and restrictions set forth
therein. The ML Investors and other parties to the Registration Rights Agreement
also will have "piggyback" registration rights with respect to JP Foodservice
Common Shares issued to them in the Merger in exchange for Registrable
Securities. See "Risk Factors--Shares Eligible for Future Sale" and "Other
Agreements--Registration Rights Agreement."
Certain Federal Income Tax Consequences
The consummation of the Merger is conditioned, among other things, upon the
receipt by JP Foodservice of an opinion of Wachtell, Lipton, Rosen & Katz,
counsel for JP Foodservice, and the receipt by Rykoff-Sexton of an opinion of
Jones, Day, Reavis & Pogue, counsel to Rykoff-Sexton, substantially to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"). Such opinions will be dated the Closing Date,
will be based upon certain customary representations, and will be subject to
certain assumptions and limitations set forth therein. No ruling regarding the
Merger will be sought from the Internal Revenue Service, which will not be bound
by the conclusions expressed in such opinions of counsel.
In accordance with such opinions, (i) neither JP Foodservice nor Rykoff-
Sexton will recognize any gain or loss as a result of the Merger and (ii) no
gain or loss will be recognized by stockholders of Rykoff-Sexton upon the
exchange of their Rykoff-Sexton Common Shares pursuant to the Merger, except
with respect to cash, if any, received in lieu of fractional JP Foodservice
Common Shares. See "The Merger--Certain Federal Income Tax Consequences."
EACH HOLDER OF RYKOFF-SEXTON COMMON STOCK IS ADVISED TO CONSULT SUCH
HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF
THE MERGER UNDER FEDERAL, STATE, LOCAL, FOREIGN OR ANY OTHER APPLICABLE LAW.
To provide assurances in connection with the qualification of the Merger as
a tax-free reorganization for federal income tax purposes, each ML Investor has
agreed in the Support Agreement that, at or prior to the Effective Time, it will
make certain representations to Rykoff-Sexton and JP Foodservice or their
respective counsel with respect to its intentions regarding the disposition of
JP Foodservice Common Shares received by it in the Merger. See "Other Agreements
- --Support Agreement."
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<PAGE>
Accounting Treatment
It is intended that the Merger will be accounted for by JP Foodservice as a
pooling of interests in accordance with generally accepted accounting
principles. It is a condition to the consummation of the Merger that (i) Rykoff-
Sexton and JP Foodservice receive a letter, dated as of the Closing Date, from
Rykoff-Sexton's independent accountants stating that Rykoff-Sexton will meet the
criteria for pooling of interests accounting under Accounting Principles Board
("APB") Opinion No. 16 and applicable SEC rules and regulations and (ii) JP
Foodservice and Rykoff-Sexton receive a letter, dated as of the Closing Date,
from JP Foodservice's independent accountants stating that the Merger will
qualify for accounting as a pooling of interests under APB Opinion No. 16 and
applicable SEC rules and regulations. See "The Merger Agreement--Conditions;
Waivers--Conditions to Each Party's Obligations to Effect the Merger."
22
<PAGE>
Dividends and Market Prices of JP Foodservice and Rykoff-Sexton Common
Shares
JP Foodservice
The JP Foodservice Common Shares have been listed on the NYSE under the
symbol "JPF" since December 31, 1996. From November 16, 1994 until December 31,
1996, the JP Foodservice Common Shares were quoted on the Nasdaq National Market
under the symbol "JPFS." The table below sets forth, for the periods indicated,
the reported high and low sale prices of JP Foodservice Common Shares on the
Nasdaq National Market prior to December 31, 1996 and, beginning on December 31,
1996, on the NYSE Composite Tape.
<TABLE>
<CAPTION>
High Low
------- ------
<S> <C> <C>
Fiscal Year Ended July 1, 1995
Second Quarter (from November 16, 1994)........ $11.50 $9.25
Third Quarter.................................. 13.13 9.25
Fourth Quarter................................. 14.38 10.88
Fiscal Year Ended June 29, 1996
First Quarter.................................. $17.75 $12.75
Second Quarter................................. 19.50 15.25
Third Quarter.................................. 22.25 18.25
Fourth Quarter................................. 25.00 18.50
Fiscal Year Ended June 28, 1997
First Quarter.................................. $24.75 $20.75
Second Quarter................................. 28.00 21.00
Third Quarter.................................. 29.13 25.75
Fourth Quarter................................. 30.13 26.00
Fiscal Year Ending June 27, 1998
First Quarter (through July 31, 1997).......... $32.44 $28.25
</TABLE>
JP Foodservice has never declared or paid a cash dividend and does not
anticipate declaring or paying a cash dividend for the foreseeable future.
Financial covenants and other restrictions contained in agreements relating to
JP Foodservice's indebtedness require JP Foodservice prior to the Merger, and
will require JP Foodservice after the Merger, to meet certain financial tests
and may restrict its ability to pay cash dividends. See "Risk Factors--JP
Foodservice Dividend Policy."
Rykoff-Sexton
The Rykoff-Sexton Common Shares are listed on the NYSE under the symbol
"RYK." The table below sets forth, for the periods indicated, the reported high
and low sale prices of Rykoff-Sexton Common Shares on the NYSE Composite Tape
and
23
<PAGE>
the semi-annual cash dividends per share paid by Rykoff-Sexton on such
shares. In December 1994, the Rykoff-Sexton Board of Directors declared a five-
for-four stock split, payable January 24, 1995, to stockholders of record on
December 21, 1994. Share prices shown below have been adjusted to give effect to
this stock split. Effective May 17, 1996, Rykoff-Sexton changed its fiscal year-
end from the Saturday closest to April 30 to the Saturday closest to June 30.
Accordingly, the information presented in the table below for the First Quarter
of the Fiscal Year Ended June 28, 1997 represents information from April 29,
1996 through September 27, 1996.
<TABLE>
<CAPTION>
Cash
Dividends
High Low Per Share
------- ------- ---------
<S> <C> <C> <C>
Fiscal Year Ended April 29, 1995
First Quarter.................................. $16.88 $14.38 ---
Second Quarter................................. 17.88 15.00 ---
Third Quarter.................................. 16.75 15.88 ---
Fourth Quarter................................. 17.88 14.88 $0.03
Fiscal Year Ended April 27, 1996
First Quarter.................................. $20.63 $17.25 $0.03
Second Quarter................................. 24.63 19.63 ---
Third Quarter.................................. 22.50 15.63 0.03
Fourth Quarter................................. 16.25 13.88 ---
Fiscal Year Ended June 28, 1997
First Quarter (from April 29, 1996 $16.38 $13.50 $0.03
through September 27,
1996)...........................
Second Quarter................................. 16.00 13.38 ---
Third Quarter.................................. 18.50 15.13 0.03
Fourth Quarter................................. 20.00 17.00 ---
Fiscal Year Ending June 27, 1998
First Quarter (through July 31, 1997) $26.88 $22.63 ---
</TABLE>
In December 1994, Rykoff-Sexton announced the reinstatement of its cash
dividend on a semi-annual basis in the amount of $0.03 per Rykoff-Sexton Common
Share. Rykoff-Sexton's policy to declare a dividend is based on a decision made
by the Rykoff-Sexton Board of Directors from time to time following
consideration of the results of operations and financial condition of Rykoff-
Sexton, terms of debt instruments that may restrict Rykoff-Sexton's ability to
pay dividends and such other factors as the Rykoff-Sexton Board of Directors
considers relevant.
24
<PAGE>
Comparative Share Prices
The following table sets forth the closing sale prices per JP Foodservice
Common Share and per Rykoff-Sexton Common Share on the NYSE on June 27, 1997,
the last full trading day prior to public announcement of the execution of the
Merger Agreement, and on __________, 1997, the latest practicable date before
the printing of this Joint Proxy Statement/Prospectus for which sales price
information was available, and the equivalent per share prices for Rykoff-Sexton
Common Shares based on the prices of JP Foodservice Common Shares.
<TABLE>
<CAPTION>
Rykoff-Sexton
JP Foodservice Rykoff-Sexton Equivalent
Common Shares Common Shares Common Share(1)
------------- ------------- ------------
<S> <C> <C> <C>
June 27, 1997......... $ 30.13 $ 19.63 $ 25.31
_______, 1997......... $ $ $
</TABLE>
(1) Represents the equivalent price of one Rykoff-Sexton Common Share in the
Merger, calculated by multiplying the closing sale price per JP Foodservice
Common Share on such date by the Exchange Ratio.
Stockholders are urged to obtain current quotations for the market prices
of JP Foodservice Common Shares and Rykoff-Sexton Common Shares. No assurance
can be given as to the market price of JP Foodservice Common Shares or Rykoff-
Sexton Common Shares at the Effective Time. Because the Exchange Ratio is fixed
in the Merger Agreement and neither JP Foodservice nor Rykoff-Sexton has the
right to terminate the Merger Agreement based on changes in the market price of
either party's stock, the market value of the JP Foodservice Common Shares that
holders of Rykoff-Sexton Common Shares will receive in the Merger may vary
significantly from the prices shown in the preceding tables.
25
<PAGE>
SUMMARY UNAUDITED COMBINED AND PRO FORMA
CONSOLIDATED FINANCIAL DATA OF
JP FOODSERVICE AND RYKOFF-SEXTON
The following table presents (i) summary unaudited combined consolidated
statement of operations data for the fiscal years ended July 2, 1994, July 1,
1995 and June 29, 1996 and the nine months ended March 30, 1996 and March 29,
1997 of JP Foodservice and Rykoff-Sexton reflecting the consummation of the
Merger, (ii) unaudited pro forma combined consolidated statement of operations
data for the fiscal year ended June 29, 1996 of JP Foodservice and Rykoff-Sexton
reflecting the consummation of the Merger and the US Foodservice Acquisition and
the acquisition of H&O Foods by Rykoff-Sexton, as if such acquisitions occurred
at the beginning of the period presented and (iii) unaudited pro forma combined
balance sheet data as of March 29, 1997 of JP Foodservice and Rykoff-Sexton
reflecting consummation of the Merger and the one-time charges to be incurred in
connection with the Merger. See "Unaudited Pro Forma Combining Consolidated
Financial Statements for the Merger." The unaudited combined and pro forma
consolidated financial data have been prepared giving effect to the Merger using
the pooling of interests method of accounting.
The summary unaudited combined and pro forma consolidated statement of
operations data do not reflect any operating or interest costs savings that
management believes may be realized following the Merger. Management of JP
Foodservice and Rykoff-Sexton have estimated that the combination of JP
Foodservice and Rykoff-Sexton could create opportunities for operating costs
savings of approximately $12 million during the first twelve-month period
following the Effective Time, $18 million during the second twelve-month period
following the Effective Time and $25 million annually thereafter. These cost
savings are expected to be realized primarily through the restructuring of
operations. In addition, in connection with the Merger, JP Foodservice expects
to enter into the New Credit Facility, which will provide for lower borrowing
costs than the overall borrowing costs under the Existing Bank Credit
Facilities. Management estimates the New Credit Facility will provide annual
interest cost savings of approximately $5 million. See "Description of Proposed
New Financing Arrangements." No assurances can be made as to the amount of cost
savings that will actually be realized.
<TABLE>
<CAPTION>
Combined Combined Pro Forma
Fiscal Year Ended (1) Nine Months Ended Fiscal Year
---------------------------------- ------------------------- Ended
July 2, July 1, June 29, March 30, March 29, June 29,
1994 1995 1996 1996 (2) 1997 1996 (1)
---- ---- ---- -------- ---- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ................................... $2,623,052 $2,857,334 $3,238,781 $2,427,272 $3,863,109 $5,002,483
Gross profit ................................ 516,079 546,549 599,623 487,200 745,811 907,361
Amortization of intangible assets ........... 2,265 2,377 3,731 2,432 11,493 15,548
Reversal of restructuring charge ............ - - (6,441) (6,441) - (6,441)
Impairment of long-lived assets ............. - - 29,700 29,700 - 29,700
Income from operations ...................... 52,630 64,543 34,773 11,693 103,429 83,122
Interest expense and other
financing costs, net ...................... 44,201 32,941 32,527 25,599 56,880 71,803
Income (loss) from continuing operations
before income taxes ................... 8,207 31,911 692 (15,423) 41,149 9,765
Income (loss) from continuing operations .... 7,064 18,303 133 (9,681) 21,821 2,597
Net income (loss) ........................... 5,620 37,209 133 (9,681) 21,821 2,597
Per share data:
Income (loss) from continuing
operations per share .............. $ 0.20 $ 0.72 $ 0.00 $ (0.31) $ 0.48 $ 0.06
Net income (loss) per common share ..... 0.30 1.46 0.00 (0.31) 0.48 0.06
Weighted average number of shares
of common stock and common
stock equivalents outstanding .... 16,898 25,477 31,359 31,474 45,628 42,179
<CAPTION>
As of
March 29, 1997
Pro Forma
---------
<S> <C>
Balance Sheet Data:
Total assets .................................................................................................. $1,732,356
Long-term debt, excluding
current maturities ....................................................................................... 662,308
Stockholders' equity .......................................................................................... 511,353
</TABLE>
- ------------------
(1) Unaudited combined and pro forma consolidated statement of operations data
for the years ended July 2, 1994, July 1, 1995 and June 29, 1996 include
historical consolidated financial results of Rykoff-Sexton for the fiscal
years ended April 30, 1994, April 29, 1995 and April 27, 1996,
respectively.
(2) Unaudited combined consolidated statement of operations data for the nine
months ended March 30, 1996 include historical consolidated financial
results of Rykoff-Sexton for the nine months ended April 27, 1996 (which
include H&O Foods from November 1, 1995 to March 30, 1996).
26
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF JP FOODSERVICE
The following summary of consolidated financial data for JP Foodservice
should be read in conjunction with the consolidated financial statements of JP
Foodservice as of and for the fiscal years ended July 2, 1994, July 1, 1995 and
June 29, 1996 and as of and for the nine months ended March 30, 1996 and March
29, 1997 incorporated herein by reference. The consolidated statement of
operations and balance sheet data for the three fiscal years ended June 29,
1996, have been derived from JP Foodservice's audited consolidated financial
statements and notes thereto. The consolidated statement of operations for the
fiscal years ended June 27, 1992 and July 3, 1993 are unaudited. Interim data
for the nine months ended March 30, 1996 and March 29, 1997 are unaudited, but
include, in the opinion of management of JP Foodservice, all adjustments
(consisting only of normal recurring adjustments, except as noted below)
necessary for a fair presentation of such data. Results for the nine months
ended March 29, 1997 are not necessarily indicative of results which may be
expected for any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
Fiscal Year Ended Nine Months Ended
---------------------------------------------------------- -----------------------
June 27, July 3, July 2, July 1, June 29, March 30, March 29,
1992 1993(1) 1994 1995 1996 1996 1997
---- -------- ---- ---- ---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales................................ $1,131,886 $1,152,709 $1,178,826 $1,288,315 $1,449,303 $1,059,565 $1,244,629
Gross profit............................. 195,353 199,008 199,718 218,821 250,506 182,252 215,552
Amortization of intangible assets........ 2,265 2,266 2,265 2,263 2,338 1,741 2,156
Stock compensation charge................ - - - 709 - - -
Income from operations................... 27,211 29,779 33,758 38,050 45,252 29,726 38,927
Nonrecurring charges..................... - - - - 1,517 1,517 5,400
Interest expense and other
financing costs, net................... 38,032 38,577 32,255 22,074 15,187 11,405 11,927
Income (loss) before income taxes
and extraordinary item................. (10,715) (8,811) 1,281 16,285 28,511 16,804 21,600
Income (loss) before extraordinary item.. (8,038) (6,620) (298) 8,927 16,913 9,744 11,849
Net income (loss)........................ (8,038) (6,620) (298) 4,337 16,913 9,744 11,849
Per share data:
Income (loss) per common share
before extraordinary item.......... $ (2.16) $ (1.95) $ (0.17) $ 0.68 $ 0.90 $ 0.52 $ 0.55
Net income (loss) per common share... (2.16) (1.95) (0.17) 0.33 0.90 0.52 0.55
Weighted average number of shares of
common stock outstanding........... 4,691 4,633 4,633 13,104 18,809 18,785 21,703
<CAPTION>
As of
----------------------
June 29, March 29,
1996 1997
---- ----
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Total assets....................................................................................... $ 448,279 $ 518,007
Long-term debt, excluding
current maturities............................................................................... 168,647 171,204
Stockholders' equity............................................................................... 128,149 207,480
</TABLE>
27
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF RYKOFF-SEXTON
The following summary of consolidated financial data for Rykoff-Sexton
should be read in conjunction with the consolidated financial statements of
Rykoff-Sexton as of and for the fiscal years ended April 30, 1994, April 29,
1995 and April 27, 1996 and as of and for the nine months ended April 27, 1996
and March 29, 1997 incorporated herein by reference. The consolidated statement
of operations and balance sheet data for the five fiscal years ended April 27,
1996 have been derived from Rykoff-Sexton's audited consolidated financial
statements and notes thereto. Interim data for the nine months ended April 27,
1996 and March 29, 1997 are unaudited, but include, in the opinion of management
of Rykoff-Sexton, all adjustments (consisting only of normal recurring
adjustments, except as noted below) necessary for a fair presentation of such
data. Results for the nine months ended March 29, 1997 are not necessarily
indicative of results which may be expected for any other interim period or for
the year as a whole.
<TABLE>
<CAPTION>
Fiscal Year Ended Nine Months Ended
-------------------------------------------------------- ---------------------
May 2, May 1, April 30, April 29, April 27, April 27, March 29,
1992 1993 1994 1995 1996(1) 1996(1) 1997(2)
---- ---- ---- ---- ------- ------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales................................ $1,447,305 $1,412,943 $1,444,226 $1,569,019 $1,789,478 $1,367,707 $2,618,480
Gross profit............................. 337,163 313,823 316,361 327,728 349,117 304,948 530,259
Amortization of intangible assets........ 370 460 156 114 1,393 691 9,337
Restructuring charge (reversal).......... - 31,000 - - (6,441) (6,441) -
Impairment of long-lived assets.......... - - - - 29,700 29,700 -
Income (loss) from operations............ 23,517 (25,951) 18,872 26,493 (10,479) (18,033) 64,502
Interest expense and other
financing costs, net................... 10,301 12,401 11,946 10,867 17,340 14,194 34,831
Income (loss) from continuing operations
before income taxes................... 13,216 (38,352) 6,926 15,626 (27,819) (32,227) 19,549
Income (loss) from continuing operations. 7,930 (24,150) 4,121 9,376 (16,780) (19,425) 9,972
Net income (loss)(3)..................... 10,006 (18,960) 5,918 32,872 (16,780) (19,425) 9,972
Per share data:
Income (loss) from continuing
operations per common share.......... $ 0.55 $ (1.66) $ 0.28 $ 0.64 $ (1.12) $ (1.29) $ 0.35
Net income (loss) per common share..... 0.69 (1.30) 0.40 2.24 (1.12) (1.29) 0.35
Weighted average number of shares
of common stock and common
stock equivalents outstanding........ 14,521 14,508 14,601 14,730 14,941 15,106 28,482
<CAPTION>
As of
------------------------
April 27, March 29,
1996 1997
---- ----
(in thousands)
<S>..................................................................................................... <C> <C>
Balance Sheet Data:
Total assets........................................................................................ $611,856 $1,220,031
Long-term debt, excluding
current maturities............................................................................... 135,081 491,104
Stockholders' equity................................................................................ 192,500 346,643
</TABLE>
- ------------------------------------------
(1) Includes amounts for H&O Foods from November 1, 1995 to April 27, 1996.
(2) Includes amounts for US Foodservice and H&O Foods from June 30, 1996 to
March 29, 1997.
(3) Includes the write off of deferred finance costs of $1,444,000 in 1994.
28
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth (i) selected historical per share data for
both JP Foodservice and Rykoff-Sexton; (ii) selected unaudited combined per
share data which reflect consummation of the Merger as if the Merger had been
consummated at the beginning of the period presented and (iii) selected
unaudited pro forma per share data which reflects consummation of the Merger,
the US Foodservice Acquisition and the acquisition of H&O Foods by Rykoff-
Sexton, as if each transaction occurred at the beginning of the period
presented. The unaudited combined data have been prepared giving effect to the
Merger using the pooling of interests method of accounting. The Rykoff-Sexton
equivalent combined and equivalent pro forma amounts have been calculated by
multiplying the corresponding combined and pro forma per share amounts of JP
Foodservice by the Exchange Ratio of 0.84.
The summary unaudited combined and pro forma consolidated statement of
operations data do not reflect any operating or interest cost savings that
management believes may be realized following the Merger. Management of JP
Foodservice and Rykoff-Sexton have estimated that the combination of JP
Foodservice and Rykoff-Sexton could create opportunities for operating cost
savings of approximately $12 million during the first twelve-month period
following the Effective Time, $18 million during the second twelve-month period
following the Effective Time and $25 million annually thereafter. These cost
savings are expected to be realized primarily through the restructuring of
operations. In addition, in connection with the Merger, JP Foodservice expects
to enter into the New Credit Facility, which will provide lower borrowing costs
than the overall borrowing costs under the Existing Bank Credit Facilities.
Management estimates the New Credit Facility will provide annual interest cost
savings of approximately $5 million. See "Description of Proposed New Financing
Arrangements." No assurances can be made as to the amount of cost savings that
will actually be realized.
The per share data presented herein are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of JP Foodservice and Rykoff-Sexton,
both of which are incorporated herein by reference. Results of JP Foodservice
and of Rykoff-Sexton for less than a full fiscal year are not necessarily
indicative of results expected for the entire year, nor are pro forma amounts
necessarily indicative of results of operations that would have resulted if the
Merger had been consummated at the beginning of the periods indicated. All
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of interim periods have been included.
<TABLE>
<CAPTION>
JP Foodservice
--------------------------------------------------------------------------------
As of and for the As of and for the
Fiscal Year Ended Nine Months Ended
----------------------------------------------- --------------------------------
July 2, July 1, June 29, March 30, March 29,
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations per common share:
Historical............................. $ (0.17) $ 0.68 $ 0.90 $ 0.52 $ 0.55
Combined............................... 0.20 0.72 0.00 (0.31) 0.48
Pro forma.............................. 0.06
Cash dividends per common share (1).......... 0.00 0.00 0.00 0.00 0.00
Book value per common share:
Historical............................. 6.83 9.31
Pro forma.............................. 11.10
<CAPTION>
Rykoff-Sexton
--------------------------------------------------------------------------------
As of and for the As of and for the
Fiscal Years Ended Nine Months Ended
----------------------------------------------- --------------------------------
April 30, April 29, April 27, April 27, March 29,
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations per common share:
Historical............................. $ 0.28 $ 0.64 $ (1.12) $ (1.29) $ 0.35
Equivalent combined.................... 0.17 0.60 0.00 (0.26) 0.40
Equivalent pro forma................... 0.05
Cash dividends per common share.............. 0.00 0.03 0.06 0.03 0.06
Book value per common share:
Historical............................. 12.99 12.42
Equivalent pro forma................... 9.32
</TABLE>
- ---------------
(1) JP Foodservice has never paid cash dividends on the JP Foodservice Common
Shares and does not anticipate declaring or paying cash dividends for the
foreseeable future following the Merger.
29
<PAGE>
RISK FACTORS
The following risk factors should be carefully considered by JP Foodservice
stockholders in deciding whether to approve the issuance of JP Foodservice
Common Shares in connection with the Merger and by Rykoff-Sexton stockholders in
deciding whether to adopt the Merger Agreement.
Uncertainties in Integrating Business Operations and Achieving Cost Savings
In determining that the Merger is in the best interests of their respective
stockholders, the JP Foodservice Board of Directors and the Rykoff-Sexton Board
of Directors considered the cost savings, operating efficiencies and other
synergies expected to result from the integration of the JP Foodservice and
Rykoff-Sexton businesses. Management of JP Foodservice and Rykoff-Sexton have
estimated that the combination of JP Foodservice and Rykoff-Sexton could create
opportunities for operating cost savings of approximately $12 million during the
first twelve-month period following the Effective Time, $18 million during the
second twelve-month period following the Effective Time and $25 million annually
thereafter. These cost savings are expected to be realized primarily through
the restructuring of operations. See "The Merger--Potential Cost Savings and
Operating Synergies."
The foregoing cost savings estimates were developed by JP Foodservice and
Rykoff-Sexton solely for purposes of evaluating the Merger, do not include non-
recurring adjustments that will be recorded in conjunction with the Merger, and
should not be relied upon as an estimate of actual cost savings that may be
achieved. These estimates are based upon assumptions and operating synergies
that are inherently uncertain, though considered reasonable by JP Foodservice
and Rykoff-Sexton, and are subject to significant business, economic and
competitive uncertainties which are difficult to predict and often beyond the
control of management. See "The Merger --Potential Cost Savings and Operating
Synergies." Several of the cost savings estimates are premised on the
assumption that certain levels of efficiency presently maintained by either JP
Foodservice or Rykoff-Sexton can be achieved by JP Foodservice following the
Merger. Other estimates are based on management's opinion as to what levels of
enhanced purchasing leverage and operating efficiencies should be achievable by
an entity the size of the combined entity.
The consolidation of functions, the integration of operations, systems,
marketing methods and procedures and the relocation of staff present significant
management challenges. There can be no assurance that such actions will be
accomplished successfully or as rapidly as currently expected. Moreover,
although the primary purpose of such actions will be to realize direct cost
savings and other operating efficiencies, there can be no assurance of the
extent to which such cost
30
<PAGE>
savings and efficiencies will be achieved or that unforeseen costs and expenses
or other factors will not offset the projected cost savings in whole or in part.
To the extent such cost savings and efficiencies are not accomplished
successfully or on a timely basis, JP Foodservice's operating results could be
negatively affected and the Merger could be dilutive to holders of JP
Foodservice Common Shares.
Significant Indebtedness
Following the consummation of the Merger, JP Foodservice will have
significant indebtedness and debt service obligations. Giving effect to the
Merger and the other acquisitions described under the caption "Unaudited Pro
Forma Combining Consolidated Financial Statements for the Merger," and assuming
such transactions had occurred on March 29, 1997, JP Foodservice's total
indebtedness (excluding current maturities) would have been approximately $662
million on such date. JP Foodservice may incur additional indebtedness in the
future, subject to certain limitations contained in the instruments governing
its indebtedness. Anticipated borrowings under the New Credit Facility will
result in indebtedness with lower average interest rates for the combined entity
than the Rykoff-Sexton indebtedness to be refinanced with such borrowings,
although average interest rates under the New Credit Facility are expected to be
generally higher than average interest rates historically paid by JP Foodservice
on borrowings under its existing senior bank credit facility. There can be no
assurance as to whether, or the definitive terms on which, the New Credit
Facility actually will be available to JP Foodservice. See "Description of
Proposed New Financing Arrangements--New Credit Facility." Based upon the
current level of operations and anticipated cost savings, JP Foodservice
believes that after the Merger its cash flow from operations, together with
borrowings under the New Credit Facility (or, if JP Foodservice does not obtain
the New Credit Facility, the Existing Bank Credit Facilities) and its other
sources of liquidity, will be adequate to meet its anticipated requirements for
working capital, capital expenditures and debt service over the next several
years. There can be no assurance, however, that the combined company's business
will continue to generate cash flow at or above the cash flow levels attained by
JP Foodservice and Rykoff-Sexton in the aggregate or that anticipated cost
savings can be fully achieved. If JP Foodservice is unable to generate
sufficient cash flow from operations in the future to service its debt and make
necessary capital expenditures, JP Foodservice may be required to refinance all
or a portion of its existing debt, sell assets or obtain additional financing.
There can be no assurance as to whether, or the terms on which, any such
refinancing or asset sales would be consummated or any additional financing
could be obtained.
Offer to Purchase Rykoff-Sexton Senior Subordinated Notes
Consummation of the Merger will constitute a "change of control" of Rykoff-
Sexton as defined in the indenture (the "Indenture") pursuant to which $130
million
31
<PAGE>
principal amount of Rykoff-Sexton's 8 7/8% Senior Subordinated Notes due
2003 (the "Rykoff-Sexton Public Notes") are outstanding. Pursuant to the
Indenture, within 30 business days after the Merger is consummated, JP
Foodservice or other successor to Rykoff-Sexton under the Indenture will be
required to make an offer to purchase the Rykoff-Sexton Public Notes at a
purchase price equal to 101% of their principal amount, plus accrued interest.
Because the Rykoff-Sexton Public Notes have traded in recent periods at prices
at or above 101% of their principal amount, JP Foodservice does not currently
anticipate that the holders of a material amount of Rykoff-Sexton Public Notes
will accept the offer to purchase. JP Foodservice expects to fund any payments
required pursuant to the purchase offer with borrowings under the New Credit
Facility. The application of such borrowings to the offer to purchase will
reduce the amounts available under the New Credit Facility or, if JP Foodservice
does not obtain the New Credit Facility, under the Existing Bank Credit
Facilities for working capital, capital expenditures and other general corporate
purposes.
Shares Eligible for Future Sale
Immediately following the Merger, the ML Investors will beneficially own
approximately 18.3% of the outstanding JP Foodservice Common Shares. The ML
Investors may not sell the JP Foodservice Common Shares issued to them in the
Merger except pursuant to an effective registration statement under the
Securities Act covering such sale or in compliance with Rule 145 promulgated
under the Securities Act or another applicable exemption from the registration
requirements of the Securities Act. The ML Investors will have the right
following the Merger, pursuant to the Registration Rights Agreement, to require
JP Foodservice, for a specified period and subject to certain limitations and
qualifications, to effect the registration under the Securities Act of the sale
of the JP Foodservice Common Shares issued to them in the Merger in exchange for
Registrable Securities. The ML Investors and other parties also have
"piggyback" registration rights under the Registration Rights Agreement with
respect to the JP Foodservice Common Shares that will be issued to them in the
Merger in exchange for Registrable Securities. See "Other Agreements--
Registration Rights Agreement." The holders of the Assumed Warrants will be
entitled to certain "demand" and "piggyback" registration rights with respect to
the JP Foodservice Common Shares issued or issuable upon exercise of the new
warrants issued by JP Foodservice in exchange for the Assumed Warrants. See
"Warrants."
In addition, JP Foodservice has previously granted certain "shelf" and
"piggyback" registration rights with respect to JP Foodservice Common Shares
issued in connection with the acquisition of other foodservice businesses. Such
registration rights are subject to certain notice requirements, timing
restrictions and volume limitations which may be imposed by the underwriters of
an offering in which such persons are participants.
32
<PAGE>
No predictions can be made as to the effect, if any, that market sales of
JP Foodservice Common Shares by the ML Investors or other stockholders pursuant
to such registration rights, or the availability of such shares for such future
sales, will have on the market price of JP Foodservice Common Shares prevailing
from time to time. Sales of substantial amounts of JP Foodservice Common Shares,
or the perception that such sales could occur, could adversely affect prevailing
market prices for the JP Foodservice Common Shares and could impair JP
Foodservice's future ability to raise capital through an offering of its equity
securities.
Potential Influence by and Relationship with ML Investors
Immediately following the Merger, the 18.3% of outstanding JP Foodservice
Common Shares beneficially owned by the ML Investors is expected to constitute
the largest percentage of such shares beneficially owned by any person or group.
The Merger Agreement entitles the ML Entities to designate two nominees to the
JP Foodservice Board of Directors. See "Management of JP Foodservice After the
Merger--Directors." In addition, pursuant to the Standstill Agreement, the ML
Entities have agreed to vote the Rykoff-Sexton Common Shares and other voting
securities owned by them and their affiliates for Rykoff-Sexton's nominees to
the Rykoff-Sexton Board of Directors, in accordance with the recommendation of
the Nominating Committee of the Rykoff-Sexton Board of Directors, subject to
certain exceptions. The ML Entities also have agreed that neither they nor any
of their affiliates will (subject to certain exceptions) participate in proxy
solicitations, acquire additional Rykoff-Sexton Common Shares or otherwise
engage in transactions, or take actions involving a change of control of Rykoff-
Sexton. The Rykoff-Sexton Common Shares and other voting securities owned by the
ML Investors are subject to certain restrictions on sale or transfer. The ML
Entities are prohibited from soliciting, offering, seeking to effect and
negotiating with any person with respect to sales or transfers of Rykoff-Sexton
Common Shares and other voting securities held by the ML Entities unless
otherwise permitted by the Standstill Agreement. See "Other Agreements --
Standstill Agreement." From and after the Effective Time, the Standstill
Agreement will be for the benefit of, and will be enforceable by, JP Foodservice
to the same extent and in the same manner as the Standstill Agreement benefits
and is enforceable by Rykoff-Sexton prior to the Merger.
The JP Foodservice Common Shares to be received by the ML Investors in the
Merger will constitute a significant block of the voting power of the JP
Foodservice Common Shares. The voting of such shares as required by the
Standstill Agreement will make it easier for the JP Foodservice Board of
Directors to obtain the approval of JP Foodservice stockholders for the election
of JP Foodservice's nominees to the JP Foodservice Board of Directors. Such a
voting block also could facilitate or impede the approval of any other matter
requiring approval of JP Foodservice stockholders, including a merger,
consolidation or other business combination involving JP Foodservice, or
discourage a potential acquiror
33
<PAGE>
from making a tender offer or otherwise attempting to obtain control of JP
Foodservice.
Factors Relating to Future Acquisitions
JP Foodservice's growth strategy emphasizes supplementing internal
expansion with acquisitions, and a significant portion of the growth of JP
Foodservice's revenues in fiscal 1997 resulted from acquisitions. See "The
Merger--Background of the Merger." There can be no assurance that JP Foodservice
will successfully identify suitable acquisition candidates, complete
acquisitions, integrate acquired operations into its existing operations or
expand into new markets in the future. Further, there can be no assurance that
acquisitions will not have an adverse effect upon JP Foodservice's operating
results, particularly in periods following the consummation of such
transactions, during which the operations of the acquired businesses are being
integrated into JP Foodservice's operations. Once integrated, acquired
operations may not achieve levels of net sales or profitability comparable to
those achieved by JP Foodservice's existing operations, or otherwise perform as
expected. There can be no assurance that, following the Merger, JP Foodservice
will be able to increase its revenues or earnings through future acquisitions at
the same rates it achieved through the acquisitions it completed in fiscal 1997.
Management may determine that it is necessary or desirable to obtain financing
for such acquisitions through additional bank borrowings or the issuance of
additional debt or equity securities. Debt financing of any such acquisition
could increase the leverage of JP Foodservice and will be subject to
restrictions contained in the New Credit Facility and other agreements relating
to JP Foodservice's indebtedness. Equity financing of any such acquisition may
dilute the ownership of JP Foodservice's stockholders. There can be no assurance
that JP Foodservice will be able to obtain financing on acceptable terms. See
"--Significant Indebtedness."
JP Foodservice Dividend Policy
In December 1994, Rykoff-Sexton announced the reinstatement of its cash
dividend on a semi-annual basis in the amount of $0.03 per Rykoff-Sexton Common
Share. JP Foodservice has never paid cash dividends on the JP Foodservice Common
Shares and does not anticipate declaring or paying cash dividends for the
foreseeable future following the Merger. Financial covenants and other
restrictions contained in the Existing Bank Credit Facilities and JP
Foodservice's outstanding senior notes currently require, and the New Credit
Facility will require, JP Foodservice to meet certain financial tests and may
restrict its ability to pay cash dividends.
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Fixed Exchange Ratio
The Exchange Ratio is fixed at 0.84 of a JP Foodservice Common Share for
each outstanding Rykoff-Sexton Common Share and will not be subject to increase
or decrease based on changes in the market values of the JP Foodservice Common
Shares or the Rykoff-Sexton Common Shares. The market prices of the JP
Foodservice Common Shares and the Rykoff-Sexton Common Shares at the Effective
Time can be expected to vary from the market prices as of June 27, 1997, the
last trading day prior to public announcement of the execution of the Merger
Agreement, and the prices as of the date of this Joint Proxy
Statement/Prospectus and the date or dates on which the JP Foodservice Special
Meeting and the Rykoff-Sexton Special Meeting are held, because of changes in
the business, operations or prospects of JP Foodservice, Rykoff-Sexton or the
combined entity, market assessments of the likelihood that the Merger will be
consummated and the timing thereof, general market and economic conditions, and
other factors. See "Summary -- Dividends and Market Prices of JP Foodservice and
Rykoff-Sexton Common Shares."
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THE JP FOODSERVICE SPECIAL MEETING
Date, Time and Place of Meeting
The JP Foodservice Special Meeting will be held on __________ __, 1997, at
____ a.m., local time, at __________________________________.
Record Date and Outstanding Shares
Holders of record of JP Foodservice Common Shares at the close of business
on __________, 1997 (the "JP Foodservice Record Date") are entitled to notice
of, and to vote at, the JP Foodservice Special Meeting. At the close of business
on the JP Foodservice Record Date, there were ___________ JP Foodservice Common
Shares outstanding, each of which will be entitled to one vote on each matter to
be acted upon at the JP Foodservice Special Meeting.
Voting of Proxies
The JP Foodservice proxy accompanying this Joint Proxy Statement/Prospectus
is solicited on behalf of the JP Foodservice Board of Directors for use at the
JP Foodservice Special Meeting. Stockholders are requested to complete, date and
sign the accompanying proxy and promptly return it in the accompanying envelope
or otherwise mail it to JP Foodservice. If no instructions are indicated, such
proxies will be voted for approval of the JP Foodservice Proposal. The JP
Foodservice Board of Directors is not currently aware of any matters other than
those referred to herein which will come before the JP Foodservice Special
Meeting. If any other matter arising from the conduct of the meeting should be
properly presented at the JP Foodservice Special Meeting for action, the persons
named in the accompanying proxy card will vote the proxy in their own
discretion.
Vote Required
The consummation of the Merger is conditioned on, among other things, the
approval of the JP Foodservice Proposal at the JP Foodservice Special Meeting.
JP Foodservice stockholders must approve the JP Foodservice Proposal in
connection with the Merger in order to comply with requirements of the NYSE, on
which the JP Foodservice Common Shares are listed. Stockholder approval is
required if a company whose common stock is listed on the NYSE issues common
stock in a transaction such as the Merger in an amount equal to or greater than
20% of the number of shares of common stock outstanding prior to such issuance.
JP Foodservice is not a constituent corporation in the Merger and,
therefore, specific approval of the Merger or the Merger Agreement by JP
Foodservice's
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stockholders is not required under the DGCL, the JP Foodservice Certificate of
Incorporation or the JP Foodservice By-laws.
The JP Foodservice Proposal will be approved upon receipt of the
affirmative vote of the holders of a majority of the JP Foodservice Common
Shares present or represented at the JP Foodservice Special Meeting and entitled
to vote, assuming a quorum is present. On the JP Foodservice Record Date,
directors and executive officers of JP Foodservice, together with their
affiliates as a group, beneficially owned approximately ___% of the issued and
outstanding JP Foodservice Common Shares. It is currently expected that each
director and executive officer of JP Foodservice will vote the JP Foodservice
Common Shares beneficially owned by such director or executive officer for
approval of the JP Foodservice Proposal. See "Ownership of JP Foodservice Common
Shares."
Quorum; Broker Non-Votes
The holders of a majority of the JP Foodservice Common Shares issued and
outstanding and entitled to vote at the JP Foodservice Special Meeting, present
in person or by proxy, will constitute a quorum at the JP Foodservice Special
Meeting. Abstentions and broker non-votes will be counted for purposes of
determining the presence of a quorum at the JP Foodservice Special Meeting.
Votes cast in person or by proxy at the JP Foodservice Special Meeting will
be tabulated by the inspectors of election appointed for the JP Foodservice
Special Meeting, who will determine whether or not a quorum is present. Votes
may be cast for, against or as abstentions. Because abstentions will be counted
for purposes of determining the shares present or represented at the JP
Foodservice Special Meeting and entitled to vote, abstentions will have the same
effect as a vote against the JP Foodservice Proposal. Broker/dealers who hold
their customers' shares in street name may, under the applicable rules of the
exchange and other self-regulatory organizations of which the broker/dealers are
members, sign and submit proxies for such shares and may vote such shares on
routine matters, which, under such rules, typically include the election of
directors, but broker/dealers may not vote such shares on certain other matters,
which typically include transactions related to mergers, including the issuance
of shares in connection therewith, without specific instructions from the
customer who owns such shares. Proxies signed and submitted by broker/dealers
which have not been voted on certain matters as described in the previous
sentence, which includes the JP Foodservice Proposal, are referred to as broker
non-votes. Broker non-votes on a particular matter are not deemed to be shares
present and entitled to vote on such matter and, assuming presence of a quorum,
will not affect whether the JP Foodservice Proposal is approved.
Each stockholder who signs and returns a proxy in the form enclosed with
this Joint Proxy Statement/Prospectus may revoke the same at any time prior to
its
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use by giving notice of such revocation to JP Foodservice in writing to the
Secretary of JP Foodservice, by signing and returning a later dated proxy, or by
voting in person at the JP Foodservice Special Meeting. Unless so revoked, the
JP Foodservice Common Shares represented by each such proxy will be voted at the
meeting and any adjournment thereof. Presence at the meeting of a stockholder
who has signed a proxy does not alone revoke that proxy.
Solicitation of Proxies and Expenses
Pursuant to the Merger Agreement, JP Foodservice will bear one-half of the
costs and expenses incurred in connection with the printing and mailing of this
Joint Proxy Statement/Prospectus. Except as otherwise provided in the Merger
Agreement, JP Foodservice will bear the cost of soliciting proxies for the JP
Foodservice Special Meeting. JP Foodservice also will reimburse brokerage houses
and other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding the soliciting material to beneficial owners of stock. Proxies are
being solicited primarily by mail, but officers and regular employees of JP
Foodservice may also solicit proxies personally, by telephone or by special
letter. JP Foodservice will also use the services of Shareholder Communications
Corporation to aid in the solicitation of proxies at an anticipated fee of
$3,500, plus reasonable out-of-pocket expenses.
THE BOARD OF DIRECTORS OF JP FOODSERVICE HAS UNANIMOUSLY DETERMINED THE
MERGER TO BE IN THE BEST INTERESTS OF JP FOODSERVICE AND ITS STOCKHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT ALL JP FOODSERVICE
STOCKHOLDERS VOTE "FOR" THE ISSUANCE OF JP FOODSERVICE COMMON SHARES IN
CONNECTION WITH THE MERGER.
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THE RYKOFF-SEXTON SPECIAL MEETING
Date, Time and Place of Meeting
The Rykoff-Sexton Special Meeting will be held on __________, __, 1997, at
____ a.m., local time, at __________________________________.
Record Date and Outstanding Shares
Holders of record of Rykoff-Sexton Common Shares at the close of business
on _______________, 1997 (the "Rykoff-Sexton Record Date") are entitled to
notice of, and to vote at, the Rykoff-Sexton Special Meeting. At the close of
business on the Rykoff-Sexton Record Date, there were ________ Rykoff-Sexton
Common Shares outstanding, each of which will be entitled to one vote on each
matter to be acted upon at the Rykoff-Sexton Special Meeting.
Voting of Proxies
The Rykoff-Sexton proxy accompanying this Joint Proxy Statement/ Prospectus
is solicited on behalf of the Rykoff-Sexton Board of Directors for use at the
Rykoff-Sexton Special Meeting. Stockholders are requested to complete, date and
sign the accompanying proxy and promptly return it in the accompanying envelope
or otherwise mail it to Rykoff-Sexton. If no instructions are indicated, such
proxies will be voted for adoption of the Merger Agreement. The Rykoff-Sexton
Board of Directors is not currently aware of any matters other than those
referred to herein which will come before the Rykoff-Sexton Special Meeting. If
any other matter arising from the conduct of the meeting should be properly
presented at the Rykoff-Sexton Special Meeting for action, the persons named in
the accompanying proxy card will vote the proxy in their own discretion.
Vote Required
The Rykoff-Sexton Proposal will be approved upon receipt of the affirmative
vote of the holders of a majority of the Rykoff-Sexton Common Shares outstanding
on the Rykoff-Sexton Record Date. Abstentions and broker non-votes will have the
same effect as votes against the Rykoff-Sexton Proposal. On the Rykoff-Sexton
Record Date, directors and executive officers of Rykoff-Sexton, together with
their affiliates as a group (other than the ML Entities and their designees on
the Rykoff-Sexton Board of Directors), beneficially owned approximately ___% of
the issued and outstanding Rykoff-Sexton Common Shares. It is currently expected
that each director and executive officer of Rykoff-Sexton will vote the Rykoff-
Sexton Common Shares beneficially owned by such director or executive officer
for the approval of the Rykoff-Sexton Proposal. The ML Investors, who hold in
the aggregate approximately 36% of the Rykoff-Sexton Common Shares outstanding
as of the
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Rykoff-Sexton Record Date, have agreed to vote the Rykoff-Sexton Common Shares
owned by them for approval of the Rykoff-Sexton Proposal. See "Other Agreements
- --Support Agreement."
Quorum; Broker Non-Votes
The holders of a majority of the Rykoff-Sexton Common Shares issued and
outstanding and entitled to vote at the Rykoff-Sexton Special Meeting, present
in person or by proxy, will constitute a quorum at the Rykoff-Sexton Special
Meeting. Abstentions and broker non-votes will be counted for purposes of
determining the presence of a quorum at the Rykoff-Sexton Special Meeting.
Votes cast in person or by proxy at the Rykoff-Sexton Special Meeting will
be tabulated by the inspectors of election appointed for the Rykoff-Sexton
Special Meeting, who will determine whether or not a quorum is present. Votes
may be cast for, against or as abstentions. Abstentions will have the same
effect as a vote against the Rykoff-Sexton Proposal. Broker/dealers who hold
their customers' shares in street name may, under the applicable rules of the
exchange and other self-regulatory organizations of which the broker/dealers are
members, sign and submit proxies for such shares and may vote such shares on
routine matters, which, under such rules, typically include the election of
directors, but broker/dealers may not vote such shares on certain other matters,
which typically include transactions related to mergers, without specific
instructions from the customer who owns such shares. Proxies signed and
submitted by broker/dealers which have not been voted on certain matters as
described in the previous sentence, which includes the Rykoff-Sexton Proposal,
are referred to as broker non-votes. Broker non-votes on the Rykoff-Sexton
Proposal will have the same effect as a vote against the Rykoff-Sexton Proposal.
Each stockholder who signs and returns a proxy in the form enclosed with
this Joint Proxy Statement/Prospectus may revoke the same at any time prior to
its use by giving notice of such revocation to Rykoff-Sexton in writing to the
Secretary of Rykoff-Sexton, by signing and returning a later dated proxy, or by
voting in person at the Rykoff-Sexton Special Meeting. Unless so revoked, the
Rykoff-Sexton Common Shares represented by each such proxy will be voted at the
meeting and any adjournment thereof. Presence at the meeting of a stockholder
who has signed a proxy does not alone revoke that proxy.
Solicitation of Proxies and Expenses
Pursuant to the Merger Agreement, Rykoff-Sexton will bear one-half of the
costs and expenses incurred in connection with the printing and mailing of this
Joint Proxy Statement/Prospectus. Except as otherwise provided in the Merger
Agreement, Rykoff-Sexton will bear the cost of soliciting proxies for the
Rykoff-Sexton Special Meeting. Rykoff-Sexton will also reimburse brokerage
houses and
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other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding the soliciting material to beneficial owners of stock. Proxies are
being solicited primarily by mail, but officers and regular employees of Rykoff-
Sexton may also solicit proxies personally, by telephone or by special letter.
Rykoff-Sexton will also use the services of Chase Mellon Shareholder Services,
L.L.C. to aid in the solicitation of proxies at an anticipated fee of $5,000,
plus reasonable out-of-pocket expenses.
THE BOARD OF DIRECTORS OF RYKOFF-SEXTON HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE FAIR
TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF RYKOFF-SEXTON, HAS APPROVED
THE MERGER AGREEMENT AND RECOMMENDS THAT RYKOFF-SEXTON STOCKHOLDERS VOTE "FOR"
ADOPTION OF THE MERGER AGREEMENT.
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THE MERGER
The discussion in this Joint Proxy Statement/Prospectus of the Merger and
the Merger Agreement's principal terms is qualified in its entirety by reference
to the Merger Agreement, which is attached to this Joint Proxy
Statement/Prospectus as Appendix A and incorporated herein by reference.
General
Upon the terms and subject to the conditions of the Merger Agreement,
Rykoff-Sexton will be merged with and into Merger Sub, a wholly-owned subsidiary
of JP Foodservice, at the Effective Time. Merger Sub will be the Surviving
Corporation in the Merger, will be renamed "Rykoff-Sexton, Inc." as of the
Effective Time and will continue to be a wholly-owned subsidiary of JP
Foodservice.
At the Effective Time, each issued and outstanding Rykoff-Sexton Common
Share (other than such shares, if any, owned by JP Foodservice, Merger Sub or
Rykoff-Sexton, which will be canceled) will be converted into the right to
receive 0.84 of a JP Foodservice Common Share. Holders of Rykoff-Sexton Common
Shares immediately before the Merger will receive an aggregate of 23,532,016 JP
Foodservice Common Shares, which is expected to represent approximately 51.0% of
the JP Foodservice Common Shares outstanding immediately after the Merger. The
ML Investors will receive an aggregate of 8,463,843 JP Foodservice Common
Shares, which is expected to represent approximately 18.3% of the JP Foodservice
Common Shares outstanding immediately after the Merger.
At the Effective Time, each Assumed Option to purchase Rykoff-Sexton Common
Shares and each Assumed Warrant to purchase Rykoff-Sexton Common Shares will be
assumed by JP Foodservice. Each Assumed Option and each Assumed Warrant will be
converted into an option or warrant, as the case may be, to purchase, on the
same terms and conditions as were applicable to such Options (subject to certain
adjustments) and Warrants, an adjusted number of JP Foodservice Common Shares
based on the Exchange Ratio. Based on the Options and the Warrants outstanding
as of June 28, 1997, 2,122,578 JP Foodservice Common Shares will be reserved for
issuance upon the exercise of the Assumed Options and the Assumed Warrants. See
"The Merger Agreement--General--Assumption of Options and Warrants" and
"Warrants."
The Merger Agreement provides that the JP Foodservice Board of Directors,
immediately following the Effective Time, will consist of (i) nine individuals,
including each of the incumbent members of the JP Foodservice Board of Directors
(or their replacements), no fewer than five of whom will be outside directors,
as selected by JP Foodservice prior to the Effective Time, (ii) seven
individuals, two of whom will be individuals designated by MLCP, one of whom
will be Mr. Van Stekelenburg and four of whom will be current incumbents of the
Rykoff-Sexton
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Board of Directors who are not employees of Rykoff-Sexton or its subsidiaries or
affiliated with MLCP and (iii) one additional person to be designated by the
Chairman of JP Foodservice following the Merger.
Following the Merger, James L. Miller will continue to serve as Chairman
and Chief Executive Officer of JP Foodservice. As of the Effective Time, Mr. Van
Stekelenburg, the current Chairman and Chief Executive Officer of Rykoff-Sexton,
will become Vice Chairman and President of JP Foodservice. See "Management of JP
Foodservice After the Merger."
Background of the Merger
Foodservice Industry Trends
Companies in the U.S. foodservice distribution industry purchase, store,
market and transport food products, paper products and other supplies and food-
related items to establishments that prepare and serve meals to be eaten away
from home. Net sales for the industry were approximately $134 billion in 1996.
For the three-year period ended 1996, foodservice distribution sales increased
at a compounded annual rate of 2.4%, which was comparable to the rate of
increase in the U.S. gross national product during the same period.
The foodservice distribution industry is extremely fragmented, with over
3,000 companies in operation in 1996. Nevertheless, over the last 20 years, the
industry has experienced substantial consolidation as larger distributors have
acquired small and regional distributors. The resulting consolidation has
permitted large foodservice distributors to benefit from lower-cost distribution
facilities resulting from various economies of scale, increased net purchasing
power, more efficient delivery systems, more efficient use of personnel and
other overhead savings. Larger distributors also have been able to take
advantage of more sophisticated management techniques and the development of
management information systems specifically designed to enhance customer service
and increase operating efficiency.
JP Foodservice and Rykoff-Sexton management anticipate further
consolidation in the industry as more companies seek to obtain the efficiencies
of operating larger distribution centers, maintaining modern fleets of delivery
vehicles and developing the sophisticated information systems required for cost-
efficient operations. JP Foodservice and Rykoff-Sexton believe that large, well-
capitalized broadline distributors generally will benefit from continuing
industry consolidation as well as from certain forecasted demographic and
economic trends that are expected to increase expenditures on meals eaten away
from home. These trends include an increasing number of two wage-earner families
who eat meals away from home, the increasing availability of convenient take-out
meals and restaurant home delivery services and the increasing affluence of the
"baby boomer" segment of the
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population. In addition, forecasted expansion of many chain restaurants is
anticipated to generate additional sales volume for large regional or national
broadline distributors that can satisfy the product and delivery requirements of
this customer segment.
JP Foodservice has supplemented its internal expansion 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 of fiscal 1997, JP Foodservice extended the scope of its
distribution network into the Western region of the United States through its
acquisition of Valley Industries, Inc., a broadline distributor located in Las
Vegas, Nevada. Also in the first quarter of fiscal 1997, pursuant to JP
Foodservice's strategy to increase penetration in its existing service areas, JP
Foodservice acquired Arrow Paper and Supply Co., Inc., a broadline distributor
located in Connecticut serving the New England, New York, New Jersey and
Pennsylvania markets. In the second quarter of fiscal 1997, 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 of fiscal 1997, 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. See
"Description of JP Foodservice."
Over the past two years, Rykoff-Sexton also has pursued strategic business
combinations as part of its effort to sharpen its strategic focus, improve
operational efficiency and position itself for sustained, profitable growth. In
the fourth quarter of fiscal 1995, Rykoff-Sexton extended the scope of its
distribution network in the Mid-Atlantic region through the acquisition of
substantially all of the assets of Continental Foods, Inc., a broadline
distributor located in Maryland serving the metropolitan Baltimore and
Washington, D.C. markets. In the first quarter of fiscal 1996, Rykoff-Sexton
increased its penetration of the Midwestern region through the acquisition of
the Specialty Foods Division of Olfisco, Inc., a Minneapolis-based subsidiary of
Noon Hour Food Products. In the second quarter of fiscal 1996, Rykoff-Sexton
enhanced its distribution network throughout the State of Nevada when it
acquired substantially all of the assets of H&O Foods, Inc., a regional, full-
line institutional foodservice distributor. Effective May 17, 1996, Rykoff-
Sexton completed the US Foodservice Acquisition, which significantly expanded
the geographic coverage of its distribution network in the Southeastern,
Southwestern and Mid-Atlantic regions. The US Foodservice Acquisition also
enabled Rykoff-Sexton to enhance its product mix and to decentralize the
management of the Rykoff-Sexton distribution centers. Prior to the US
Foodservice Acquisition, US Foodservice had enhanced its distribution network in
the Southeastern region through the 1995 acquisitions of certain divisions of
Clark Foodservice, Inc. in Florida, the assets of Fort Myers Meat & Seafood
Company, Inc., in Fort Myers,
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Florida, the assets of City Provisioners, Inc., in Ormond Beach, Florida and the
assets of Goode Foodservice, Inc. in Georgia. See "Description of Rykoff-
Sexton."
Chronology of Events Leading up to the Merger
On April 1, 1997, members of senior management of JP Foodservice and
Rykoff-Sexton met to discuss trends in the foodservice distribution industry,
certain strategic issues in the context of a possible business combination
between the two companies and procedures for the commencement of due diligence
investigations and the exchange of financial information.
On April 2, 1997, JP Foodservice and Rykoff-Sexton each agreed to provide
the other company with certain confidential information for use in evaluating a
possible business combination. On the same date, JP Foodservice signed a
confidentiality agreement pursuant to which JP Foodservice and its affiliates
and representatives agreed to maintain as confidential certain information
received from Rykoff-Sexton in connection with such an evaluation and Rykoff-
Sexton signed a substantially identical confidentiality agreement pursuant to
which Rykoff-Sexton and its affiliates and representatives agreed to maintain as
confidential certain information received from JP Foodservice for the same
purpose. In addition, JP Foodservice and Rykoff-Sexton each agreed that, for a
period of one year, neither it nor its affiliates or representatives would
acquire the other company's voting securities, engage in the solicitation of
proxies with respect to the other company's voting securities or form any
"group" within the meaning of the Exchange Act relating to the other company's
voting securities without the other company's written consent. Following
execution of the confidentiality agreements, JP Foodservice and Rykoff-Sexton
exchanged information regarding their respective companies and businesses and
initiated their financial, business and legal due diligence review.
On April 7, 1997, members of senior management of JP Foodservice and
Rykoff-Sexton and their respective financial advisors met to discuss a possible
business combination and to exchange and review financial information and other
due diligence materials concerning the two companies. Members of JP Foodservice
management attending the meeting included James L. Miller, Chairman, President
and Chief Executive Officer, and Lewis Hay, III, Senior Vice President and Chief
Financial Officer. Members of Rykoff-Sexton management attending the meeting
included Mark Van Stekelenburg, Chairman and Chief Executive Officer, Frank
Bevevino, former President, David McAnally, Senior Vice President and Chief
Financial Officer, and Richard J. Martin, Senior Vice President-Corporate
Development.
On April 17, 1997, the financial advisors to JP Foodservice and Rykoff-
Sexton met to discuss financial information about the two companies.
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On April 24, 1997, the JP Foodservice Board of Directors met in a regularly
scheduled meeting at which JP Foodservice's senior management advised the
directors of the status of discussions with Rykoff-Sexton and provided the
directors with information regarding Rykoff-Sexton and its business.
On April 29, 1997, the financial advisors to JP Foodservice and Rykoff-
Sexton met to discuss the financial information provided and the positions of
the two companies regarding the terms of a possible business combination.
During the first week of May 1997, members of senior management of JP
Foodservice and Rykoff-Sexton exchanged additional detailed financial
information and, together with their respective financial advisors, discussed
due diligence matters.
On May 7, 1997, the Rykoff-Sexton Board of Directors met in a regularly
scheduled meeting at which Rykoff-Sexton's senior management and financial
advisors advised the directors of the status of discussions with JP Foodservice
and provided the directors with information regarding JP Foodservice and its
business, and related financial data.
On May 8 and May 12, 1997, Mr. Miller and Mr. Hay met with certain members
of the Rykoff-Sexton Board of Directors for general discussions regarding a
possible business combination.
During the period from late May 1997 to June 17, 1997, members of senior
management of JP Foodservice and Rykoff-Sexton, and their financial and legal
advisors, held discussions and meetings pertaining to the terms of the proposed
business combination, general business issues and the management of the combined
company, and conducted due diligence investigations.
On June 5, 1997, the Rykoff-Sexton Board of Directors met in a special
meeting at which Rykoff-Sexton's senior management reviewed with the Board the
status of discussions with JP Foodservice in the context of Rykoff-Sexton's
strategic plan and developments in the foodservice industry.
On June 17, 1997, Messrs. Miller and Van Stekelenburg confirmed that they
would be prepared to recommend to their respective Boards of Directors a tax-
free, all stock business combination involving conversion of the outstanding
Rykoff-Sexton Common Shares into the right to receive JP Foodservice Common
Shares at the Exchange Ratio, and the other material terms of the transaction as
described herein, subject to negotiation of definitive transaction documents and
approval of the combination by the JP Foodservice Board and the Rykoff-Sexton
Board.
On June 18, 1997, the JP Foodservice Board of Directors held a special
meeting with members of JP Foodservice's senior management to review the terms
of the proposed transaction. The JP Foodservice Board authorized the members of
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senior management to proceed to negotiate the terms of the definitive
transaction documents. On the same date, the Rykoff-Sexton Board of Directors
held a special meeting with members of Rykoff-Sexton's senior management to
review the terms of the proposed transaction. The Rykoff-Sexton Board of
Directors authorized the members of senior management to proceed to negotiate
the terms of the definitive transaction documents.
During the ten days following June 19, 1997, members of senior management
of JP Foodservice and Rykoff-Sexton, together with their financial and legal
advisors, negotiated the terms of the Merger Agreement and related transaction
documents, including the Stock Option Agreements and the Support Agreement.
During this period, JP Foodservice and its advisors also negotiated the terms of
the Support Agreement with representatives of the ML Entities and their
advisors. The parties continued during this time to exchange financial, business
and legal due diligence materials and conducted additional due diligence.
On June 26, 1997, members of senior management of JP Foodservice and their
counsel, together with Mr. Van Stekelenburg, met separately with representatives
of the ML Entities and their counsel to discuss matters relating to the Support
Agreement and the proposed transaction.
On June 27, 1997, the JP Foodservice Board of Directors met in a regularly
scheduled meeting, at which JP Foodservice's senior management advised the
directors of the status of JP Foodservice's due diligence review and the
negotiations relating to the definitive transaction documents.
On June 28, 1997, members of senior management of JP Foodservice and
Rykoff-Sexton held a meeting to discuss outstanding issues relating to the
terms of the proposed Merger Agreement and related transaction documents.
On June 29, 1997, the Rykoff-Sexton Board of Directors met in a special
meeting. At this meeting, members of Rykoff-Sexton's senior management, together
with counsel to Rykoff-Sexton, Wasserstein Perella and Merrill Lynch, reviewed
with the Rykoff-Sexton Board, among other things, the background of the proposed
Merger, the financial and legal aspects of the transaction, the proposed
composition of the Board of Directors and management of the combined entity, the
terms of the Merger Agreement, the Stock Option Agreements, the Support
Agreement and related transaction documents, and the other matters described
below under "--Recommendation of the Rykoff-Sexton Board of Directors; Reasons
for the Merger." Part of the meeting was attended by Mr. Miller, who, together
with Mr. Van Stekelenburg, made a presentation to the Rykoff-Sexton Board
regarding the management of the combined entity. Members of the Rykoff-Sexton
Board discussed this and other issues during the meeting and during a recess
that followed the presentation. David M. Abramson, Senior Vice President,
General Counsel and Secretary of JP Foodservice, and Mr. Miller met separately
with the
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representatives of the ML Entities on the Rykoff-Sexton Board and their counsel
and Mr. Van Stekelenburg to discuss matters relating to the Support Agreement
and the Standstill Agreement. Following further discussions between
representatives of JP Foodservice and the Rykoff-Sexton Board during the recess,
the Board reconvened. Wasserstein Perella and Merrill Lynch each delivered their
oral opinion to the Rykoff-Sexton Board, which oral opinions were subsequently
confirmed in written opinions dated June 30, 1997, to the effect that, as of
such date, the Exchange Ratio was fair from a financial point of view to the
holders of Rykoff-Sexton Common Shares, other than JP Foodservice and its
affiliates. After discussion and consideration, the Rykoff-Sexton Board
unanimously determined that the Merger and the other transactions contemplated
by the Merger Agreement are fair to and in the best interests of the
stockholders of Rykoff-Sexton, unanimously approved the Merger Agreement and
recommended that the Merger Agreement be submitted for adoption by the
stockholders of Rykoff-Sexton.
On June 29, 1997, the JP Foodservice Board met in a special meeting. At
this meeting, members of JP Foodservice's senior management, together with JP
Foodservice's legal and financial advisors, reviewed with the Board, among other
things, the financial and legal aspects of the transaction, the terms of the
Merger Agreement, the Stock Option Agreements, the Support Agreement and related
transaction documents, and the other matters described below under "--
Recommendation of the JP Foodservice Board of Directors; Reasons for the
Merger." Goldman Sachs and Smith Barney each delivered its oral opinion to the
Board of Directors, which oral opinions were subsequently confirmed by delivery
of written opinions dated June 30, 1997, to the effect, that as of such date and
based upon and subject to certain matters stated therein and such other matters
as Goldman Sachs and Smith Barney considered relevant, the Exchange Ratio was
fair (in the case of Smith Barney, from a financial point of view) to JP
Foodservice. See "--Opinions of Financial Advisors to JP Foodservice." After
discussion and consideration, the JP Foodservice Board unanimously determined
that the Merger Agreement and the transactions contemplated thereby are in the
best interests of JP Foodservice and its stockholders, unanimously approved the
Merger Agreement and the Merger and the issuance of JP Foodservice Common Shares
in connection with the Merger and unanimously recommended that the issuance of
JP Foodservice Common Shares in connection with the Merger be submitted for
approval by the stockholders of JP Foodservice. In addition, on June 29, by
unanimous written consent, the Board of Directors of Merger Sub approved and
adopted the Merger Agreement, and JP Foodservice, as the sole stockholder of
Merger Sub, approved and adopted the Merger Agreement.
On June 30, 1997, the Merger Agreement was executed and delivered by JP
Foodservice, Rykoff-Sexton and Merger Sub, the Stock Option Agreements were
executed and delivered by JP Foodservice and Rykoff-Sexton, and the Support
Agreement was executed and delivered by JP Foodservice and the ML Entities and
acknowledged by Rykoff-Sexton.
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Recommendation of the JP Foodservice Board of Directors; Reasons for the Merger
The JP Foodservice Board of Directors believes that the Merger Agreement
and the transactions contemplated thereby are in the best interests of JP
Foodservice and its stockholders. Accordingly, the JP Foodservice Board of
Directors has unanimously approved the Merger Agreement and the Merger and the
issuance of the JP Foodservice Common Shares in connection with the Merger and
unanimously recommends that the JP Foodservice stockholders vote "for" the
approval of the issuance of JP Foodservice Common Shares in connection with the
Merger.
In evaluating a business combination with Rykoff-Sexton, the JP Foodservice
Board of Directors reviewed presentations from, and discussed the terms and
conditions of the Merger Agreement and the Merger with, senior executive
officers of JP Foodservice and JP Foodservice's legal and financial advisors.
The JP Foodservice Board of Directors considered a number of factors, including,
in addition to the factors referred to in "--Background of the Merger" and
"Management of JP Foodservice After the Merger," the factors listed below, in
reaching its determination to approve the Merger Agreement and the transactions
contemplated thereby. In view of the wide variety of factors considered by the
JP Foodservice Board in connection with its evaluation of the Merger, the JP
Foodservice Board did not consider it practicable to, nor did it attempt to,
quantify or otherwise assign relative weights to the specific factors it
considered in reaching its determination. In addition, individual members of
the JP Foodservice Board may have given different weights to different factors.
(i) Strategic Benefits in Consolidating Industry. The JP Foodservice
Board considered management's view of recent trends in the U.S. foodservice
industry, particularly the trend toward consolidation, and management's
view that the Merger with Rykoff-Sexton would further JP Foodservice's
strategic objective of supplementing internal growth with a program of
acquisitions and business combinations to increase JP Foodservice's
existing market presence and expand its operations into new markets. The JP
Foodservice Board took into account that the combination of JP Foodservice
and Rykoff-Sexton would create the second largest broadline foodservice
distributor in the United States based on projected pro forma fiscal 1997
net sales of over $5 billion. The JP Foodservice Board considered that the
combined enterprise would have a nationwide distribution network through
which it could offer its products and services across a broad geographic
area encompassing more than 85% of the U.S. population. The JP Foodservice
Board noted the complementary nature of the businesses of the two
companies, with Rykoff-Sexton conducting large-scale distribution
operations in the Southeastern, Southwestern and Western
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regions of the United States, in which JP Foodservice has had a
significantly smaller presence. The JP Foodservice Board considered
management's view that the establishment of nationwide operations would
give the combined entity the ability to leverage its existing regional
relationships with chain customers on a national basis, would strengthen
its regional market positions and would enable it to compete more
effectively with traditional national broadline foodservice distribution
competitors, such as SYSCO Corp. and Alliant Foodservice, Inc. The JP
Foodservice Board considered the potential of the combined entity to
increase sales by offering complementary product lines and services to
customers now only partially served by JP Foodservice and/or Rykoff-Sexton
and the potential positive impact on gross margins of the combined entity
that would result from increased percentages of sales attributable to sales
of imported and specialty items and private label products in the Rykoff-
Sexton product line. The JP Foodservice Board also considered the economies
of scale, cost savings and synergies that management of JP Foodservice
believes over time may result from the combination of JP Foodservice and
Rykoff-Sexton, as discussed under "--Potential Cost Savings and Operating
Synergies."
(ii) Information Concerning JP Foodservice and Rykoff-Sexton. In
evaluating the terms of the Merger, the JP Foodservice Board of Directors
considered, among other things, information (including the results of its
due diligence review of Rykoff-Sexton's business) with respect to the
financial condition, results of operations, businesses and prospects of JP
Foodservice and Rykoff-Sexton, and current industry, economic and market
conditions. In evaluating Rykoff-Sexton's prospects, the JP Foodservice
Board considered, among other things, the strengths of Rykoff-Sexton's food
distribution and related businesses, including particularly the fact that
Rykoff-Sexton, directly and through US Foodservice and its other
subsidiaries, (i) operates in 32 service areas throughout the United States
and has a significant presence in many key metropolitan areas, (ii) has
strong nationwide distribution capabilities, which enable it to offer more
than 40,000 products to over 100,000 customers through 32 distribution
centers, (iii) generates approximately 65% of its sales volume from sales
to street accounts, which generally have higher gross margins than sales to
chain accounts, (iv) offers a wide array of high-quality proprietary
private and signature brand products, which generally have higher gross
margins than national brand products of comparable quality, and (v) offers,
as part of its value-added services, design and engineering services for
diverse types of foodservice operations through its contract/design group.
The JP Foodservice Board also took into account the quality, experience and
breadth of Rykoff-Sexton's senior management team, distribution center
management and sales force. In its evaluation, the JP Foodservice Board
considered its management's view that Rykoff-Sexton's management has
successfully integrated a number of significant regional acquisitions and
that, since
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acquiring US Foodservice in May 1996, Rykoff-Sexton has realized
significant cost savings and synergies.
(iii) Integration of Rykoff-Sexton. The JP Foodservice Board
considered the record of JP Foodservice in integrating and realizing the
benefits of prior acquisitions and the potential issues, including
operational, marketing, administrative, financial and personnel issues, in
integrating Rykoff-Sexton and realizing the benefits of the Merger.
(iv) Opinions of Goldman Sachs and Smith Barney. The JP Foodservice
Board of Directors considered the opinions and financial analysis of
Goldman Sachs and Smith Barney described below under "--Opinions of
Financial Advisors to JP Foodservice."
(v) Terms and Conditions of the Merger Agreement. The JP
Foodservice Board of Directors considered the terms and conditions of the
Merger Agreement. In its review, the JP Foodservice Board noted that the
Exchange Ratio represented a premium to the market price of Rykoff-Sexton
Common Shares as of the last trading day prior to public announcement of
execution of the Merger Agreement, the fixed Exchange Ratio provides
certainty as to the number of JP Foodservice Common Shares to be issued in
the Merger, and the Merger is intended to qualify as a reorganization
within the meaning of Section 368(a) of the Code and for pooling of
interests accounting treatment. The JP Foodservice Board took into account
the provisions of the Merger Agreement that would require JP Foodservice to
pay to Rykoff-Sexton a Termination Fee of $30 million if the Merger
Agreement is terminated and the Merger is abandoned in certain
circumstances and the effects of the change of control payments,
accelerated vesting of certain Rykoff-Sexton employee stock awards and the
rights of holders of the Rykoff-Sexton Public Notes in connection with the
Merger. The JP Foodservice Board considered the terms of the Stock Option
Agreements, the Support Agreement and related transaction documents and the
fact that JP Foodservice would succeed to Rykoff-Sexton's rights and
obligations under agreements to which Rykoff-Sexton is a party, including
the Standstill Agreement and the Registration Rights Agreement. The JP
Foodservice Board also considered the proposed arrangements with respect to
the current directors and executive officers of JP Foodservice and Rykoff-
Sexton, as described below under "--Interests of Certain Persons in the
Merger" and "Management of JP Foodservice After the Merger."
(vi) Effect on Public Market for JP Foodservice Common Shares. The JP
Foodservice Board of Directors took into account the effects of the
issuance of additional JP Foodservice Common Shares in connection with the
Merger. Among such effects, the JP Foodservice Board considered that the
issuance of JP Foodservice Common Shares would result in a more liquid
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public market for such shares, which would facilitate JP Foodservice's
ability to consummate future acquisitions by offering potential acquisition
targets an interest in JP Foodservice Common Shares.
Recommendation of the Rykoff-Sexton Board of Directors; Reasons for the Merger
The Board of Directors of Rykoff-Sexton has unanimously determined that the
Merger and the other transactions contemplated by the Merger Agreement are fair
to and in the best interests of the stockholders of Rykoff-Sexton, has approved
the Merger Agreement and recommends that Rykoff-Sexton stockholders vote "for"
adoption of the Merger Agreement.
In reaching its determination to approve the Merger Agreement and the
transactions contemplated thereby, the Rykoff-Sexton Board of Directors
considered a number of factors, including, in addition to the factors referred
to in "--Background of the Merger" and "Management of JP Foodservice After the
Merger," the factors listed below. In view of the wide variety of factors
considered in connection with its evaluation of the Merger, the Rykoff-Sexton
Board of Directors did not consider it practicable to, nor did it attempt to,
quantify or otherwise assign relative weights to the specific factors it
considered in reaching its determination. In addition, individual members of
the Rykoff-Sexton Board may have given different weights to different factors.
(i) Management's Recommendation. The Rykoff-Sexton Board of Directors
reviewed presentations from, and discussed the terms and conditions of the
Merger Agreement and the Merger with, senior executive officers of Rykoff-
Sexton, representatives of Rykoff-Sexton's legal counsel and representatives of
Rykoff-Sexton's financial advisors. The Rykoff-Sexton Board considered
management's view of recent trends in the United States foodservice industry. In
particular, the Rykoff-Sexton Board of Directors considered management's view
that a combination of Rykoff-Sexton with JP Foodservice, the fifth largest
broadline food distribution company in the United States, would create the
second largest U.S. foodservice distribution company and a strong competitor in
the foodservice distribution industry, with increased presence in many of
Rykoff-Sexton's existing service areas. In making its determination,
the Rykoff-Sexton Board also considered the view expressed by Rykoff-Sexton's
management that the Merger with JP Foodservice would further Rykoff-Sexton's
strategic objectives. Rykoff-Sexton's management's view is based on its belief
that the pattern of consolidation in the foodservice industry will continue, and
that sales growth and expansion in existing and into new markets through
acquisitions will be essential to compete as a low-cost, high-quality national
distributor in the foodservice industry. The Rykoff-Sexton Board also considered
management's view as to the importance of a transaction with
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JP Foodservice in creating a larger organization in order to maintain
historical growth rates in an increasingly consolidating industry and
competitive environment.
(ii) JP Foodservice's Business, Condition, Prospects and Management.
In evaluating the terms of the Merger, the Rykoff-Sexton Board of Directors
considered information with respect to the financial condition, results of
operations and businesses of JP Foodservice, on both a historical and
prospective basis, and JP Foodservice's success in increasing sales and
profitability and implementing strategic acquisitions over the last several
years. The Rykoff-Sexton Board of Directors also considered the quality,
experience and breadth of JP Foodservice's senior management team and the
growth-oriented corporate culture of JP Foodservice's management. In
evaluating JP Foodservice's prospects, the Rykoff-Sexton Board of Directors
considered, among other things, the strengths of JP Foodservice's food
distribution businesses, including its customer relationships, and the
challenges facing the foodservice distribution business, including
competition from traditional broadline foodservice distribution competitors
(such as SYSCO Corp. and Alliant Foodservice, Inc.) and specialized system
distributors (such as Prosource, Inc. and AmeriServ Food Company).
(iii) Strategic Benefits. In reviewing the Merger and JP
Foodservice's assets and operations, the Rykoff-Sexton Board of Directors
considered Rykoff-Sexton's strategic plan as an independent company and the
belief that Rykoff-Sexton's ability to pursue its plan would be enhanced by
the Merger. In particular, Rykoff-Sexton's Board of Directors reviewed the
complementary nature of the businesses of the two companies, the potential
of the combined entity to increase sales by offering complementary product
lines and services to customers now only partially served by Rykoff-Sexton
and/or JP Foodservice, the economies of scale, cost savings and synergies
that management of Rykoff-Sexton believes over time may result from the
combination of Rykoff-Sexton and JP Foodservice, as discussed below under
"--Potential Cost Savings and Operating Synergies," and the availability of
experienced management to address the challenges associated with
successfully integrating the businesses of the two corporations. In
particular, the Rykoff-Sexton Board of Directors considered the role of
Rykoff-Sexton management in its recent acquisition history, focusing on the
successful integration of a number of significant regional foodservice
distributors and the significant cost savings and operating synergies that
have been realized since the consummation of the US Foodservice Acquisition
in May 1996.
(iv) Terms and Conditions of the Merger Agreement. The Rykoff-Sexton
Board of Directors considered the terms and conditions of the Merger
Agreement (including the Exchange Ratio), together with the terms of the
Stock Options, the Support Agreement, the proposed amendment of the Rykoff-
Sexton Rights Plan (as defined herein) and the JP/Van Stekelenburg
Employment Agreement (as defined herein).
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(v) Tax and Accounting Treatment. The Rykoff-Sexton Board of Directors
also approved the transaction relying upon its belief that the Merger would be
accomplished on a tax-free basis for federal income tax purposes (other than
cash received in lieu of fractional shares) and accounted for as a pooling of
interests transaction.
(vi) Opinions of Merrill Lynch and Wasserstein Perella. The Rykoff-
Sexton Board of Directors considered as favorable to its determination the oral
opinions delivered by each of Merrill Lynch and Wasserstein Perella on June 29,
1997, each of which was subsequently confirmed in a written opinion to the
Rykoff-Sexton Board of Directors dated June 30, 1997, to the effect that, as of
such date, the Exchange Ratio was fair from a financial point of view to the
holders of Rykoff-Sexton Common Shares (other than JP Foodservice and its
affiliates). The Rykoff-Sexton Board of Directors reviewed a financial
comparison of Rykoff-Sexton and JP Foodservice, studied the potential impact of
the Merger on the balance sheet and earnings per share of Rykoff-Sexton, and
analyzed certain historical and estimated financial information (including
sales, net income, earnings before interest, taxes, depreciation and
amortization ("EBITDA") and earnings before interest and taxes ("EBIT")) for
Rykoff-Sexton, JP Foodservice and the pro forma combined entity resulting from
the Merger and the relative contributions of Rykoff-Sexton and JP Foodservice to
the combined entity. The Rykoff-Sexton Board also considered the expectation
that, based upon the Exchange Ratio, the Merger would be accretive to holders of
Rykoff-Sexton Common Shares on an earnings per share basis and that holders of
Rykoff-Sexton Common Shares would receive a premium over market for their shares
in connection with the Merger. See "--Opinion of Financial Advisors to Rykoff-
Sexton." Copies of Merrill Lynch's and Wasserstein Perella's written opinions to
the Rykoff-Sexton Board of Directors are attached as Appendix D and Appendix E,
respectively, to this Joint Proxy Statement/Prospectus and are incorporated
herein by reference.
(vii) Financial Flexibility; Equity Markets. The Rykoff-Sexton Board of
Directors considered the fact that the combined company will have improved
financial flexibility and a more attractive currency with which to pursue future
strategic acquisitions. Specifically, the Board of Directors considered the fact
that following the Merger, JP Foodservice could be expected to have greater
borrowing capacity than Rykoff-Sexton would have on a stand-alone basis, the
likelihood that the debt of the combined company would be rated at a level above
the current rating of Rykoff-Sexton's indebtedness, and the greater public float
that would be available to Rykoff-Sexton stockholders in the form of JP
Foodservice Common Shares compared to the current public float of Rykoff-Sexton
Common Shares. The Board also considered the fact that the combined entity
should attract a stronger equity analyst following in the public markets
following the Merger due to the combined company's size and enhanced position in
the foodservice industry.
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Potential Cost Savings and Operating Synergies
Management of JP Foodservice and Rykoff-Sexton have estimated that the
combination of JP Foodservice and Rykoff-Sexton could create opportunities for
operating cost savings of approximately $12 million during the first twelve-
month period following the Effective Time, $18 million during the second twelve-
month period following the Effective Time and $25 million annually thereafter.
These cost savings are expected to be realized primarily through the
restructuring of operations. See "Unaudited Pro Forma Combining Consolidated
Financial Statements for the Merger." In addition, in connection with the
Merger, JP Foodservice proposes to enter into the New Credit Facility, which is
expected to provide for lower borrowing costs than the overall borrowing costs
available under the Existing Bank Credit Facilities. See "Description of
Proposed New Financing Arrangements--New Credit Facility." Management estimates
that the New Credit Facility will provide annual interest cost savings of
approximately $5 million. The estimates of cost savings through the
restructuring of operations were based on preliminary evaluations of
opportunities for the combined foodservice businesses of JP Foodservice and
Rykoff-Sexton to benefit from operating a larger business with cost savings and
other synergies associated with the operation of larger-scale distribution
facilities that benefit from various economies of scale. Such economies of scale
result from increased net purchasing power, more efficient delivery systems,
more efficient use of personnel and reduction of overhead costs through
elimination of redundant management and overhead expenses. Although no
assurances can be given as to the amount, nature and timing of such synergies,
the managements of JP Foodservice and Rykoff-Sexton expect that the bulk of
these cost savings should be derived from the following opportunities:
(i) enhanced purchasing leverage (resulting in a lower cost of goods),
selection among the most advantageous purchasing programs currently in
effect at JP Foodservice and Rykoff-Sexton, and more favorable sales and
marketing allowances from suppliers resulting from the increased purchasing
power of the combined entity;
(ii) opportunities to achieve operating efficiencies and synergies,
including (a) the consolidation of overlapping distribution centers and
related management teams, and reduction of redundant facility costs, and
(b) rationalization of routing logistics for facilities with overlapping
service areas;
(iii) opportunities to increase the sales volume and related earnings
for self-manufactured items through JP Foodservice's sales force;
(iv) the combination of certain management and administrative functions
of JP Foodservice and Rykoff-Sexton, and the elimination of costs
associated with redundant departments and functions, including (a) cost
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efficiencies in information system operations as a result of the
consolidation of such operations and related economies of scale, (b) cost
savings from integrated, combined purchasing of equipment and miscellaneous
supplies, labels and packaging and (c) rationalization and consolidation of
employee benefit plans, including combined purchasing of insurance;
(v) opportunities to lower borrowing costs by refinancing certain of
the outstanding indebtedness of Rykoff-Sexton, which accrues interest at
higher rates than are expected to be charged on borrowings by the combined
entity under the New Credit Facility or other financing sources; and
(vi) the capacity of the combined entity to increase sales by expanding
existing regional relationships with chain customers on a national scale
and by offering additional product lines and services to customers now only
partially served by JP Foodservice and/or Rykoff-Sexton, including, in
particular, (a) opportunities for JP Foodservice to offer equipment and
supplies, contract and design services and specialty and imported products
to additional customers through JP Foodservice's sales force and (b)
opportunities for Rykoff-Sexton to offer in certain markets JP
Foodservice's "center-of-the-plate" (or entree) selections and commodity
products.
The foregoing cost savings estimates were developed jointly by JP
Foodservice and Rykoff-Sexton solely for purposes of evaluating the Merger, do
not include non-recurring adjustments that will be recorded in conjunction with
the Merger, and should not be relied upon as an estimate of actual cost savings
that may be achieved, which may vary materially from such estimates. These
estimates are based upon assumptions that are inherently uncertain, though
considered reasonable by JP Foodservice and Rykoff-Sexton, and are subject to
significant business, economic and competitive uncertainties which are difficult
to predict and often beyond the control of management.
Opinions of Financial Advisors to JP Foodservice
JP Foodservice retained Goldman Sachs and Smith Barney to act as financial
advisors to JP Foodservice in connection with the proposed Merger. On June 29,
1997, at a meeting of the Board of Directors of JP Foodservice held to evaluate
the proposed Merger, Goldman Sachs and Smith Barney each delivered an oral
opinion (which oral opinions were subsequently confirmed by delivery of written
opinions dated June 30, 1997, the date of execution of the Merger Agreement) to
the Board of Directors of JP Foodservice to the effect that, as of such date and
based upon and subject to certain matters stated therein and such other matters
as Goldman Sachs and Smith Barney considered relevant, the Exchange Ratio was
fair (in the case of Smith Barney, from a financial point of view) to JP
Foodservice.
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In arriving at their respective opinions, each of Goldman Sachs and Smith
Barney reviewed the Merger Agreement and held discussions with certain senior
officers, directors and other representatives and advisors of JP Foodservice and
certain senior officers and other representatives and advisors of Rykoff-Sexton
concerning the businesses, operations and prospects of JP Foodservice and
Rykoff-Sexton. Each of Goldman Sachs and Smith Barney examined certain publicly
available business and financial information relating to JP Foodservice and
Rykoff-Sexton as well as certain financial forecasts and other information and
data for JP Foodservice and Rykoff-Sexton which were provided to or otherwise
discussed with Goldman Sachs and Smith Barney by the respective managements of
JP Foodservice and Rykoff-Sexton, including information relating to certain
strategic implications and operational benefits anticipated to result from the
Merger. Each of Goldman Sachs and Smith Barney reviewed the financial terms of
the Merger as set forth in the Merger Agreement in relation to, among other
things: current and historical market prices and trading volumes of JP
Foodservice Common Shares and Rykoff-Sexton Common Shares; the historical and
projected earnings and other operating data of JP Foodservice and Rykoff-Sexton;
and the capitalization and financial condition of JP Foodservice and Rykoff-
Sexton. Each of Goldman Sachs and Smith Barney also considered, to the extent
publicly available, the financial terms of certain other similar transactions
recently effected which Goldman Sachs and Smith Barney considered relevant in
evaluating the Merger and analyzed certain financial, stock market and other
publicly available information relating to the businesses of other companies
whose operations Goldman Sachs and Smith Barney considered relevant in
evaluating those of JP Foodservice and Rykoff-Sexton. Each of Goldman Sachs and
Smith Barney also evaluated the potential pro forma financial impact of the
Merger on JP Foodservice. In addition to the foregoing, each of Goldman Sachs
and Smith Barney conducted such other analyses and examinations and considered
such other financial, economic and market criteria as Goldman Sachs and Smith
Barney deemed appropriate in arriving at their respective opinions. Each of
Goldman Sachs and Smith Barney noted that their respective opinions were
necessarily based upon information available, and financial, stock market and
other conditions and circumstances existing and disclosed, to Goldman Sachs and
Smith Barney as of the date of such opinions.
In rendering their respective opinions, each of Goldman Sachs and Smith
Barney assumed and relied, without independent verification, upon the accuracy
and completeness of all financial and other information and data publicly
available or furnished to or otherwise reviewed by or discussed with Goldman
Sachs and Smith Barney. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with
Goldman Sachs and Smith Barney, the managements of JP Foodservice and Rykoff-
Sexton advised each of Goldman Sachs and Smith Barney that such forecasts and
other information and data were reasonably prepared reflecting the best
currently available estimates and judgments of the respective managements of JP
Foodservice and Rykoff-Sexton as to the future financial performance of JP
Foodservice and Rykoff-Sexton and the
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strategic implications and operational benefits anticipated to result from the
Merger. Each of Goldman Sachs and Smith Barney assumed, with the consent of the
Board of Directors of JP Foodservice, that the Merger will be treated as a
pooling of interests in accordance with generally accepted accounting principles
and as a tax-free reorganization for federal income tax purposes. Goldman Sachs
and Smith Barney also assumed, with the consent of the Board of Directors of JP
Foodservice, that the Merger will not constitute a change of control of JP
Foodservice. The respective opinions of Goldman Sachs and Smith Barney, as set
forth therein, relate to the relative value of JP Foodservice and Rykoff-Sexton.
Neither Goldman Sachs nor Smith Barney expressed any opinion as to what the
value of the JP Foodservice Common Shares actually will be when issued to
Rykoff-Sexton stockholders pursuant to the Merger or the price at which the JP
Foodservice Common Shares will trade subsequent to the Merger. Neither Goldman
Sachs nor Smith Barney made, and neither Goldman Sachs nor Smith Barney was
provided with, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of JP Foodservice or Rykoff-Sexton, nor
did Goldman Sachs or Smith Barney make any physical inspection of the properties
or assets of JP Foodservice or Rykoff-Sexton. Neither Goldman Sachs nor Smith
Barney was requested to consider, and neither the opinion of Goldman Sachs nor
the opinion of Smith Barney addresses, the relative merits of the Merger as
compared to any alternative business strategies that might exist for JP
Foodservice or the effect of any other transaction in which JP Foodservice might
engage. Although each of Goldman Sachs and Smith Barney evaluated the fairness
to JP Foodservice of the Exchange Ratio (in the case of Smith Barney, from a
financial point of view), neither Goldman Sachs nor Smith Barney was asked to
recommend, and neither Goldman Sachs nor Smith Barney recommended, the specific
consideration payable in the Merger, which was determined through negotiation
between JP Foodservice and Rykoff-Sexton. No other limitations were imposed by
JP Foodservice on either Goldman Sachs or Smith Barney with respect to the
investigations made or procedures followed by Goldman Sachs or Smith Barney in
rendering their respective opinions.
The full texts of the written opinions of Goldman Sachs and Smith Barney
dated June 30, 1997, which set forth the assumptions made, matters considered
and limitations on the review undertaken, are attached hereto as Appendix B and
Appendix C, respectively, and should be read carefully in their entirety. The
opinions of Goldman Sachs and Smith Barney are directed to the Board of
Directors of JP Foodservice and relate only to the fairness of the Exchange
Ratio (in the case of Smith Barney, from a financial point of view) to JP
Foodservice, do not address any other aspect of the Merger or related
transactions and do not constitute a recommendation to any stockholder as to how
such stockholder should vote at the JP Foodservice Special Meeting. The summary
of the respective opinions of Goldman Sachs and Smith Barney
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set forth in this Joint Proxy Statement/Prospectus is qualified in its entirety
by reference to the full text of such opinions.
In preparing their respective opinions, each of Goldman Sachs and Smith
Barney separately performed a variety of financial and comparative analyses,
including those described below. The summary of such analyses does not purport
to be a complete description of the analyses underlying the opinion of Goldman
Sachs or the opinion of Smith Barney. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, each of Goldman
Sachs and Smith Barney believes that their respective analyses must be
considered as a whole and that selecting portions of their respective analyses
and factors, without considering all analyses and factors, could create a
misleading or incomplete view of the processes underlying such analyses and
opinions. In their respective analyses, each of Goldman Sachs and Smith Barney
made numerous assumptions with respect to JP Foodservice, Rykoff-Sexton,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of JP
Foodservice and Rykoff-Sexton. The estimates contained in such analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. The respective opinions and
analyses of Goldman Sachs and Smith Barney were only one of many factors
considered by the Board of Directors of JP Foodservice in its evaluation of the
Merger and should not be viewed as determinative of the views of the Board of
Directors or management of JP Foodservice with respect to the Exchange Ratio or
the proposed Merger. Neither JP Foodservice nor Rykoff-Sexton publicly discloses
internal management estimates of the type provided to Goldman Sachs and Smith
Barney in connection with their review of the financial terms of the Merger.
Selected Company Analysis. Using publicly available information, each of
Goldman Sachs and Smith Barney analyzed, among other things, the market values
and trading multiples of Rykoff-Sexton and the following selected publicly
traded companies in the foodservice distribution industries: JP Foodservice;
Performance Food Group Company; and SYSCO Corp. (collectively, the "Selected
Companies"). Goldman Sachs compared equity market values as a multiple of
estimated net income for the fiscal years ending June 30, 1997 and 1998 and
adjusted market values (equity market value, plus total debt, less cash and cash
equivalents) as multiples of latest twelve months (i) sales, (ii) earnings
before interest, taxes, depreciation and amortization ("EBITDA") and (iii)
earnings before interest and
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taxes ("EBIT"). The range of multiples for the Selected Companies for the latest
twelve months was (i) 0.4x to 0.6x sales, (ii) 10.2x to 14.1x EBITDA and (iii)
13.2x to 18.5x EBIT.
Smith Barney compared market values as a multiple of, among other things,
estimated calendar 1998 net income and adjusted market values (equity market
value, plus total debt and the book value of preferred stock, less cash and cash
equivalents) as multiples of, among other things, estimated calendar 1997
revenues, EBITDA and earnings before interest, taxes and amortization ("EBITA").
All multiples were based on closing stock prices as of June 27, 1997. Applying
a range of multiples for the Selected Companies of estimated calendar 1998 net
income and estimated calendar 1997 revenues, EBITDA and EBITA of 16.1x to 19.1x,
0.23x to 0.47x, 8.0x to 10.7x and 10.5x to 12.7x, respectively, to corresponding
financial data for Rykoff-Sexton resulted in an equity reference range for
Rykoff-Sexton of approximately $14.38 to $28.33 per share, as compared to the
equity value implied by the Exchange Ratio of approximately $25.31 per share
based on a closing stock price of JP Foodservice Common Shares on June 27, 1997.
Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, each of Goldman Sachs and Smith Barney analyzed the
purchase price and implied transaction value multiples paid in selected
transactions in the foodservice distribution industry effected, in the case of
Goldman Sachs, from 1984 through 1997 and, in the case of Smith Barney, in 1995
and 1996. The selected transactions analyzed by Goldman Sachs consisted of
(acquiror/target): JP Foodservice/Mazo-Lerch Co.; Performance Food Group/McLane
Food Service; Nash Finch/Super Food Services; JP Foodservice/Squeri Food
Service; JP Foodservice/Arrow Paper Supply & Food Co.; JP Foodservice/Valley
Food Distributors; Rykoff-Sexton/US Foodservice; Rykoff-Sexton/Continental
Foods; Unifax/White Swan; SUPER VALU/Wetterau; Wal-Mart/McLane; Kraft/Three
Branches of PYA; Chase Manhattan Bank/PYA North and Midwest (JP Foodservice):
Management/White Swan; SYSCO Corp./CFS Continental; Management/IU Foodservice;
Marriott Corp./Saga Corp.; ARA Holding Company/ARA Services, Inc.; Staley
Manufacturing/CFS Continental, Inc.; and Kraft Foodservice/Clayton Dubilier &
Rice (collectively, the "Goldman Sachs Selected Transactions"). The selected
transactions analyzed by Smith Barney consisted of (acquiror/target): (i)
transactions announced or effected in 1996: JP Foodservice/Squeri Food Service,
Inc.; JP Foodservice/Arrow Paper and Supply Co., Inc.; JP Foodservice/Valley
Industries, Inc.; and Rykoff-Sexton/US Foodservice Inc. (collectively, the "1996
Transactions"); and (ii) transactions announced or effected in 1995: JP
Foodservice/Foodservice Distribution of Rotelle; Rykoff-Sexton/H&O Foods Inc.;
Shamrock Foods Co./Dairy Maid Foods Corp.; Fresh America Corp./Lone Star
Produce, Inc.; Proficient Acquisition Corp./Proficient Food Company (Flagstar);
Rykoff-Sexton/Olfisco Inc.-Specialty Foods Division; JP Foodservice/Tri-River
Foods Inc.; Performance Food Group Company/Cannon Foodservice, Inc.; US
Foodservice Inc./City Provisioners Inc.; ProSource Distribution Services/Martin-
Brower-
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National Accounts; and Clayton Dubilier & Rice/Kraft Foodservice (collectively,
the "1995 Transactions" and, together with the 1996 Transactions, the "Smith
Barney Selected Transactions"). Each of Goldman Sachs and Smith Barney compared,
among other things, the transaction values in such transactions as multiples of
latest 12 months revenues, EBITDA and EBIT. All multiples for the Goldman Sachs
Selected Transactions and the Smith Barney Selected Transactions were based on
information available at the time of announcement of the applicable transaction.
With respect to the Goldman Sachs Selected Transactions analyzed, Goldman Sachs
focused primarily on the larger acquisitions, such as the acquisition by Clayton
Dubilier & Rice of Kraft Foodservice (0.2x latest twelve months sales) and the
acquisition by Rykoff-Sexton of US Foodservice (0.4x latest twelve months sales,
9.7x latest twelve months EBITDA and 13.4x latest twelve months EBIT). In
general, the comparability of this transaction to many of the Goldman Sachs
Selected Transactions was limited as a result of the smaller sizes and limited
publicly available information on those transactions.
With respect to the Smith Barney Selected Transactions analyzed, Smith
Barney focused primarily on the 1996 Transactions. Applying a range of multiples
(excluding outliers) for the 1996 Transactions of latest 12 months revenue,
EBITDA and EBIT of 0.38x to 0.49x, 8.5x to 10.3x and 9.9x to 13.8x,
respectively, to corresponding financial data for Rykoff-Sexton for fiscal year
1997 resulted in an equity reference range for Rykoff-Sexton of approximately
$19.06 to $29.91 per share, as compared to the equity value implied by the
Exchange Ratio of approximately $25.31 per share based on a closing stock price
of JP Foodservice Common Shares on June 27, 1997.
No company, transaction or business used in the "Selected Company Analysis"
or the "Selected Merger and Acquisition Transactions Analysis" as a comparison
is identical to JP Foodservice, Rykoff-Sexton or the Merger. Accordingly, an
analysis of the results of the foregoing is not entirely mathematical; rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the Selected Companies, Selected
Transactions or the business segment, company or transaction to which they are
being compared.
Contribution Analysis. Goldman Sachs analyzed the respective contributions
of JP Foodservice and Rykoff-Sexton to the estimated revenue, EBITDA, EBIT, net
income and net income plus goodwill of the combined company for fiscal years
1997 through 1999, based on internal estimates of the managements of JP
Foodservice and Rykoff-Sexton, before giving effect to certain cost savings and
other potential synergies anticipated by the managements of JP Foodservice and
Rykoff-Sexton to result from the Merger. This analysis indicated that in fiscal
year 1997, JP Foodservice would contribute approximately 32.7% of revenues,
36.7% of EBITDA, 38.0% of EBIT, 58.7% of net income, and 48.3% of net income
plus goodwill, of the
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combined company; in fiscal year 1998, JP Foodservice would contribute
approximately 35.3% of revenues, 37.7% of EBITDA, 40.6% of EBIT, 56.5% of net
income, and 49.7% of net income plus goodwill, of the combined company; and in
fiscal year 1999, JP Foodservice would contribute approximately 36.0% of
revenues, 36.3% of EBITDA, 38.3% of EBIT, 49.5% of net income, and 58.7% of net
income plus goodwill, of the combined company.
Smith Barney analyzed the respective contributions of JP Foodservice and
Rykoff-Sexton to the estimated revenue, gross profit, EBITDA, EBITA and net
income of the combined company for fiscal years 1997 through 2000, based on
internal estimates of the managements of JP Foodservice and Rykoff-Sexton, both
before and after giving effect to certain cost savings and other potential
synergies anticipated by the managements of JP Foodservice and Rykoff-Sexton to
result from the Merger and after excluding non-recurring charges, with
particular focus on such contributions before giving effect to such cost savings
and other potential synergies. This analysis indicated that before giving effect
to certain cost savings and other potential synergies, in fiscal year 1997, JP
Foodservice would contribute approximately 32.7% of revenues, 29.4% of gross
profit, 36.7% of EBITDA, 38.3% of EBITA and 61.7% of net income, of the combined
company; in fiscal year 1998, JP Foodservice would contribute approximately
35.3% of revenues, 32.0% of gross profit, 37.7% of EBITDA, 38.8% of EBITA and
56.4% of net income, of the combined company; in fiscal year 1999, JP
Foodservice would contribute approximately 36.0% of revenues, 32.9% of gross
profit, 36.3% of EBITDA, 36.9% of EBITA and 49.1% of net income, of the combined
company; and in fiscal year 2000, JP Foodservice would contribute approximately
36.7% of revenues, 33.7% of gross profit, 36.2% of EBITDA, 36.6% of EBITA and
46.2% of net income, of the combined company. Based on the Exchange Ratio,
current stockholders of JP Foodservice and Rykoff-Sexton would own approximately
48.6% and 51.4%, respectively, of the combined company upon consummation of the
Merger, and JP Foodservice and Rykoff-Sexton would constitute approximately
38.6% and 61.4%, respectively, of the adjusted equity value (equity market
value, plus total debt, less cash and cash equivalents) of the combined company.
Discounted Cash Flow Analysis. Each of Goldman Sachs and Smith Barney
performed a discounted cash flow analysis of the projected free cash flow of
Rykoff-Sexton for the fiscal years 1998 through 2002, based on internal
estimates of the management of Rykoff-Sexton. The stand-alone discounted cash
flow analysis of Rykoff-Sexton was determined by (i) adding (x) the net present
value of projected free cash flows over the five-year period from 1998 to 2002
and (y) the present value of Rykoff-Sexton's estimated terminal value in year
2002 and (ii) subtracting the current net debt of Rykoff-Sexton. The range of
estimated terminal values for Rykoff-Sexton at the end of the five-year period
was calculated by applying terminal value multiples ranging, in the case of
Goldman Sachs, from 7.0x to 9.0x, and in the case of Smith Barney, from 8.0x to
9.0x, to Rykoff-Sexton's projected 2002 EBITDA, representing Rykoff-Sexton's
estimated value beyond the year 2002. The cash flows
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and terminal values of Rykoff-Sexton were discounted to present value using
discount rates ranging, in the case of Goldman Sachs, from 10% to 11% and, in
the case of Smith Barney, from 10% to 12%. Utilizing such terminal multiples and
discount rates, this analysis resulted in an equity reference range for Rykoff-
Sexton of, in the case of Goldman Sachs, approximately $22.49 to $35.01 per
share, and in the case of Smith Barney, approximately $24.82 to $34.39 per
share, as compared to the equity value implied by the Exchange Ratio of
approximately $25.31 per share based on a closing stock price of JP Foodservice
Common Shares on June 27, 1997.
Pro Forma Merger Analysis. Each of Goldman Sachs and Smith Barney analyzed
certain pro forma effects resulting from the Merger, including, among other
things, the impact of the Merger on the projected earnings per share ("EPS") of
JP Foodservice for the fiscal years ended 1998 through 2000, based on internal
estimates of the managements of JP Foodservice and Rykoff-Sexton. The results of
the pro forma merger analysis suggested that the Merger could be accretive to JP
Foodservice's EPS in each of the fiscal years analyzed, assuming certain cost
savings and other potential synergies anticipated by the managements of JP
Foodservice and Rykoff-Sexton to result from the Merger were achieved in the
amounts and in the time period specified herein and excluding non-recurring
charges. The actual results achieved by the combined company may vary from
projected results and the variations may be material.
Exchange Ratio Analysis. Goldman Sachs compared the Exchange Ratio with the
historical ratio of the daily closing prices of JP Foodservice Common Shares and
Rykoff-Sexton Common Shares over the last six-month and twelve-month periods and
the period from JP Foodservice's initial public offering of JP Foodservice
Common Shares on November 15, 1994 through June 25, 1997. The average exchange
ratios during such periods were 0.643, 0.631 and 0.985, respectively, as
compared to the Exchange Ratio of 0.84. Smith Barney compared the Exchange Ratio
with the historical ratio of the daily closing prices of JP Foodservice Common
Shares and Rykoff-Sexton Common Shares over the three-month, six-month and 12-
month periods ending June 27, 1997 and the period from JP Foodservice's initial
public offering through June 27, 1997. The average exchange ratios during such
periods were 0.673, 0.644, 0.634 and 0.988, respectively, as compared to the
Exchange Ratio of 0.84.
Other Factors and Comparative Analyses. In rendering their respective
opinions, each of Goldman Sachs and Smith Barney considered certain other
factors and conducted certain other comparative analyses, including, among other
things, a review of (i) JP Foodservice's and Rykoff-Sexton's historical and
projected financial results; (ii) the history of trading prices and volume for
JP Foodservice Common Shares and Rykoff-Sexton Common Shares and, in the case of
Smith Barney, the relationship between movements in such Common Shares,
movements in the common stock of the Selected Companies and movements in the S&P
500 Index; and (iii) selected published analysts' reports on JP Foodservice and
Rykoff-Sexton,
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including analysts' estimates as to the earnings growth potential of JP
Foodservice and Rykoff-Sexton. Smith Barney also reviewed the premiums paid in
selected transactions with transaction values of $1.0 billion to $1.5 billion
and the pro forma ownership of the combined company.
Pursuant to the terms of its engagement of Goldman Sachs, JP Foodservice
has agreed to pay Goldman Sachs for its services in connection with the Merger
an aggregate financial advisory fee of $2.5 million. In addition, if in certain
circumstances JP Foodservice is entitled to a break-up or similar fee or
payment, Goldman Sachs will be entitled to a fee equal to 7.5% of such payment.
JP Foodservice has also agreed to reimburse Goldman Sachs for reasonable out-of-
pocket expenses incurred by Goldman Sachs in performing its services, including
the fees and expenses of its legal counsel, and to indemnify Goldman Sachs and
related persons against certain liabilities, including liabilities under the
federal securities laws, arising out of its engagement of Goldman Sachs.
Pursuant to the terms of Smith Barney's engagement, JP Foodservice has
agreed to pay Smith Barney for its services in connection with the Merger an
aggregate financial advisory fee of approximately $1.6 million. In addition, if
in certain circumstances JP Foodservice is entitled to a break-up or similar fee
or payment, Smith Barney will be entitled to a fee based on such payment. JP
Foodservice has also agreed to reimburse Smith Barney for reasonable travel and
other out-of-pocket expenses incurred by Smith Barney in performing its
services, including the fees and expenses of its legal counsel, and to indemnify
Smith Barney and related persons against certain liabilities, including
liabilities under the federal securities laws, arising out of Smith Barney's
engagement.
Each of Goldman Sachs and Smith Barney has advised JP Foodservice that, in
the ordinary course of business, Goldman Sachs or Smith Barney and their
respective affiliates may actively trade or hold the securities of JP
Foodservice and Rykoff-Sexton for their own account or for the account of
customers and, accordingly, may at any time hold a long or short position in
such securities. Goldman Sachs and Smith Barney have in the past provided
investment banking services to JP Foodservice unrelated to the Merger, for which
services they have received compensation, and may provide investment banking
services to JP Foodservice in the future. JP Foodservice has engaged Goldman
Sachs to provide financial advisory services with respect to JP Foodservice's
capital structure and other matters for a period of one year following the
Merger. Smith Barney is currently providing JP Foodservice with similar
financial advisory services. In addition, Goldman Sachs and its affiliates and
Smith Barney and its affiliates (including Travelers Group Inc. and its
affiliates) may maintain relationships with JP Foodservice and Rykoff-Sexton.
Each of Goldman Sachs and Smith Barney is an internationally recognized
investment banking firm and was selected by JP Foodservice based on its
experience, expertise and familiarity with JP Foodservice and its business.
Each of Goldman Sachs and Smith Barney regularly engages in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted
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securities, private placements and valuations for estate, corporate and other
purposes.
Opinions of Financial Advisors to Rykoff-Sexton
Rykoff-Sexton retained Merrill Lynch and Wasserstein Perella to act as its
financial advisors in connection with a possible business combination.
Representatives of Merrill Lynch and Wasserstein Perella attended the meeting of
the Rykoff-Sexton Board of Directors on June 29, 1997 at which the Rykoff-Sexton
Board of Directors considered and approved the Merger Agreement. At that
meeting, each of Merrill Lynch and Wasserstein Perella orally rendered its
respective opinion (subsequently confirmed in a written opinion dated June 30,
1997) that, as of such date (and based upon the matters, assumptions,
qualifications and limitations to be set forth in the written opinion, forms of
which were presented to the Rykoff-Sexton Board of Directors), the Exchange
Ratio was fair to the holders of Rykoff-Sexton Common Shares (other than JP
Foodservice and its affiliates) from a financial point of view.
The full texts of the Rykoff-Sexton Fairness Opinions, which set forth the
assumptions made, matters considered, and qualifications and limitations on the
review undertaken by each of Merrill Lynch and Wasserstein Perella, are attached
as Appendix D and Appendix E, respectively, to this Joint Proxy
Statement/Prospectus and are incorporated herein by reference. Stockholders of
Rykoff-Sexton are urged to and should read such Rykoff-Sexton Fairness Opinions
in their entirety. The summary of the Rykoff-Sexton Fairness Opinions set forth
in this Joint Proxy Statement/Prospectus is qualified in its entirety by
reference to the full texts of such Rykoff-Sexton Fairness Opinions. The
Rykoff-Sexton Fairness Opinions were provided to the Rykoff-Sexton Board of
Directors for its use and benefit and are directed only to the fairness from a
financial point of view of the Exchange Ratio to the holders of Rykoff-Sexton
Common Shares (other than JP Foodservice and its affiliates), do not address the
merits of the underlying decision by Rykoff-Sexton to engage in the Merger and
do not constitute a recommendation to any Rykoff-Sexton stockholder as to how
such stockholder should vote with respect to the Merger Agreement or any
transaction related thereto.
The Exchange Ratio was determined through negotiations between JP
Foodservice and Rykoff-Sexton and was approved by the Rykoff-Sexton Board of
Directors. Merrill Lynch and Wasserstein Perella provided advice to Rykoff-
Sexton during the course of such negotiations.
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The summary set forth below does not purport to be a complete description
of the analyses underlying the Rykoff-Sexton Fairness Opinions or the
presentation made by Merrill Lynch and Wasserstein Perella to the Rykoff-Sexton
Board of Directors. The preparation of a fairness opinion is a complex analytic
process involving various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. In arriving at their
respective opinions, Merrill Lynch and Wasserstein Perella did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Merrill Lynch and Wasserstein Perella believe that their
analyses must be considered as a whole and that selecting portions of their
analyses, without considering all analyses, would create an incomplete view of
the process underlying each of their opinions.
In performing their analyses, numerous assumptions were made with respect
to industry performance, general business, regulatory, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, Wasserstein Perella, Rykoff-Sexton and/or JP Foodservice. Any
estimates contained in the analyses performed by Merrill Lynch and Wasserstein
Perella are not necessarily indicative of actual values or future results, which
may be significantly more or less favorable than suggested by such analyses.
Additionally, estimates of the value of businesses or securities do not purport
to be appraisals or to reflect the prices at which such businesses or securities
might actually be sold. Accordingly, such analyses and estimates are inherently
subject to substantial uncertainty and neither Merrill Lynch nor Wasserstein
Perella assume any responsibility for their accuracy. In addition, as described
above, the Rykoff-Sexton Fairness Opinions and the joint presentation to the
Rykoff-Sexton Board of Directors by Merrill Lynch and Wasserstein Perella were
among several factors taken into consideration by the Rykoff-Sexton Board of
Directors in making its determination to approve the Merger Agreement.
Consequently, the Merrill Lynch and Wasserstein Perella analyses described below
should not be viewed as determinative of the decision of the Rykoff-Sexton Board
of Directors or Rykoff-Sexton's management with respect to the fairness of the
Exchange Ratio.
In arriving at their respective opinions, each of Merrill Lynch and
Wasserstein Perella, among other things: (i) reviewed certain publicly available
business and financial information relating to each of Rykoff-Sexton and JP
Foodservice which each of Merrill Lynch and Wasserstein Perella deemed relevant;
(ii) reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of Rykoff-
Sexton and JP Foodservice, as well as the amount and timing of the cost savings
and related expenses and synergies expected to result from the Merger (the
"Expected Savings and Synergies"), in each case furnished to Merrill Lynch and
Wasserstein Perella by Rykoff-Sexton and JP Foodservice; (iii) conducted
discussions with members of
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senior management and representatives of Rykoff-Sexton and JP Foodservice
concerning the matters described in clauses (i) and (ii) above, as well as their
respective businesses and prospects before and after giving effect to the Merger
and the Expected Savings and Synergies; (iv) reviewed the market prices and
valuation multiples for Rykoff-Sexton Common Shares and JP Foodservice Common
Shares and compared them with those of certain publicly traded companies which
each of Merrill Lynch and Wasserstein Perella deemed relevant; (v) reviewed the
results of operations of Rykoff-Sexton and JP Foodservice and compared them with
those of certain publicly traded companies which each of Merrill Lynch and
Wasserstein Perella deemed relevant; (vi) compared the proposed financial terms
of the Merger with the financial terms of certain other transactions which each
of Merrill Lynch and Wasserstein Perella deemed relevant; (vii) participated in
certain discussions and negotiations among representatives of Rykoff-Sexton and
JP Foodservice and their financial and legal advisors; (viii) reviewed the
potential pro forma impact of the Merger; (ix) reviewed the Merger Agreement;
and (x) reviewed such other financial studies and analyses and took into account
such other matters as each of Merrill Lynch and Wasserstein Perella deemed
necessary, including Merrill Lynch's and Wasserstein Perella's assessment of
current general economic, market and monetary conditions.
In connection with their review, each of Merrill Lynch and Wasserstein
Perella relied on the accuracy and completeness of all information supplied or
otherwise made available to each of Merrill Lynch and Wasserstein Perella,
discussed with or reviewed by or for each of Merrill Lynch and Wasserstein
Perella, or publicly available and further relied on the assurances of
management of Rykoff-Sexton and JP Foodservice that they were not aware of any
facts that would make such information inaccurate or misleading. Each of Merrill
Lynch and Wasserstein Perella has not assumed any responsibility for
independently verifying such information, has not undertaken an independent
evaluation or appraisal of the assets or liabilities of Rykoff-Sexton or JP
Foodservice and has not been furnished with any such evaluation or appraisal. In
addition, each of Merrill Lynch and Wasserstein Perella has not assumed any
obligation to conduct a physical inspection of the properties or facilities of
Rykoff-Sexton or JP Foodservice. With respect to the financial forecasts and the
Expected Savings and Synergies furnished to or discussed with Merrill Lynch and
Wasserstein Perella by Rykoff-Sexton or JP Foodservice, each of Merrill Lynch
and Wasserstein Perella assumed that they were reasonably prepared in good faith
and reflected the best currently available estimates and judgments of Rykoff-
Sexton's and JP Foodservice's managements as to the expected future financial
performance of, and expenses and benefits to, Rykoff-Sexton or JP Foodservice,
as the case may be, and the Expected Savings and Synergies, and that such
forecasted results and Expected Savings and Synergies will be realized in the
amounts and at the times indicated thereby. Each of Merrill Lynch and
Wasserstein Perella expressed no view as to such financial forecasts and
Expected Savings and Synergies or the assumptions on which they were based. In
addition, each of Merrill Lynch and Wasserstein Perella assumed that the Merger
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will qualify for pooling-of-interests accounting treatment in accordance with
generally accepted accounting principles and as a tax-free reorganization for
United States Federal income tax purposes. Each Rykoff-Sexton Fairness Opinion
is necessarily based upon market, economic and other conditions as they existed
on, and could be evaluated as of, the date of such opinion. Neither Merrill
Lynch nor Wasserstein Perella was authorized by Rykoff-Sexton or the Rykoff-
Sexton Board of Directors to solicit, nor did Merrill Lynch or Wasserstein
Perella solicit, third-party indications of interest for the acquisition of all
or any part of Rykoff-Sexton. In addition, neither Merrill Lynch nor Wasserstein
Perella was asked to consider, and neither Rykoff-Sexton Fairness Opinion in any
manner addresses, the price at which or the trading ranges in which JP
Foodservice Common Shares will actually trade following the announcement or
consummation of the Merger.
Set forth below is a brief summary of the material analyses presented
jointly by Merrill Lynch and Wasserstein Perella to the Rykoff-Sexton Board of
Directors in connection with the rendering of the Rykoff-Sexton Fairness
Opinions.
Premium Analysis. Merrill Lynch and Wasserstein Perella calculated the
percentage stock premium paid for all announced merger of equals transactions
between April 20, 1995 and April 20, 1997 with total transaction values greater
than $500 million at one day, one week and four week periods prior to the
announcement of the merger. The median premium paid by the acquiror for such
mergers for the one day, one week and four week periods was 8.9%, 10.2% and
13.6%, respectively.
Merrill Lynch and Wasserstein Perella then analyzed the premium to the
historic stock price of Rykoff-Sexton Common Shares by comparing the $25.10
implied transaction value per share to the closing price of Rykoff-Sexton Common
Shares on June 26, 1997, March 27, 1997, December 27, 1996 and June 27, 1996.
The $25.10 implied transaction value per share was determined by multiplying the
0.84x Exchange Ratio by the closing price of JP Foodservice Common Shares on
June 26, 1997. Based on such comparisons, Merrill Lynch and Wasserstein Perella
calculated that the implied transaction value per share exceeded such stock
prices by 27.1%, 41.4%, 59.3% and 77.7%, respectively. Merrill Lynch and
Wasserstein Perella also calculated the percentage premium represented by the
Exchange Ratio over the average exchange ratio (i.e., the average of the ratios
of the closing stock prices of Rykoff-Sexton Common Shares to JP Foodservice
Common Shares) for 30 days, 60 days, 90 days and 12 months prior to June 26,
1997 and determined that the Exchange Ratio represented a premium of 20.7%,
24.1%, 27.0% and 32.6%, respectively, over such average exchange ratio.
Leveraged Contribution Analysis. Merrill Lynch and Wasserstein Perella
compared the relative contributions by each of Rykoff-Sexton and JP Foodservice
to the implied combined Market Value of the two companies ("Market Value" being
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defined for each company as total shares outstanding times a recent closing
price per share plus the option spread (options deemed outstanding times average
exercise price)) at June 26, 1997 and noted that Rykoff-Sexton's contribution to
the Market Value of the combined entity was 45.6%. Merrill Lynch and Wasserstein
Perella also compared the relative contributions by each of Rykoff-Sexton and JP
Foodservice to a hypothetical implied combined market value of the two companies
based on (a) a value derived by applying median trading multiples (obtained from
the Comparable Company Analysis described below) to estimated 1997 and 1998
Revenues, EBITDA and EBIT for each of Rykoff-Sexton and JP Foodservice (as
provided by the respective managements of Rykoff-Sexton and JP Foodservice) and
(b) subtracting, in each case, net debt. Based on estimated 1997 financial data,
Rykoff-Sexton's rates of contribution to such hypothetical implied combined
market value based on Revenues, EBITDA and EBIT were 60.8%, 54.1% and 47.7%,
respectively. Such contribution rates correspond to implied exchange ratios of
1.240, .942 and .728, respectively. Based on estimated 1998 financial data,
Rykoff-Sexton's rates of contribution to such hypothetical implied combined
market value based on Revenues, EBITDA and EBIT were 56.8%, 52.7% and 47.5%,
respectively. Such contribution rates correspond to implied exchange ratios of
1.048, .888 and .723, respectively. Merrill Lynch and Wasserstein Perella
further compared the relative contributions by each of Rykoff-Sexton and JP
Foodservice to a hypothetical implied combined market value of the two companies
based on a value derived by applying median trading multiples (obtained from the
Comparable Company Analysis described below) to estimated 1997 and 1998 net
income for each of Rykoff-Sexton and JP Foodservice (as provided by the
respective managements of Rykoff-Sexton and JP Foodservice). Based on estimated
1997 and 1998 financial data as provided by the respective managements of
Rykoff-Sexton and JP Foodservice, Rykoff-Sexton's rates of contribution based on
net income were 41.0% and 42.6%, respectively, to such hypothetical implied
combined market value. Such contribution rates correspond to implied exchange
ratios of .555 and .593, respectively.
The contribution analyses pertaining to net income, EBITDA and EBIT
(especially those using the estimated 1998 financial data) are believed by
Merrill Lynch and Wasserstein Perella to be the most relevant measures primarily
because such measures are the most reflective of profitability. Accordingly,
based on such measures, Merrill Lynch and Wasserstein Perella calculated a range
of implied exchange ratios based on the contribution analysis described above of
0.60x to 0.90x.
Comparable Company Analysis. In order to analyze the Exchange Ratio in
relationship to the relative public market valuations of Rykoff-Sexton and JP
Foodservice, Merrill Lynch and Wasserstein Perella compared the stock price and
operating performance of Rykoff-Sexton and JP Foodservice with certain selected
comparable public foodservice distributors (i.e., SYSCO Corp., Performance Food
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Group Company, International Multifoods Corporation and ProSource, Inc.).
Merrill Lynch and Wasserstein Perella calculated the following market trading
multiples for each of such companies based on last twelve months ("LTM") data as
of June 26, 1997 and estimates for each of their respective next fiscal years
("NFY") (in the cases of Rykoff-Sexton and JP Foodservice based on projections
provided by the respective managements and in the cases of the other companies,
based on research analyst reports): Market Value (as of June 26, 1997) as a
multiple of net income and book value; and "Adjusted Market Value" (defined as
Market Value minus cash and cash equivalents plus total debt (including asset
securitization), capitalized leases, preferred stock and minority interest) (as
of June 26, 1997) as a multiple of sales, EBITDA and EBIT.
Finding the results for SYSCO Corp. ("Sysco") and Performance Food Group
Company ("PFGC") most relevant for comparison purposes with Rykoff-Sexton and JP
Foodservice, Merrill Lynch and Wasserstein Perella compared Rykoff-Sexton, JP
Foodservice, Sysco and PFGC and determined that (i) Market Values as a multiple
of LTM net income were 36.0x, 29.8x, 22.1x and 21.8x, respectively; (ii) Market
Values as a multiple of LTM book value were 1.6x, 3.0x, 4.5x and 2.5x,
respectively; (iii) Adjusted Market Values as a multiple of LTM sales were 0.4x,
0.5x, 0.5x and 0.3x, respectively; (iv) Adjusted Market Values as a multiple of
LTM EBITDA were 9.6x, 11.7x, 10.3x and 11.4x, respectively; and (v) Adjusted
Market Values as a multiple of LTM EBIT were 13.7x, 14.6x, 13.4x and 14.9x,
respectively. Additionally, Merrill Lynch and Wasserstein Perella determined
that (i) Market Values as a multiple of NFY net income were 22.3x, 19.7x, 19.5x
and 18.8x, respectively; (ii) Market Values as a multiple of NFY book value were
1.5x, 2.5x and 4.1x for Rykoff-Sexton, JP Foodservice and Sysco, respectively
(NFY book value was not available for PFGC); (iii) Adjusted Market Values as a
multiple of NFY sales were 0.3x, 0.4x, 0.4x and 0.2x, respectively; (iv)
Adjusted Market Values as a multiple of NFY EBITDA were 8.3x, 9.7x, 9.3x and
9.5x, respectively; and (v) Adjusted Market Values as a multiple of NFY EBIT
were 11.5x, 12.1x, 11.9x and 11.7x, respectively.
Based on the calculation of such ranges, Merrill Lynch and Wasserstein
Perella derived ranges of hypothetical implied adjusted market values and
hypothetical implied market values for each of Rykoff-Sexton and JP Foodservice
by applying what Merrill Lynch and Wasserstein Perella judged to be the
appropriate multiples derived therefrom to the relevant LTM (fiscal year ended
June 30, 1997) financial information (as provided by the respective managements
of Rykoff-Sexton and JP Foodservice) of each of Rykoff-Sexton and JP
Foodservice. Assuming net debt of $669.4 million for Rykoff-Sexton and $207.0
million for JP Foodservice, the hypothetical implied adjusted market value range
was $1,173 million to $1,340 million for Rykoff-Sexton and $787 million to $876
million for JP Foodservice; and the hypothetical implied market value range was
$503 million to $671 million for Rykoff-Sexton and $580 million to $669 million
for JP Foodservice. The range of hypothetical implied market values of each of
Rykoff-Sexton and JP Foodservice
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was then divided by 28.0 million shares for Rykoff-Sexton and 22.3 million
shares for JP Foodservice, respectively, to yield a range of hypothetical
implied market values per share of $18.00 to $24.00 for Rykoff-Sexton and $26.00
to $30.00 for JP Foodservice. From such hypothetical implied ranges, Merrill
Lynch and Wasserstein Perella calculated a range of implied exchange ratios of
0.60x to 0.92x.
No company utilized in the Comparable Company Analysis was identical to
Rykoff-Sexton or JP Foodservice. Accordingly, an analysis of the results of this
comparison is not purely mathematical; rather, it involves complex
considerations and judgments concerning differences in historical and projected
financial and operating characteristics of the comparable companies and other
factors that could affect the value of such companies and consequently, the
comparisons with Rykoff-Sexton and JP Foodservice.
Relative Discounted Cash Flow Analysis. Merrill Lynch and Wasserstein
Perella performed discounted cash flow ("DCF") analyses for the five-year period
ending with the 2002 fiscal year on the stand-alone unlevered free cash flows of
Rykoff-Sexton and JP Foodservice, based on estimates of projected financial
performance prepared by the respective managements of Rykoff-Sexton and JP
Foodservice. Unlevered free cash flows were calculated as the after-tax
unlevered earnings of Rykoff-Sexton and JP Foodservice, respectively, plus
depreciation and amortization and other non-cash items, plus (or minus) net
changes in working capital, minus projected capital expenditures. Merrill Lynch
and Wasserstein Perella calculated terminal values by applying a range of
terminal EBITDA multiples of 7.0x to 10.0x to the projected year 2002 EBITDA of
Rykoff-Sexton and JP Foodservice, respectively. The unlevered free cash flows
and terminal values were then discounted to the present using a range of
discount rates of 9.0% to 11.0% to yield a range of Adjusted Market Values and,
after subtracting current net debt, Market Values.
Based on such calculations, Merrill Lynch and Wasserstein Perella
determined ranges of hypothetical implied adjusted market values and
hypothetical implied market values for each of Rykoff-Sexton and JP Foodservice
by applying what Merrill Lynch and Wasserstein Perella judged to be the most
relevant discount rates and terminal multiples. Assuming net debt of $669.4
million for Rykoff-Sexton and $207.0 million for JP Foodservice, such analyses
yielded a range of hypothetical implied adjusted market values for Rykoff-Sexton
of $1,368 million to $1,508 million and $854 million to $943 million for JP
Foodservice and a range of hypothetical implied market values of $699 million to
$839 million for Rykoff-Sexton and $647 million to $736 million for JP
Foodservice. The range of hypothetical implied market values was then divided by
28.0 million shares for Rykoff-Sexton and 22.3 million shares for JP Foodservice
to yield a range of hypothetical implied market values per share of $25.00 to
$30.00 for Rykoff-Sexton and $29.00 to $33.00 for JP Foodservice. From such
hypothetical ranges, Merrill
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Lynch and Wasserstein Perella calculated a range of implied exchange ratios of
0.76x to 1.03x.
With respect to the Relative DCF Analysis, Merrill Lynch and Wasserstein
Perella believe that the selection of an appropriate discount rate is an
inherently subjective process and is affected by such factors as Rykoff-Sexton's
and JP Foodservice's cost of capital, the uncertainty associated with achieving
the projections provided by the managements of Rykoff-Sexton and JP Foodservice
and transaction risks generally. Merrill Lynch and Wasserstein Perella also
believe that the Relative DCF Analysis is a widely used valuation methodology,
but that it relies on numerous assumptions regarding the future performance of a
company and the future economic environment, including earnings growth rates,
unlevered free cash flows, terminal values and discount rates, all of which are
inherently uncertain because they are predicated upon future events and
circumstances.
Pro Forma Merger Analysis. Based on projections (including the Expected
Savings and Synergies) prepared by the managements of JP Foodservice and Rykoff-
Sexton, Merrill Lynch and Wasserstein Perella compared Rykoff Sexton's projected
EPS on a stand-alone basis to the portion of the pro forma projected EPS of the
combined company allocable to the holders of JP Foodservice Common Shares to be
owned on a pro forma basis by the Rykoff-Sexton stockholders. The analysis
indicated that, for the Rykoff-Sexton stockholders, the Merger would be 42.2%,
20.1% and 15.0% accretive for the fiscal years ended June 30, 1998, 1999 and
2000, respectively.
Pursuant to a letter agreement, dated April 15, 1997, among Rykoff-Sexton,
Merrill Lynch and Wasserstein Perella, Rykoff-Sexton agreed to pay Merrill Lynch
and Wasserstein Perella (such fee to be divided equally) 0.52% of the implied
transaction value minus the amount (if any) paid to Merrill Lynch and
Wasserstein Perella pursuant to the succeeding sentence. In addition, if, in
certain circumstances, Rykoff-Sexton is entitled to a break up or similar fee or
payment or obtains any profit resulting from any option on any shares of JP
Foodservice, Merrill Lynch and Wasserstein Perella shall be entitled to 20% of
the excess (if any) of such fees, payments and profits over Rykoff-Sexton's
direct out-of-pocket expenses incurred in connection with the business
combination giving rise to such fees, payments or profits, subject to a cap of
the maximum amount that would have been payable to Merrill Lynch and Wasserstein
Perella had the Merger been consummated. Rykoff-Sexton has also agreed to
reimburse Merrill Lynch and Wasserstein Perella for their reasonable out-of-
pocket expenses, including the reasonable fees and disbursements of its legal
counsel, and to indemnify Merrill Lynch and Wasserstein Perella and certain
related persons for certain liabilities related to or arising out of their
engagement, including certain liabilities under the Federal securities laws.
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The terms of the fee arrangement with Merrill Lynch and Wasserstein
Perella, which each of Merrill Lynch, Wasserstein Perella and Rykoff-Sexton
believe are customary in transactions of this nature, were negotiated at arm's
length among Rykoff-Sexton, Merrill Lynch and Wasserstein Perella and the
Rykoff-Sexton Board of Directors was aware of such arrangement, including the
fact that a significant portion of the aggregate fee payable to Merrill Lynch
and Wasserstein Perella is contingent upon consummation of the Merger.
Rykoff-Sexton retained Merrill Lynch and Wasserstein Perella based upon
their experience and expertise. Each of Merrill Lynch and Wasserstein Perella
are internationally recognized investment banking and advisory firms and members
of Merrill Lynch and Wasserstein Perella have substantial experience in
transactions such as the Merger and in valuing companies. Each of Merrill Lynch
and Wasserstein Perella, as part of its investment banking business, is
continuously engaged in, among other things, the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Merrill Lynch has, in the past, provided financial advisory and
financing services to Rykoff-Sexton and/or its affiliates and may continue to do
so and has received fees for the rendering of such services. In the ordinary
course of its business, each of Merrill Lynch and Wasserstein Perella may
actively trade in the securities of Rykoff-Sexton and JP Foodservice for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities. Certain affiliates of Merrill
Lynch own, prior to the Merger, approximately 36% of the outstanding Rykoff-
Sexton Common Shares and have representatives serving on the Rykoff-Sexton Board
of Directors. See "--Interests of Certain Persons in the Merger." Certain
stockholders of Rykoff-Sexton who are affiliates of Merrill Lynch are parties to
contractual arrangements related to the Merger and with respect to their
existing Rykoff-Sexton Common Shares and the JP Foodservice Common Shares to be
received by them in the Merger. Neither of the Rykoff-Sexton Fairness Opinions
took into account or in any way addressed the implications to such stockholders
of such contractual arrangements.
Interests of Certain Persons in the Merger
Certain members of the Boards of Directors and management of JP Foodservice
and Rykoff-Sexton and certain holders of Rykoff-Sexton Common Shares have
certain interests in the Merger that are different from, or in addition to, the
interests generally of stockholders of JP Foodservice or Rykoff-Sexton, as
applicable. Such interests relate to or arise from, among other things, the
terms of the Merger Agreement providing for (i) the JP Foodservice Board of
Directors after the Effective Time to consist of certain members from the board
of directors of each of the companies, (ii) the division of senior management
positions of JP Foodservice
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after the Effective Time among the existing senior management of each of the
companies, (iii) certain employment agreements for executive officers of Rykoff-
Sexton and provisions for the treatment of certain employee benefits for which
executive officers of Rykoff-Sexton are eligible, (iv) the assumption of
employee stock options and other rights granted to employees of Rykoff-Sexton,
including executive officers, and the fact that, under the terms thereof,
substantially all existing stock options and other rights held by executive
officers and directors of Rykoff-Sexton become fully vested by reason of
stockholder approval of the Rykoff-Sexton Proposal, and (v) the indemnification
of existing directors and officers of Rykoff-Sexton. In addition, Merrill Lynch,
which was retained by Rykoff-Sexton as one of its financial advisors in
connection with the Merger, is an affiliate of the ML Investors. Such additional
interests are described below. The JP Foodservice Board of Directors and the
Rykoff-Sexton Board of Directors were each aware of these interests of their
respective directors and officers and, in the case of Rykoff-Sexton, certain
stockholders and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.
Employment, Change in Control and Severance Agreements. Prior to the
execution of the Merger Agreement, Rykoff-Sexton entered into the Original Van
Stekelenburg Employment Agreement (as defined herein) and a Change in Control
Agreement with Mark Van Stekelenburg, the Chairman and the Chief Executive
Officer of Rykoff-Sexton. Five other executive officers of Rykoff-Sexton are
also parties to Change in Control Agreements. These agreements, as well as
certain other Rykoff-Sexton compensation arrangements, provide, under specified
circumstances, payments and other benefits to the executives who are parties to
these agreements and arrangements upon or after a "change of control" of Rykoff-
Sexton. The consummation of the Merger will constitute a "change in control" of
Rykoff-Sexton under these agreements and arrangements. As a result, Mr. Van
Stekelenburg will, and certain of such other executive officers following
termination of employment under certain circumstances could, receive specified
payments and other benefits upon or after consummation of the Merger. Mr. Van
Stekelenburg is the only executive officer of Rykoff-Sexton who is a party to an
employment or Change in Control Agreement entitling him to terminate his
employment following a change in control at his sole discretion, and receive
such payments and other benefits. See "Management of JP Foodservice After the
Merger--Executive Compensation." In addition, the Merger Agreement provides that
JP Foodservice will enter into the JP/Van Stekelenburg Employment Agreement with
Mr. Van Stekelenburg, who will, as of the Effective Time, become the Vice
Chairman and President of JP Foodservice. See "Management of JP Foodservice
after the Merger--Executive Compensation."
Merrill Lynch Advisory Services. Rykoff-Sexton retained Merrill Lynch to
act as one of Rykoff-Sexton's financial advisors in connection with the proposed
business combination with JP Foodservice. Merrill Lynch is an affiliate of the
ML Investors, who beneficially owned approximately 36% of the Rykoff-Sexton
Common
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Shares outstanding as of the Rykoff-Sexton Record Date. See "--Opinions of
Financial Advisors to Rykoff-Sexton" for a discussion of amounts payable to
Merrill Lynch for such financial advisory services.
Board Designations; Directors. JP Foodservice has agreed in the Merger
Agreement that, prior to the Effective Time, it will increase the size of the JP
Foodservice Board of Directors from nine to 17 directors. In addition, the
Merger Agreement provides that the JP Foodservice Board of Directors,
immediately following the Effective Time, will consist of (i) nine individuals,
including each of the incumbent members of the JP Foodservice Board of Directors
(or their replacements), (ii) seven individuals, two of whom will be individuals
designated by MLCP, one of whom will be Mr. Van Stekelenburg and four of whom
will be current incumbents of the Rykoff-Sexton Board of Directors who are not
employees of Rykoff-Sexton or its subsidiaries or affiliated with MLCP and (iii)
one additional person to be designated by the Chairman of JP Foodservice
following the Merger. Mr. Van Stekelenburg will be appointed to the class of
directors of the JP Foodservice Board of Directors whose terms expire in 1998.
The two directors who will be designated by MLCP will be appointed, one each, to
the class of directors whose terms expire in 1999 and 2000, respectively. Of the
four directors to be selected by Rykoff-Sexton pursuant to clause (ii) above,
James I. Maslon will be appointed to the class of directors whose terms expire
in 1998 and Bernard Sweet will be appointed to the class of directors whose
terms expire in 1999.
The Merger Agreement also provides that, as of the Effective Time, the JP
Foodservice Board of Directors will initially have an audit committee, a
compensation committee and a nominating committee. Each committee will consist
of four directors, two of whom will be designated by JP Foodservice, one of whom
will be designated by Rykoff-Sexton and one of whom will be designated by mutual
agreement of JP Foodservice and Rykoff-Sexton. The initial chairman of each of
the audit committee, the compensation committee and the nominating committee
will be the JP Foodservice director who is currently the incumbent chairman of
such committee until such chairman's replacement is duly designated by the JP
Foodservice Board of Directors. If any of such committee chairs becomes vacant
for any reason prior to the Effective Time, the chairman will be the person
thereafter designated by the JP Foodservice Board of Directors pursuant to the
Certificate of Incorporation and By-Laws of JP Foodservice. One member of the
nominating committee of the JP Foodservice Board of Directors (and of an
executive committee thereof, if such a committee is established) will be
designated by MLCP as Rykoff-Sexton's designee thereon. See "Management of JP
Foodservice After the Merger--Directors."
Combined Company Management. See "Management of JP Foodservice After the
Merger" for information concerning the expected composition of the senior
management of JP Foodservice after the Effective Time.
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Registration Rights Agreement. In connection with the US Foodservice
Acquisition, Rykoff-Sexton executed the Registration Rights Agreement, pursuant
to which the ML Investors have certain "demand" and "piggyback" rights, and the
Equitable Entities named therein and Frank H. Bevevino have certain "piggyback"
rights, requiring Rykoff-Sexton to register under the Securities Act the
transfer of all or a portion of the Registrable Securities. Pursuant to the
Support Agreement, JP Foodservice has agreed, as of the Effective Time, to
assume Rykoff-Sexton's rights and obligations under the Registration Rights
Agreement and will be required, for a specified period and subject to certain
limitations and qualifications, to register under the Securities Act the
transfer of all or a portion of the JP Foodservice Common Shares that will be
issued in the Merger in exchange for Registrable Securities to holders thereof
who have rights under the Registration Rights Agreement. See "Other Agreements-
- -Registration Rights Agreement."
Stock Options and Other Rights. As of June 28, 1997, 2,195,118 Options were
outstanding under the Rykoff-Sexton Stock Plans, of which 1,743,812 Options were
fully vested and exercisable as of that date. Of the remaining Options, 402,452
will automatically become fully vested upon stockholder approval of the Rykoff-
Sexton Proposal. The unvested Options that are currently outstanding under the
Rykoff-Sexton 1993 Director Stock Option Plan will become fully vested and
exercisable on September 5, 1997, and the unvested Options currently outstanding
under the Amended and Restated US Foodservice 1993 Stock Option Plan will become
fully vested and exercisable on January 1, 1998, in accordance with their terms.
As of June 28, 1997, executive officers of Rykoff-Sexton held 1,034,601 Options
that are expected to be Assumed Options.
As of June 28, 1997, 99,252 Restricted Shares were issued and outstanding
under the Rykoff-Sexton Stock Plans and subject to a risk of forfeiture and
restrictions on transfer and 553,000 Rykoff-Sexton Common Shares were subject to
outstanding Performance Share Awards granted under the Rykoff-Sexton Stock
Plans. As of June 28, 1997, executive officers of Rykoff-Sexton held 597,149
Restricted Shares and Performance Share Awards. Subsequent to June 28, 1997, the
number of outstanding Performance Share Awards was reduced to 405,000. Upon
stockholder approval of the Rykoff-Sexton Proposal, all Restricted Shares then
outstanding will automatically become nonforfeitable and freely transferable
(subject to any transfer restrictions under applicable securities laws), and all
Rykoff-Sexton Common Shares subject to Performance Share Awards then outstanding
will become issuable. All of such Rykoff-Sexton Common Shares will thereafter be
converted, at the Effective Time, into the right to receive JP Foodservice
Common Shares at the Exchange Ratio.
Indemnification; Insurance. Pursuant to the Merger Agreement, JP
Foodservice has agreed to maintain in effect in accordance with their terms all
rights to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time existing as of the date of the
Merger
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Agreement in favor of the current or former directors or officers of
Rykoff-Sexton and its subsidiaries (and any of their respective predecessors,
including, without limitation, US Foodservice) as provided in their respective
certificates of incorporation or by-laws (or comparable organizational
documents) and any indemnification agreements of Rykoff-Sexton or in Section
7.13 of the merger agreement governing the US Foodservice Acquisition. In
addition, the Merger Agreement provides that, from and after the Effective Time,
directors and officers of Rykoff-Sexton who become directors or officers of JP
Foodservice will be entitled to the same indemnity rights and protections, and
directors' and officers' liability insurance, as are afforded from time to time
to other directors and officers of JP Foodservice.
Certain Federal Income Tax Consequences
The following is a summary of the material federal income tax consequences
of the Merger, without regard to the particular facts and circumstances of each
stockholder of Rykoff-Sexton, and assumes that the Merger is completed as
contemplated herein. The summary assumes that the Rykoff-Sexton Common Shares
converted in the Merger are held as capital assets. It does not discuss all of
the consequences that may be relevant to stockholders of Rykoff-Sexton subject
to special treatment under the Code (such as insurance companies, financial
institutions, dealers in securities, exempt organizations or foreign persons) or
to stockholders of Rykoff-Sexton who acquired their Rykoff-Sexton Common Shares
pursuant to the exercise of employee stock options or otherwise as compensation.
The summary does not purport to be a complete analysis of all potential tax
effects of the transactions contemplated by the Merger Agreement or of the
Merger itself. No information is provided herein with respect to the tax
consequences, if any, of the Merger under state, local, foreign or other tax
laws.
JP Foodservice and Rykoff-Sexton expect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code and that for
federal income tax purposes no gain or loss will be recognized by stockholders
of Rykoff-Sexton upon the receipt of JP Foodservice Common Shares in exchange
for Rykoff-Sexton Common Shares pursuant to the Merger (except with respect to
the receipt of cash by a holder of Rykoff-Sexton Common Shares in lieu of a
fractional share interest in JP Foodservice Common Shares). The Internal
Revenue Service (the "Service") has not been and will not be asked to rule on
the tax consequences of the Merger. Instead, JP Foodservice will rely on the
opinion of Wachtell, Lipton, Rosen & Katz, counsel to JP Foodservice, and
Rykoff-Sexton will rely on the opinion of Jones, Day, Reavis & Pogue, counsel to
Rykoff-Sexton, as to certain federal income tax consequences of the Merger.
Such opinions will be based upon facts and assumptions described therein and
certain representations that are expected to be made as of the Closing Date by
JP Foodservice and Rykoff-Sexton and certain stockholders of Rykoff-Sexton. The
opinions of Wachtell, Lipton, Rosen & Katz and Jones, Day, Reavis & Pogue will
be based on current laws and interpretations
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thereof, including the Code, the regulations promulgated thereunder,
administrative rulings and practice and judicial authority, all of which are
subject to change, possibly with retroactive effect. An opinion of counsel is
not binding on the Service and there can be no assurance, and none is hereby
given, that the Service will not take a position contrary to one or more
positions reflected in such opinions or that such opinions will be upheld by the
courts if challenged by the Service. Each holder of Rykoff-Sexton Common Shares
is urged to consult such stockholder's own tax and financial advisors as to the
federal income tax consequences of the Merger under such stockholder's own
particular facts and circumstances and also as to any state, local, foreign or
other tax consequences arising out of the Merger.
The obligation of each of JP Foodservice and Rykoff-Sexton to consummate
the Merger is conditioned on, among other things, the receipt (or waiver
thereof) by JP Foodservice of the opinion of Wachtell, Lipton, Rosen & Katz
described above and the receipt (or waiver thereof) by Rykoff-Sexton of the
opinion of Jones, Day, Reavis & Pogue described above substantially to the
following effect:
(a) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code;
(b) JP Foodservice and Rykoff-Sexton will each be party to such
reorganization within the meaning of Section 368(b) of the Code;
(c) no gain or loss will be recognized by JP Foodservice or Rykoff-
Sexton as a result of the Merger;
(d) no gain or loss will be recognized by the stockholders of Rykoff-
Sexton upon the exchange of their Rykoff-Sexton Common Shares solely for JP
Foodservice Common Shares pursuant to the Merger, except with respect to
cash, if any, received in lieu of fractional JP Foodservice Common Shares;
(e) the aggregate tax basis of the JP Foodservice Common Shares
received by Rykoff-Sexton stockholders solely in exchange for Rykoff-Sexton
Common Shares pursuant to the Merger (including fractional JP Foodservice
Common Shares for which cash is received) will be the same as the aggregate
tax basis of the Rykoff-Sexton Common Shares surrendered in exchange
therefor; and
(f) the holding period for JP Foodservice Common Shares received in
exchange for Rykoff-Sexton Common Shares pursuant to the Merger will
include the holding period of the Rykoff-Sexton Common Shares exchanged
therefor, provided such Rykoff-Sexton Common Shares were held as capital
assets by the stockholder at the Effective Time.
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The receipt by a holder of Rykoff-Sexton Common Shares of cash in lieu of a
fractional share interest in JP Foodservice Common Shares will be treated as
though the fractional share interest in JP Foodservice Common Shares was
received as a part of the reorganization exchange and then redeemed by JP
Foodservice, and, assuming that the redemption of the fractional share interest
in JP Foodservice Common Shares is characterized as a sale or exchange of such
stock and not as a dividend, a Rykoff-Sexton stockholder will recognize gain or
loss at the Effective Time in an amount equal to the difference between the
amount of cash received and the basis of the fractional share interest in JP
Foodservice Common Shares deemed to be surrendered (determined as described in
(e) above), which gain or loss will be capital gain or loss if the JP
Foodservice Common Shares constituted a capital asset in the hands of the
Rykoff-Sexton stockholder at the Effective Time. Any such capital gain or loss
will be long-term capital gain or loss if such stockholder's holding period for
the fractional share interest in JP Foodservice Common Shares (determined as
described in (f) above) is more than one year.
JP Foodservice has received from Wachtell, Lipton, Rosen & Katz, and
Rykoff-Sexton has received from Jones, Day, Reavis & Pogue, such firm's
opinion, dated the date of this Joint Proxy Statement/Prospectus, that, based
upon and subject to certain facts, representations and assumptions set forth
therein, the foregoing discussion, except as otherwise indicated, represents
such firm's opinion as to the material federal income tax consequences of the
Merger under applicable law in effect as of such date.
Restrictions on Resale of JP Foodservice Common Shares by Affiliates
The issuance of JP Foodservice Common Shares to Rykoff-Sexton stockholders
in connection with the Merger has been registered under the Securities Act. Such
shares may be traded freely and without restriction by those Rykoff-Sexton
stockholders who are not deemed to be "affiliates" of Rykoff-Sexton within the
meaning of the Securities Act. An affiliate of Rykoff-Sexton, as defined by the
rules promulgated pursuant to the Securities Act, is a person who directly, or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with, Rykoff-Sexton. Any subsequent transfer of JP
Foodservice Common Shares issued in the Merger by any person who is an affiliate
of Rykoff-Section at the time adoption of the Merger Agreement is submitted for
stockholder approval at the Rykoff-Sexton Special Meeting will, under existing
law, require either (i) the registration of such transfer under the Securities
Act, (ii) compliance with Rule 145 promulgated under the Securities Act (which
permits limited sales under certain circumstances) or (iii) the availability of
another exemption from registration. The foregoing restrictions are expected to
apply to, among other persons, directors and executive officers of Rykoff-Sexton
and the holders of 10% or more of the Rykoff-Sexton Common Shares converted in
the Merger, including the ML Investors.
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SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales of shares of the acquiring and acquired company by
affiliates of either company in a business combination. SEC guidelines indicate
further that the pooling of interests method of accounting generally will not be
challenged on the basis of sales by affiliates of the acquiring or acquired
company if such affiliates do not dispose of any of the shares of the
corporation they own or shares of a corporation they receive in connection with
a business combination during the period beginning 30 days before the
consummation of the business combination and ending when financial results
covering at least 30 days of post-merger operations of the combined entity have
been published.
Each of JP Foodservice and Rykoff-Sexton has agreed in the Merger Agreement
to use its best efforts to cause each person who is an affiliate of such party
(for purposes of qualifying the Merger for pooling of interests accounting
treatment and, in the case of Rykoff-Sexton, for purposes of Rule 145) to
deliver to the other party prior to the Effective Time a written agreement
intended to preserve the ability to treat the Merger as a pooling of interests
and to ensure compliance with the Securities Act.
JP Foodservice has agreed in the Merger Agreement to use its best efforts
to publish, not later than 45 days after the end of the first month after the
Effective Time in which there are at least 30 days of post-Merger combined
operations, combined sales and net income figures as contemplated by and in
accordance with the terms of the SEC Accounting Series Release No. 135.
From and after the Effective Time, the ML Investors will have the right
under the Registration Rights Agreement to require JP Foodservice, for a
specified period and subject to certain limitations and qualifications, to
register under the Securities Act the transfer of all or a portion of the JP
Foodservice Common Shares acquired by them in the Merger in exchange for
Registrable Securities, thus permitting the sale of such Rykoff-Sexton Common
Shares to the general public in the circumstances and subject to the conditions
and restrictions set forth therein. The ML Investors and other parties to the
Registration Rights Agreement will also have "piggyback" registration rights
with respect to JP Foodservice Common Shares issued to them in the Merger in
exchange for Registrable Securities. See "Risk Factors--Shares Eligible for
Future Sale" and "Other Agreements--Registration Rights Agreement."
Amendments to Rights Plans
JP Foodservice Rights Plan. JP Foodservice has amended the terms of the JP
Foodservice Rights Agreement (as defined under "Description of JP Foodservice
Capital Stock--Common Shares, Rights and Series A Preferred Stock") to provide
that the execution, delivery and performance of the Merger Agreement, the Stock
Option Agreements and the Support Agreement will not (i) cause any "Rights" (as
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defined in the JP Foodservice Rights Agreement) to become exercisable or (ii)
cause Rykoff-Sexton or the ML Investors or any of its or their affiliates or
associates to become an "Acquiring Person" (as defined in the JP Foodservice
Rights Agreement). For a more complete description of the JP Foodservice Rights
Agreement, see "Description of JP Foodservice Capital Stock--Common Shares,
Rights and Series A Preferred Stock."
Rykoff-Sexton Rights Plan. Rykoff-Sexton has amended the terms of the
Rykoff-Sexton Rights Agreement (as defined under "Description of Rykoff-Sexton
Capital Stock--Common Shares, Rights and Series A Preferred Stock") to provide
that the execution, delivery and performance of the Merger Agreement, the Stock
Option Agreements and the Support Agreement will not (i) cause any "Rights" (as
defined in the Rykoff-Sexton Rights Agreement) to become exercisable, (ii) cause
JP Foodservice or any of its affiliates or associates to become an "Acquiring
Person" (as defined in the Rykoff-Sexton Rights Agreement) or (iii) give rise to
a "Distribution Date" or "Triggering Event" (as each such term is defined in the
Rykoff-Sexton Rights Agreement). For a more complete description of the Rykoff-
Sexton Rights Agreement, see "Description of Rykoff-Sexton Capital Stock--Common
Shares, Rights and Series A Preferred Stock."
Clearance Under Federal Antitrust Laws
The Merger is subject to the requirements of the HSR Act, which provides
that certain acquisition transactions (including the Merger) may not be
consummated until certain information has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. JP Foodservice and Rykoff-Sexton filed the required information and
material with respect to the Merger with the Antitrust Division and the FTC on
July 3, 1997. The required waiting period under the HSR Act with respect to such
filings will expire on August 2, 1997, unless extended by a request for
additional information or documentary material or unless early termination of
the waiting period is granted. Merrill Lynch & Co., Inc., Merrill Lynch Capital
Appreciation Partnership No. B-XVIII, L.P., and Merrill Lynch Capital
Appreciation Partnership No. XIII, L.P. filed the required information with the
Antitrust Division and the FTC on ________, 1997. The required waiting period
under the HSR Act with respect to such filing will expire on __________, 1997,
unless extended. ML Offshore LBO Partnership No. B-XVIII filed the required
information with the Antitrust Division and the FTC on _____________, 1997. The
required waiting period under the HSR Act with respect to such filing will
expire on __________, 1997, unless extended. Satisfaction or termination of the
waiting period requirement with respect to any such filing does not preclude the
Antitrust Division, the FTC or any other party either before or after the
Effective Time from challenging or seeking to delay or enjoin the Merger on
antitrust or other grounds. There can be no assurance that such a challenge will
not be made or, if made, would not succeed.
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Accounting Treatment
It is intended that the Merger will be accounted for by JP Foodservice as a
pooling of interests in accordance with generally accepted accounting
principles. It is a condition to the consummation of the Merger that (i) Rykoff-
Sexton and JP Foodservice receive a letter, dated as of the Closing Date, from
Rykoff-Sexton's independent accountants stating that Rykoff-Sexton will meet the
criteria for pooling of interests accounting under APB Opinion No. 16 and
applicable SEC rules and regulations and (ii) JP Foodservice and Rykoff-Sexton
receive a letter, dated as of the Closing Date, from JP Foodservice's
independent accountants stating that the Merger will qualify for accounting as a
pooling of interests under APB Opinion No. 16 and applicable SEC rules and
regulations. See "The Merger Agreement--Conditions; Waivers--Conditions to Each
Party's Obligations to Effect the Merger."
Listing of JP Foodservice Common Shares on the NYSE
It is a condition to each party's obligation to consummate the Merger that
the JP Foodservice Common Shares to be issued pursuant to the Merger (including
shares issuable upon exercise of the Assumed Options and Assumed Warrants) be
approved for listing on the NYSE, subject only to official notice of issuance.
JP Foodservice has agreed to use its best efforts to cause such shares to be so
approved for listing, subject only to official notice of issuance, prior to the
Effective Time.
Absence of Dissenters' Rights
Both JP Foodservice and Rykoff-Sexton are incorporated under the laws of
the State of Delaware, and, accordingly, are governed by the provisions of the
DGCL. Pursuant to Section 262(b)(1) of the DGCL, the stockholders of Rykoff-
Sexton are not entitled to appraisal rights in connection with the Merger
because Rykoff-Sexton Common Shares are listed on the NYSE and such stockholders
will receive as consideration in the Merger only shares of JP Foodservice Common
Shares, which shares will be listed on the NYSE upon the closing of the Merger,
and cash in lieu of fractional shares. In addition, JP Foodservice stockholders
are not entitled to appraisal rights under Section 262 of the DGCL because, even
though approval of such stockholders is required for the issuance of JP
Foodservice Common Shares in the Merger pursuant to the requirements of the
NYSE, JP Foodservice is not a constituent corporation in the Merger.
Exchange of Certificates
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail a letter of transmittal and instructions to each holder of
record (other than JP Foodservice, Merger Sub or any other subsidiary of JP
Foodservice) of certificates that immediately prior to the Effective Time
represented outstanding
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Rykoff-Sexton Common Shares (the "Certificates"). Such letter of transmittal and
instructions are to be used in forwarding the Certificates for surrender and
exchange for the Merger Consideration. After the Effective Time there will be no
further registrations of transfers on the stock transfer books of the Surviving
Corporation of the Rykoff-Sexton Common Shares which were outstanding
immediately prior to the Effective Time. RYKOFF-SEXTON STOCKHOLDERS ARE
REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL SUCH LETTER OF
TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. At and after the Effective Time and
until surrendered as provided above, Certificates will represent solely the
right to receive the Merger Consideration and the holders of Certificates will
not be entitled to receive dividends or any other distributions from JP
Foodservice after the Effective Time in respect of such JP Foodservice Common
Shares until such Certificates are so surrendered. Upon surrender of a
Certificate, there will be paid to the person in whose name such JP Foodservice
Common Shares are issued any dividends or other distributions with a record date
after the Effective Time and which became payable prior to such surrender with
respect to such JP Foodservice Common Shares. After such surrender, there will
be paid to the person in whose name the JP Foodservice Common Shares are issued
any dividends or other distributions on such shares that have a record date
after the Effective Time and a payment date after such surrender, and such
payment will be made on such payment date. In no event shall the persons
entitled to receive such dividends or other distributions be entitled to receive
interest on such dividends or other distributions. Upon consummation of the
Merger, the Rykoff-Sexton Common Shares will cease to be traded on the NYSE, and
there will be no further market for Rykoff-Sexton Common Shares.
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THE MERGER AGREEMENT
This section of the Joint Proxy Statement/Prospectus describes all material
terms of the Merger Agreement. The following description, however, does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, which is attached hereto as Appendix A and is incorporated
herein by reference. Capitalized terms used herein and not otherwise defined
have the meanings given to such terms in the Merger Agreement.
General
Subject to the terms and conditions of the Merger Agreement, Rykoff-Sexton
will be merged with and into Merger Sub at the Effective Time. The separate
corporate existence of Rykoff-Sexton will then cease, and Merger Sub will be the
Surviving Corporation and will continue to be governed by the laws of the State
of Delaware.
Certificate of Incorporation and By-laws of Surviving Corporation. The
Merger Agreement provides that the certificate of incorporation of Merger Sub as
in effect immediately prior to the Effective Time will become the certificate of
incorporation of the Surviving Corporation, except that Article First of such
certificate of incorporation will be amended to change the name of Merger Sub to
"Rykoff-Sexton, Inc." The by-laws of Merger Sub in effect at the Effective Time
will become the by-laws of the Surviving Corporation.
Directors and Officers of Surviving Corporation. The directors and officers
of Merger Sub at the Effective Time will become the directors and officers of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal.
Directors and Executive Officers of JP Foodservice. See "Management of JP
Foodservice After the Merger" for a description of terms of the Merger Agreement
providing for (i) the JP Foodservice Board of Directors after the Effective Time
to consist of nine directors of JP Foodservice, five persons who are currently
directors of Rykoff-Sexton, two persons to be designated by MLCP, and one
additional person to be selected by the Chief Executive Officer of JP
Foodservice, and (ii) the division of senior management positions of JP
Foodservice after the Effective Time among the existing senior management of JP
Foodservice and Rykoff-Sexton.
Conversion of Rykoff-Sexton Common Shares. At the Effective Time, each
issued and outstanding Rykoff-Sexton Common Share (other than such shares, if
any, owned by JP Foodservice, Merger Sub or Rykoff-Sexton, which will be
canceled) will be converted into the right to receive 0.84 of a JP Foodservice
Common Share. If, prior to the Effective Time, the outstanding Rykoff-Sexton
Common Shares or JP Foodservice Common Shares are changed into a different
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number of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities is declared thereon with a record date within such period, the
Exchange Ratio will be adjusted accordingly to provide the holders of Rykoff-
Sexton Common Shares with the same economic effect as contemplated by the Merger
Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
Fractional Shares. No fractional JP Foodservice Common Shares will be
issued in the Merger. In lieu of any such fractional shares, each holder of
Rykoff-Sexton Common Shares pursuant to the Merger will be paid an amount in
cash (without interest) determined by multiplying (a) the fractional interest to
which such holder otherwise would be entitled by (b) the average of the closing
prices of JP Foodservice Common Shares as reported on the NYSE Composite
Reporting Tape (as reported in The Wall Street Journal, or, if not reported
therein, any other authoritative source) during the ten trading days preceding
the fifth trading day prior to the Closing Date. As soon as practicable after
the determination of the amount of cash, if any, to be paid to former
stockholders of Rykoff-Sexton in lieu of any fractional interests, JP
Foodservice will deposit with the Exchange Agent the cash necessary for such
purpose.
Assumption of Options and Warrants. At the Effective Time (i) each Option
will be converted into an option (an "Assumed Option") to acquire, on the same
terms and conditions that were applicable under such Option, a number of JP
Foodservice Common Shares equal to the product, rounded to the nearest whole
share, of the number of Rykoff-Sexton Common Shares subject to such Option
immediately prior to the Effective Time and the Exchange Ratio, at a price per
share equal to the aggregate exercise price per Rykoff-Sexton Common Share
subject to such Option divided by the Exchange Ratio and rounded to the nearest
whole cent; and (ii) each Warrant will be assumed by JP Foodservice and will
constitute a warrant (an "Assumed Warrant") to acquire, on the same terms and
conditions that were applicable under such Warrant, a number of JP Foodservice
Common Shares equal to the number of JP Foodservice Common Shares that a holder
of such Warrant would have received in the Merger if such holder had exercised
such Warrant for Rykoff-Sexton Common Shares immediately prior to the Effective
Time, at a price per share equal to the aggregate exercise price for the Rykoff-
Sexton Common Shares subject to such Warrant divided by the number of JP
Foodservice Common Shares that a holder of such Assumed Warrant would have
received in the Merger if such holder had exercised such Warrant for Rykoff-
Sexton Common Shares immediately prior to the Effective Time. As soon as
practicable following the Effective Time, and upon surrender of the outstanding
Options and Warrants, JP Foodservice will deliver to holders of Assumed Options
and Assumed Warrants appropriate option and warrant agreements representing the
right to acquire JP Foodservice Common Shares on the same terms and conditions
as contained in the Assumed Options and Assumed Warrants (subject to any
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adjustments required by the preceding sentence). JP Foodservice will take all
corporate action necessary to reserve for issuance a sufficient number of JP
Foodservice Common Shares for delivery upon exercise of the Assumed Options and
Assumed Warrants.
JP Foodservice will file one or more registration statements on Form S-8
(or any successor form) or another appropriate form, effective as of, or
reasonably promptly following, the Effective Time, with respect to JP
Foodservice Common Shares subject to Assumed Options and will use commercially
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and the prospectus or prospectuses contained
therein) for so long as the Assumed Options remain outstanding.
Effective Time
The Merger will be consummated and become effective at the time of the
filing of a certificate of merger pursuant to the DGCL with the Secretary of
State of the State of Delaware (or at such later date and time as JP Foodservice
and Rykoff-Sexton shall agree and specify in such certificate), which will be as
soon as practicable on the Closing Date.
Representations and Warranties
The Merger Agreement contains various representations and warranties of the
parties thereto. The Merger Agreement includes representations and warranties
by Rykoff-Sexton as to, among other things, the following: (a) the corporate
organization, standing and power of Rykoff-Sexton and its subsidiaries and the
nature of Rykoff-Sexton's investments in its significant subsidiaries, (b)
Rykoff-Sexton's capitalization, (c) the authorization of the Merger Agreement
and the Option Agreements, (d) the noncontravention by the Merger Agreement or
the Option Agreements of any agreement, law, order or charter or by-law
provision, the absence of the need (except as specified) for governmental or
third-party consents to the Merger, (e) the accuracy of Rykoff-Sexton's
documents required to be filed with the SEC, (f) the absence of any undisclosed
liabilities, (g) the accuracy of information to be supplied by Rykoff-Sexton for
inclusion in this Joint Proxy Statement/Prospectus and in the Registration
Statement, (h) the conduct of Rykoff-Sexton's business in the ordinary course,
and the absence of any material adverse change in the business, financial
condition, results of operations, properties, assets or liabilities of Rykoff-
Sexton and its subsidiaries since April 27, 1996, (i) compliance with applicable
laws, (j) pending or threatened litigation, (k) the terms, existence,
operations, liabilities and compliance with applicable laws of employee plans of
Rykoff-Sexton and its subsidiaries, certain other matters relating to the
Employee Retirement Income Security Act of 1974, as amended, and certain labor
matters, (l) payment of taxes and certain other tax matters, (m) the stockholder
vote required for the adoption of the Merger Agreement, (n) the inapplicability
of
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state takeover statutes and certain provisions of Rykoff-Sexton's Certificate
of Incorporation, (o) the absence of any action by Rykoff-Sexton or its
affiliates that would prevent the Merger from being accounted for as a pooling
of interests, (p) brokers and finders employed by Rykoff-Sexton, (q) the
fairness opinions received by Rykoff-Sexton, (r) ownership of JP Foodservice
Common Shares, (s) ownership of and rights to use certain intellectual property,
(t) certain contracts of Rykoff-Sexton, (u) the nonapplicability of the Rykoff-
Sexton Rights Agreement and (v) certain environmental matters.
The Merger Agreement also includes representations and warranties by JP
Foodservice and Merger Sub as to, among other things, the following: (a) the
corporate organization, standing and power of JP Foodservice and its
subsidiaries and the nature of JP Foodservice's investments in its significant
subsidiaries, (b) JP Foodservice's capitalization, (c) the authorization of the
Merger Agreement, (d) the noncontravention by the Merger Agreement or the Option
Agreements of any agreement, law, order or charter or by-law provision and the
absence of the need (except as specified) for governmental or third-party
consents to the Merger, (e) the accuracy of JP Foodservice's documents required
to be filed with the SEC, (f) the absence of any undisclosed liabilities, (g)
the accuracy of information to be supplied by JP Foodservice for inclusion in
this Joint Proxy Statement/Prospectus and in the Registration Statement, (h) the
conduct of JP Foodservice's business in the ordinary course and the absence of
any material adverse change in the business, financial condition, results of
operations, properties, assets or liabilities of JP Foodservice and its
subsidiaries since June 29, 1996, (i) compliance with applicable laws, (j)
pending or threatened litigation, (k) the terms, existence, operations,
liabilities and compliance with applicable laws of employee plans of JP
Foodservice and its subsidiaries, and certain other matters relating to the
Employee Retirement Income Security Act of 1974, as amended, and certain labor
matters, (l) payment of taxes and certain other tax matters, (m) the stockholder
vote required for the adoption of the Merger Agreement and the Merger and the
issuance of JP Foodservice Common Shares in connection therewith, (n) the
inapplicability of state takeover statutes, (o) the absence of any action by JP
Foodservice or its affiliates that would prevent the Merger from being accounted
for as a pooling of interests, (p) brokers and finders employed by JP
Foodservice, (q) the fairness opinions received by JP Foodservice, (r)
ownership of Rykoff-Sexton Common Shares, (s) ownership of and rights to use
certain intellectual property, (t) certain contracts of JP Foodservice, (u) the
nonapplicability of the JP Foodservice Rights Agreement and (v) certain
environmental matters.
The representations and warranties of each of the parties contain various
customary exceptions for materiality, knowledge and previously disclosed
information. The representations and warranties of each of the parties are
deemed to be conditions to the Merger to the extent provided for in the Merger
Agreement, but will not survive the Merger.
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Business of Rykoff-Sexton Pending the Merger
Rykoff-Sexton has agreed that, among other things, prior to the Effective
Time, except as contemplated by the Merger Agreement, as set forth in Rykoff-
Sexton's Disclosure Statement or as otherwise permitted by the prior written
consent of JP Foodservice, Rykoff-Sexton and its subsidiaries will (i) each
conduct its business in the ordinary course consistent with past practice and in
compliance with all material laws, and (ii) use all reasonable efforts to
preserve intact its current business organizations, use reasonable efforts to
keep available the services of its current officers and other key employees and
preserve its relationships with those persons having business dealings with it
so that their goodwill and ongoing businesses will be unimpaired at the
Effective Time. Rykoff-Sexton has agreed that, unless JP Foodservice agrees in
writing or except as previously disclosed to JP Foodservice or otherwise
permitted pursuant to the Merger Agreement, prior to the Effective Time neither
Rykoff-Sexton nor any of its subsidiaries will:
(a) other than dividends and distributions by a direct or indirect wholly-
owned subsidiary of Rykoff-Sexton to its parent, or by a subsidiary that is
partially owned by Rykoff-Sexton or any of its subsidiaries, provided that
Rykoff-Sexton or any such subsidiary receives or is to receive its proportionate
share thereof, or regular semi-annual dividends not to exceed $.03 per share,
(i) declare, set aside or pay any dividends on, make any other distributions in
respect of, or enter into any agreement with respect to the voting of any of its
capital stock, (ii) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, except for issuance of
Rykoff-Sexton Common Shares upon the exercise of Rykoff-Sexton Employee Stock
Options or the Assumed Warrants, in each case, outstanding as of the date of the
Merger Agreement in accordance with their terms (including cashless exercise) or
issued pursuant to paragraph (b) below or (iii) purchase, redeem or otherwise
acquire any shares of capital stock of Rykoff-Sexton or any of its subsidiaries
or any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities (except, in the case of this clause (iii),
for the deemed acceptance of shares upon cashless exercise of Rykoff-Sexton
Employee Stock Options outstanding on the date of the Merger Agreement, or in
connection with withholding obligations relating thereto);
(b) issue, deliver, sell, pledge or otherwise encumber or subject to any
Lien any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities (other than the
issuance of Rykoff-Sexton Common Shares upon the exercise or conversion of
Rykoff-Sexton Employee Stock Options or the Assumed Warrants, in each case,
outstanding as of the date of the Merger Agreement in accordance with their
terms or the issuance of Rykoff-Sexton Employee Stock Options (and Rykoff-Sexton
Common Shares upon the exercise thereof) granted after the date of the Merger
Agreement in the ordinary course of
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business consistent with past practice for employees (so long as such additional
amount of Rykoff-Sexton Common Shares subject to Rykoff-Sexton Employee Stock
Options issued to such employees does not exceed 250,000 Rykoff-Sexton Common
Shares in the aggregate);
(c) amend its certificate of incorporation, by-laws or other comparable
organizational documents;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any person, or, except for transactions in the ordinary course of
business consistent with past practice pursuant to contracts or agreements in
force at the date of the Merger Agreement or pursuant to Rykoff-Sexton's capital
and operating budgets that were current as of the date of the Merger Agreement,
make any material investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other individual, corporation or other entity other than a
subsidiary of Rykoff-Sexton;
(e) sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets (including
securitizations), other than in the ordinary course of business consistent with
past practice;
(f) take any action that would cause the representations and warranties
set forth in the Merger Agreement and qualified as to materiality to be no
longer true and correct or, if not so qualified, to be no longer true and
correct in all material respects;
(g) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed money, other than
pursuant to a revolving credit facility or receivables facility in effect as of
the date of the Merger Agreement, in the ordinary course of business consistent
with past practice;
(h) settle any material claim, action or proceeding involving money
damages, except in the ordinary course of business consistent with past
practice;
(i) enter into or terminate any material contract or agreement, or make
any change in any of its material leases or contracts, other than amendments or
renewals of contracts and leases without material adverse change of terms; or
(j) authorize, or commit or agree to take, any of the foregoing actions.
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Business of JP Foodservice Pending the Merger
JP Foodservice has agreed that, among other things, prior to the Effective
Time, except as contemplated by the Merger Agreement, as set forth in the JP
Foodservice Disclosure Statement or as otherwise permitted by the prior written
consent of Rykoff-Sexton, JP Foodservice and its subsidiaries will (i) each
conduct its business in the ordinary course consistent with past practice, and
(ii) use all reasonable efforts to preserve intact its current business
organizations, use reasonable efforts to keep available the services of its
current officers and other key employees and preserve its relationships with
those persons having business dealings with it so that its goodwill and ongoing
businesses will be unimpaired at the Effective Time. JP Foodservice has agreed
that, unless Rykoff-Sexton agrees in writing or except as previously disclosed
to Rykoff-Sexton or otherwise permitted by the Merger Agreement, prior to the
Effective Time neither JP Foodservice nor any of its subsidiaries will:
(a) other than dividends and distributions by a direct or indirect wholly-
owned subsidiary of JP Foodservice to its parent, or by a subsidiary that is
partially owned by JP Foodservice or any of its subsidiaries, provided that JP
Foodservice or any such subsidiary receives or is to receive its proportionate
share thereof, (i) declare, set aside or pay any dividends on, make any other
distributions in respect of, or enter into any agreement with respect to the
voting of, any of its capital stock, (ii) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
except for issuances of JP Foodservice Common Shares upon the exercise of JP
Foodservice Employee Stock Options outstanding as of the date of the Merger
Agreement in accordance with their terms (including cashless exercise) or issued
pursuant to paragraph (b) below, or (iii) purchase, redeem or otherwise acquire
any shares of capital stock of JP Foodservice or any of its subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities (except, in the case of clause (iii), for the deemed
acceptance of shares upon cashless exercise of JP Foodservice Employee Stock
Options, or in connection with withholding obligations relating thereto);
(b) issue, deliver, sell, pledge or otherwise encumber or subject to any
Lien any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities (other than the
issuance of JP Foodservice Common Shares upon the exercise of JP Foodservice
Employee Stock Options outstanding as of the date of the Merger Agreement in
accordance with their terms or the issuance of JP Foodservice Employee Stock
Options (and JP Foodservice Common Shares upon the exercise thereof) granted
after the date of the Merger Agreement in the ordinary course of business
consistent with past practice for employees (so long as such additional amount
of JP Foodservice Common Shares
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subject to JP Foodservice Employee Stock Options issued to such employees does
not exceed 300,000 JP Foodservice Common Shares in the aggregate);
(c) except as contemplated by the Merger Agreement, amend its certificate
of incorporation, by-laws or other comparable organizational documents;
(d) acquire or agree to acquire by merger or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any person or, except for transactions in the ordinary course of
business consistent with past practice pursuant to contracts or agreements in
force at the date of the Merger Agreement or pursuant to JP Foodservice's
capital and operating budgets that were current as of the date of the Merger,
make any material investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other individual, corporation or other entity other than a
subsidiary of JP Foodservice;
(e) sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets (including
securitizations), other than in the ordinary course of business consistent with
past practice;
(f) take any action that would cause the representations and warranties
set forth in the Merger Agreement and qualified as to materiality to be no
longer true and correct or, if not so qualified, to be no longer true and
correct in all material respects;
(g) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed money, other than
pursuant to a revolving credit facility or receivables facility in effect as of
the date of the Merger Agreement, in the ordinary course of business consistent
with past practice;
(h) settle any claim, action or proceeding involving money damages, except
in the ordinary course of business consistent with past practice;
(i) enter into or terminate any material contract or agreement, or make
any change in any of its material leases or contracts, other than amendments or
renewals of contracts and leases without material adverse changes of terms; or
(j) authorize, or commit or agree to take, any of the foregoing actions.
No Solicitation
Under the Merger Agreement, Rykoff-Sexton and JP Foodservice have agreed
that, prior to the Effective Time, they will not directly or indirectly solicit
or
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encourage (including by way of furnishing information), or authorize any
individual, corporation or other entity to solicit or encourage (including by
way of furnishing information), from any third party any inquiries or proposals
relating to, or conduct negotiations or discussions with any third party with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or that may reasonably be expected to lead to,
any proposal or offer relating to the disposition of its business or assets, or
the acquisition of its voting securities, or the merger or consolidation of it
or any of its subsidiaries with or into any corporation or other entity other
than as provided in the Merger Agreement, the Option Agreements or the Support
Agreement (and each party is required to notify promptly the other of all of the
relevant details relating to all inquiries and proposals which it may receive
relating to any such matters).
Certain Other Covenants
Under the Merger Agreement, both JP Foodservice and Rykoff-Sexton have
agreed as follows: (a) to use best efforts to take, or cause to be taken, all
actions and do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by the Merger Agreement; (b) to
afford access to officers, employees, counsel, accountants and other authorized
representatives of the other party, during the period prior to the Effective
Time, to their respective properties, books, contracts, commitments, personnel
and records and, during such period, to furnish promptly to such representatives
(i) all information filed by it pursuant to the requirements of federal and
state securities laws and (ii) all information concerning their respective
businesses, properties and personnel as may reasonably be requested; (c) that
Rykoff-Sexton will use best efforts to cause each person deemed to be an
affiliate of Rykoff-Sexton to deliver to JP Foodservice not less than 30 days
prior to the Effective Time, an affiliate letter with respect to Rule 145 under
the Securities Act, in the form attached to the Merger Agreement; (d) that JP
Foodservice will use its best efforts to cause the JP Foodservice Common Shares
issuable pursuant to the Merger Agreement (including shares issuable upon
exercise of the Assumed Options and Assumed Warrants) to be approved for listing
on the NYSE, subject only to official notice of issuance prior to the Closing
Date; (e) to use their best efforts to cause the Merger to qualify as a
reorganization under the provisions of Rule 368 of the Code; (f) to use their
best efforts to cause the Merger to be accounted for as a pooling of interests
under APB Opinion No. 16 and applicable SEC rules and regulations; (g) to
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding certain transfer,
recording, registration and similar taxes and fees payable in connection with
the transactions contemplated by the Merger Agreement; and (h) not to treat the
Merger as a change in the ownership or effective control of Rykoff-Sexton or a
change in the ownership of a substantial portion of the assets of Rykoff-Sexton,
each within the meaning of Section 280G of the Code.
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Under the Merger Agreement, Rykoff-Sexton and JP Foodservice have agreed to
take all action necessary in accordance with applicable law to convene the
Rykoff-Sexton Special Meeting and the JP Foodservice Special Meeting as promptly
as practicable after the Registration Statement is declared effective under the
Securities Act. In addition, the Merger Agreement provides that the Boards of
Directors of both JP Foodservice and Rykoff-Sexton will recommend and declare
advisable such approval. Under the Merger Agreement, Rykoff-Sexton and JP
Foodservice have also agreed to cooperate and prepare the Registration Statement
which JP Foodservice has agreed to file with the SEC as soon as practicable
after the date of the Merger Agreement.
Under the Merger Agreement, (a) JP Foodservice has agreed that (i) it will,
and will cause Merger Sub to, honor in accordance with their respective terms,
and assume and agree to perform, in the same manner and to the same extent that
Rykoff-Sexton would be required to do if the Merger had not taken place, the
Rykoff-Sexton Benefit Plans, the Rykoff-Sexton Stock Plans (subject to the
provisions of the Merger Agreement relating to the Assumed Options and the
Assumed Warrants) and all employment, severance and change in control agreements
in effect as of the date of the Merger Agreement and (ii) the consummation of
the Merger constitutes a change of control for the purpose of any such Plan or
agreement that contains a provision relating to a change in control of Rykoff-
Sexton that is disclosed in the Rykoff-Sexton Disclosure Schedule and (b) JP
Foodservice and Rykoff-Sexton have agreed to cooperate on and after the date of
the Merger Agreement to develop appropriate employee benefit plans, programs and
arrangements, including, but not limited to, executive and incentive
compensation, stock option, and supplemental executive retirement plans, for
employees and directors of the Surviving Corporation, provided that nothing in
the foregoing will prevent the Surviving Corporation from amending, modifying or
terminating any Rykoff-Sexton Stock Plans or Rykoff-Sexton Benefit Plans, or
other contracts, arrangements, commitments or understandings, in accordance with
their terms and applicable law, or be deemed to constitute an employment
contract between JP Foodservice or the Surviving Corporation and any individual,
or a waiver of JP Foodservice's or the Surviving Corporation's right to
discharge any employee at any time without cause.
At or prior to the Effective Time, JP Foodservice and Rykoff-Sexton will
terminate Mark Van Stekelenburg's employment with Rykoff-Sexton (which
termination will be deemed to be involuntary and without "cause") and pay Mark
Van Stekelenburg all amounts owing under his existing employment and change in
control agreements, and other plans and agreements to which he is a party,
subject to the provisions of the JP/Van Stekelenburg Employment Agreement, and
JP Foodservice will execute and deliver the JP/Van Stekelenburg Employment
Agreement. At the Effective Time, Rykoff-Sexton may pay the amounts due under
the change in control agreement of any executive that terminates his employment
for good reason based upon the management and other changes occurring on the
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Effective Date. Mr. Van Stekelenburg is the only officer of Rykoff-Sexton who
is a party to an employment or change in control agreement entitling him to
terminate his employment following a change in control at his sole discretion,
for any reason whatsoever, with rights to severance compensation. See "--
Interest of Certain Persons in the Merger" and "Management of JP Foodservice
After the Merger--Executive Compensation."
Under the Merger Agreement, JP Foodservice has agreed to maintain in effect
in accordance with their terms all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the Effective
Time existing as of the date of the Merger Agreement in favor of the current or
former directors or officers of Rykoff-Sexton and its subsidiaries (and any of
their respective predecessors, including, without limitation, US Foodservice,
that was merged within and into USF Acquisition Corporation on May 17, 1996) as
provided in their respective certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification agreements of
Rykoff-Sexton or in the Agreement and Plan of Merger dated February 2, 1996
among Rykoff-Sexton, USF Acquisition Corporation and US Foodservice. In
addition, JP Foodservice has agreed to cause the directors and officers of
Rykoff-Sexton who become directors or officers of JP Foodservice to be entitled
to the same indemnity rights and protections, and directors' and officers'
liability insurance, as are afforded from time to time to other directors and
officers of JP Foodservice from and after the Effective Time. JP Foodservice has
agreed to use its best efforts to provide to Rykoff-Sexton's current directors
and officers, for six years after the Effective Time, liability insurance
covering acts or omissions occurring prior to the Effective Time with respect to
those persons who are currently covered by Rykoff-Sexton's directors' and
officers' liability insurance policy on terms with respect to such coverage and
amount no less favorable than those of such policy in effect on the date of the
Merger Agreement, provided that in no event will JP Foodservice be required to
expend more than 200% of the current amount expended by Rykoff-Sexton to
maintain such coverage.
Under the Merger Agreement, JP Foodservice and Rykoff-Sexton have agreed
that from the date of the Merger Agreement through the Effective Time, except as
they may subsequently agree in writing, neither will terminate, amend, modify or
waive any provision of any confidentiality or standstill agreement to which it
or its subsidiaries is a party and each will enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreement.
Under the terms of the Merger Agreement, following the Effective Time, JP
Foodservice will maintain its headquarters and principal corporate offices in
Columbia, Maryland.
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Conditions; Waivers
Conditions to Each Party's Obligations to Effect the Merger. The respective
obligations of JP Foodservice, Rykoff-Sexton and Merger Sub to effect the Merger
are subject to the fulfillment at or prior to the Effective Time of each of the
following conditions (any of which may be waived in whole or in part under the
Merger Agreement by the party benefiting thereby, to the extent permitted by
applicable law): (a) the Rykoff-Sexton stockholders shall have approved the
Rykoff-Sexton Proposal and the JP Foodservice stockholders shall have approved
the JP Foodservice Proposal; (b) the waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired; (c) all consents, approvals and actions of, filings with and
notices to any Governmental Entity required to consummate the Merger and the
other transactions contemplated by the Merger Agreement other than the filing of
a certificate of merger in accordance with the DGCL, shall have been obtained
except as would not have a material adverse effect on any of Rykoff-Sexton, JP
Foodservice or the Surviving Corporation; (d) there shall not be any judgment,
order, decree, statute, law, ordinance, rule or regulation entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition in effect (i)
preventing the consummation of the Merger or (ii) which otherwise is reasonably
likely to have a material adverse effect on Rykoff-Sexton or JP Foodservice; (e)
the Registration Statement shall have become effective under the Securities Act
and no stop order or proceedings seeking a stop order shall be threatened by the
SEC or shall have been initiated by the SEC; (f) the JP Foodservice Common
Shares issuable to Rykoff-Sexton's stockholders shall have been approved for
listing on the NYSE subject to official notice of issuance; (g) JP Foodservice
shall have received from Wachtell, Lipton, Rosen & Katz, counsel to JP
Foodservice, and Rykoff-Sexton shall have received from Jones, Day, Reavis &
Pogue, counsel to Rykoff-Sexton, an opinion, dated the Closing Date,
substantially to the effect that: (i) the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and JP
Foodservice and Rykoff-Sexton will each be a party to such reorganization within
the meaning of Section 368(b) of the Code, (ii) no gain or loss will be
recognized by JP Foodservice or Rykoff-Sexton as a result of the Merger, (iii)
no gain or loss will be recognized by the stockholders of Rykoff-Sexton upon the
exchange of their Rykoff-Sexton Common Shares solely for JP Foodservice Common
Shares pursuant to the Merger, except with respect to cash, if any, received in
lieu of fractional JP Foodservice Common Shares, (iv) the aggregate tax basis of
the JP Foodservice Common Shares received solely in exchange for Rykoff-Sexton
Common Shares pursuant to the Merger (including fractional JP Foodservice Common
Shares for which cash is received) will be the same as the aggregate tax basis
of the Rykoff-Sexton Common Shares exchanged therefor and (v) the holding period
for JP Foodservice Common Shares received in exchange for Rykoff-Sexton Common
Shares pursuant to the Merger will include the holding period of the Rykoff-
Sexton Common Shares exchanged therefor, provided such Rykoff-Sexton Common
Shares were held as capital assets
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by the stockholder at the Effective Time; and (h) Rykoff-Sexton and JP
Foodservice shall have received a letter, dated as of the Closing Date, from
Rykoff-Sexton's independent accountants stating that Rykoff-Sexton will meet the
criteria for pooling of interests accounting under APB Opinion No. 16 and
applicable SEC rules and regulations and JP Foodservice and Rykoff-Sexton shall
have received a letter, dated as of the Closing Date, from JP Foodservice's
independent accountants stating that the Merger will qualify for accounting as a
pooling of interests under APB Opinion No. 16 and applicable SEC rules and
regulations.
Conditions to the Obligations of JP Foodservice. The obligation of JP
Foodservice to effect the Merger is subject to the fulfillment at or prior to
the Effective Time of each of the following conditions (any and all of which may
be waived in whole or in part under the Merger Agreement by JP Foodservice to
the extent permitted by applicable law): (a) each of the representations and
warranties of Rykoff-Sexton in the Merger Agreement shall be true and correct
both when made and at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which case
as of such date), except where the failure of such representations or warranties
to be so true and correct (without giving effect to any limitation as to
materiality or material adverse effect set forth therein) does not have, and is
not likely to have, individually or in the aggregate, a material adverse effect
on Rykoff-Sexton; (b) Rykoff-Sexton shall have performed in all material
respects all obligations required to be performed by it under the Merger
Agreement at or prior to the Closing Date; (c) there shall not have occurred any
material adverse change relating to Rykoff-Sexton; and (d) the Rykoff-Sexton
Rights issued pursuant to the Rykoff-Sexton Rights Agreement shall not have
become nonredeemable, exercisable, distributed or triggered pursuant to the
terms of such agreement.
Conditions to the Obligations of Rykoff-Sexton. The obligation of Rykoff-
Sexton to effect the Merger is subject to the fulfillment at or prior to the
Effective Time of each of the following conditions (any and all of which may be
waived in whole or in part under the Merger Agreement by Rykoff-Sexton to the
extent permitted by applicable law): (a) each of the representations and
warranties of JP Foodservice shall be true and correct both when made and at and
as of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
where the failure of such representations or warranties to be so true and
correct (without giving effect to any limitation as to materiality or material
adverse effect set forth therein) does not have, and is not likely to have,
individually or in the aggregate, a material adverse effect on JP Foodservice;
(b) JP Foodservice shall have performed in all material respects all obligations
required to be performed by it under the Merger Agreement at or prior to the
Closing Date; (c) there shall not have occurred any material adverse change
relating to JP Foodservice; and (d) the JP Foodservice Rights issued pursuant to
the JP Foodservice Rights Agreement shall not have become
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nonredeemable, exercisable, distributed or triggered pursuant to the terms of
such agreement.
Amendment; Termination
Amendment. The parties to the Merger Agreement may not amend the Merger
Agreement except by an instrument in writing signed on behalf of all the parties
to the Merger Agreement and duly approved by the parties' respective Boards of
Directors or a duly designated committee thereof. The Merger Agreement may be
amended by the parties thereto, at any time before or after approval of matters
presented in connection with the Merger by the stockholders of JP Foodservice,
Rykoff-Sexton and Merger Sub, but after any such stockholder approval, no
amendment may be made that changes the amount or form of the consideration to be
delivered to holders of Rykoff-Sexton Common Shares or which by law otherwise
requires the further approval of stockholders without obtaining such approval.
Termination by Mutual Consent. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of matters presented in connection with the Merger by
stockholders of Rykoff-Sexton or stockholders of JP Foodservice, by the mutual
written consent of Rykoff-Sexton and JP Foodservice, if the Board of Directors
of each so determines by a vote of a majority of its entire Board of Directors.
Termination by Either Rykoff-Sexton or JP Foodservice. The Merger
Agreement may also be terminated and the Merger may be abandoned by action of
the Board of Directors of either Rykoff-Sexton or JP Foodservice at any time
prior to the Effective Time, before or after approval of matters presented in
connection with the Merger by stockholders of Rykoff-Sexton or stockholders of
JP Foodservice, if (a) the Merger is not consummated by April 1, 1998 (provided
that the right to terminate the Merger Agreement under such provision will not
be available to any party whose failure to perform any of its obligations under
the Merger Agreement resulted in the failure of the Merger to occur on or before
such date), (b) the approval of Rykoff-Sexton's stockholders required under the
Merger Agreement shall not have been obtained at the Rykoff-Sexton Special
Meeting, (c) the approval of JP Foodservice's stockholders required under the
Merger Agreement shall not have been obtained at the JP Foodservice Special
Meeting or (d) any court of competent jurisdiction in the United States or
governmental body in the United States shall have issued a judgment, order,
decree, statute, law, ordinance, rule or regulation or taken any other action
preventing the consummation of the Merger or which otherwise is reasonably
likely to have a material adverse affect (as defined) on Rykoff-Sexton or JP
Foodservice and such order, decree, statute, law, ordinance, rule, regulation or
other action shall have become final and nonappealable (provided that the party
seeking to terminate the Merger Agreement pursuant to
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such provision shall have used all reasonable efforts to remove such order,
decree, ruling or other action).
Termination by JP Foodservice. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of matters presented in connection with the Merger by holders
of JP Foodservice Common Shares or Rykoff-Sexton Common Shares, by action of the
JP Foodservice Board of Directors, if (a) Rykoff-Sexton shall have breached or
failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in the Merger Agreement,
which breach or failure (x) has, or is likely to have, individually or in the
aggregate, a material adverse effect on Rykoff-Sexton or (y) is incapable of
being cured or is not cured within 45 days of written notice thereof, and JP
Foodservice is not then in material breach of any representation, warranty,
covenant or other agreement contained in the Merger Agreement or (b) at any time
prior to the Rykoff-Sexton Special Meeting, if the Rykoff-Sexton Board of
Directors fails to make its recommendation in favor of approval of the Merger
Agreement and the Merger to the Rykoff-Sexton stockholders prior to the date of
the first mailing of this Joint Proxy Statement/Prospectus to such stockholders,
or, once made, withdraws such recommendation or modifies or changes such
recommendation in a manner adverse to the interests of JP Foodservice.
Termination by Rykoff-Sexton. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of matters presented in connection with the Merger by holders
of JP Foodservice Common Shares and Rykoff-Sexton Common Shares, by action of
the Rykoff-Sexton Board of Directors, if (a) JP Foodservice shall have breached
or failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in the Merger Agreement,
which breach or failure (x) has, or is likely to have, individually or in the
aggregate, a material adverse effect on JP Foodservice or (y) is incapable of
being cured or is not cured within 45 days of written notice thereof, and
Rykoff-Sexton is not then in material breach of any representation, warranty,
covenant or other agreement contained in the Merger Agreement or (b) at any time
prior to the JP Foodservice Special Meeting, if the JP Foodservice Board of
Directors fails to make its recommendation in favor of approval of issuance of
JP Foodservice Common Shares in connection with the Merger to the JP Foodservice
stockholders prior to the date of the first mailing of this Joint Proxy
Statement/Prospectus to such stockholders or, once made, withdraws such
recommendation or modifies or changes such recommendation in a manner adverse to
the interests of Rykoff-Sexton.
Certain Consequences of Termination. In the event of termination of the
Merger Agreement as provided above, no party to the Merger Agreement will have
any liability or further obligation under the Merger Agreement, other than with
respect to the obligations of the parties pursuant to the Termination Fee
provisions
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and the provisions of the Merger Agreement dealing with confidentiality,
expenses and certain miscellaneous matters, except that nothing in the Merger
Agreement will relieve any party from liability for any willful breach of any
provision of the Merger Agreement.
Termination Fees
JP Foodservice and Rykoff-Sexton each have agreed to pay the other a
Termination Fee of $30 million in substantially identical circumstances that
result in the termination of the Merger Agreement and abandonment of the Merger.
Payment of the Termination Fee by either company will not be subject to approval
by stockholders.
Rykoff-Sexton has agreed to pay JP Foodservice a Termination Fee in the
event that: (i) JP Foodservice terminates the Merger Agreement and abandons the
Merger as a result of a willful breach or failure by Rykoff-Sexton to perform in
any material respect any of its representations, warranties, covenants or other
agreements contained in the Merger Agreement, which breach or failure (x) has or
is likely to have, individually or in the aggregate, a material adverse effect
on Rykoff-Sexton and (y) is incapable of being cured or is not cured within 45
days of written notice; (ii) JP Foodservice terminates the Merger Agreement and
abandons the Merger at any time before the Rykoff-Sexton Special Meeting because
the Rykoff-Sexton Board of Directors shall have (A) failed to make its
recommendation in favor of approval and adoption of the Merger Agreement, the
Merger and the other transactions contemplated by the Merger Agreement no later
than the date of the first mailing of this Joint Proxy Statement/Prospectus to
the Rykoff-Sexton stockholders, (B) withdrawn such recommendation or (C)
modified or changed such recommendation in a manner adverse to the interests of
JP Foodservice; or (iii) JP Foodservice or Rykoff-Sexton terminates the Merger
Agreement and abandons the Merger as a result of the failure of the Rykoff-
Sexton stockholders to approve the Merger Agreement and the Merger if at the
time of such failure any event has occurred that would give JP Foodservice the
right to exercise the Rykoff-Sexton Option, including an acquisition or proposed
acquisition by a third party of 20% or more of the outstanding Rykoff-Sexton
Common Shares or a material portion of the assets of Rykoff-Sexton.
JP Foodservice has agreed to pay Rykoff-Sexton a Termination Fee in the
event that: (i) Rykoff-Sexton terminates the Merger Agreement and abandons the
Merger as a result of a willful breach or failure by JP Foodservice to perform
in any material respect any of its representations, warranties, covenants or
other agreements contained in the Merger Agreement, which breach or failure (x)
has or is likely to have, individually or in the aggregate, a material adverse
effect on JP Foodservice and (y) is incapable of being cured or is not cured
within 45 days of written notice; (ii) Rykoff-Sexton terminates the Merger
Agreement and abandons the Merger at any time before the JP Foodservice Special
Meeting because the JP
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Foodservice Board of Directors shall have (A) failed to make its recommendation
in favor of approval of the JP Foodservice Proposal no later than the date of
the first mailing of this Joint Proxy Statement/Prospectus to the JP Foodservice
stockholders, (B) withdrawn such recommendation or (C) modified or changed such
recommendation in a manner adverse to the interests of Rykoff-Sexton; or (iii)
Rykoff-Sexton or JP Foodservice terminates the Merger Agreement and abandons the
Merger as a result of the failure of the JP Foodservice stockholders to approve
the JP Foodservice Proposal if at the time of such failure any event has
occurred that would give Rykoff-Sexton the right to exercise the JP Foodservice
Option, including an acquisition or proposed acquisition by a third party of 20%
or more of the outstanding JP Foodservice Common Shares or a material portion of
the assets of JP Foodservice.
If JP Foodservice exercises the Rykoff-Sexton Option or Rykoff-Sexton
exercises the JP Foodservice Option, any Termination Fee payable by JP
Foodservice or Rykoff-Sexton, as applicable, pursuant to the Merger Agreement
will be reduced by the amount of any profit realized by JP Foodservice or
Rykoff-Sexton, as the case may be, upon the sale or other disposition by such
company of any shares acquired by it pursuant to exercise of the applicable
Option. A Termination Fee payment by JP Foodservice or Rykoff-Sexton will reduce
the amount of any cash payment required to be made by such company in
cancellation of the Option granted by it under the circumstances specified in
the applicable Stock Option Agreement. See "Other Agreements--Stock Option
Agreements."
Expenses
Except as provided under "--Termination Fees," each party to the Merger
Agreement will bear its own expenses, except that each of JP Foodservice and
Rykoff-Sexton shall bear and pay one-half of the costs and expenses incurred in
connection with (a) the filing, printing and mailing of the Form S-4
Registration Statement and this Joint Proxy Statement/Prospectus (including SEC
filing fees) and (b) the filing of the pre-merger notification and report forms
under the HSR Act (including filing fees).
OTHER AGREEMENTS
Support Agreement
JP Foodservice and the ML Investors entered into the Support Agreement
concurrently with the execution of the Merger Agreement. The Support Agreement,
which was acknowledged by Rykoff-Sexton, will automatically terminate if the
Merger Agreement is terminated in accordance with its terms.
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Agreement to Vote; No Solicitation. Pursuant to the Support Agreement, each
ML Investor has agreed that it will vote or cause to be voted at the Rykoff-
Sexton Special Meeting, or any adjournment or postponement thereof, and at any
other meeting of Rykoff-Sexton stockholders at which the Merger Agreement and
the Merger are submitted for approval, all of the Rykoff-Sexton Common Shares
and other voting securities, if any, of Rykoff-Sexton which it owns or has the
right to vote, for adoption of the Merger Agreement. Each ML Investor also has
agreed that it will not, directly or indirectly, solicit or encourage (including
by way of furnishing information), or authorize any individual, corporation or
other entity to solicit or encourage (including by way of furnishing
information), from any third party any inquiries or proposals relating to, or
conduct negotiations or any discussions with any third party with respect to, or
take any other action to facilitate any inquiries or the making of any proposal
that constitutes, or that may reasonably be expected to lead to, any proposal or
offer relating to the disposition of the business or assets, or the acquisition
of the voting securities, of JP Foodservice or Rykoff-Sexton, or the merger or
consolidation of JP Foodservice or Rykoff-Sexton or any of their respective
subsidiaries with or into any corporation or other entity other than as provided
in the Merger Agreement, the Option Agreements or the Support Agreement (and
each ML Investor has agreed to notify promptly JP Foodservice of all the
relevant details relating to all inquiries and proposals which such ML Investor
may receive relating to any such matters).
Pooling Covenants. To preserve the ability of JP Foodservice to account
for the Merger as a pooling of interests for financial reporting purposes, each
ML Investor has agreed not to sell, transfer or otherwise dispose of any
securities of Rykoff-Sexton or any JP Foodservice Common Shares received by such
ML Investor in the Merger or other shares of capital stock of JP Foodservice
during the period beginning 30 days prior to the Effective Time and ending at
such time as results covering at least 30 days of combined operations of Rykoff-
Sexton and JP Foodservice have been published by JP Foodservice in any
authorized filing with the SEC or in any public announcement which includes the
combined results of operations, except for transfers or other dispositions that,
taking into account the actions of other affiliates of Rykoff-Sexton, will not
prevent JP Foodservice from accounting for the Merger as a pooling of interests.
Tax Representations. To provide assurances in connection with the
qualification of the Merger as a tax-free reorganization for federal income tax
purposes, each ML Investor has agreed that, at or prior to the Effective Time,
it will represent to Rykoff-Sexton and JP Foodservice or their respective
counsel that, as of the Effective Time, (i) it has no plan or intention to sell,
exchange or otherwise dispose of, or to enter into an agreement (a "Sales
Agreement") to sell, exchange or otherwise dispose of, JP Foodservice Common
Shares during the two-year period immediately following the Effective Time and
(ii) it is not subject to or obligated to enter into an agreement to sell,
exchange or otherwise dispose of JP Foodservice Common Shares, if any resulting
sale, exchange or disposition would (when taken
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in combination with actions by other ML Investors and assuming all Sales
Agreements are consummated) cause the ML Investors in the aggregate to retain
ownership for federal income tax purposes of less than the lesser of (i) 25% of
the JP Foodservice Common Shares received by the ML Investors in the aggregate
in the Merger or (ii) the Shortfall Percent of the JP Foodservice Common Shares
issued in the Merger to stockholders of Rykoff-Sexton. For purposes of these
representations, the phrase "sell, exchange or otherwise dispose of" includes
entry into transactions in which the ML Investor gives up substantially all of
the benefits and burdens of ownership of JP Foodservice Common Shares or which
otherwise constitute a transfer of ownership of such stock for federal income
tax purposes. "Shortfall Percent" means the greater of zero or that percentage
which, when added to the following percentage, equals 45%: 100% minus the sum of
(i) the percent of JP Foodservice Common Shares issuable in the Merger that are
issuable to the ML Investors and (ii) the percent of JP Foodservice Common
Shares issuable in the Merger to stockholders of Rykoff-Sexton that are issuable
to any other persons that can be identified immediately prior to the Effective
Time as holding 5% or more of the total number of Rykoff-Sexton Common Shares
outstanding at such time (for which purposes shares held by a family of mutual
funds will, to the extent possible, be identified with separate funds within
such family and, to the extent so separately identifiable, treated as separate
stockholders).
The foregoing representations will not apply to any transfers of JP
Foodservice Common Shares during the two-year period that are incident to an
extraordinary business transaction involving JP Foodservice (such as a merger,
consolidation, tender or exchange offer, share exchange, restructuring,
recapitalization or other similar transaction), so long as any such transaction
is not arranged as part of an overall plan to which the transferring ML Investor
is a party and pursuant to which the Merger is also being consummated.
Notwithstanding the foregoing, no ML Investor will be required to provide
the representations described herein if, as a result of a change in law
(including, without limitation, a change pursuant to Treasury regulations that
may be applied, by election or otherwise, to the Merger), the facts intended to
be reached by such representation are not a necessary condition for
qualification of the Merger under Section 368 of the Code.
Wachtell, Lipton, Rosen & Katz, counsel to JP Foodservice, and Jones, Day,
Reavis & Pogue, counsel to Rykoff-Sexton, will each rely on the tax
representations to be made pursuant to the Support Agreement in rendering their
tax opinions at the closing of the Merger to JP Foodservice and Rykoff-Sexton,
respectively, with regard to the treatment of the Merger as a tax-free
reorganization for federal income tax purposes. See "The Merger Agreement --
Conditions; Waivers."
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Assumption of Registration Rights Agreement. JP Foodservice has agreed, as
of the Effective Time, to assume the rights and obligations of Rykoff-Sexton
under the Registration Rights Agreement. See "-- Registration Rights Agreement."
Stock Option Agreements
As an inducement and condition to JP Foodservice's willingness to enter
into the Merger Agreement and the JP Foodservice Stock Option Agreement, Rykoff-
Sexton entered into the Rykoff-Sexton Stock Option Agreement with JP
Foodservice, pursuant to which Rykoff-Sexton granted to JP Foodservice the
Rykoff-Sexton Option. As an inducement and condition to Rykoff-Sexton's
willingness to enter into the Merger Agreement and the Rykoff-Sexton Stock
Option Agreement, JP Foodservice entered into the JP Foodservice Stock Option
Agreement with Rykoff-Sexton, pursuant to which JP Foodservice granted to
Rykoff-Sexton the JP Foodservice Option.
Except as otherwise noted below, the terms and conditions of the Rykoff-
Sexton Stock Option Agreement and the JP Foodservice Stock Option Agreement are
identical in all material respects. For purposes of the following summary, as
applicable, (i) "Issuer" refers to Rykoff-Sexton with respect to the Rykoff-
Sexton Option and JP Foodservice with respect to the JP Foodservice Option, (ii)
"Grantee" refers to JP Foodservice with respect to the Rykoff-Sexton Stock
Option Agreement and Rykoff-Sexton with respect to the JP Foodservice Stock
Option Agreement, (iii) "Option" refers to the Rykoff-Sexton Option or the JP
Foodservice Option, (iv) "Option Agreement" refers to the Rykoff-Sexton Stock
Option Agreement or the JP Foodservice Stock Option Agreement and (v) "Issuer
Common Stock" refers to JP Foodservice Common Shares with respect to the JP
Foodservice Option and to Rykoff-Sexton Common Shares with respect to the
Rykoff-Sexton Option.
Arrangements such as the Option Agreements are customarily entered into in
connection with corporate mergers and acquisitions in an effort to increase the
likelihood that the transactions will be consummated in accordance with their
terms, and to compensate the Grantee for the efforts undertaken and the
expenses, losses and opportunity costs incurred by it in connection with the
transactions if they are not consummated under certain circumstances involving
an acquisition or potential acquisition of the Issuer by a third party. The
Option Agreements were entered into to accomplish these objectives. Certain
aspects of the Option Agreements may have the effect of discouraging persons who
might now or at any other time prior to the Effective Time be interested in
acquiring all of, or a significant interest in, JP Foodservice or Rykoff-Sexton
from considering or proposing such an acquisition, even if, in the case of
Rykoff-Sexton, such persons were prepared to offer to pay consideration to the
Rykoff-Sexton stockholders which had a higher current market price than the JP
Foodservice Common Shares to be received for each Rykoff-Sexton Common Share
pursuant to the Merger Agreement. The acquisition of JP Foodservice Common
Shares or Rykoff-Sexton Common
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Shares could cause the JP Foodservice Option or the Rykoff-Sexton Option, as the
case may be, to become exercisable. The existence of the Options could
significantly increase the cost to a potential acquiror of acquiring either
Issuer compared to its cost had the Option Agreements and the Merger Agreement
not been entered into. Such increased cost might discourage a potential acquiror
from considering or proposing an acquisition or might result in a potential
acquiror proposing to pay a lower per share price to acquire such Issuer than it
otherwise might have proposed to pay. Moreover, following consultation with
their respective independent accountants, JP Foodservice and Rykoff-Sexton
believe that the exercise by a Grantee of provisions contained in the Option
Agreements requiring an issuer to pay certain Cancellation Amounts (as defined
herein) is likely to prohibit any other acquiror of an Issuer from accounting
for any acquisition of such Issuer using the pooling of interests accounting
method for a period of two years following such payment.
The Rykoff-Sexton Option permits JP Foodservice to purchase up to 5,564,140
Rykoff-Sexton Common Shares, which represents approximately 19.9% of the number
of Rykoff-Sexton Common Shares outstanding as of the date of the Rykoff-Sexton
Stock Option Agreement. The exercise price of the Rykoff-Sexton Option is
$25.305 per Rykoff-Sexton Common Share (the product of (x) the closing sale
price of the JP Foodservice Common Shares on the trading day preceding public
announcement of the execution of the Merger Agreement and (y) the Exchange
Ratio), subject to adjustment under specified circumstances (such exercise
price, as so adjusted, being referred to herein as the "Rykoff-Sexton Option
Price").
The JP Foodservice Option permits Rykoff-Sexton to purchase up to 4,495,149
JP Foodservice Common Shares, which represents approximately 19.9% of the number
of JP Foodservice Common Shares outstanding as of the date of the JP Foodservice
Stock Option Agreement. The exercise price of the JP Foodservice Option is
$30.125 per JP Foodservice Common Share (the closing sale price of the JP
Foodservice Common Shares on the trading day preceding public announcement of
the execution of the Merger Agreement), subject to adjustment under specified
circumstances (such exercise price, as so adjusted, being referred to herein as
the "JP Foodservice Option Price"). The Rykoff-Sexton Option Price and the JP
Foodservice Option Price are each referred to herein as an "Option Price."
Each of the Stock Options will become exercisable in whole or in part upon
public disclosure of, or the Grantee's having learned of, the occurrence of any
of a number of specified events or transactions (each, a "Triggering Event")
with respect to the Issuer prior to the expiration of the Stock Option (the
"Expiration Date"). The purchase of any Rykoff-Sexton Common Shares or JP
Foodservice Common Shares pursuant to an Option is subject to compliance with
applicable law, including the HSR Act. Based on the number of JP Foodservice
Common Shares and Rykoff-Sexton Common Shares outstanding on the date of the
grant of the
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Options, if the Grantee of either Option were to exercise its right to acquire
the full 19.9% of the outstanding shares of Issuer Common Stock subject to such
Grantee's Option, such Grantee would hold approximately 16.6% of the outstanding
shares of Issuer Common Stock immediately after such exercise.
A Triggering Event under the Option means any of the following events or
transactions:
(i) any person or group (1) other than the Grantee or its affiliates
or, in the case of the Rykoff-Sexton Stock Option Agreement only,
the ML Entities, shall have acquired or become the beneficial
owners of more than 20% of the outstanding Issuer Common Stock, or
(2) other than the Grantee or its affiliates shall have been
granted any option or right, conditional or otherwise, to acquire
more than 20% of the outstanding Issuer Common Stock;
(ii) any person other than the Grantee and its affiliates shall have
made, or entered into an agreement to make, a tender offer or
exchange offer for at least 20% of the outstanding Issuer Common
Stock;
(iii) the Issuer shall have entered into a written definitive agreement
or written agreement in principle with any person other than the
Grantee or its affiliates in connection with a liquidation,
dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or a material portion of the assets
of the Issuer and its subsidiaries, taken as a whole, or all or a
material portion of the equity interest in the Issuer and its
subsidiaries, taken as a whole, or other similar transaction or
business combination (each, an "Acquisition Transaction");
(iv) any person other than the Grantee or its affiliates shall have
made a proposal to the Issuer or its stockholders to engage in an
Acquisition Transaction; or
(v) in the case of the Rykoff-Sexton Stock Option Agreement only, the
ML Entities and their affiliates in the aggregate (1) shall have
acquired or become the beneficial owners of a percentage of the
outstanding Rykoff-Sexton Common Shares greater than the sum of
(A) the ML Entities' proportionate ownership of such outstanding
Rykoff-Sexton Common Shares on the date of the Rykoff-Sexton Stock
Option Agreement and (B) the Additional Percentage (as defined in
the Standstill Agreement) to the extent acquired pursuant to the
Standstill Agreement, or (2) shall have been granted any option or
right, conditional or
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otherwise, other than any such option or right in existence
immediately prior to the date of the Rykoff-Sexton Stock Option
Agreement and previously disclosed to JP Foodservice, to acquire
any outstanding Rykoff-Sexton Common Shares that, together with
any other Rykoff-Sexton Common Shares then beneficially owned by
such ML Entities, would exceed the sum of (A) the ML Entities'
proportionate ownership of such outstanding Rykoff-Sexton Common
Shares on the date of the Rykoff-Sexton Stock Option Agreement and
(B) the Additional Percentage to the extent acquired pursuant to
the Standstill Agreement. See "Other Agreements--Standstill
Agreement."
The Options define the term "Expiration Date" to mean the earliest of the
following: (i) the Effective Time; (ii) one year after termination of the
Merger Agreement (x) if, in the case of the Rykoff-Sexton Option, the Rykoff-
Sexton stockholders shall not have approved the Rykoff-Sexton Proposal at the
Rykoff-Sexton Special Meeting or if, in the case of the JP Foodservice Option,
the JP Foodservice stockholders shall not have approved the JP Foodservice
Proposal at the JP Foodservice Special Meeting (in each case, if the Rykoff-
Sexton Option or the JP Foodservice Option, as the case may be, is exercisable
at the time of such event of termination of the Merger Agreement) or (y) if (A),
in the case of the Rykoff-Sexton Option, the Rykoff-Sexton Board of Directors
shall have failed to make its recommendation in favor of approval and adoption
of the Merger, the Merger Agreement and the other transactions contemplated by
the Merger Agreement no later than the date of the first mailing of this Joint
Proxy Statement/Prospectus to the Rykoff-Sexton stockholders or shall have
withdrawn such recommendation or modified or changed such recommendation in a
manner adverse to the interests of JP Foodservice or (B), in the case of the JP
Foodservice Option, the JP Foodservice Board of Directors shall have failed to
make its recommendation in favor of the JP Foodservice Proposal no later than
the date of the first mailing of this Joint Proxy Statement/Prospectus to the JP
Foodservice stockholders or shall have withdrawn such recommendation or modified
or changed such recommendation in a manner adverse to the interests of Rykoff-
Sexton; or (iii) the date of termination of the Merger Agreement, other than as
contemplated by clause (ii) above.
If an Option becomes exercisable, it may be exercised in whole or in part
within 30 business days following the date notice of exercise is given. The
Grantee's right to exercise the Option is subject to an extension until the date
of expiration or termination of any applicable waiting period under the HSR Act.
The Option Price and the number of shares issuable under the Option are
subject to adjustment in the event of any change in the number of issued and
outstanding shares of Issuer Common Stock by reason of any stock dividend, stock
split, recapitalization, merger, rights offering, share exchange or other change
in the corporate or capital structure of the Issuer.
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Upon the occurrence of a Triggering Event that occurs prior to the
Expiration Date, the Grantee will have two "demand" registration rights and
"piggyback" registration rights with respect to the shares of Issuer Common
Stock issued or issuable pursuant to the Option.
Each Option also provides that at any time after the occurrence of a Share
Proposal, a Merger Proposal, an Asset Proposal or a Share Acquisition (each as
defined below), upon request by the Grantee, the Issuer will be obligated to pay
to the Grantee an amount in cash (the "Cancellation Amount") in cancellation of
the Option if the Option is then exercisable and the Grantee chooses to request
cancellation of, rather than to exercise, the Option. The Cancellation Amount
will be equal to (i) the excess over the Option Price of the greater of (A) the
last sale price of a share of Issuer Common Stock as reported on the last
trading day prior to the date of the exercise notice, or (B)(1) the highest
price per share of Issuer Common Stock offered or proposed to be paid or paid by
any person or group pursuant to or in connection with a Share Proposal, a Share
Acquisition or a Merger Proposal or (2) the aggregate consideration offered to
be paid or paid in any transaction or proposed transaction in connection with an
Asset Proposal, divided by the number of shares of Issuer Common Stock then
outstanding, multiplied by (ii) the number of Option Shares then covered by the
Option. The Cancellation Amount will be reduced by the amount of any
Termination Fee actually paid to the Grantee by the Issuer pursuant to the
Merger Agreement. See "The Merger Agreement -- Termination Fees." The Options
define (i) a Share Proposal to mean a bona fide, publicly disclosed proposal
with respect to a tender offer or exchange offer for 50% or more of the
outstanding Issuer Common Stock, (ii) a Merger Proposal to mean a bona fide,
publicly disclosed proposal with respect to a merger, consolidation or other
business combination with the Issuer, (iii) an Asset Proposal to mean a bona
fide, publicly disclosed proposal with respect to any acquisition of a material
portion of the assets of the Issuer and (iv) a Share Acquisition to mean the
acquisition of 50% or more of the outstanding Issuer Common Stock, in each case
by a person or group other than the Grantee or its affiliates.
If the Grantee exercises the Option, and subsequently sells, pledges or
otherwise disposes of the Option Shares (a "Sale"), any Termination Fee due and
payable by the Issuer following such time will be reduced (but not below zero)
to the extent of the amounts received by the Grantee in such Sale less the
exercise price of such Option Shares sold in the Sale (the "Option Share
Profit"). If the Issuer has paid to the Grantee the Termination Fee prior to a
Sale, the Grantee will be required to pay over to the Issuer the Option Share
Profit realized in such Sale, but only to the extent that such Option Share
Profit, in the aggregate with any other Option Share Profit realized in a Sale
subsequent to payment of the Termination Fee, is less than or equal to the
amount of the Termination Fee.
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To the best knowledge of JP Foodservice and Rykoff-Sexton, no event giving
rise to the right to exercise either Option has occurred as of the date of this
Joint Proxy Statement/Prospectus.
Each Stock Option Agreement provides that the Issuer may not assign any of
its rights or obligations thereunder and that the Option may be exercised only
by Grantee or its designee (which must be a wholly-owned subsidiary of the
Grantee).
Standstill Agreement
In connection with the US Foodservice Acquisition, Rykoff-Sexton and the ML
Entities entered into the Standstill Agreement, which imposes certain
standstill, voting and transfer restrictions on the ML Entities, and provides
for representation on the Rykoff-Sexton Board of Directors and certain
committees thereof by individuals selected by the ML Entities. From and after
the Effective Time, the Standstill Agreement will be for the benefit of, and
will be enforceable by, JP Foodservice to the same extent and in the same manner
as the Standstill Agreement benefits and is enforceable by Rykoff-Sexton prior
to the Merger. The following description of the Standstill Agreement summarizes
provisions of the Standstill Agreement as in effect immediately prior to the
Effective Time.
ML Entities. The ML Entities consist of Merrill Lynch Capital Partners,
Inc., ("MLCP") the general partner of certain of the ML Investors, and the
following entities (the "ML Investors"): Merrill Lynch Capital Appreciation
Partnership No. B-XVIII, L.P., Merrill Lynch KECALP L.P. 1994, ML Offshore LBO
Partnership No. B-XVIII, ML IBK Positions, Inc., MLCP Associates L.P. No. II,
MLCP Associates L.P. No. IV, Merrill Lynch KECALP L.P. 1991, Merrill Lynch
Capital Appreciation Partnership No. XIII, L.P., ML Offshore LBO Partnership No.
XIII, ML Employees LBO Partnership No. I, L.P., Merrill Lynch KECALP L.P. 1987
and Merchant Banking L.P. No. II.
Standstill Provisions. During the term of the Standstill Agreement, except
as otherwise expressly provided therein or as approved by the prior affirmative
vote of a majority of the directors of Rykoff-Sexton who are not affiliated with
the ML Entities, the ML Entities will not, and will not permit any of their
respective affiliates to, directly or indirectly, (i) acquire, propose to
acquire (or publicly announce or otherwise disclose an intention to propose to
acquire) or offer to acquire, by purchase or otherwise, any securities entitled
to vote generally for the election of directors ("Rykoff-Sexton Voting
Securities") of Rykoff-Sexton if the effect of such acquisition would be to
increase the number of shares of Rykoff-Sexton Voting Securities beneficially
owned by the ML Entities and their affiliates to an amount representing more
than 36.4% of the aggregate number of votes which may be cast by holders of
outstanding shares of Rykoff-Sexton Voting Securities. ("Total Voting Power")
(such percentage to be automatically reduced to reflect the actual percentage of
Rykoff-Sexton Voting Securities owned by the ML Entities and their
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affiliates from time to time); (ii) propose (or publicly announce or otherwise
disclose an intention to propose), solicit, offer, seek to direct, negotiate
with or provide any confidential information relating to Rykoff-Sexton or its
business to any other person with respect to any tender offer or exchange offer,
merger, consolidation, share exchange, business combination, restructuring,
recapitalization or similar transaction involving Rykoff-Sexton; provided that
the ML Entities will not be prohibited from soliciting, offering, seeking to
effect and negotiating with any person with respect to sales or transfers of
Rykoff-Sexton Voting Securities held by the ML Entities if otherwise permitted
by the Standstill Agreement; (iii) make, or in any way participate in, any
solicitation of proxies to vote, solicit any consent with respect to the voting
of any Rykoff-Sexton Voting Securities or become a participant in any election
contest with respect to Rykoff-Sexton; (iv) form, participate in or join any
person or group with respect to any Rykoff-Sexton Voting Securities, or
otherwise act in concert with any third person (other than an ML Entity) for the
purpose of acquiring any Rykoff-Sexton Voting Securities or holding or disposing
of Rykoff-Sexton Voting Securities for any purpose otherwise prohibited by the
Standstill Agreement; (v) deposit any Rykoff-Sexton Voting Securities into a
voting trust or similar arrangement; (vi) initiate, propose or otherwise solicit
stockholders for the approval of one or more stockholder proposals with respect
to Rykoff-Sexton, or induce or attempt to induce any other person to initiate
any stockholder proposal; (vii) except as specifically provided for in the
Standstill Agreement, seek election to or seek to place a representative on the
Board of Directors of Rykoff-Sexton, or seek the removal of any member of the
Board of Directors of Rykoff-Sexton; (viii) call or seek to have called any
meeting of the stockholders of Rykoff-Sexton for any purpose otherwise
prohibited by the Standstill Agreement; (ix) take any other action to seek to
control Rykoff-Sexton; (x) demand, request or propose to amend, waive or
terminate the foregoing provisions; or (xi) agree to do any of the foregoing, or
advise, assist, encourage or persuade any third party to take any action with
respect to any of the foregoing.
Each of the ML Entities will notify Rykoff-Sexton promptly if any inquiries
or proposals are received by, or any negotiations or discussions are initiated
or continued regarding any of the foregoing matters with, any ML Entity or, to
its knowledge (subject to applicable confidentiality policies), any of their
respective affiliates.
Notwithstanding the above restrictions, the Standstill Agreement provides
that Merrill Lynch and its affiliates (other than the ML Entities) may effect or
recommend transactions in the ordinary course of its or their business, in,
relating to or involving Rykoff-Sexton Voting Securities provided that Merrill
Lynch and its affiliates (other than the ML Entities) do not acquire beneficial
ownership of Rykoff-Sexton Voting Securities representing more than 2% of the
Total Voting Power, subject to increase to (i) 3% in the event that the ML
Entities beneficially own Rykoff-Sexton Voting Securities representing less than
30%, but at least 22%, of the Total Voting Power; (ii) 4% in the event that the
ML Entities beneficially own
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Rykoff-Sexton Voting Securities representing less than 22%, but at least 16%, of
the Total Voting Power; and (iii) 5% in the event that the ML Entities
beneficially own Rykoff-Sexton Voting Securities representing less than 16%, but
at least 10%, of the Total Voting Power. Such permitted activities may include
transactions in which Merrill Lynch or its affiliates are acting as an
investment banking organization providing advisory services, an investment
adviser, an investment company, a broker or dealer in securities, an underwriter
or placement agent of securities, a market maker, a specialist, an arbitrageur
or a block positioner. Such permitted activities may not, however, include any
activities or transactions which have the purpose or effect of seeking to
control or influence the management, policies or affairs of Rykoff-Sexton,
including, without limitation, through advising any person with respect to any
unsolicited bid for control of, or any other offer for securities of or any
business combination involving, Rykoff-Sexton.
Board Representation. In accordance with the Standstill Agreement, at the
effective time of the US Foodservice Acquisition, Rykoff-Sexton increased the
size of its Board of Directors to 12 directors and filled four of the vacancies
thereby created with directors designated by a representative of the ML Entities
(the "ML Directors"). Of the four initial ML Directors, one was appointed (and
reelected in September 1996) to Class A (term expiring in 1999), one was
appointed to Class B (term expiring in 1998) and two were appointed to Class C
(terms expiring in 1997). Any designees of ML Directors who are not employees
of either an ML Entity which is controlled by Merrill Lynch & Co. or an
affiliate of an ML Entity which is controlled by Merrill Lynch & Co. must be
reasonably acceptable to the Rykoff-Sexton directors other than the ML
Directors. Pursuant to the Merger Agreement, JP Foodservice has agreed that two
of directors to be designated by Rykoff-Sexton for service on the JP Foodservice
Board of Directors will be designated by MLCP. See "Management of JP
Foodservice After the Merger."
Until such time as the ML Entities no longer beneficially own Rykoff-Sexton
Voting Securities representing at least 10% of the Total Voting Power, except as
contemplated by the Standstill Agreement or otherwise agreed to by a majority of
ML Directors, Rykoff-Sexton will not take or recommend to its stockholders any
action which would (i) cause the Rykoff-Sexton Board of Directors to consist of
any number of directors other than 12 directors divided into three classes of
four directors each, or (ii) result in any amendment to the bylaws of Rykoff-
Sexton or the bylaws or regulations of any subsidiary of Rykoff-Sexton in effect
at the effective time of the US Foodservice Acquisition that would impose any
qualifications to the eligibility of directors of Rykoff-Sexton or any
subsidiary of Rykoff-Sexton to serve on any committee of the Board of Directors
of Rykoff-Sexton or on the Board of Directors (or any committee thereof) of any
subsidiary of Rykoff-Sexton, except as may be required by applicable law.
In addition, Rykoff-Sexton will use its best efforts to cause the
Nominating Committee of its Board of Directors (or if the Nominating Committee
makes no such
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recommendation, the Rykoff-Sexton Board of Directors) to recommend for election
in the applicable year in which the respective class term expires, in each case
as designated by the ML Entities, (i) four ML Directors, consisting of one ML
Director in each of Class A and Class B and two ML Directors in Class C, so long
as the ML Entities beneficially own Rykoff-Sexton Voting Securities representing
at least 34% of the Total Voting Power; (ii) three ML Directors, consisting of
one ML Director in each of Class A, Class B and Class C, so long as the ML
Entities beneficially own Rykoff-Sexton Voting Securities representing less than
34%, but at least 27%, of the Total Voting Power; (iii) two ML Directors,
consisting of one ML Director in Class A and one ML Director in Class B or Class
C, so long as the ML Entities beneficially own Rykoff-Sexton Voting Securities
representing less than 27%, but at least 16%, of the Total Voting Power; and
(iv) one ML Director in Class A, so long as the ML Entities beneficially own
Rykoff-Sexton Voting Securities representing less than 16%, but at least 10%, of
the Total Voting Power.
Until such time as the ML Entities no longer beneficially own Rykoff-Sexton
Voting Securities representing at least 16% of the Total Voting Power, to the
extent that, and for so long as, any of the ML Directors is qualified under the
then-current rules of the NYSE, the rules and regulations under the Code, the
rules and regulations under Section 16(b) of the Exchange Act and Rykoff-
Sexton's bylaws, Rykoff-Sexton will use its best efforts to cause the Rykoff-
Sexton Board of Directors to designate one of the ML Directors to serve on each
of the committees of the Rykoff-Sexton Board of Directors to the same extent,
and on the same basis, as the other members of the Rykoff-Sexton Board of
Directors. In addition, subject to the same director qualification
requirements, in the event that, and for so long as, the ML Entities own Rykoff-
Sexton Voting Securities representing less than 16% but at least 10% of the
Total Voting Power, Rykoff-Sexton will use its best efforts to cause the Rykoff-
Sexton Board of Directors to designate one of the ML Directors to serve on the
Nominating Committee and the Management Development -- Compensation and Stock
Option Committee of the Rykoff-Sexton Board of Directors to the same extent, and
on the same basis, as the other members of the Board of Directors. Pursuant to
the Merger Agreement, a designee of MLCP will serve on the Nominating Committee
of the JP Foodservice Board of Directors as Rykoff-Sexton's designee thereon.
See "Management of JP Foodservice After the Merger."
The Standstill Agreement also provides that, so long as the ML Entities
beneficially own Rykoff-Sexton Voting Securities representing at least 10% of
the Total Voting Power, the ML Directors will have representation on the board
of directors (and any committees thereof) of any subsidiaries of Rykoff-Sexton
in a manner similar to their rights to representation on the Rykoff-Sexton Board
of Directors, but only to the extent that any directors of Rykoff-Sexton who are
not officers or employees of Rykoff-Sexton are members of the board of directors
of any such subsidiary of Rykoff-Sexton.
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<PAGE>
The ML Entities have the right, with cause, to request the removal of any
ML Director from the Rykoff-Sexton Board of Directors, subject to the applicable
provisions of the Rykoff-Sexton Charter and Bylaws as well as applicable
statutory provisions, and Rykoff-Sexton will use its best efforts to have such
removal approved by the Rykoff-Sexton Board of Directors. The ML Entities also
have the right to designate nominees for vacancies caused by a ML Director
ceasing to serve as a member of the Board of Directors, subject to certain
restrictions, provided that the filing of the vacancy is to be made by action of
the Rykoff-Sexton Board of Directors in accordance with the terms of the Rykoff-
Sexton Charter (as defined herein). In addition, in the event that the
percentage of Total Voting Power represented by the Rykoff-Sexton Voting
Securities beneficially owned in the aggregate by the ML Entities at any time
decreases below any of the minimum percentages specified above entitling the ML
Entities to board and committee representation, the ML Entities will cause such
number of ML Directors to resign as is necessary to adjust the number of
remaining ML Directors to the number (if any) to which the ML Entities would
have otherwise been entitled under the Standstill Agreement if the nominations
to the Board or Directors (or any committee thereof) of Rykoff-Sexton or any
subsidiary of Rykoff-Sexton were made at such time. Any subsequent increase in
the percentage of the Total Voting Power represented in the aggregate by the
Rykoff-Sexton Voting Securities beneficially owned by the ML Entities above any
such minimum percentage will not entitle the ML Entities to have any additional
ML Directors named or elected.
Nothing in the Standstill Agreement requires the ML Entities to designate
any ML Directors or requires an ML Director to serve in office. Until such time
as the ML Entities no longer beneficially own Rykoff-Sexton Voting Securities
representing in the aggregate at least 10% of the Total Voting Power, in the
event there is a vacancy created on the Rykoff-Sexton Board of Directors by the
resignation or removal of an ML Director or the failure of the ML Entities to
designate an ML Director (other than a resignation as a result of a decrease in
the percentage of the aggregate number of votes of all outstanding Rykoff-Sexton
Voting Securities represented by Rykoff-Sexton Voting Securities owned by the ML
Entities below the minimum percentages specified above for representation on the
Rykoff-Sexton Board of Directors), upon the written request of the ML Entities,
Rykoff-Sexton will reduce the size of the Rykoff-Sexton Board of Directors by
the number of such vacancies and thereafter, the ML Entities will have no right
to designate any ML Directors to the extent of such reduction.
The Standstill Agreement provides that the rights to board and committee
representation described above will extend only to those ML Entities which are
controlled by Merrill Lynch & Co., and in the event of any transaction resulting
in Merrill Lynch & Co. no longer controlling such ML Entity, such ML Entity will
no longer have any rights to such board and committee representation, but will
be bound by the other terms of the Standstill Agreement.
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Rykoff-Sexton's obligations described above regarding board and committee
representation are subject to compliance with the provisions of the Rykoff-
Sexton Charter and Bylaws and the fiduciary duties of Rykoff-Sexton's Board of
Directors and Nominating Committee to the stockholders of Rykoff-Sexton.
Nothing set forth in such provisions will require Rykoff-Sexton to violate any
such provisions or require any director of Rykoff-Sexton to breach any such
fiduciary duty.
Voting Provisions. During the term of the Standstill Agreement, until such
time as the ML Entities no longer beneficially own Rykoff-Sexton Voting
Securities representing at least 10% of the Total Voting Power, the ML Entities
will take all such action as may be required so that all Rykoff-Sexton Voting
Securities owned by the ML Entities and their affiliates, as a group, are (i)
voted for Rykoff-Sexton's nominees to the Rykoff-Sexton Board of Directors, in
accordance with the recommendation of the Nominating Committee of the Rykoff-
Sexton Board of Directors, and (ii) voted on all matters to be voted on by
holders of Rykoff-Sexton Voting Securities. The foregoing obligation referred to
in clause (i) is subject to (i) Rykoff-Sexton having performed its obligations
under the Standstill Agreement to use its best efforts to cause the Rykoff-
Sexton Board of Directors to designate one of the ML Directors to serve on such
Nominating Committee as long as the ML Entities own Rykoff-Sexton Voting
Securities representing at least 10% of the Total Voting Power, if the ML
Entities have requested such representation on the Nominating Committee; and
(ii) the right of the ML Entities to abstain from, or to vote against, any one
(and only one) nominee for election to the Rykoff-Sexton Board of Directors at
an annual meeting of stockholders (other than any nominee who was a member of
the Rykoff-Sexton Board of Directors as of the date of the merger agreement
related to the US Foodservice Acquisition, which would include all of the
directors (other than directors appointed by ML Entities) who will become
members of the JP Foodservice Board of Directors pursuant to the Merger
Agreement) if the ML Entities have a reasonable, good faith objection to any
such nominee based on such nominee's personal qualifications to serve as a
member of the Rykoff-Sexton Board of Directors. In addition, the ML Entities
agree to be present, in person or by proxy, at all duly held meetings of
stockholders of Rykoff-Sexton so that all Rykoff-Sexton Voting Securities held
by the ML Entities may be counted for determining the presence of a quorum at
such meetings.
Transfer Restrictions and Right of First Refusal. During the term of the
Standstill Agreement, except as described below, the ML Entities have agreed not
to, directly or indirectly, sell, transfer or assign any Rykoff-Sexton Voting
Securities, except (i) to Rykoff-Sexton, (ii) pursuant to a merger or
consolidation of Rykoff-Sexton which has been approved by the affirmative vote
of a majority of the members of the Rykoff-Sexton Board of Directors then in
office, (iii) pursuant to a bona fide public offering registered under the
Securities Act, in which the ML Entities will use commercially reasonable
efforts to effect as wide a distribution of such Rykoff-Sexton Voting Securities
as is reasonably practicable and to prevent any person or group from acquiring
pursuant to such offering beneficial ownership
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of Rykoff-Sexton Voting Securities representing more than 5% of the Total Voting
Power, (iv) pursuant to Rule 144 under the Securities Act, (v) pursuant to a pro
rata distribution (including any such distribution pursuant to any liquidation
or dissolution of any ML Entity) by any ML Entity to its partners or
stockholders, if no ultimate successor or distributee, as the case may be, and
no person who controls such ultimate successor or distributee, acquires from any
ML Entity in such distribution beneficial ownership of Rykoff-Sexton Voting
Securities representing more than 3% of the Total Voting Power, (vi) transfers
of Rykoff-Sexton Voting Securities to any person or group which, after giving
effect to such transfer, would beneficially own Rykoff-Sexton Voting Securities
representing less than 5% of the Total Voting Power, (vii) transfers of Rykoff-
Sexton Voting Securities representing less than 10% of the Total Voting Power to
any person or group eligible to file a short-form statement on Schedule 13G
under Rule 13d-1 under the Exchange Act based on its ownership of Rykoff-Sexton
Voting Securities, (viii) transfers of Rykoff-Sexton Voting Securities made on
or after January 1, 2000, in connection with the required dissolution of any ML
Entity, to any person or group (A) which, after giving effect to such transfer,
would beneficially own Rykoff-Sexton Voting Securities representing in the
aggregate less than the greater of (x) 15% of the Total Voting Power or (y) such
other percentage of the Total Voting Power as would make such person or group an
"Acquiring Person" under Rykoff-Sexton's shareholders' rights plan or (B)
approved by the prior affirmative vote of a majority of the members of the
Rykoff-Sexton Board of Directors other than the ML Directors, (ix) pursuant to a
tender offer or exchange offer that the Rykoff-Sexton Board of Directors, by
action taken by the affirmative vote of a majority of the members of the Board
of Directors then in office, has determined not to oppose, or (x) following
compliance with procedures with respect to the right of first refusal described
below.
Pursuant to the right of first refusal, except as otherwise permitted under
the Standstill Agreement, if any ML Entity (the "Selling ML Entity") receives an
offer from, or enters into any agreement or understanding with, a third party to
purchase or otherwise acquire Rykoff-Sexton Voting Securities from the Selling
ML Entity, the Selling ML Entity will have the right, provided that the rights
of the Selling ML Entity under the Standstill Agreement will not transfer to
such third party, to sell or otherwise transfer the amount of Rykoff-Sexton
Voting Securities which are the subject of such offer by, or agreement or
understanding with, such third party if, prior to such transfer, Rykoff-Sexton
has been given the opportunity to purchase such Rykoff-Sexton Voting Securities
pursuant to the following procedures. The Selling ML Entity must give written
notice of such proposed transfer to Rykoff-Sexton specifying the amount of
Rykoff-Sexton Voting Securities proposed to be transferred, the proposed price
therefor (the "Transfer Consideration"), the identity of the offeror and other
material terms of the proposed transfer. Rykoff-Sexton will thereafter have a
period of 15 business days to provide the Selling ML Entity with written notice
of the exercise of its right to purchase all such Rykoff-Sexton Voting
Securities for cash in an amount equivalent to the Transfer Consideration.
Rykoff-
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Sexton may also specify a designee as purchaser under the right of first
refusal. The closing of the purchase pursuant to the exercise of the right of
first refusal must take place within 60 days after Rykoff-Sexton gives notice of
such exercise (such period to be extended for up to an additional 60 days, if
necessary, to comply with applicable laws and regulations). If Rykoff-Sexton
elects not to exercise its right of first refusal, the Selling ML Entity will be
free, during the following 60-day period (such period to be extended for up to
an additional 60 days, if necessary, to comply with applicable laws and
regulations), to transfer the Rykoff-Sexton Voting Securities in accordance with
the terms of the original offer.
Term. The Standstill Agreement will continue in effect until the earlier
of (i) the tenth anniversary of the effective date of the US Foodservice
Acquisition (May 17, 1996) and (ii) the date on which the ML Entities and their
affiliates beneficially own Rykoff-Sexton Voting Securities representing less
than 10% of the Total Voting Power. The Standstill Agreement will be reinstated,
however, if, after termination of the Standstill Agreement due to a reduction in
beneficial ownership below such 10% threshold and prior to the tenth anniversary
of such effective date, (i) the ML Entities subsequently become the beneficial
owners of Rykoff-Sexton Voting Securities representing 10% or more of the Total
Voting Power or (ii) the ML Entities and their affiliates subsequently become
the beneficial owner of 5% or more of all outstanding Rykoff-Sexton Voting
Securities in a manner which requires the filing of a Schedule 13D under the
Exchange Act.
Registration Rights Agreement
In connection with the US Foodservice Acquisition, Rykoff-Sexton executed
and delivered the Registration Rights Agreement, pursuant to which the ML
Investors have certain "demand" and "piggyback" rights, and the Equitable
Entities named therein and Frank H. Bevevino, former President of Rykoff-Sexton,
have certain "piggyback" rights, to require Rykoff-Sexton to register under the
Securities Act the transfer of all or a portion of the Registrable Securities
held by them. In connection with the Merger, pursuant to the Support Agreement,
JP Foodservice has agreed, as of the Effective Time, to assume Rykoff-Sexton's
rights and obligations under the Registration Rights Agreement and will be
required, for a specified period and subject to certain limitations and
qualifications, to register under the Securities Act the transfer of all or a
portion of the JP Foodservice Common Shares that will be issued in the Merger in
exchange for Registrable Securities to holders thereof who have rights under the
Registration Rights Agreement (collectively, the "Holders"). The following
description of the Registration Rights Agreement summarizes provisions of the
Registration Rights Agreement as in effect immediately prior to the Effective
Time.
The ML Investors may make a written demand of Rykoff-Sexton to effect the
registration of all or part of the ML Investors' Registrable Securities.
Rykoff-Sexton will not be required to take any action if, among other things,
(i) four demand
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registrations have been previously effected, or (ii) the Registrable Securities
requested to be registered have a then current market value of less than $50
million, unless such demand is for registration of all remaining Registrable
Securities held by the ML Investors. Rykoff-Sexton will be required to file the
registration statement within 30 days after exercise of any demand right.
Rykoff-Sexton will not be required to effect a registration during certain
"blackout periods" during which Rykoff-Sexton has determined in good faith that
such registration (i) could materially impair or delay a pending transaction (up
to 180 days) or (ii) would require disclosure of confidential information (up to
90 days).
If Rykoff-Sexton seeks to register, in a proposed public offering for its
own account or for the account of any holder of Rykoff-Sexton Common Shares
(other than pursuant to a registration statement on Form S-4 or Form S-8 or any
successor form under the Securities Act, or filed in connection with an exchange
offer or an offering of securities solely to existing stockholders or employees
of Rykoff-Sexton), any Rykoff-Sexton Common Shares while the Registration Rights
Agreement is in effect, the Holders will have the right to request that Rykoff-
Sexton include any or all of their Registrable Securities in the proposed
offering. Rykoff-Sexton must provide each Holder with at least 20 business days'
notice prior to the filing of the registration statement. Such notice must
specify the approximate date on which Rykoff-Sexton proposes to file such
registration statement and advise the Holder of the Holder's right to have any
or all of the Holder's Registrable Securities included in such registration. A
Holder, in a written request given to Rykoff-Sexton within 15 days after such
Holder's receipt of written notice from Rykoff-Sexton, may include such Holder's
Registrable Securities in such registration statement, subject to constraints of
marketability of the proposed offering, as determined in good faith by the lead
managing underwriter. In the event that marketing constraints prevent the
registration of all Registrable Securities requested to be registered, such
Registrable Securities shall be registered, to the extent marketable, on a pro
rata basis.
In registering Registrable Securities, Rykoff-Sexton will be obligated to
use its reasonable best efforts to make relevant filings with the SEC, to
provide appropriate notices and necessary disclosures to requesting parties, to
make customarily required warranties and representations to underwriters, and to
take certain other specified actions.
Each Holder will be required to pay all underwriting discounts,
commissions, transfer taxes and documentary stamp taxes related to the
Registrable Securities offered for sale by such Holder as well as the fees and
disbursements of its counsel (other than counsel representing the Holders as a
group). All other fees and expenses in connection with the Registration of
Registrable Securities, including those of counsel representing the Holders as a
group, will be borne by Rykoff-Sexton.
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Rykoff-Sexton will agree to indemnify the Holders and the prospective
underwriters of registrations of Registrable Securities for liabilities for
material misstatements and omissions, other than any material misstatements or
omissions based on information provided by the Holders, included in the
registration statement. Each Holder will agree to indemnify Rykoff-Sexton, all
other Holders or any underwriter for liabilities for material misstatements and
omissions made in the registration statement in reliance on information provided
to Rykoff-Sexton by such Holders, subject to certain limitations. To the extent
that indemnification from an indemnifying party is unavailable, contribution
will also be available, with certain limitations, to any of the above parties in
relation to relative fault.
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JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED PRO FORMA COMBINING CONSOLIDATED FINANCIAL
STATEMENTS FOR THE MERGER
The accompanying unaudited pro forma combining consolidated financial
statements give effect to the Merger, which will be accounted for as a pooling
of interests. Accordingly, the underlying unaudited pro forma combining
consolidated balance sheet as of March 29, 1997 and the unaudited pro forma
combining consolidated statements of operations for the year ended June 29, 1996
reflect the combining of the historical financial results of JP Foodservice with
the unaudited pro forma financial results of Rykoff-Sexton. The unaudited pro
forma financial results of Rykoff-Sexton for the year ended April 27, 1996
include (i) the results for the twelve months ended March 31, 1996 of US
Foodservice, which was acquired by Rykoff-Sexton on May 17, 1996 in a
transaction accounted for as a purchase, and (ii) the results for the twelve
months ended April 27, 1996 of H&O Foods, which was acquired on November 1, 1995
in a transaction accounted for as a purchase. JP Foodservice and Rykoff-Sexton
have entered into several other business combinations accounted for under the
purchase method of accounting since June 29, 1996 which are immaterial
individually and in the aggregate and, accordingly, have not been reflected in
the pro forma combining consolidated financial statements.
The unaudited pro forma combining consolidated financial statements reflect
adjustments for the pooling of JP Foodservice and Rykoff-Sexton, including
reclassifications to conform to the presentation expected to be used by the
combined entity companies and JP Foodservice Common Shares issued as
consideration in connection with the Merger.
The unaudited pro forma combining consolidated balance sheet includes one-
time charges expected to be incurred in connection with the Merger. The charges
include professional fees incurred in the Merger and severance and change in
control costs, facility consolidations and other related costs associated with
the integration of the JP Foodservice and Rykoff-Sexton businesses. JP
Foodservice estimates the charges will be approximately $78.0 million before
related income tax benefits.
The unaudited pro forma combining consolidated statements of operations do
not reflect operating and interest cost savings that management believes may be
realized following the acquisition. Management of JP Foodservice and Rykoff-
Sexton have estimated that the combination of JP Foodservice and Rykoff-Sexton
could create opportunities for operating cost savings of approximately $12
million during the first twelve-month period following the Effective Time, $18
million during the second twelve-month period following the Effective Time and
$25 million annually thereafter. These cost savings are expected to be realized
primarily
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through the restructuring of operations. See "The Merger - Potential Cost
Savings and Operating Synergies." In addition, upon consummation of the Merger,
JP Foodservice expects to enter into the New Credit Facility, which is expected
to provide for lower borrowing costs than the overall borrowing costs available
under the Existing Bank Credit Facilities. See "Description of Proposed New
Financing Arrangements." Management estimates that the New Credit Facility will
provide annual interest cost savings of approximately $5 million. No assurances
can be made as to the amount of cost savings that actually will be realized from
restructuring of operations, the New Credit Facility, or otherwise.
Upon consummation of the New Credit Facility, the combined company will
incur an extraordinary charge of $9.1 million, net of an income tax benefit of
$5.9 million (principally related to loan prepayment charges and the write-off
of deferred financing costs). The unaudited pro forma combining consolidated
financial statements do not reflect such extraordinary charge.
The unaudited pro forma combining consolidated financial statements do not
purport to present the combined financial position or results of operations of
JP Foodservice and Rykoff-Sexton if the acquisitions reflected in the following
Unaudited Pro Forma Consolidated Financial Information of Rykoff-Sexton
Excluding the Merger had occurred on the date specified, nor are they
necessarily indicative of the operating results that may be achieved in the
future.
The unaudited pro forma combining consolidated financial statements are
based on certain assumptions and adjustments described in the following
unaudited pro forma combining consolidated financial information and should be
read in conjunction therewith and with (i) the Unaudited Pro Forma Consolidated
Financial Information of Rykoff-Sexton Excluding the Merger, included elsewhere
in this Joint Proxy Statement/Prospectus, and (ii) the consolidated financial
statements and related notes thereto of JP Foodservice, Rykoff-Sexton, US
Foodservice, and H&O Foods previously filed with the SEC, which are incorporated
by reference in this Joint Proxy Statement/Prospectus.
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JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED PRO FORMA COMBINING CONSOLIDATED BALANCE SHEET
As of March 29, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
---------------------------- Pro Forma
JP Rykoff- Pro Forma Combined
Foodservice Sexton Adjustments Companies
----------- ------ ----------- ---------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents.................................. $ 11,527 $ 56,302 $ - $ 67,829
Accounts receivable, net................................... 148,211 125,712 - 273,923
Inventories................................................ 102,112 219,469 - 321,581
Prepaid expenses and other assets.......................... 14,702 21,599 - 36,301
Deferred income taxes...................................... - 13,758 14,400 (a) 28,158
-------------- ----------- ---------- ------------
Total current assets................................... 276,552 436,840 14,400 727,792
-------------- ----------- ========== ------------
Property, plant and equipment, net.............................. 131,557 284,395 (18,150) (a) 397,802
Goodwill, net................................................... 109,898 440,574 - 550,472
Deferred income taxes, net...................................... - 33,200 1,918 (a) 35,118
Other assets, net............................................... - 25,022 (3,850) (a) 21,172
-------------- ----------- ---------- ------------
Total assets.......................................... $ 518,007 $ 1,220,031 $ (5,682) $ 1,732,356
============== =========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt and
capital lease obligations.............................. $ 5,921 $ 15,635 $ - $ 21,556
Accounts payable........................................... 104,837 229,595 - 334,432
Accrued expenses........................................... 19,683 99,052 40,970 (a) 159,705
-------------- ----------- ---------- ------------
Total current liabilities.............................. 130,441 344,282 40,970 515,693
-------------- ----------- ---------- ------------
Noncurrent liabilities
Senior debt................................................ 147,199 348,715 - 495,914
Subordinated debt.......................................... 4,414 129,250 - 133,664
Obligations under capital leases........................... 19,591 13,139 - 32,730
Deferred income taxes...................................... 8,882 - (8,882) (a) -
Other noncurrent liabilities............................... - 38,002 5,000 (a) 43,002
-------------- ----------- ---------- ------------
Total liabilities...................................... 310,527 873,388 37,088 1,221,003
-------------- ----------- ---------- ------------
Stockholders' equity
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued................................ - - - -
Common stock, $.01 par value, 75,000,000 shares
authorized, 22,292,337 issued and 46,080,674 pro forma. 222 2,819 (2,581) (b) 460
Additional paid-in-capital................................. 213,141 299,396 9,390 (b) 521,927
Retained earnings (deficit)................................ (5,883) 47,619 (52,770) (a) (11,034)
Treasury stock............................................. - (3,191) 3,191 (b) -
-------------- ----------- ---------- ------------
Total stockholders' equity............................. 207,480 346,643 (42,770) 511,353
-------------- ----------- ---------- ------------
Total liabilities and stockholders' equity............. $ 518,007 $ 1,220,031 $ (5,682) $ 1,732,356
============== =========== ========== ============
</TABLE>
See Notes to Unaudited Pro Forma Combining Consolidated Financial Statements.
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JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED PRO FORMA COMBINING CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Year ended June 29, 1996
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Pro Forma Pro Forma Pro Forma
JP Rykoff- Merger Combined
Foodservice Sexton Adjustments Companies
----------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Net sales ............................................... $ 1,449,303 $ 3,553,180 $ - $ 5,002,483
Cost of sales ........................................... 1,198,797 2,896,325 - 4,095,122
-------------- ------------- ------------ -------------
Gross profit ...................................... 250,506 656,855 - 907,361
Operating expenses ...................................... 202,916 582,516 - 785,432
Amortization of intangible assets ....................... 2,338 13,210 - 15,548
Impairment of long-lived assets ......................... - 29,700 - 29,700
Reversal of restructuring reserves ...................... - (6,441) - (6,441)
------------- ------------ ----------- -------------
Income from operations ............................ 45,252 37,870 - 83,122
Interest expense and other financing costs, net ......... 15,187 56,616 - 71,803
Nonrecurring charges .................................... 1,517 - - 1,517
Other costs and expenses ................................ 37 - - 37
------------- ------------ ----------- -------------
Income (loss) before income taxes (benefit) ....... 28,511 (18,746) - 9,765
Provision for income taxes (benefit) .................... 11,598 (4,430) - 7,168
-------------- ------------- ------------ -------------
Net income (loss) ................................. $ 16,913 $ (14,316) $ - $ 2,597
============= ============ =========== =============
Net income (loss) per common share ...................... $ 0.90 $ (0.51) $ 0.06
============= ============ =============
Weighted average common shares outstanding .............. 18,809 27,822 (4,452)(c) 42,179
============= ============ =========== =============
</TABLE>
See Notes to Unaudited Pro Forma Combining Consolidated Financial Statements.
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<PAGE>
JP FOODSERVICE, INC. and Subsidiaries
NOTES TO UNAUDITED PRO FORMA COMBINING CONSOLIDATED
FINANCIAL STATEMENTS
Certain reclassifications have been made to the historical consolidated
statements of operations of JP Foodservice and Rykoff-Sexton to conform to the
presentation expected to be used by the merged companies. The pro forma
adjustments are as follows:
(a) Reflects costs associated with employee severance and change in control
costs, facility consolidations, and Merger-related professional fees, based
on management's preliminary estimates (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Professional fees................................ $12,645
Severance and change in control costs............ 21,000
Facility consolidations.......................... 32,000
Other transaction related costs.................. 12,325
-------
One-time charges, pre-tax........................ 77,970
Tax benefit of deductible charges
(effective tax rate 40.0%)..................... 25,200
-------
After-tax charge................................. $52,770
-------
</TABLE>
(b) Reflects the reclassification of equity in connection with issuance of JP
Foodservice Common Shares to the Rykoff-Sexton stockholders, as well as
issuance of the equivalent number of JP Foodservice Common Shares in
exchange for the Performance Stock Awards, the cost of which has been
included as part of the severance and change in control costs described
above in (a).
(c) Reflects the application of the Exchange Ratio to the Rykoff-Sexton Common
Shares to be exchanged in the Merger.
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JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
OF RYKOFF-SEXTON
EXCLUDING THE MERGER
The unaudited pro forma consolidated statements of operations of Rykoff-
Sexton for the year ended April 27, 1996 is presented as if the acquisitions of
US Foodservice (consummated on May 17, 1996) and H&O Foods (consummated on
November 1, 1995) had occurred on April 30, 1995. The historical results of US
Foodservice and H&O Foods are for the twelve months ended March 31, 1996 and the
six months ended October 31, 1995, respectively. Results of H&O Foods for the
six months ended April 27, 1996 are included in the Historical Rykoff-Sexton
results for the year ended April 27, 1996.
The aforementioned acquisitions have been accounted for using the purchase
method of accounting. Accordingly, assets acquired and liabilities assumed have
been recorded at their estimated fair values.
The unaudited pro forma consolidated statements of operations do not
purport to present the results of operations of Rykoff-Sexton as if the
transaction and events assumed therein had occurred on May 1, 1995, nor are they
necessarily indicative of the results of operations that may be achieved in the
future.
The unaudited pro forma consolidated statements of operations is based on
certain assumptions and adjustments described in the Notes to Unaudited Pro
Forma Consolidated Financial Information of Rykoff-Sexton Excluding the Merger
and should be read in conjunction therewith and with the consolidated financial
statements and related notes thereto of Rykoff-Sexton, US Foodservice, and H&O
Foods previously filed with the SEC, which are incorporated by reference in this
Joint Proxy Statement/Prospectus.
123
<PAGE>
RYKOFF-SEXTON, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Year ended April 27, 1996
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
-------------------------------------------- Pro Forma
US H&O Pro Forma Combined
Rykoff-Sexton Foodservice (1) Foods (2) Adjustments Companies
------------- --------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales.......................................... $ 1,789,478 $ 1,696,827 $ 66,875 $ - $ 3,553,180
Cost of sales...................................... 1,440,361 1,397,553 58,411 - 2,896,325
----------- ----------- --------- ------- -----------
Gross profit................................. 349,117 299,274 8,464 - 656,855
Operating expenses................................. 334,944 240,890 6,682 - 582,516
Amortization of intangible assets.................. 1,393 6,441 - 5,376 (a) 13,210
Impairment of long-lived assets.................... 29,700 - - - 29,700
Reversal of restructuring reserves................. (6,441) - - - (6,441)
----------- ----------- --------- -------- -----------
Income (loss) from operations................ (10,479) 51,943 1,782 (5,376) 37,870
Interest expense and other financing costs, net.... 17,340 37,136 259 1,881 (b),(c) 56,616
----------- ----------- --------- -------- -----------
Income (loss) before income taxes (benefit).. (27,819) 14,807 1,523 (7,257) (18,746)
Provision for income taxes (benefit)............... (11,039) 6,839 -- (230) (d) (4,430)
----------- ----------- --------- -------- -----------
Net income (loss)............................ $ (16,780) $ 7,968 $ 1,523 $ (7,027) $ (14,316)
=========== =========== ========= ======== ===========
Net income (loss) per common share................. $ (1.12) $ (0.51)
=========== ===========
Weighted average common shares outstanding......... 14,941 12,881 (e) 27,822
=========== ======== ===========
</TABLE>
(1) Amounts for US Foodservice are for the twelve months ended March 31, 1996.
(2) Amounts for H&O Foods are for the six months ended October 31, 1995.
124
<PAGE>
JP FOODSERVICE, INC. and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF RYKOFF-SEXTON
EXCLUDING THE MERGER
(a) Reflects adjustments to amortization (of $217 and $5,159 for H&O Foods and
US Foodservice, respectively) based on purchase accounting allocations
related to intangible assets acquired in connection with the acquisitions
of H&O Foods and US Foodservice. Goodwill is being amortized over 40 years.
(b) Includes the elimination of historical interest expense on debt (of $261
and $39,187 for H&O Foods and US Foodservice, respectively) which was
refinanced or not assumed, offset by the additional interest expense that
would have been incurred (of $1,262 and $27,667 for H&O Foods and US
Foodservice, respectively) if the acquisitions of H&O Foods and US
Foodservice and the credit facility entered into in connection with the
acquisition of US Foodservice (the "Rykoff-Sexton Credit Facility") had
occurred on April 30, 1995. For purposes of the Unaudited Pro Forma
Consolidated Financial Information of Rykoff-Sexton Excluding the Merger,
the interest rate was assumed to be LIBOR plus the applicable margin. The
weighted average rate assumed was 8.26%. The proceeds from the Rykoff-
Sexton Credit Facility were used to refinance substantially all of the
outstanding debt of US Foodservice and to refinance Rykoff-Sexton's
existing amended credit agreement dated as of October 23, 1993. The
weighted average interest rate on the debt retired ranged from 8.61% to
9.11% for US Foodservice's revolver and term loans, 14.25% on the Rykoff-
Sexton 14.25% debentures and 6.98% for other Rykoff-Sexton loans.
(c) Includes the elimination of historical amortization of deferred financing
costs of $2,768 on debt which was refinanced, offset by the amortization of
deferred financing costs of $1,833 on debt that would have been incurred if
the receivables securitization program initiated in connection with the
acquisition of US Foodservice (the "Rykoff-Sexton Receivables
Securitization") had been in place on April 30, 1995. The loss related to
the sale of receivables of $14,075 represents the yield on the aggregate
receivables sold. The yield under the Rykoff-Sexton Receivables
Securitization is based on either a certain base rate plus an applicable
margin or LIBOR plus an applicable margin as determined by a special-
purpose, wholly-owned subsidiary of Rykoff-Sexton. The computed yield rate
for both securitization programs for purposes of the Unaudited Pro Forma
Consolidated Financial Information of Rykoff-Sexton Excluding the Merger
was 7.0%, assuming a constant level of receivables secured of $200 million.
To the extent that the amount of receivables secured or the interest rate
changes, the amount of the loss could change.
(d) Adjustments reflect (i) income tax effects assuming a combined state and
federal statutory income tax rate of 40%, excluding nondeductible goodwill
amortization related to the acquisition of US Foodservice and (ii) pro
forma income taxes for H&O Foods assuming a combined state and federal
statutory income tax rate of 40%.
(e) The pro forma adjustment to weighted average common shares outstanding
reflects the equivalent number of Rykoff-Sexton Common Shares issued to
effect the acquisition of US Foodservice.
125
<PAGE>
JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED COMBINING HISTORICAL CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE MERGER
The accompanying unaudited combining historical consolidated financial
statements give effect to the business combination of JP Foodservice and Rykoff-
Sexton, which will be accounted for as a pooling of interests. Accordingly, the
underlying unaudited combining historical consolidated statements of operations
for each of the years ended July 2, 1994, July 1, 1995, and June 29, 1996, and
the nine months ended March 30, 1996 and March 29, 1997, reflect the combining
of the historical financial results of Rykoff-Sexton with the historical
consolidated financial results of JP Foodservice. JP Foodservice expects to
recognize one-time charges related to transaction and business combination costs
in connection with the Merger, which are not reflected in the unaudited
combining historical consolidated statements of operations.
The unaudited combining historical consolidated financial statements
reflect adjustments for the pooling of JP Foodservice and Rykoff-Sexton,
including reclassifications to conform to the presentation expected to be used
by the combined entity and JP Foodservice Common Shares issued as consideration
in connection with the Merger.
The unaudited combining historical consolidated financial statements should
be read in conjunction with the consolidated financial statements and related
notes thereto of JP Foodservice and Rykoff-Sexton previously filed with the SEC,
which are incorporated by reference in this Joint Proxy Statement/Prospectus.
126
<PAGE>
JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED COMBINING HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Year ended July 2, 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
----------
JP Rykoff- Combining Combined
Foodservice Sexton (a) Adjustments Companies
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales......................................................... $ 1,178,826 $ 1,444,226 $ - $ 2,623,052
Cost of sales..................................................... 979,108 1,127,865 - 2,106,973
------------- ----------- ----------- -----------
Gross profit.................................................. 199,718 316,361 - 516,079
Operating expenses................................................ 163,695 141,333 - 305,028
Amortization of intangible assets................................. 2,265 156,156 - 158,421
------------- ----------- ----------- -----------
Income from operations........................................ 33,758 18,872 - 52,630
Interest expense and other financing costs, net................... 32,255 11,946 - 44,201
Other costs and expenses.......................................... 222 - - 222
------------- ----------- ----------- -----------
Income from continuing operations before
provision for income taxes and extraordinary charge.......... 1,281 6,926 - 8,207
Provision for income taxes........................................ 1,579 2,805 - 4,384
------------- ----------- ----------- -----------
Income (loss) from continuing operations
before extraordinary charge.................................. (298) 4,121 - 3,823
Income from discontinued operations, net of
income taxes of $2,207........................................... - 3,241 - 3,241
------------- ----------- ----------- -----------
Income (loss) before extraordinary charge..................... (298) 7,362 - 7,064
Extraordinary charge, net of income tax benefit of $1,003......... - (1,444) - (1,444)
------------- ----------- ----------- -----------
Net income (loss)............................................. (298) 5,918 - 5,620
Preference dividends.............................................. (504) - - (504)
------------- ----------- ----------- -----------
Net income (loss) applicable to common shareholders........... $ (802) $ 5,918 $ - 5,116
============= =========== =========== ===========
Net income (loss) per common share:
Income (loss) from continuing operations before
extraordinary charge......................................... $ (0.17) $ 0.28 $ 0.20
Income from discontinued operations........................... - 0.22 0.19
Extraordinary charge.......................................... - (0.10) (0.09)
------------- ----------- -----------
Net income (loss) per common share................................ $ (0.17) $ 0.40 $ 0.30
============= =========== ===========
Weighted average common shares and common stock
equivalents outstanding.......................................... 4,633 14,601 (2,336)(b) 16,898
============= =========== ========== ===========
</TABLE>
Note: Certain reclassifications have been made to the historical consolidated
statements of operations of JP Foodservice and Rykoff-Sexton to
conform to the presentation expected to be used by the combined
entity.
(a) Historical results for Rykoff-Sexton are for the fiscal year ended
April 30, 1994.
(b) The combining adjustment to weighted average common shares and
common stock equivalents outstanding reflects the application of the
Exchange Ratio to the Rykoff-Sexton Common Shares.
127
<PAGE>
JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED COMBINING HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Year ended July 1, 1995
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
----------
JP Rykoff- Combining Combined
Foodservice Sexton (a) Adjustments Companies
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................................................ $ 1,288,315 $1,569,019 $ - $ 2,857,334
Cost of sales........................................................ 1,069,494 1,241,291 - 2,310,785
----------- ---------- ----------- -----------
Gross profit.................................................. 218,821 327,728 - 546,549
Operating expenses................................................... 177,799 301,121 - 478,920
Amortization of intangible assets.................................... 2,263 114 - 2,377
Stock compensation charge............................................ 709 - - 709
----------- ---------- ----------- -----------
Income from operations........................................ 38,050 26,493 - 64,543
Interest expense and other financing costs, net...................... 22,074 10,867 - 32,941
Other (income) expenses.............................................. (309) - - (309)
----------- ---------- ----------- -----------
Income from continuing operations before provision -
for income taxes and extraordinary charge................... 16,285 15,626 - 31,911
Provision for income taxes........................................... 7,358 6,250 - 13,608
----------- ---------- ----------- -----------
Income from continuing operations
before extraordinary charge................................ 8,927 9,376 - 18,303
Gain on disposal of discontinued operations, net of
income taxes $15,687.............................................. - 23,496 - 23,496
----------- ---------- ----------- -----------
Income before extraordinary charge............................ 8,927 32,872 - 41,799
Extraordinary charge, net of income tax benefit of $3,100............ (4,590) - - (4,590)
----------- ---------- ----------- -----------
Net income.................................................... 4,337 32,872 - 37,209
Preference dividends................................................. (40) - - (40)
----------- ---------- ----------- -----------
Net income applicable to common shareholders.................. $ 4,297 $ 32,872 $ - $ 37,169
=========== ========== =========== ===========
Net income per common share:
Income from continuing operations before extraordinary charge. $ 0.68 $ 0.64 $ 0.72
Gain on disposal of discontinued operations................... - $ 1.60 $ 0.92
Extraordinary charge.......................................... (0.35) - (0.18)
----------- ---------- -----------
Net income per common share.......................................... $ 0.33 $ 2.24 $ 1.46
=========== ========== ===========
Weighted average common shares and common stock
equivalents outstanding............................................ 13,104 14,730 (2,357)(b) 25,477
=========== ========== =========== ===========
</TABLE>
Notes Certain reclassifications have been made to the historical consolidated
statements of operations of JP Foodservice and Rykoff-Sexton to conform
to the presentation expected to be used by the combined entity.
(a) Historical results for Rykoff-Sexton are for the fiscal year ended
April 29, 1995.
(b) The combining adjustment to weighted average common shares and common
stock equivalents outstanding reflects the application of the Exchange
Ratio to the Rykoff-Sexton Common Shares.
128
<PAGE>
JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED COMBINING HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Year ended June 29, 1996
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
----------
JP Rykoff- Combining Combined
Foodservice Sexton (a) Adjustments Companies
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $1,449,303 $ 1,789,478 $ - $ 3,238,781
Cost of sales.................................... 1,198,797 1,440,361 - 2,639,158
---------- ----------- ---------- -----------
Gross profit............................... 250,506 349,117 - 599,623
Operating expenses............................... 202,916 334,944 - 537,860
Amortization of intangible assets................ 2,338 1,393 - 3,731
Impairment of long-lived assets.................. - 29,700 - 29,700
Reversal of restructuring reserves............... - (6,441) (6,441)
---------- ----------- ---------- -----------
Income (loss) from operations.............. 45,252 (10,479) - 34,773
Interest expense and other financing costs, net.. 15,187 17,340 - 32,527
Nonrecurring charges............................. 1,517 - - 1,517
Other costs and expenses......................... 37 - - 37
---------- ----------- ---------- -----------
Income (loss) before income taxes (benefit) 28,511 (27,819) - 692
Provision for income taxes (benefit)............. 11,598 (11,039) - 559
---------- ----------- ---------- -----------
Net income (loss).......................... $ 16,913 $ (16,780) $ - $ 133
========== =========== ========== ===========
Net income (loss) per common share............... $ 0.90 $ (1.12) $ 0.00
========== =========== ===========
Weighted average common shares outstanding....... 18,809 14,941 (2,391)(b) 31,359
========== =========== ========== ===========
</TABLE>
Note: Certain reclassifications have been made to the historical consolidated
statements of operations of JP Foodservice and Rykoff-Sexton to conform
to the presentation expected to be used by the combined entity.
(a) Historical results for Rykoff-Sexton are for the year ended April 27,
1996.
(b) The combining adjustment to weighted average common shares outstanding
reflects application of the Exchange Ratio to the Rykoff-Sexton Common
Shares.
129
<PAGE>
JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED COMBINING HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months ended March 30, 1996
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
----------
JP Rykoff- Combining Combined
Foodservice Sexton (a) Adjustments Companies
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................................ $1,059,565 $ 1,367,707 $ - $ 2,427,272
Cost of sales........................................ 877,313 1,062,759 - 1,940,072
---------- ----------- ---------- -----------
Gross profit................................... 182,252 304,948 - 487,200
Operating expenses................................... 150,785 299,031 449,816
Amortization of intangible assets.................... 1,741 691 2,432
Impairment of long-lived assets...................... - 29,700 29,700
Reversal of restructuring reserves................... - (6,441) (6,441)
---------- ----------- ---------- -----------
Income (loss) from operations.................. 29,726 (18,033) - 11,693
Interest expense and other financing costs, net...... 11,405 14,194 25,599
Nonrecurring charges................................. 1,517 - 1,517
---------- ----------- ---------- -----------
Income (loss) before income taxes (benefit).... 16,804 (32,227) - (15,423)
Provision for income taxes (benefit)................. 7,060 (12,802) (5,742)
---------- ----------- ---------- -----------
Net income (loss).............................. $ 9,744 $ (19,425) $ - $ (9,681)
========== =========== ========== ===========
Net income (loss) per common share................... $ 0.52 $ (1.29) $ (0.31)
========== =========== ===========
Weighted average common shares outstanding........... 18,785 15,106 (2,417)(b) 31,474
========== =========== ========== ===========
</TABLE>
Note: Certain reclassifications have been made to the historical consolidated
statements of operations of JP Foodservice and Rykoff-Sexton to conform
to the presentation expected to be used by the combined entity.
(a) Historical results for Rykoff-Sexton are for the nine months ended April
27, 1996.
(b) The combining adjustment to weighted average common shares outstanding
reflects the application of the Exchange Ratio to the Rykoff-Sexton
Common Shares.
130
<PAGE>
JP FOODSERVICE, INC. and Subsidiaries
UNAUDITED COMBINING HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months ended March 29, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
----------
JP Rykoff- Combining Combined
Foodservice Sexton Adjustments Companies
----------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $1,244,629 $2,618,480 $ - $3,863,109
Cost of sales.................................... 1,029,077 2,088,221 - 3,117,298
---------- ---------- ---------- ----------
Gross profit............................... 215,552 530,259 - 745,811
Operating expenses............................... 174,469 456,420 630,889
Amortization of intangible assets................ 2,156 9,337 - 11,493
---------- ---------- ---------- ----------
Income from operations..................... 38,927 64,502 - 103,429
Interest expense and other financing costs, net.. 11,927 44,953 - 56,880
Nonrecurring charges............................. 5,400 -- - 5,400
---------- ---------- ---------- ----------
Income before income taxes................. 21,600 19,549 - 41,149
Provision for income taxes....................... 9,751 9,577 - 19,328
---------- ---------- ---------- ----------
Net income................................. $ 11,849 $ 9,972 $ - $ 21,821
========== ========== ========== ==========
Net income per common share...................... $ 0.55 $ 0.35 $ 0.48
========== ========== ==========
Weighted average common shares and common stock
equivalents outstanding........................ 21,703 28,482 (4,557)(a) 45,628
========== ========== ========== ==========
</TABLE>
Note: Certain reclassifications have been made to the historical consolidated
statements of operations of JP Foodservice and Rykoff-Sexton to conform
to the presentation expected to be used by the combined entity.
(a) The combining adjustment to weighted average common shares and common
stock equivalents outstanding reflects the application of the Exchange
Ratio to the Rykoff-Sexton Common Shares.
131
<PAGE>
DESCRIPTION OF PROPOSED NEW FINANCING ARRANGEMENTS
In connection with the Merger and effective as of the Closing Date, JP
Foodservice proposes to enter into the New Credit Facility. JP Foodservice will
apply amounts drawn under the New Credit Facility, which will provide a $800
million revolving credit line, primarily to (i) refinance the indebtedness of JP
Foodservice and Rykoff-Sexton outstanding under the Existing Bank Credit
Facilities (which totaled approximately $479 million as of June 28, 1997), (ii)
pay estimated fees and expenses of approximately $33 million incurred in
connection with the Merger and (iii) finance capital expenditures and on-going
working capital needs. Borrowings under the New Credit Facility also will be
used to repurchase any Rykoff-Sexton Public Notes tendered pursuant to an offer
to purchase required to be made following consummation of the Merger. See "Risk
Factors -- Offer to Purchase Rykoff-Sexton Senior Subordinated Notes." If the
terms of the New Credit Facility are completed on the terms set forth below, JP
Foodservice expects that annual interest costs for the combined companies will
be approximately $5 million less than the overall interest costs that would be
incurred under the Existing Bank Credit Facilities. The availability of
financing under the New Credit Facility or otherwise is not a condition to
consummation of the Merger. Such financing will be subject to certain terms and
conditions, which will include the negotiation, execution and delivery of
definitive credit documents. There can be no assurance as to whether, or the
definitive terms on which, the New Credit Facility actually will be available to
JP Foodservice.
JP Foodservice also intends after the Merger to increase the size of the
existing receivables securitization programs currently operated by it and
Rykoff-Sexton by $50 million to $100 million. The proceeds of the additional
securitization will be used to reduce revolving credit borrowings.
New Credit Facility
The following is a summary of the proposed material provisions of the New
Credit Facility based on discussions between JP Foodservice and potential
lenders. JP Foodservice has not executed a commitment letter for the New Credit
Facility with any lenders. Because the terms, conditions and covenants of the
Credit Facility are subject to the negotiation, execution and delivery of
definitive credit documents, certain of the actual terms, conditions and
covenants of the New Credit Facility may differ in material respects from those
described below.
The obligor or obligors under the New Credit Facility (collectively, the
"Borrower") will be one or more wholly-owned subsidiaries of JP Foodservice,
including the Surviving Corporation. Borrowings under the New Credit Facility
will be unsecured general obligations of the Borrower ranking pari passu with
all other unsubordinated obligations of the Borrower.
132
<PAGE>
The New Credit Facility will consist of a revolving credit facility of up
to a maximum of $800 million. Availability of borrowings under the New Credit
Facility will be based on the Borrower's ratio of indebtedness to operating cash
flow from time to time. Although the Borrower may pay all or a portion of such
borrowings at any time, any outstanding principal will be required to be paid in
full on or before the fifth anniversary of the closing of the New Credit
Facility. The Borrower will be required to offer to repay indebtedness
outstanding under the New Credit Facility with the net cash proceeds from sales
of assets other than in the ordinary course of business if such proceeds are not
reinvested in the manner specified in the credit documents.
Amounts drawn under the New Credit Facility will bear interest, at the
Borrower's option, at either the lender's prime rate or LIBOR, plus an
applicable margin. The applicable margin will be an annual rate which will
fluctuate based on the Borrower's ratio of indebtedness to operating cash flow
from time to time. Interest will be payable quarterly.
The Borrower and certain of its present and future subsidiaries will be
subject to various covenants limiting their ability to (i) incur debt, (ii)
create liens on their assets, (iii) engage in sale and lease-back transactions,
(iv) pay dividends or make certain other restricted payments, (v) engage in
consolidations or mergers or sell, lease or convey substantially all of their
assets and (vi) engage in transactions with affiliates other than on arms-length
terms. In addition, the New Credit Facility will contain affirmative covenants,
including, among others, covenants requiring compliance with laws, maintenance
of corporate existence, licenses and insurance, payment of taxes and performance
of other material obligations and the delivery of financial and other
information.
The Borrower will be required to comply with certain financial tests and to
maintain certain financial ratios on a consolidated basis. The New Credit
Facility will require the Borrower to maintain a specified level of net worth at
all times and to maintain, as of the end of each fiscal quarter, a specified
fixed charge coverage ratio and a specified ratio of indebtedness to operating
cash flow.
Failure to satisfy any of the foregoing covenants would constitute an event
of default under the New Credit Facility, notwithstanding the ability of the
Borrower to meet its debt service obligations. The New Credit Facility also will
include other customary events of default, including, without limitation, a
cross-default to other indebtedness, material undischarged judgments, bankruptcy
and a change of control of the Borrower or JP Foodservice.
133
<PAGE>
Receivables Securitization
JP Foodservice and Rykoff-Sexton currently operate receivables
securitization programs of $50 million and $200 million, respectively. JP
Foodservice intends to increase the aggregate size of the existing programs by
$50 million to $100 million depending on the volume of eligible receivables. The
securitizations are structured as sales of certain accounts receivable to
special-purpose subsidiaries of JP Foodservice or Rykoff-Sexton. The special-
purpose subsidiaries, in turn, convey the receivables they purchase, or
undivided interests in such receivables, to unaffiliated financing vehicles for
cash or cash equivalents.
134
<PAGE>
OWNERSHIP OF JP FOODSERVICE COMMON SHARES
The following table sets forth certain information regarding the beneficial
ownership of JP Foodservice Common Shares as of June 28, 1997, and as adjusted
to reflect the issuance by JP Foodservice of ____________ JP Foodservice Common
Shares in connection with the Merger, by (i) each person or entity known by JP
Foodservice to be the beneficial owner of more than 5% of the JP Foodservice
Common Shares, (ii) each person or entity known by JP Foodservice to be a
beneficial owner of Rykoff-Sexton Common Shares that would become a beneficial
owner of more than 5% of the JP Foodservice Common Shares as a result of the
Merger, (iii) each director of JP Foodservice, (iv) certain executive officers
of JP Foodservice, (v) certain directors and executive officers of Rykoff-Sexton
who are expected to serve as directors or executive officers of JP Foodservice
following consummation of the Merger and (vi) all such executive officers and
directors of JP Foodservice and Rykoff-Sexton as a group.
<TABLE>
<CAPTION>
Before the Merger After the Merger
----------------- ----------------
Shares Percentage Shares Percentage
Name and Address Beneficially Before Beneficially After
of Beneficial Owner Owned (1) the Merger Owned (1) the Merger
- ---------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
T. Rowe Price Associates.... 2,651,550 (2)
100 E. Pratt Street
Baltimore, Maryland 21202
Palisade Capital
Management, L.L.C .......... 1,173,500 (3)
1 Bridge Plaza, Suite 695
Fort Lee, New Jersey 07024
William Blair & Company,
L.L.C. .................... 1,462,204 (4)
222 West Adams Street
Chicago, Illinois 60606
ML Investors (5)............ 0 * 8,463,843 18.3
c/o Merrill Lynch Capital
Partners, Inc.
225 Liberty Street
New York, New York 10080
David M. Abramson........... 12,426 (6) *
Michael J. Drabb............ 4,750 (7) *
Eric E. Glass............... 3,400 (8) *
Lewis Hay, III.............. 109,500 (9) *
</TABLE>
135
<PAGE>
<TABLE>
<CAPTION>
Before the Merger After the Merger
----------------- ----------------
Shares Percentage Shares Percentage
Name and Address Beneficially Before Beneficially After
of Beneficial Owner Owned (1) the Merger Owned (1) the Merger
- ---------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Mark P. Kaiser.............. 62,063 (10) *
Paul I. Latta............... 2,250 (11) *
James I. Maslon............. (12)
James L. Miller............. 269,854 (13)
James P. Miscoll............ (14)
Neil I. Sell................ (15)
Jeffrey D. Serkes........... 1,250 (16) *
Dean R. Silverman........... 1,250 (17) *
Mark Van Stekelenburg....... (18)
Bernard Sweet............... (19)
All directors and
executive officers as a
group (10 persons before
the Merger and __ persons
after the Merger) (20)...... (21) (21)(22)
</TABLE>
* Less than 1%.
(1) The information regarding beneficial ownership of the JP Foodservice Common
Shares has been presented in accordance with rules of the SEC and is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership of JP Foodservice Common Shares
includes any shares as to which a person has sole or shared voting power or
investment power and also any shares which a person has the right to
acquire within 60 days through the exercise of any stock option or other
right.
(2) As reported in a Schedule 13G dated February 11, 1997 filed with the SEC.
Voting power with respect to all but 336,750 shares is exercised by other
persons. T. Rowe Price New Horizons Fund, Inc. has sole voting power with
respect to 1,200,000 of the 2,651,550 shares reported by T. Rowe Price
Associates.
(3) As reported in a Schedule 13G dated February 12, 1997 filed with the SEC.
(4) As reported in a Schedule 13G dated February 18, 1997 filed with the SEC.
Voting power with respect to all but 699,754 shares is exercised by other
persons.
(5) The ML Investors consist of the following entities, each of which after the
consummation of the Merger will beneficially own the percentage of
outstanding JP Foodservice Common Shares indicated after its name: Merrill
Lynch Capital Appreciation Partnership No. B-XVIII, L.P. (7.90%), ML
Offshore LBO Partnership No. B-XVIII (3.98%), ML IBK Positions, Inc.
(2.61%), MLCP Associates L.P. No. II (0.10), MLCP Associates No. IV (0.03),
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Merrill Lynch KECALP L.P. 1994 (0.12), Merrill Lynch KECALP L.P. 1991
(0.34), Merrill Lynch Capital Appreciation Partnership No. XIII, L.P.
(2.94), ML Offshore LBO Partnership No. XIII (0.08), ML Employees LBO
Partnership No. I (0.07), Merrill Lynch KECALP L.P. 1987 (0.05) and
Merchant Banking L.P. No. II (0.05). The ML Investors are affiliates of
Merrill Lynch & Co. and Merrill Lynch & Co. disclaims beneficial ownership
of all such shares for all purposes.
(6) Includes (i) 80 shares credited to participant accounts in JP Foodservice's
401(k) retirement savings plan, which are voted by the plan's trustees,
(ii) outstanding options exercisable within 60 days to purchase 9,971
shares, and (iii) 2,000 shares held by a family trust for the benefit of
Mr. Abramson's minor children, of which Mr. Abramson acts as the trustee
and with respect to which he exercises voting power and investment power.
(7) Includes outstanding options exercisable within 60 days to purchase 4,750
shares.
(8) Includes outstanding options exercisable within 60 days to purchase 3,000
shares.
(9) Includes (i) 642 shares credited to participant accounts in JP
Foodservice's 401(k) retirement savings plan, which are voted by the plan's
trustees, and (ii) outstanding options exercisable within 60 days to
purchase 38,813 shares. Also includes 381 shares held by Mr. Hay's wife as
a custodian for their minor children. Mr. Hay disclaims any beneficial
interest in such shares.
(10) Includes (i) 658 shares credited to participant accounts in JP
Foodservice's 401(k) retirement savings plan, which are voted by the plan's
trustees, and (ii) outstanding options exercisable within 60 days to
purchase 30,026 shares.
(11) Includes outstanding options exercisable within 60 days to purchase 1,250
shares.
(12) Includes (i) _____ shares held of record by Mr. Maslon as trustee for his
children, (ii) _____ shares held of record by Mr. Maslon as co-trustee for
his mother and (iii) ___ shares owned by his spouse. Also includes
Assumed Options exercisable within 60 days to purchase ______ shares.
(13) Includes (i) 11,332 shares credited to participant accounts in JP
Foodservice's 401(k) retirement savings plan, which are voted by the plan's
trustees, and (ii) outstanding options exercisable within 60 days to
purchase 85,041 shares. Also includes 1,195 shares owned by members of Mr.
Miller's family. Mr. Miller disclaims any beneficial interest in such
shares.
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<PAGE>
(14) Includes Assumed Options exercisable within 60 days to purchase ____
shares.
(15) Includes Assumed Options exercisable within 60 days to purchase ____
shares.
(16) Includes outstanding options exercisable within 60 days to purchase 1,250
shares.
(17) Includes outstanding options exercisable within 60 days to purchase 1,250
shares.
(18) Includes Assumed Options exercisable within 60 days to purchase _________
shares. Also includes ________ shares owned by one of his children.
(19) Includes Assumed Options exercisable within 60 days to purchase ____
shares.
(20) Pursuant to the Merger Agreement, the MLCP will be entitled to designate
two nominees to the JP Foodservice Board of Directors. Because such
nominees have not yet been identified, the beneficial ownership of JP
Foodservice Common Shares of all directors and executive officers as a
group after the Merger does not give effect to the share holdings of such
nominees.
(21) Includes options exercisable within 60 days to purchase ____ shares.
(22) Includes Assumed Options exercisable within 60 days to purchase ____
shares.
The information contained in the foregoing footnotes is for explanatory
purposes only.
Information regarding the beneficial ownership of Rykoff-Sexton Common
Shares is contained in the Rykoff-Sexton Annual Report on Form 10-K, which is
incorporated by reference in this Joint Proxy Statement/Prospectus. See
"Additional Information" and "Incorporation of Certain Documents by Reference."
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<PAGE>
MANAGEMENT OF JP FOODSERVICE AFTER THE MERGER
Executive Officers
James L. Miller, who currently serves as the Chairman, President and Chief
Executive Officer of JP Foodservice, will serve as Chairman and Chief Executive
Officer of JP Foodservice following the Merger. As of the Effective Time Mark
Van Stekelenburg, who currently serves as Chairman and Chief Executive Officer
of Rykoff-Sexton, will become the Vice Chairman and President of JP Foodservice.
Frank H. Bevevino, former President of Rykoff-Sexton and Chief Executive
Officer of Rykoff-Sexton's US Foodservice subsidiary, and Thomas G. McMullen,
former Executive Vice President of Rykoff-Sexton, retired from their executive
officer positions at Rykoff-Sexton in July 1997 and will not be executive
officers of JP Foodservice after the Merger. Mr. Bevevino also resigned as a
member of the Rykoff-Sexton Board of Directors during July 1997.
Directors
JP Foodservice has agreed in the Merger Agreement that, prior to the
Effective Time, it will increase the size of the JP Foodservice Board of
Directors from nine to 17 directors. In addition, the Merger Agreement provides
that the JP Foodservice Board of Directors, immediately following the Effective
Time, will consist of (i) nine individuals, including each of the incumbent
members of the JP Foodservice Board of Directors (or their replacements), no
fewer than five of whom will be outside directors, as selected by JP Foodservice
prior to the Effective Time, (ii) seven individuals, no fewer than four of whom
will be outside directors, two of whom will be individuals designated by MLCP,
one of whom will be Mr. Van Stekelenburg, and four of whom will be current
incumbents of the Rykoff-Sexton Board of Directors who are not employees of
Rykoff-Sexton or its subsidiaries or affiliated with MLCP, and (iii) one
additional person to be designated by the Chairman of JP Foodservice following
the Merger. In addition, the Merger Agreement obligates JP Foodservice to take
such action as may be necessary such that two of the three classes of the JP
Foodservice Board of Directors will consist of six directors each, three of whom
will be incumbent directors of the JP Foodservice Board of Directors pursuant to
clause (i) above and three of whom will be designated by Rykoff-Sexton pursuant
to clause (ii) above, and the third class of the JP Foodservice Board of
Directors will consist of five directors, three of whom will be incumbent
members of the JP Foodservice Board of Directors pursuant to clause (ii) above,
one of whom will be designated by Rykoff-Sexton pursuant to clause (ii) above
and one of whom will be designated as a director by the Chairman of JP
Foodservice following the Merger pursuant to clause (iii) above. Mr. Van
Stekelenburg will be appointed to the class of directors of the JP Foodservice
Board of Directors whose term will expire in 1998. The two directors who will be
designated by MLCP will be appointed, one each, to the class of directors whose
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term will expire in 1999 and 2000, respectively. Of the four directors to be
selected by Rykoff-Sexton pursuant to clause (ii) above, James I. Maslon will be
appointed to the class of directors whose term will expire in 1998 and Bernard
Sweet will be appointed to the class of directors whose term will expire in
1999.
The By-laws of JP Foodservice provide that directors elected to the Board
subsequent to June 29, 1997 who are 70 or more years of age are not eligible for
re-nomination to the JP Foodservice Board of Directors. Based upon their ages
at the Effective Time, it is expected that Messrs. Maslon and Sweet will retire
as directors in classes of the JP Foodservice Board whose terms will expire in
1998 and 1999, respectively. It is currently contemplated that the first three
vacancies on the JP Foodservice Board of Directors to occur following the
Effective Time will not be filled, so that the total number of directors
constituting the JP Foodservice Board of Directors thereafter will be reduced to
14.
The Merger Agreement also provides that, as of the Effective Time, the JP
Foodservice Board of Directors will initially have an audit committee, a
compensation committee and a nominating committee. Each committee will consist
of four directors, two of whom will be designated by JP Foodservice, one of whom
will be designated by Rykoff-Sexton and one of whom will be designated by mutual
agreement of JP Foodservice and Rykoff-Sexton. The initial chairman of each of
the audit committee, the compensation committee and the nominating committee
will be the JP Foodservice director who is currently the incumbent chairman of
such committee until such chairman's replacement is duly designated by the JP
Foodservice Board of Directors. If any of such committee chairs becomes vacant
for any reason prior to the Effective Time, the chairman will be the person
thereafter designated by the JP Foodservice Board of Directors pursuant to the
Certificate of Incorporation and By-laws of JP Foodservice. One member of the
nominating committee of the JP Foodservice Board of Directors (and of an
executive committee thereof, if such a committee is established) will be
designated by MLCP as Rykoff-Sexton's designee thereon.
Set forth below is certain information about each person who is expected to
be a member of the Board of Directors of JP Foodservice as of the Effective
Time, except that MLCP has not yet designated the two persons to be designated
by it under the Merger Agreement for service as directors. Following the
designation of such persons, the JP Foodservice Board will have 16 members as of
the Effective Time.
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<TABLE>
<CAPTION>
Term as
Year Became Director
Name a Director Expires Age
- ---- ----------- -------- ---
<S> <C> <C> <C>
James L. Miller.......................... 1989 2000 48
Chairman of the Board of Directors and
President and Chief Executive Officer of
JP Foodservice since July 1989. From
1986 to 1989, Mr. Miller served as
Executive Vice President and Chief
Operating Officer of the Northern
Division of PYA/Monarch, Inc.
("PYA/Monarch"), a wholly owned
subsidiary of Sara Lee Corporation.
From 1983 to 1985, Mr. Miller served as
Vice President and General Manager of
PYA/Monarch's Northeast Division.
Before joining PYA/Monarch, from 1972 to
1983, Mr. Miller was employed by SYSCO
Corp., where he held the positions of
Vice President of Operations, Vice
President of Sales, Vice President and
General Manager.
Lewis Hay, III........................... 1991 1999 41
Senior Vice President and Chief Financial
Officer of JP Foodservice since 1991.
Before joining JP Foodservice, Mr. Hay
was a Vice President and partner of
Mercer Management Consulting (formerly
Strategic Planning Associates), where he
led the strategy consulting practice in
the firm's Washington, D.C. office. Mr.
Hay joined Mercer Management Consulting
in 1982 and, beginning in 1986,
participated in a number of consulting
projects for PYA/Monarch, including the
management-led leveraged acquisition of
certain operations of PYA/Monarch in
connection with the formation of JP
Foodservice. Mr. Hay also serves as a
member of the Council on Finance for the
Graduate School of Industrial
Administration of Carnegie Mellon
University.
David M. Abramson........................ 1994 2000 44
Senior Vice President and General Counsel
of JP Foodservice since July 1, 1996 and
Secretary since September 2, 1996. Mr.
Abramson was the President and Managing
Principal of the law firm of Levan,
Schimel, Belman & Abramson, P.A. from
1992 to 1996. Previously, Mr. Abramson
was a Vice President and Principal of
that firm. Mr. Abramson serves as a
director of Monocacy Bancshares, Inc.,
which is the parent corporation of
Taneytown Bank & Trust Company in
Taneytown, Maryland.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Term as
Year Became Director
Name a Director Expires Age
- ---- ----------- -------- ---
<S> <C> <C> <C>
Mark P. Kaiser........................... 1996 1999 40
Senior Vice President-Sales, Marketing
and Procurement of JP Foodservice since
1993. Mr. Kaiser served as the JP
Foodservice's Vice President-Sales and
Marketing from 1989 to 1991 and as
Executive Vice President-Sales, Marketing
and Procurement from 1991 to 1993. Mr.
Kaiser previously held a number of
positions at PYA/Monarch, including Vice
President-Sales from 1985 to 1989.
Michael J. Drabb......................... 1994 1998 63
Executive Vice President of O'Brien Asset
Management, Inc., an institutional asset
management firm, since August 1993. From
April 1992 to July 1993, Mr. Drabb was
retired. Mr. Drabb served as an
Executive Vice President and a member of
the cabinet of The Mutual Life Insurance
Company of New York ("MONY") from 1989 to
1992 and was employed by MONY from 1961
until his retirement in 1992. Mr. Drabb
also serves as a director of the New York
Life Fund, Inc., the New York Life MFA
Series Fund, Inc., the MONY Series Fund,
Inc. and United States Leather, Inc.
Eric E. Glass............................ 1996 1998 57
Chairman of the Board for The Taney
Corporation, a manufacturer of wooden
stairway components and stairways, since
1995. Previously, from 1962 to 1995, Mr.
Glass served as President of The Taney
Corporation. Mr. Glass also serves as a
director of the Gettysburg Hospital in
Gettysburg, Pennsylvania and Chairman of
the Board and Vice Chairman of the
Executive Committee of Monocacy
Bancshares, Inc., which is the parent
corporation of Taneytown Bank & Trust
Company in Taneytown, Maryland.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Term as
Year Became Director
Name a Director Expires Age
- ---- ----------- -------- ---
<S> <C> <C> <C>
Paul I. Latta............................ 1996 1998 54
Senior Vice President of The Rouse
Company, a real estate development and
management company, where he is
responsible for all retail properties.
Mr. Latta previously held a number of
positions with The Rouse Company, where
he has been employed since 1968.
Jeffrey D. Serkes........................ 1996 1999 39
Vice President and Treasurer of
International Business Machines
Corporation ("IBM") since January 1995
and Assistant Treasurer of IBM from
August 1994 to December 1994. From 1987
to August 1994, Mr. Serkes held a number
of positions with RJR Nabisco, Inc.,
including Vice President and Deputy
Treasurer and Vice President and
Assistant Treasurer, Corporate Finance.
Mr. Serkes serves as a director of IBM
Credit Corporation.
Dean R. Silverman........................ 1996 2000 46
President of Dean & Company, a strategic
management consulting company located in
Vienna, Virginia since 1993. Prior to
1993, Mr. Silverman was Executive Vice
President and a partner of Mercer
Management Consulting.
Mark Van Stekelenburg.................... 1997 1998 46
Vice Chairman and President of JP
Foodservice as of the Effective Time.
Mr. Van Stekelenburg was Chairman of the
Board of Directors of Rykoff-Sexton since
December 1995, Chief Executive Officer
since December 1992 and a director since
September 1992. Mr. Van Stekelenburg
joined Rykoff-Sexton in 1991, and was
Executive Vice President until December
1992, at which time he was elected
President and Chief Executive Officer of
Rykoff-Sexton. He was previously
President and Chief Executive Officer of
Grootverbruik Ahold, the foodservice
division of Royal Ahold, N.V.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Term as
Year Became Director
Name a Director Expires Age
- ---- ----------- -------- ---
<S> <C> <C> <C>
James I. Maslon......................... 1997 1998 70
A director of Rykoff-Sexton since 1962.
Mr. Maslon has been retired since 1992.
Mr. Maslon was previously Vice President
- - Manufacturing of Rykoff-Sexton's S.E.
Rykoff & Co. division.
Bernard Sweet............................ 1997 1999 73
A director of Rykoff-Sexton since 1978.
Mr. Sweet has been retired since 1985.
Mr. Sweet was previously President and
Chief Executive Office of Republic
Airlines, Inc. He is a director of G&K
Services, Inc.
Neil I. Sell............................. 1997 1999 56
A director of Rykoff-Sexton since 1982.
Mr. Sell is a partner in the firm of
Maslon Edelman Borman & Brand, L.L.P.,
a position that he has held since 1973.
He is a director of Grand Casinos, Inc.
and Stratosphere Corporation.
James P. Miscoll......................... 1997 2000 62
A director of Rykoff-Sexton since 1992.
Mr. Miscoll has been retired since 1992.
Mr. Miscoll was previously Vice Chairman
of BankAmerica Corporation. He is a
director of American International Group,
Inc., Coast Federal Financial, Inc., MK
Gold Company, MotivePower Industries,
Inc., Northern Technology, Inc.,
Montgomery-Watson, Inc., Winkler McManus
and the California Higher Education
Authority.
</TABLE>
Set forth below is certain information about each person who is expected to
be an executive officer of JP Foodservice as of the Effective Time.
<TABLE>
<CAPTION>
Year Became
Name an Executive Director Age
- ---- --------------------- ---
<S> <C> <C>
</TABLE>
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<PAGE>
Executive Compensation
The following sets forth information concerning certain agreements and
plans relating to the compensation of specified executive officers of Rykoff-
Sexton prior to the Merger and after the Effective Time.
Employment Agreements and Related Matters
Mark Van Stekelenburg. Rykoff-Sexton is a party to an amended and restated
employment agreement with Mr. Van Stekelenburg, Chairman and Chief Executive
Officer of Rykoff-Sexton (the "Original Van Stekelenburg Employment Agreement").
The Original Van Stekelenburg Employment Agreement provides for a minimum annual
base salary, which is currently $500,000 for a five-year term which began on
February 2, 1996 (with automatic one-year renewals commencing at the end of the
fifth year unless either party gives advance notice to the contrary), with a
guaranteed minimum bonus of 50% of annual base salary for Rykoff-Sexton's 1997
fiscal year and 25% of annual base salary for Rykoff-Sexton's 1998 fiscal year.
Mr. Van Stekelenburg's annual bonus opportunity under Rykoff-Sexton's existing
senior management incentive plan is 150% of his base salary. The Original Van
Stekelenburg Employment Agreement provides term life insurance of not less than
$1,000,000 and a corresponding tax reimbursement. If his employment is
involuntarily terminated without "cause" (as defined) during the term of the
Original Van Stekelenburg Employment Agreement, Mr. Van Stekelenburg will
receive termination payments for the greater of two years or the remaining term
of such Employment Agreement. Termination benefits include salary and welfare
benefit continuation, bonus (equal to the average amount of his incentive bonus
during the three years preceding termination), immediate exercisability of any
outstanding stock options, the lapse of any restrictions on other equity awards,
and if termination occurs before July 20, 1999, two additional years of service
credit for the CEO SERP (as defined in "--Supplemental Executive Retirement
Plans (SERPs)--CEO SERP"). See "--Supplemental Executive Retirement Plans
(SERPs)." Termination payments will be offset by any severance payments (other
than tax reimbursements) made under Mr. Van Stekelenburg's Change in Control
Agreement (as defined in "--Change in Control Agreements and Golden Parachute
Tax Exemption"). See "--Change in Control Agreements and Golden Parachute Tax
Exemption."
Pursuant to the terms of the Merger Agreement and the JP/Van Stekelenburg
Employment Agreement, at or prior to the Effective Time, Mr. Van Stekelenburg's
employment with Rykoff-Sexton will be terminated, and Mr. Van Stekelenburg will
be paid all amounts owing to him under (i) the Original Van Stekelenburg
Employment Agreement (as if he were involuntarily terminated by Rykoff-Sexton
without "cause"), (ii) his Change in Control Agreement (as if he were terminated
by Rykoff-Sexton after the occurrence of a change in control other than by
reason of death) and (iii) any other plans and agreements to which he is a party
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<PAGE>
with Rykoff-Sexton, and he will be entitled to the benefits under the CEO SERP
(as if he were terminated other than by reason of death or an approved leave of
absence) (collectively, the foregoing agreements with Mr. Van Stekelenburg are
referred to as the "Existing Agreements"), subject, however, to the applicable
provisions of the JP/Van Stekelenburg Employment Agreement. All obligations of
Rykoff-Sexton set forth in the Existing Agreements will survive any such
payments. See "--Change in Control Agreements and Golden Parachute Tax
Exemption" and "--Supplemental Executive Retirement Plans (SERPs)--CEO SERP."
At the Effective Time, JP Foodservice will enter into a new employment
agreement with Mr. Van Stekelenburg (the "JP/Van Stekelenburg Employment
Agreement"), pursuant to which Mr. Van Stekelenburg will serve as the Vice
Chairman and President of JP Foodservice. The term of the JP/Van Stekelenburg
Employment Agreement will be three years, subject to earlier termination either
"involuntarily" (as described below) or voluntarily by Mr. Van Stekelenburg. JP
Foodservice will have the right to terminate Mr. Van Stekelenburg's employment
effective on or after the first anniversary of the Closing Date of the Merger,
provided that JP Foodservice gives 30 days' notice prior to the effective date
of the termination, and such termination by JP Foodservice will not be
considered an involuntary termination under the JP/Van Stekelenburg Employment
Agreement that would entitle Mr. Van Stekelenburg to payment of the amounts
described below as payable upon an involuntary termination. The JP/Van
Stekelenburg Employment Agreement provides a minimal annual base salary of
$500,000, with an annual bonus opportunity of 100% of annual base salary for
each fiscal year of JP Foodservice that ends during the term of the JP/Van
Stekelenburg Employment Agreement. The JP/Van Stekelenburg Employment also
provides for various benefits, including the right to participate in various JP
Foodservice savings and retirement plans and welfare benefit plans (including
health and life insurance for Mr. Van Stekelenburg and his family) to the extent
applicable to other JP Foodservice peer executives (but not to the extent that
Mr. Van Stekelenburg is entitled to such benefits under the Original Van
Stekelenburg Employment Agreement or his Change in Control Agreement), and
reimbursement for relocation expenses to the Columbia, Maryland area.
If Mr. Van Stekelenburg's employment is involuntarily terminated without
"cause" during the first year of the term of the JP/Van Stekelenburg Employment
Agreement, Mr. Van Stekelenburg will be entitled to receive (1) a lump sum
termination payment equal to (a) the sum of (i) his highest base salary during
the prior three-year period, plus (ii) his average annual cash incentive
compensation awarded during the prior three-year period, times (b) a fraction
equal to the portion of the year remaining, if any, from the date of termination
to the first anniversary date of Mr. Van Stekelenburg's employment with JP
Foodservice, and (2) for the portion of the year remaining, if any, from the
date of termination to the first anniversary date of Mr. Van Stekelenburg's
employment with JP Foodservice, the benefit of all employee welfare benefit
plans and perquisite programs in which Mr.
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Van Stekelenburg was entitled to participate immediately prior to his
termination (but not to the extent that Mr. Van Stekelenburg becomes entitled to
similar benefits under the Original Van Stekelenburg Employment Agreement or his
Change in Control Agreement). See "--Change in Control Agreements and Golden
Parachute Tax Exemption." For purposes of calculating the lump sum termination
payment, the applicable three-year period includes Mr. Van Stekelenburg's
employment with Rykoff-Sexton. In general, "cause" is defined as a willful and
continued failure to perform assigned duties after notice of such failure or the
willful engaging in illegal conduct or gross misconduct which is materially and
demonstrably injurious to JP Foodservice. Mr. Van Stekelenburg will be deemed to
have been involuntarily terminated if he terminates employment after any of the
following events: Mr. Van Stekelenburg's disability; certain changes to Mr. Van
Stekelenburg's duties, titles, offices or positions; failure of JP Foodservice
to compensate Mr. Van Stekelenburg in accordance with the terms of the JP/Van
Stekelenburg Employment Agreement; the relocation of Mr. Van Stekelenburg from
JP Foodservice's Columbia, Maryland location; or Mr. Van Stekelenburg's
termination during the thirty-day period immediately following a "change in
control." For this purpose, a "change in control" will be deemed to occur if any
of the following events occurs: the individuals who, as of the date of the
signing of the JP/Van Stekelenburg Employment Agreement, constitute the Board of
Directors of JP Foodservice (the "Incumbent Board") (or any individual whose
subsequent election to the Board of Directors of JP Foodservice was approved by
the Incumbent Board) cease to constitute a majority of the Board of Directors of
JP Foodservice; with certain exceptions, any individual, entity or group is or
becomes the beneficial owner of 50% or more of JP Foodservice's capital stock
generally entitled to vote for the election of directors; a reorganization,
merger or consolidation or sale or other disposition of substantially all of the
assets of JP Foodservice is consummated; or the stockholders of JP Foodservice
approve a complete liquidation of JP Foodservice (except that in no event will
the Merger constitute a change in control). In addition, if Mr. Van
Stekelenburg's employment is involuntarily terminated without "cause" at any
time during the term of the JP/Van Stekelenburg Employment Agreement, then,
notwithstanding any provision to the contrary in any agreement or plan, all of
his outstanding stock options will immediately become exercisable and all
restrictions on any other equity awards will lapse and such awards will vest and
Mr. Van Stekelenburg will be entitled to reimbursement for relocation expenses.
The JP/Van Stekelenburg Employment Agreement also provides for payment of an
amount necessary to restore any benefit diminution if the 20% excise tax imposed
under Section 4999 of the Code is applicable to payments or distributions made
to Mr. Van Stekelenburg by JP Foodservice.
Other Executive Officers of Rykoff-Sexton. Rykoff-Sexton also has entered
into employment agreements with certain other executive officers, including
David F. McAnally, Senior Vice President and Chief Financial Officer, and Harold
E. Feather, Executive Vice President, Corporate Planning.
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<PAGE>
The employment agreement with Mr. McAnally generally parallels the Original
Van Stekelenburg Employment Agreement. Mr. McAnally's employment agreement
provides an annual base salary (which is currently $205,000 for a two-year term
commencing on May 17, 1996 (with automatic one-year renewals commencing at the
end of the initial term unless either party gives advance notice to the
contrary), with a guaranteed, minimum bonus of 50% of annual base salary for
Rykoff-Sexton's 1997 fiscal year and 25% of annual base salary for Rykoff-
Sexton's 1998 fiscal year. In the event that Mr. McAnally is involuntarily
terminated by Rykoff-Sexton without "cause" during the term of his employment
agreement, he will receive termination payments for the greater of one year or
the period remaining in the term. "Cause" is defined to include: a failure to
consistently meet applicable performance appraisal standards; an intentional act
of fraud, embezzlement or theft; intentional wrongful damage to Rykoff-Sexton's
property; intentional misconduct that is materially injurious to Rykoff-Sexton's
property; or a breach of the confidentiality/nonsolicitation provisions of the
agreement. Involuntary termination includes disability, notice from Rykoff-
Sexton that it intends to terminate Mr. McAnally's employment agreement and
employment, reduction in base salary (unless the reduction is part of a general
reduction applicable to senior executives of Rykoff-Sexton), or the relocation,
without Mr. McAnally's consent, of Mr. McAnally, his offices, or the principal
place where Mr. McAnally is required to perform his duties, from Wilkes-Barre,
Pennsylvania. Termination benefits for Mr. McAnally include salary and welfare
benefit continuation, bonus (equal to the average amount of his incentive bonus
during the three years preceding termination), immediate exercisability of any
outstanding stock options, and the lapse of certain specified restrictions on
other equity awards. Such termination payments payable to Mr. McAnally will be
reduced by the amount of certain severance payments payable under his change in
control agreement with Rykoff-Sexton. See "--Change in Control Agreements and
Golden Parachute Tax Exemption."
Rykoff-Sexton has entered into an employment agreement with Mr. Feather,
which provides that Mr. Feather will be paid a minimum annual base salary, which
is currently $275,000, and an annual car allowance of $7,200, through December
31, 1998 (after which time, either Mr. Feather or Rykoff-Sexton may terminate
his employment at any time with or without cause and with or without notice).
Mr. Feather's employment agreement permits him to participate in Rykoff-Sexton's
employee benefit, stock option, and incentive plans, subject to the terms of
such plans. If Mr. Feather is terminated by Rykoff-Sexton for any reason other
than Mr. Feather's death, disability, or for cause (as defined), Mr. Feather
will receive termination payments equal to his continued base salary through
December 31, 1998, provided that Mr. Feather does not directly or indirectly
compete with Rykoff-Sexton. Any payments made pursuant to Mr. Feather's Change
in Control Agreement will reduce, dollar for dollar, the amount of the
termination payments made pursuant to Mr. Feather's employment agreement. See
"--Change in Control Agreements and Golden Parachute Tax Exemption."
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Change in Control Agreements and Golden Parachute Tax Exemption
Rykoff-Sexton is a party to a change in control agreement with Mr. Van
Stekelenburg and change in control agreements with certain other executive
officers of Rykoff-Sexton (Harold E. Feather, Alan V. Giuliani, Robert J.
Harter, Jr., Richard J. Martin and David McAnally) (collectively referred to as
the "Change in Control Agreements"). Prior to a "change in control," each of
the Change in Control Agreements provides for a base term ending on December 31,
1999, with automatic one-year renewals unless Rykoff-Sexton gives advance notice
to the contrary. Each of the Change in Control Agreements provides for the
payment of specified benefits under the circumstances described below after the
occurrence of a "change in control" (as defined). For purposes of the Change in
Control Agreements, the consummation of the Merger will constitute a "change in
control." Upon a "change in control," each Change in Control Agreement (other
than Mr. Van Stekelenburg's) will provide an executive with an amount equal to
2.99 times the sum of his base salary plus the amount that would otherwise be
earned under any executive compensation plan if, within two years subsequent to
the "change in control," the executive's employment is involuntarily terminated
by Rykoff-Sexton other than for death, disability or "cause" (defined generally
as the executive's willful and continued failure to substantially perform his
duties, after specific demand for substantial performance has been made by
Rykoff-Sexton, or the executive's willful engaging in misconduct that is
materially injurious to Rykoff-Sexton) or if the executive terminates his
employment for "good reason" (defined as (i) certain changes to the executive's
duties, title, offices or positions, (ii) a salary reduction or a failure to
increase salary by certain amounts, (iii) failure to maintain, or certain
adverse effects on the executive's participation in, certain benefit, incentive
or stock option plans, (iv) a relocation subsequent to a "change in control" of
Rykoff-Sexton's principal executive offices to a location more than 40 miles
from the location of such principal executive offices immediately prior to the
"change in control," provided that such relocation will have no effect under the
executive's Change in Control Agreement unless prior to the "change in control"
the executive performed the executive's duties at such principal offices; or the
executive's relocation to any place other than the location at which the
executive performed the executive's duties prior to a "change in control,"
except for required travel by the executive on Rykoff-Sexton's business to an
extent substantially consistent with the executive's business travel obligations
at the time of a "change in control," (v) a reduction in the executive's
vacation days, (vi) a material breach of, or failure by a successor or assign of
Rykoff-Sexton to assume, the executive's Change in Control Agreement or (vii) a
purported termination of the executive's employment that is not implemented in
accordance with the terms of the executive's Change in Control Agreement).
Additionally, if a "change in control" occurs and the executive's employment
with Rykoff-Sexton is terminated by Rykoff-Sexton or the executive terminates
his employment for "good reason" prior to the date on which the "change in
control" occurs, such termination will be deemed to be a termination of
employment after a
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"change in control" for purposes of the Change in Control Agreement if the
executive can reasonably demonstrate that such termination was at the request of
a third party who took steps reasonably calculated to effect a "change in
control," or otherwise arose in connection with or in anticipation of a "change
in control." Termination benefits for each of the executive officers who is a
party to a Change in Control Agreement include outplacement expense
reimbursement and welfare benefit continuation for two years after the
executive's termination of employment.
Pursuant to Mr. Van Stekelenburg's Change in Control Agreement, Mr. Van
Stekelenburg will receive an amount equal to 2.99 times the sum of his base
salary plus the amount that would otherwise be earned under any executive
compensation plan if within two years subsequent to the "change in control" his
employment is terminated by Rykoff-Sexton for any reason or no reason (other
than death) or if Mr. Van Stekelenburg elects to terminate his employment for
any or no reason. Mr. Van Stekelenburg's termination benefits include
outplacement expense reimbursement and welfare benefit continuation for two
years after his termination of employment. Pursuant to the terms of the Merger
Agreement and upon the execution of the JP/Van Stekelenburg Employment
Agreement, at or prior to the Effective Time, Mr. Van Stekelenburg's employment
with Rykoff-Sexton will be terminated, and he will be treated for purposes of
his Change in Control Agreement as if he were terminated by Rykoff-Sexton after
the occurrence of a "change in control" other than by reason of death. See "--
Employment Agreements and Related Matters."
The Change in Control Agreements with Messrs. Van Stekelenburg and Feather
also provide for payment of an amount necessary to restore any benefit
diminution if the 20% excise tax imposed under Section 4999 of the Code is
applicable to payments made or benefits provided under this agreements.
Severance Agreements
As of February 2, 1996, Rykoff-Sexton entered into individual severance
agreements with Messrs. Feather, Giuliani, Harter and Martin (the "Severance
Agreements"). The individual Severance Agreements provide for termination
benefits if an executive is involuntarily terminated by Rykoff-Sexton other than
for death, disability or "cause," or terminates employment voluntarily after a
reduction in pay (other than a general reduction), or notice of the non-renewal
of the agreement, during the Severance Agreement's three-year term. The
Severance Agreements also provide for automatic one-year renewals unless either
party gives advance notice to the contrary. "Cause" under the Severance
Agreements is defined as a failure by the executive consistently to meet
applicable performance appraisal standards; an intentional act of fraud,
embezzlement or theft; intentional wrongful damage to Rykoff-Sexton's property;
intentional misconduct that is materially injurious to Rykoff-Sexton; or a
breach of the confidentiality/nonsolicitation provisions of the Severance
Agreement. Termination benefits include salary and
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welfare benefit continuation for two years, bonus (based on actual performance
results during the applicable performance period and calculated as though the
executive had remained employed throughout the period, but prorated to reflect
the period of actual service), full vesting in any stock options and in each
individual's SERP and crediting of benefits under Rykoff-Sexton's Deferred
Compensation Plan at a "preferred" rate. Termination payments will be offset by
any payments made under an individual executive's employment agreement or Change
in Control Agreement.
Supplemental Executive Retirement Plans (SERPs)
Non-CEO SERPs. Effective October 1, 1995, Rykoff-Sexton established a non-
qualified supplemental executive retirement plan ("SERP") for each of Messrs.
Feather, Giuliani, Harter and Martin (individually referred to as an
"executive").
An executive who has at least 15 years of service and retires at or after
age sixty-two (the "Normal Retirement Age") is entitled, provided he has
participated in his SERP for at least five plan years or has otherwise become
fully vested in his SERP, to an annual SERP retirement benefit for life equal to
50% of his final average earnings, reduced by the actuarial equivalent of any
benefits he is entitled to receive under Rykoff-Sexton's qualified pension plan
(the "Rykoff-Sexton Pension Plan"), Rykoff-Sexton's supplemental excess
retirement plan, certain other nonqualified retirement plans of Rykoff-Sexton
and its subsidiaries, Social Security, and all qualified and non-qualified plans
for all prior employers (the "Executive's Other Benefits"). Final average
earnings are defined as the executive's highest average annual base compensation
plus bonus during any consecutive three-year period within the five-year period
preceding termination of employment.
An executive who has at least ten years of service and retires prior to
Normal Retirement Age but at or after age fifty-five is entitled, provided he
has participated in his SERP for at least five plan years or has otherwise
become fully vested in his SERP, to an annual early retirement benefit for life
equal to the 50% benefit payable at Normal Retirement Age (as reduced by the
Executive's Other Benefits), reduced on account of the early payment of
benefits. The early payment reduction is 6% for each year that the date of the
commencement of benefits precedes his normal retirement at age sixty-two (the
"Six Percent Annual Early Payment Reduction").
An executive will become fully vested in his SERP at age fifty-five and
upon completion of five plan years of participation in the SERP, or earlier if
his employment is terminated without cause under his Severance Agreement or
following a "change in control" (as defined). For purposes of the SERPs, the
consummation of the Merger will constitute a "change in control." An executive
who becomes fully vested in his SERP will be entitled, upon termination prior to
the date the executive would have both attained age fifty-five and completed ten
years
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of service, to a lifetime annual retirement benefit payable commencing at the
date he would have had ten years of service if his employment continued with
Rykoff-Sexton and he had attained age fifty-five. The benefit will be determined
in the same manner as an early retirement benefit.
If an executive dies prior to his termination of employment, his surviving
spouse, if he has been married to such spouse for at least one year prior to
death, is entitled to an annual survivor benefit for life equal to 50% of the
benefit to which the executive would have been entitled had he then retired (but
without reduction by the benefits the executive would have been entitled to
receive under the Rykoff-Sexton Pension Plan), reduced by the survivor benefits
paid under the Rykoff-Sexton Pension Plan. If an executive dies after the
commencement of benefits under the SERP, his surviving spouse, if he has been
married to such spouse for at least one year prior to death, is entitled to an
annual survivor benefit equal to 50% of the benefit actually then being paid to
the executive, adjusted, in a manner similar to that described above, to take
into account the survivor benefits paid under the Rykoff-Sexton Pension Plan.
An executive who becomes disabled with less than ten years of service is
entitled to an annual disability benefit for life equal to 25% of his final
average earnings, reduced by the Executive's Other Benefits. An executive who
becomes disabled with ten or more years of service is entitled to a disability
benefit calculated by (a) multiplying his final average earnings by a percentage
that equals his years of service times 2-1/2% (but in no event more than 50%),
and (b) subtracting therefrom an amount equal to the Executive's Other Benefits.
Disability benefits will commence after the end of the salary continuation
period under Rykoff-Sexton's non-insured salary continuation plan. Disability
benefits are not subject to the Six Percent Annual Early Payment Reduction.
CEO SERP. Effective July 20, 1994, Rykoff-Sexton established a non-
qualified supplemental executive retirement plan for Mr. Van Stekelenburg (the
"CEO SERP").
If Mr. Van Stekelenburg has at least twenty years of service and retires at
or after age sixty (the "CEO's Normal Retirement Age"), Mr. Van Stekelenburg is
entitled under the CEO SERP to an annual retirement benefit for life equal to
60% of his final average earnings, reduced by the actuarial equivalent of any
benefits he is entitled to receive under the Rykoff-Sexton Pension Plan (the
"CEO's Other Benefits"). Mr. Van Stekelenburg is not a participant in Rykoff-
Sexton's supplemental excess retirement plan. Final average earnings are defined
as Mr. Van Stekelenburg's average annual base compensation plus bonus during the
three-year period preceding termination of employment. If Mr. Van Stekelenburg
retires prior to the CEO's Normal Retirement Age but at or after age fifty-five,
he is entitled to an early retirement benefit equal to the 60% benefit payable
at Normal Retirement Age (reduced by the CEO's Other Benefits), reduced by 6%
for each year
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that the date of commencement of benefits precedes the CEO's Normal Retirement
Age. In all cases, the retirement benefits payable to Mr. Van Stekelenburg will
be reduced by the amount of retirement benefits paid to him under Social
Security.
Mr. Van Stekelenburg became fully vested in the CEO SERP upon completing
five years of service. As a result, if Mr. Van Stekelenburg terminates prior to
age fifty-five, he will be entitled to an annual retirement benefit for life
payable commencing at age fifty-five which is equal to the actuarial equivalent
of the 60% benefit payable at Normal Retirement Age (as reduced by the CEO's
Other Benefits). The retirement benefit will be reduced by the amount of
retirement benefits paid to him under Social Security.
If Mr. Van Stekelenburg dies prior to his termination of employment, his
surviving spouse is entitled, if he has been married to such spouse for at least
one year prior to death, to an annual survivor benefit for life equal to 60% of
the benefit to which he would have been entitled had he then retired (but
without reduction by the benefits Mr. Van Stekelenburg would have been entitled
to receive under the Rykoff-Sexton Pension Plan), reduced by the survivor
benefits paid under the Rykoff-Sexton Pension Plan. If Mr. Van Stekelenburg
dies after the commencement of benefits under the CEO SERP, his surviving
spouse, if he has been married to such spouse for at least one year prior to
death, is entitled to an annual survivor benefit equal to 60% of the benefit
actually then being paid to him, adjusted, in a manner similar to that described
above, to take into account the survivor benefits paid under the Rykoff-Sexton
Pension Plan.
If Mr. Van Stekelenburg becomes disabled with less than ten years of
service, he is entitled to an annual disability benefit for life equal to 30% of
his final average earnings, reduced by the CEO's Other Benefits. If Mr. Van
Stekelenburg becomes disabled with ten or more years of service, he is entitled
to a disability benefit calculated by (a) multiplying his final average earnings
by a percentage that equals his years of service times 3% (but in no event more
than 60%), and (b) subtracting therefrom an amount equal to the CEO's Other
Benefits. Disability benefits will commence after the end of the salary
continuation period under Rykoff-Sexton's non-insured salary continuation plan,
are reduced by the amount of retirement benefits paid under Social Security, and
are not subject to the 6% annual early payment reduction.
Deferred Compensation Plan and Master Trust Agreement. The Rykoff-Sexton
Deferred Compensation Plan permits specified Rykoff-Sexton executives and
members of Rykoff-Sexton's Board of Directors to elect to defer portions of
annual base salary, annual bonus and/or director's fees. The minimum deferral
for any year is $2,000 of base salary, bonus or fees, and the maximum annual
deferral is 50% of annual base salary and 100% of each of annual bonus and
director's fees. Interest is credited to an individual's account on the amount
deferred at specific rates. A higher interest rate is generally applied for
payments
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due to death, disability or retirement after age 62 (or for employees only,
after age 55 with five years service), or for payments made to a participant
with at least five years of participation in the Plan. The higher interest rate
is also applied after a "change in control" occurs. The Master Trust Agreement
for Executive Deferral Plans provides a means of securing payment for various of
Rykoff-Sexton's deferred compensation plans for executives, including the
Deferred Compensation Plan and the SERPs. Certain provisions of the Master Trust
Agreement take effect only after a "change in control" (as defined) occurs.
For purposes of the Deferred Compensation Plan and the Master Trust
Agreement, the consummation of the Merger will constitute a "change in control."
At or prior to the Effective Time, Rykoff-Sexton may transfer funds to the trust
established pursuant to the Master Trust Agreement in an amount sufficient to
provide for all obligations secured by the trust and accrued through the
Effective Time and for the fees and expenses of the trust.
Additional information regarding the compensation and certain relationships
and related transactions of directors and officers of JP Foodservice who will
serve as directors or officers of JP Foodservice as of the Effective Time is
contained in the JP Foodservice Annual Report on Form 10-K, which is
incorporated by reference in this Joint Proxy Statement/Prospectus. See
"Available Information" and "Incorporation of Certain Documents by Reference."
Additional information regarding the compensation and certain relationships
and related transactions of directors and officers of Rykoff-Sexton who will
serve as directors or officers of JP Foodservice as of the Effective Time is
contained in the Rykoff-Sexton Annual Report on Form 10-K, which is incorporated
by reference in this Joint Proxy Statement/Prospectus. See "Available
Information" and "Incorporation of Certain Documents by Reference."
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DESCRIPTION OF JP FOODSERVICE
JP Foodservice is a leading broadline distributor of food and related
products to restaurants and other institutional foodservice establishments in
the Mid-Atlantic, Midwestern and Northeastern regions of the United States and
in Las Vegas, Nevada. JP Foodservice ranks as the nation's fifth largest
broadline 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 over 30,000 national, private and
signature brand items to over 34,000 foodservice customers, including
restaurants, hotels, healthcare facilities, cafeterias and schools. This
diverse customer base encompasses both independent (or "street") and multi-unit
(or "chain") businesses, including Old Country Buffet, Perkins Family
Restaurants, Subway, Eurest Dining Services, Ruby Tuesday and Pizzeria Uno. JP
Foodservice also is a foodservice supplier to the United States Congress, Fenway
Park and other prominent institutions. JP Foodservice's comprehensive product
line includes canned and dry food products, fresh meats, poultry, seafood,
frozen foods, fresh produce, dairy and other refrigerated products, paper
products, cleaning supplies, light restaurant equipment and other supplies.
This broad product line provides JP Foodservice customers with a single source
to satisfy substantially all of their foodservice needs.
JP Foodservice distributes its products out of its 13 full-service
distribution centers located in Massachusetts, Connecticut, Pennsylvania,
Maryland, Minnesota, Indiana, Illinois, Iowa, Nevada, Ohio and Virginia. JP
Foodservice extends this geographic coverage through remote distribution
locations including, among others, facilities in Ohio, Maryland, Michigan,
Vermont and New Jersey.
JP Foodservice has supplemented its internal expansion with an active
program of strategic acquisitions to take advantage of growth opportunities from
ongoing consolidation in the fragmented foodservice distribution industry. See
"The Merger -- Background of the Merger -- Foodservice Industry Trends."
JP Foodservice has approximately 3,500 full-time employees, of whom
approximately 120 are employed in corporate and administration at JP
Foodservice's corporate headquarters in Columbia, Maryland.
Portions of JP Foodservice's business date back to the formation of Monarch
Foods in 1853. In 1946, Monarch Foods was acquired by Consolidated Foods
Corporation (now named Sara Lee Corporation) and in 1967 was merged with Pearce,
Young, Angel ("PYA"), a Southeast institutional foodservice distributor. JP
Foodservice began operations in July 1989 following a management-led leveraged
acquisition of certain operations of PYA/Monarch, Inc., a wholly owned
subsidiary of Sara Lee Corporation. In November 1994, JP Foodservice completed
its initial public offering of JP Foodservice Common Shares as part of a
recapitalization.
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JP Foodservice was organized under the laws of the State of Delaware. JP
Foodservice's principal executive offices are located at 9830 Patuxent Woods
Drive, Columbia, Maryland 21046, and JP Foodservice's telephone number is (410)
312-7100.
Additional information concerning JP Foodservice is included in certain
documents incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
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DESCRIPTION OF RYKOFF-SEXTON
Established in 1911, Rykoff-Sexton is a leading distributor and
manufacturer of high-quality foods and related non-food products and services
for the foodservice industry throughout the United States. Rykoff-Sexton's
products and services are sold wherever food is prepared and consumed away from
home. Rykoff-Sexton distributes its product line of more than 40,000 items to
restaurants, industrial cafeterias, health care facilities, schools and
colleges, hotels, airlines, supermarket service delicatessen departments and
other segments of the travel and leisure markets. It also offers equipment and
supplies and design and engineering services for all types of foodservice
operations. Rykoff-Sexton's products consist of a broad line of private label
and national branded food and foodservice equipment and supplies. Rykoff-
Sexton's proprietary private label products accounted for approximately 33% of
its net sales in the fiscal year ended April 27, 1996. Rykoff-Sexton develops
and manufactures many of its private label products, and also manufactures other
products for certain customers under the customers' own brand labels.
Rykoff-Sexton's principal operations are conducted through the US
Foodservice Distribution Division (the "Distribution Division"), Targeted
Specialty Services, Inc. ("TSSI") and the Rykoff-Sexton Manufacturing Division
(the "Manufacturing Division"). The Distribution Division comprises 32
distribution branches that are largely located in major metropolitan areas
throughout the United States. In fiscal 1996, sales of the Distribution Division
(including products sold through this division by TSSI and the Manufacturing
Division) generated approximately 98% of Rykoff-Sexton's net sales.
TSSI provides restaurant design and engineering services for all types of
foodservice operations through its contract/design offices. In addition, this
division offers equipment and supplies as well as specialty and gourmet imported
products and manages Rykoff-Sexton's consolidation and in-transit warehouses.
The Manufacturing Division manufactures products primarily under Rykoff-
Sexton's proprietary private labels and also manufactures products for other
manufacturers, distributors, restaurant chains and other large users under their
own brand labels at its three manufacturing plants. Approximately 90% of the
Manufacturing Division's products are sold through the Distribution Division and
the remainder are sold directly to customers.
Effective May 17, 1996, Rykoff-Sexton consummated the acquisition of US
Foodservice, a privately held broadline foodservice distribution company.
Holders of US Foodservice Common Stock received approximately 12.9 million
Rykoff-Sexton Common Shares in exchange for each outstanding share of US
Foodservice Common Stock. Options and warrants to acquire US Foodservice Common
Stock were converted into options and warrants to acquire Rykoff-Sexton Common
Shares on the same basis. In addition, Rykoff-Sexton repaid and refinanced all
of the outstanding
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bank and subordinated debt of US Foodservice and purchased all of the
outstanding shares of US Foodservice Preferred Stock. In connection with the US
Foodservice Acquisition, Rykoff-Sexton changed its fiscal year to the Saturday
closest to June 30 from the Saturday closest to April 30.
US Foodservice had net sales for the fiscal year ended December 31, 1995 of
approximately $1.7 billion and is a distributor of food and non-food products to
the foodservice industry, serving more than 40,000 customers in over 30 states,
primarily in the Southeastern, Southwestern and Mid-Atlantic regions. US
Foodservice currently operates as a wholly-owned subsidiary of Rykoff-Sexton and
its primary operations have been integrated with the Distribution Division and
TSSI.
Rykoff-Sexton, which was organized under the laws of the state of Delaware
in 1961, is the successor to a business founded in 1911. Rykoff-Sexton's
principal executive offices are located at 613 Baltimore Drive, East Mountain
Corporate Center, Wilkes-Barre, Pennsylvania 18702, and Rykoff-Sexton's
telephone number is (717) 831-7500.
Additional information concerning Rykoff-Sexton is included in certain
documents incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
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DESCRIPTION OF JP FOODSERVICE CAPITAL STOCK
General
JP Foodservice's authorized capital stock consists of 75,000,000 Common
Shares, of which 22,589,913 shares were outstanding as of June 28, 1997, and
5,000,000 shares of preferred stock ("JP Foodservice Preferred Stock"), no
shares of which are outstanding. No series of JP Foodservice Preferred Stock has
been designated other than 350,000 shares of Series A Junior Participating
Preferred Stock, par value $.01 per share (the "JP Foodservice Series A
Preferred Stock"). The number of JP Foodservice Common Shares to be issued in
connection with the Merger (including JP Foodservice Common Shares reserved for
issuance upon exercise of the Assumed Warrants and Assumed Options) is
25,654,594. The following description is a summary of the material provisions of
JP Foodservice's capital stock and is qualified in its entirety by reference to
the provisions of the Restated Certificate of Incorporation of JP Foodservice
(the "JP Foodservice Charter"), its By-laws (the "JP Foodservice By-laws"), and
the JP Foodservice Rights Agreement, copies of which have been filed as exhibits
to the Registration Statement of which this Joint Proxy Statement/Prospectus
forms a part.
Common Shares, Rights and Series A Preferred Stock
The following description of JP Foodservice Common Shares and certain
associated rights should be read carefully by the holders of Rykoff-Sexton
Common Shares, because, at the Effective Time, each issued and outstanding
Rykoff-Sexton Common Share will be converted into the right to receive JP
Foodservice Common Shares based on the Exchange Ratio as set forth in the Merger
Agreement and described herein. See "Comparative Rights of JP Foodservice
Stockholders and Rykoff-Sexton Stockholders."
JP Foodservice Common Shares
Subject to any prior rights of any holders of Rykoff-Sexton Preferred Stock
then outstanding, holders of JP Foodservice Common Shares are entitled to such
dividends as may be declared from time to time by the JP Foodservice Board of
Directors out of funds legally available therefor. Each holder of JP Foodservice
Common Shares is entitled to one vote for each share owned by such holder on all
matters submitted to a vote of the stockholders of JP Foodservice. Such shares
are not entitled to any cumulative voting rights. In the event of any
liquidation, dissolution or winding up of JP Foodservice, holders of JP
Foodservice Common Shares are entitled to share equally and ratably in any
assets remaining after the payment of all debt and liabilities, subject to the
prior rights, if any, of holders of JP Foodservice Preferred Stock. Holders of
JP Foodservice Common Shares have no preemptive or other subscription or
conversion rights. JP Foodservice Common Shares are not subject to redemption
and the outstanding JP Foodservice Common
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Shares are, and the JP Foodservice Common Shares to be issued in connection with
the Merger will be, fully paid and nonassessable.
JP Foodservice Rights
Under the Rights Agreement dated as of February 19, 1996, as amended,
between JP Foodservice and The Bank of New York, as Rights Agent (the "JP
Foodservice Rights Agreement"), each outstanding JP Foodservice Common Share has
attached to it one preferred share purchase right (a "Right") initially
represented by such JP Foodservice Common Share. Each JP Foodservice Common
Share to be issued in connection with the Merger or pursuant to Assumed Options
or Assumed Warrants will have one JP Foodservice Right attached to it. Each JP
Foodservice Right entitles the registered holder of JP Foodservice Common Shares
to purchase from JP Foodservice, upon the occurrence of certain events, one one-
hundredth of a share of JP Foodservice Series A Preferred Stock at a price of
$95 per one one-hundredth of a share (the "Purchase Price"), subject to
adjustment. The description and terms of the JP Foodservice Rights are set forth
in the JP Foodservice Rights Agreement.
Until the Distribution Date (as defined below), JP Foodservice will not
issue separate certificates evidencing the JP Foodservice Rights. Until such
date, the JP Foodservice Rights will be evidenced, with respect to any JP
Foodservice Common Share certificate outstanding as of the Record Date, by such
JP Foodservice Common Share certificate with a copy of a summary of the terms of
the JP Foodservice Rights (the "Summary of JP Foodservice Rights") attached
thereto. The JP Foodservice Rights will detach from the JP Foodservice Common
Shares and a Distribution Date will occur upon the earlier of (i) subject to the
exceptions described below, the 10th day following a public announcement that a
person or group of affiliated or associated persons (a "group") has acquired
beneficial ownership of 10% or more of the outstanding JP Foodservice Common
Shares (any such person or group, subject to the exceptions described below, an
"Acquiring Person"), or (ii) the 10th business day (or such later date as may be
determined by action of the JP Foodservice Board of Directors prior to such time
as any person or group becomes an Acquiring Person) following the commencement
by any person or group of, or the first public announcement by any person or
group of an intention to make, a tender offer or exchange offer that would
result in (A) beneficial ownership by a group or person of 10% or more of the
outstanding JP Foodservice Common Shares or (B) any person otherwise being
deemed an Acquiring Person. Notwithstanding anything in the foregoing to the
contrary, the term "Acquiring Person" does not include (x) JP Foodservice, any
subsidiary of JP Foodservice, any employee benefit plan of JP Foodservice or any
subsidiary of JP Foodservice, or any entity holding JP Foodservice Common Shares
for or pursuant to the terms of such plan or (y) Rykoff-Sexton or any ML Entity,
but only to the extent that Rykoff-Sexton or such ML Entity would, absent this
provision, be deemed to be an Acquiring Person solely as the result of (i) the
execution and delivery of the Merger
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Agreement, (ii) the execution and delivery of the Rykoff-Sexton Stock Option
Agreement, (iii) the execution and delivery of the Support Agreement or (vi) the
consummation of the transactions contemplated by the Merger Agreement and the
agreements contemplated thereby, including, without limitation, the Merger.
Further, references in this paragraph to beneficial ownership of 10% of the
outstanding JP Foodservice Common Shares are to 15% of the outstanding JP
Foodservice Common Shares with respect to any person who is eligible to report
its beneficial ownership of (or who will or would be eligible upon acquisition
of) equity securities of JP Foodservice (including JP Foodservice Common Shares)
on Schedule 13G under the Exchange Act and, without limiting the foregoing, with
respect to whom clause (i) of paragraph (b)(1) of Rule 13d-1 under the Exchange
Act is true and correct.
The JP Foodservice Rights Agreement provides that, until the Distribution
Date (or earlier redemption or expiration of the JP Foodservice Rights), the JP
Foodservice Rights will be transferred with and only with the JP Foodservice
Common Shares. Until the Distribution Date (or earlier redemption or expiration
of the JP Foodservice Rights), (i) new JP Foodservice Common Shares certificates
issued after the Record Date upon transfer or new issuances of JP Foodservice
Common Shares will contain a notation incorporating the JP Foodservice Rights
Agreement by reference, and (ii) the surrender for transfer of any certificates
for JP Foodservice Common Shares outstanding as of the Record Date, even without
such notation or a copy of the Summary of JP Foodservice Rights, also will
constitute the transfer of the JP Foodservice Rights associated with the JP
Foodservice Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the JP Foodservice Rights (the "JP Foodservice Right Certificates") will be
mailed to holders of record of the JP Foodservice Common Shares as of the close
of business on the Distribution Date, and such separate JP Foodservice Right
Certificates alone will evidence the JP Foodservice Rights. Only JP Foodservice
Common Shares issued prior to the Distribution Date will be issued with JP
Foodservice Rights.
The JP Foodservice Rights are not exercisable until the Distribution Date.
The JP Foodservice Rights will expire on February 19, 2006, unless such
expiration date is extended or unless the JP Foodservice Rights are earlier
redeemed or exchanged by JP Foodservice, in each case as described below.
The Purchase Price payable, and the number of shares of JP Foodservice
Series A Preferred Stock or other securities or property issuable, upon exercise
of the JP Foodservice Rights, as well as the number of JP Foodservice Rights
outstanding, are subject to adjustment from time to time to prevent dilution (i)
in the event of a dividend on, or a subdivision, recombination or
reclassification of, shares of JP Foodservice Series A Preferred Stock, (ii)
upon the grant to holders of the shares of JP Foodservice Series A Preferred
Stock of certain rights, options or warrants to subscribe for shares of JP
Foodservice Series A Preferred Stock or
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convertible securities at less than the then-current per share market price of
the shares of JP Foodservice Series A Preferred Stock or (iii) upon the
distribution to holders of the shares of JP Foodservice Series A Preferred Stock
of evidences of indebtedness or assets (other than a regular quarterly cash
dividend or a dividend payable in shares of JP Foodservice Series A Preferred
Stock) or subscription rights or warrants (other than those referred to above).
The number of outstanding JP Foodservice Rights and the number of one one-
hundredths of a share of JP Foodservice Series A Preferred Stock issuable upon
exercise of each JP Foodservice Right are also subject to adjustment in the
event of a stock split of the JP Foodservice Common Shares or a stock dividend
on the JP Foodservice Common Shares payable in JP Foodservice Common Shares or
subdivisions, consolidations or combinations of the JP Foodservice Common Shares
occurring, in any such case, prior to the Distribution Date.
Shares of JP Foodservice Series A Preferred Stock purchasable upon exercise
of the JP Foodservice Rights will not be redeemable. Each share of JP
Foodservice Series A Preferred Stock will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share, but will be entitled to an
aggregate dividend of 100 times the dividend declared per JP Foodservice Common
Share. In the event of liquidation, the holders of the shares of JP Foodservice
Series A Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share, but will be entitled to an aggregate payment of 100
times the payment made per JP Foodservice Common Share. Each share of JP
Foodservice Series A Preferred Stock will have 100 votes, voting together with
the JP Foodservice Common Shares. In the event of any merger, consolidation or
other transaction in which JP Foodservice Common Shares are exchanged, each
share of JP Foodservice Series A Preferred Stock will be entitled to receive 100
times the amount received per JP Foodservice Common Share. These rights are
protected by customary antidilution provisions. Because of the nature of the
dividend, liquidation and voting rights of the shares of JP Foodservice Series A
Preferred Stock, the value of the one one-hundredth interest in a share of JP
Foodservice Series A Preferred Stock purchasable upon exercise of each Right
should approximate the value of one JP Foodservice Common Share.
In the event that any person or group becomes an Acquiring Person, proper
provision will be made so that each holder of a Right, other than JP Foodservice
Rights beneficially owned by the Acquiring Person (which will thereupon become
null and void), will thereafter have the right to receive upon exercise of the
Right at the then-current exercise price thereof, in lieu of shares of JP
Foodservice Series A Preferred Stock, that number of JP Foodservice Common
Shares having a market value of two times the exercise price of the Right. In
the event JP Foodservice does not have sufficient JP Foodservice Common Shares
issued but not outstanding or authorized but unissued to permit the exercise in
full of the JP Foodservice Rights, JP Foodservice will be required to take all
such action as may be necessary to
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authorize additional JP Foodservice Common Shares for issuance upon exercise of
the JP Foodservice Rights. If, after a good-faith effort, JP Foodservice is
unable to take all such action, JP Foodservice will substitute, for each JP
Foodservice Common Share that would otherwise be issuable upon exercise of a
Right, a number of shares of JP Foodservice Series A Preferred Stock (or
fraction thereof) with the same market value as such JP Foodservice Common
Share.
In the event that, after a person or group has become an Acquiring Person,
JP Foodservice is acquired in a merger or other business combination transaction
(excluding the Merger) or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a JP
Foodservice Right, other than JP Foodservice Rights beneficially owned by the
Acquiring Person (which will thereupon become null and void), will thereafter
have the right to receive, upon the exercise thereof at the then-current
exercise price of the JP Foodservice Right and in lieu of shares of JP
Foodservice Series A Preferred Stock, that number of shares of common stock of
the acquiring company (or its parent) which at the time of such transaction will
have a market value of two times the exercise price of the JP Foodservice Right.
The exercise price of a JP Foodservice Right at any date will be equal to
the Purchase Price at such date multiplied by the number of one one-hundredths
of a share of JP Foodservice Series A Preferred Stock for which a JP Foodservice
Right is exercisable at such date.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding JP
Foodservice Common Shares, the Board of Directors of JP Foodservice may exchange
the JP Foodservice Rights (other than JP Foodservice Rights owned by such person
or group, which will have become void), in whole or in part, at an exchange
ratio of one JP Foodservice Common Share per JP Foodservice Right (subject to
adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of JP Foodservice Series A Preferred
Stock will be issued (other than fractions which are integral multiples of one
one-hundredth of a share of JP Foodservice Series A Preferred Stock, which may,
at the election of JP Foodservice, be evidenced by depositary receipts) and, in
lieu thereof, an adjustment in cash will be made based on the market price of
the shares of JP Foodservice Series A Preferred Stock on the last trading day
prior to the date of exercise.
JP Foodservice, pursuant to approval by its Board of Directors, may redeem
the JP Foodservice Rights in whole, but not in part, at any time prior to such
time as any person or group becomes an Acquiring Person, at a price of $.01 per
Right.
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The redemption of the JP Foodservice Rights may be made effective at such time,
on such basis and with such conditions as the JP Foodservice Board of Directors
may establish in its sole discretion. Immediately upon the action of the JP
Foodservice Board of Directors ordering redemption of the JP Foodservice Rights,
the right to exercise the JP Foodservice Rights will terminate and the only
right of the holders of the JP Foodservice Rights will be to receive the
redemption price specified above.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of JP Foodservice, including, without limitation, the
right to vote or to receive dividends. Although the distribution of the JP
Foodservice Rights will not be taxable to stockholders or to JP Foodservice,
stockholders may, depending upon the circumstances, recognize taxable income in
the event that the JP Foodservice Rights become exercisable for JP Foodservice
Common Shares (or other consideration) of JP Foodservice or for common stock of
the acquiring company (or its parent) as set forth above.
The JP Foodservice Rights Agreement may be amended or supplemented by JP
Foodservice from time to time without the approval of any holders of Right
Certificates in order to cure any ambiguity, to correct or supplement any
defective or inconsistent provisions, or to make any other provisions with
respect to the JP Foodservice Rights which JP Foodservice may deem necessary or
desirable, provided that, from and after such time as any person or group
becomes an Acquiring Person, the JP Foodservice Rights Agreement may not be
amended in any manner which would adversely affect the interest of the holders
of JP Foodservice Rights. The JP Foodservice Rights Agreement was amended in
connection with execution of the Merger Agreement. See "The Merger--Amendment
of Rights Plans."
Preferred Stock
Under the JP Foodservice Charter, the JP Foodservice Board of Directors has
the authority, without further action by the stockholders, to issue up to
5,000,000 shares of JP Foodservice Preferred Stock in one or more series and to
fix the voting powers, designations, preferences and the relative participating
optional or other special rights and qualifications, limitations and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series. To date, the JP Foodservice Board of Directors has so
fixed only the JP Foodservice Series A Preferred Stock. Because JP Foodservice's
Board of Directors has the power to establish the preferences and rights of the
shares of any additional series of JP Foodservice Preferred Stock, it may afford
holders of any such JP Foodservice Preferred Stock preferences, powers and
rights (including voting rights) senior to the rights of holders of JP
Foodservice Common Shares, which could adversely affect the holders of JP
Foodservice Common Shares.
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WARRANTS
Pursuant to the Merger Agreement, JP Foodservice will assume the
obligations of Rykoff-Sexton under the Warrants. The Warrants evidence the right
to acquire a total of 331,761 Rykoff-Sexton Common Shares at a purchase price of
$____ per share as of June 30, 1997. The purchase price is subject to adjustment
upon issuances of additional Rykoff-Sexton Common Shares for consideration, or
grants of stock options with exercise prices that are, less than current market
value (as determined under the terms of the Warrants). The purchase price of the
Warrants is also subject to adjustment in the event of certain dividends and
other distributions, issuances of convertible securities and stock splits, stock
dividends and similar events.
Under the terms of the Warrants, Rykoff-Sexton may not effect the Merger
unless, prior to the consummation of the Merger, JP Foodservice has assumed the
obligations of Rykoff-Sexton under the Warrants by a written instrument
delivered to, and reasonably satisfactory to, the holders of at least a majority
of the Rykoff-Sexton Common Shares issuable upon exercise of the outstanding
Warrants, and has provided such holders with an opinion of counsel reasonably
satisfactory to such holders to the effect that the Warrants will continue in
full force and effect after the Merger. To satisfy this condition, it is
anticipated that JP Foodservice will issue Common Stock Purchase Warrants of JP
Foodservice (the "New Warrants") to the holders of the Warrants at the Effective
Time in replacement of the Assumed Warrants. The terms of the New Warrants will
be identical to the terms of the Warrants required to be assumed by JP
Foodservice under the terms of the Merger Agreement, except for adjustments to
the purchase price and the number of shares issuable to reflect the Exchange
Ratio.
Giving effect to the Merger, the New Warrants will evidence the right to
acquire approximately 278,679 JP Foodservice Common Shares (representing
approximately ___% of the JP Foodservice Common Shares on a fully diluted basis)
at a purchase price of $____ per share. The purchase price of the New Warrants,
and the number of JP Foodservice Common Shares for which the New Warrants will
be exercisable, are subject to adjustment in the event of certain issuances of
JP Foodservice Common Shares without consideration or for consideration below
market prices, stock dividends, stock splits, share combinations,
recapitalizations and similarly dilutive events.
Each New Warrant will be exercisable until the earlier of (i) September 30,
2005 or (ii) the registration (upon the demand of the holders of the Warrants
pursuant to the terms of the New Warrants) of all JP Foodservice Common Shares
issuable upon the exercise of the New Warrant or the 30th day after notice to
the holders of the New Warrants that, in the opinion of counsel for such
holders, the transfer of the New Warrants or the underlying JP Foodservice
Common Shares issuable upon the exercise thereof are no longer restricted under
the Securities Act.
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The holders of New Warrants will not have any voting rights until, and to the
extent that, the New Warrants are exercised for JP Foodservice Common Shares.
The holders of the New Warrants will be entitled to certain "demand" and
"piggyback" registration rights with respect to the JP Foodservice Common Shares
issued or issuable upon exercise of the New Warrants.
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DESCRIPTION OF RYKOFF-SEXTON CAPITAL STOCK
General
Rykoff-Sexton's authorized capital stock consists of 40,000,000 Common
Shares, of which 28,014,305 shares were outstanding as of June 28, 1997, and
10,000,000 shares of preferred stock, par value $.10 per share ("Rykoff-Sexton
Preferred Stock"), no shares of which are outstanding. No series of Rykoff-
Sexton Preferred Stock has been designated other than 125,000 shares of Series A
Junior Participating Preferred Stock, par value $.10 per share (the "Series A
Preferred Stock"). The following description is a summary of the material
provisions of Rykoff-Sexton's capital stock and is qualified in its entirety by
reference to the provisions of the Certificate of Incorporation of Rykoff-Sexton
(the "Rykoff-Sexton Charter"), its By-laws (the "Rykoff-Sexton By-laws") and the
Rykoff-Sexton Rights Agreement. See "Comparative Rights of JP Foodservice
Stockholders and Rykoff-Sexton Stockholders."
Common Shares, Rights and Series A Preferred Stock
Rykoff-Sexton Common Shares
Subject to any prior rights of any Rykoff-Sexton Preferred Stock then
outstanding, holders of Rykoff-Sexton Common Shares are entitled to such
dividends as may be declared from time to time by the Rykoff-Sexton Board of
Directors out of funds legally available therefor. Each holder of Rykoff-Sexton
Common Shares is entitled to one vote for each share owned by such holder on all
matters submitted to a vote of the stockholders of Rykoff-Sexton. Such shares
are not entitled to any cumulative voting rights. In the event of any
liquidation, dissolution or winding up of Rykoff-Sexton, holders of Rykoff-
Sexton Common Shares are entitled to share equally and ratably in any assets
remaining after the payment of all debt and liabilities, subject to the prior
rights, if any, of holders of Rykoff-Sexton Preferred Stock. Holders of Rykoff-
Sexton Common Shares have no preemptive or other subscription or conversion
rights. Rykoff-Sexton Common Shares are not subject to redemption and the
outstanding Rykoff-Sexton Common Shares are fully paid and nonassessable.
Rykoff-Sexton Rights
Rykoff-Sexton entered into a Rights Agreement (the "Initial Rykoff-Sexton
Rights Agreement"), with Bank of America National Trust & Savings Association,
as original rights agent (the "Original Rykoff-Sexton Rights Agent"), dated as
of December 8, 1996, as amended by the Amendment to Rights Agreement, dated as
of October 5, 1989, the Second Amendment to Rights Agreement, dated as of
December 4, 1995, the Third Amendment to the Rights Agreement, dated as of
January 31, 1996, and the Amended and Restated Rights Agreement (the "Current
Rykoff-Sexton Rights Agreement"), dated as of May 15, 1996. On June 30, 1997,
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Rykoff-Sexton executed and delivered the Amendment (the "Rykoff-Sexton Rights
Plan Amendment") to the Current Rykoff-Sexton Rights Agreement (as amended by
the Amendment, the "Rykoff-Sexton Rights Agreement"), with Chase Mellon
Shareholder Services, L.L.C., as rights agent (the "Rykoff-Sexton Rights
Agent"), as successor to Chemical Bank, which was the successor to Chemical
Trust Company of California, which was the successor to the Original Rykoff-
Sexton Rights Agent.
Under the Rykoff-Sexton Rights Agreement, each outstanding Rykoff-Sexton
Common Share is accompanied by 0.64 preferred share purchase rights (each, a
"Rykoff-Sexton Right"). Except as described below, each Rykoff-Sexton Right
entitles the registered holder to purchase from Rykoff-Sexton a unit (a "Unit")
consisting of one two-hundredths of a share of Series A Preferred Stock at a
purchase price of $100 per Unit (the "Purchase Price"), subject to adjustment.
The description and terms of the Rykoff-Sexton Rights are set forth in the
Rykoff-Sexton Rights Agreement.
The Rykoff-Sexton Rights attach implicitly to all Rykoff-Sexton Common
Share certificates outstanding. No separate Rykoff-Sexton Right certificates
have been distributed. A "Distribution Date" for the Rykoff-Sexton Rights occurs
upon the earlier of (i) 10 days after a public announcement that a person or
group of affiliated or associated persons has acquired beneficial ownership of
15% or more of the then outstanding Rykoff-Sexton Common Shares (an "Acquiring
Person"), excluding (a) Rykoff-Sexton, (b) any subsidiary of Rykoff-Sexton, (c)
any employee benefit plan of Rykoff-Sexton or of any subsidiary of Rykoff-
Sexton, (d) any entity organized, appointed or established by Rykoff-Sexton for
or pursuant to the terms of any such plan, (e) the ML Entities if the ML
Entities shall have executed a written agreement with Rykoff-Sexton (approved by
the Rykoff-Sexton Board of Directors) on or prior to the date on which the ML
Entities (together with its affiliates) became the beneficial owner of 15% or
more of the Rykoff-Sexton Common Shares then outstanding, which agreement
imposes one or more limitations on the ML Entities' beneficial ownership of
Rykoff-Sexton Common Shares and if, and so long as, such written agreement (a
"Written Agreement") (or any amendment thereto approved by at least a majority
of the members of the Rykoff-Sexton Board of Directors who are not affiliates or
associates of an ML Entity or representatives or nominees of an ML Entity or any
such affiliate or associate (the "ML Entity Directors")) continues to be in
effect and bind the ML Entities and the ML Entities are in compliance (as
determined by the Rykoff-Sexton Board of Directors in its discretion by at least
a majority of the members who are not ML Entity Directors) with the terms of
such Written Agreement (including any such amendment), provided that no
amendment of any such Written Agreement shall cure any prior breach of such
Written Agreement or any amendment thereto, (f) JP Foodservice or any of its
affiliates or associates solely as a result of the execution and delivery of the
Transaction Agreements, or (g) JP Foodservice or any of its affiliates or
associates as a result of their being or becoming not more than a 2% beneficial
owner of the then outstanding Rykoff-Sexton Common Shares (in addition to the
Rykoff-Sexton Common Shares that JP Foodservice has become the beneficial owner
of as a result of its execution and delivery of the
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Transaction Agreements) (excluding, however, for purposes of determining whether
such 2% limitation has been exceeded, Rykoff-Sexton Common Shares that JP
Foodservice would be deemed the beneficial owner of because any JPFI Benefit
Plan (as that term is defined in the Merger Agreement) is the beneficial owner
of such Rykoff-Sexton Common Shares as of the date of the Rykoff-Sexton Rights
Plan Amendment), or (ii) 10 days following the commencement of (or first public
announcement of the intent to commence) a tender offer or exchange offer if,
upon consummation thereof, the person or persons proposing such offer would be
the beneficial owner of 30% or more of the outstanding Rykoff-Sexton Common
Shares. The Standstill Agreement qualifies as a Written Agreement that excludes
the ML Entities from being an Acquiring Person, so long as the conditions
described above are satisfied.
Until the Distribution Date, the Rykoff-Sexton Rights are transferred with
and only with Rykoff-Sexton Common Share certificates. Until the Distribution
Date (or earlier redemption or expiration of the Rykoff-Sexton Rights),
certificates for Rykoff-Sexton Common Shares issued since December 18, 1986 (the
record date for the initial distribution of Rykoff-Sexton Rights under the
Initial Rykoff-Sexton Rights Agreement) upon transfer or new issuance of Rykoff-
Sexton Common Shares contain a notation incorporating the Initial Rykoff-Sexton
Rights Agreement by reference except that after the adoption of the Rykoff-
Sexton Rights Agreement, such notation incorporates the Rykoff-Sexton Rights
Agreement. Until the Distribution Date, the surrender for transfer of any
certificates for Rykoff-Sexton Common Shares also constitutes the transfer of
the Rykoff-Sexton Rights associated with the Rykoff-Sexton Common Shares
represented by such certificate.
The Rykoff-Sexton Rights are not exercisable until the Distribution Date.
Under the Rykoff-Sexton Rights Agreement, the Rykoff-Sexton Rights expire on the
earlier of (i) May 15, 2006, or (ii) immediately prior to the effective time of
the Merger, unless earlier redeemed by Rykoff-Sexton at any time prior to 5:00
P.M., Chicago time, on the close of business on the thirtieth day following the
date of the public announcement that an Acquiring Person has become such.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rykoff-Sexton Rights ("Rykoff-Sexton Right
Certificates") will be mailed to holders of record of Rykoff-Sexton Common
Shares as of the close of business on the Distribution Date. From and after the
Distribution Date, such separate Rykoff-Sexton Right Certificates alone will
evidence the Rykoff-Sexton Rights.
In the event that, at any time following the Distribution Date, (i) Rykoff-
Sexton is the surviving corporation in a merger with an Acquiring Person and
Rykoff-Sexton Common Shares are not changed or exchanged, (ii) any person
becomes the beneficial owner of 15% or more of the then outstanding Rykoff-
Sexton Common Shares (excluding any event occurring as a result of the
execution, delivery
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and performance of the Transaction Agreements), unless the event causing the 15%
threshold to be crossed is (a) an acquisition of Rykoff-Sexton Common Shares by
the ML Entities, if the ML Entities shall have executed a Written Agreement and
if, and so long as, such Written Agreement (or any amendments thereto approved
by at least a majority of the members of the Rykoff-Sexton Board of Directors
who are not ML Entity Directors) continues to be in effect and bind the ML
Entities and the ML Entities are in compliance (as determined by the Rykoff-
Sexton Board of Directors in its discretion by at least a majority of the
members who are not ML Entity Directors) with the terms of such Written
Agreement (including any such amendment), provided that no amendment of any such
Written Agreement shall cure any prior breach of such Written Agreement or any
amendment thereto, (b) a transaction in which the holders of Rykoff-Sexton
Rights have the right to receive common stock of the acquiring entity, as
described below, or (c) an acquisition of Rykoff-Sexton Common Shares pursuant
to a tender offer or exchange offer of all outstanding Rykoff-Sexton Common
Shares at a price and on terms determined by a majority of "disinterested"
members of the Rykoff-Sexton Board of Directors to be fair and otherwise in the
best interests of Rykoff-Sexton and its stockholders, or (iii) an Acquiring
Person engages in one or more "self-dealing" transactions as set forth in the
Rykoff-Sexton Rights Agreement (each a "Flip-In Event"), then each holder of a
Rykoff-Sexton Right would thereafter have the right to receive upon exercise
thereof at the then current Purchase Price of the Rykoff-Sexton Right, Rykoff-
Sexton Common Shares (or, in certain circumstances, a combination of cash, other
property, Rykoff-Sexton Common Shares or other securities) that have a value of
two times the Purchase Price of the Rykoff-Sexton Right. As noted above, the
Standstill Agreement qualifies as a Written Agreement that excludes the
acquisition of Rykoff-Sexton Common Shares by the ML Entities from being a
triggering event under the foregoing provisions, so long as the conditions
described above are satisfied. In the event that, at any time following the
Distribution Date, Rykoff-Sexton is acquired in a merger (excluding the Merger)
or other business combination transaction or 50% or more of its assets or
earning power are sold, provision would be made so that each holder of a Rykoff-
Sexton Right would thereafter have the right to receive, upon the exercise of a
Rykoff-Sexton Right at the then current Purchase Price of the Rykoff-Sexton
Right, common stock of the acquiring entity that has a value of two times the
Purchase Price of the Rykoff-Sexton Right. Notwithstanding any of the foregoing,
following the occurrence of any of the events described above in this paragraph,
any Rykoff-Sexton Rights that are or were beneficially owned by an Acquiring
Person or affiliates or associates of an Acquiring Person would be null and
void.
The Purchase Price payable and the number of Units of Series A Preferred
Stock or other securities or property issuable upon exercise of the Rykoff-
Sexton Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of the Series A Preferred Stock, (ii) upon the grant to holders
of the Series A Preferred Stock of certain rights or warrants to subscribe for
Series A Preferred Stock or convertible securities at less than the current
market price of the Series A Preferred Stock or
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(iii) upon the distribution to holders of the Series A Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price is required
until cumulative adjustments require an adjustment of at least 1% in the
Purchase Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Series A
Preferred Stock on the last trading date prior to the date of exercise.
At any time until 30 days following the public announcement that a person
or group or affiliated or associated persons (excluding any transaction
occurring pursuant to the Transaction Agreements) has acquired beneficial
ownership of 15% or more of the outstanding Rykoff-Sexton Common Shares, Rykoff-
Sexton can redeem the Rykoff-Sexton Rights in whole, but not in part, at a price
of $.01 per Rykoff-Sexton Right (the "Redemption Price"). The Rykoff-Sexton
Board of Directors can from time to time, in its discretion, extend the period
of redemption. Immediately upon action of the Rykoff-Sexton Board of Directors
ordering redemption of the Rykoff-Sexton Rights, the Rykoff-Sexton Rights
terminate and the only right of the holders of Rykoff-Sexton Rights is to
receive the Redemption Price.
Until a Rykoff-Sexton Right is exercised, the holder thereof has no rights
as a stockholder of Rykoff-Sexton (other than those as an existing stockholder),
including, without limitation, the right to vote or to receive dividends.
The Series A Preferred Stock purchasable upon exercise of the Rykoff-Sexton
Rights is nonredeemable and is subordinate to any other series of Rykoff-Sexton
Preferred Stock that may be issued in the future unless such series is
specifically stated to be junior. Each whole share of Series A Preferred Stock
has a minimum preferential quarterly dividend of either $20 per share or 200
times the dividend per share declared on Rykoff-Sexton Common Shares, whichever
is greater. In the event of liquidation, the holders of Series A Preferred Stock
receive a preferred liquidation payment of either $200 per share or 200 times
the payment made per Rykoff-Sexton Common Shares, whichever is greater. Each
whole share of Preferred Stock has 200 votes, voting together with the Rykoff-
Sexton Common Shares. In the event of any merger (excluding the Merger),
consolidation or other transaction in which Rykoff-Sexton Common Shares are
exchanged, each share of Series A Preferred Stock would be entitled to receive
200 times the amount received per Rykoff-Sexton Common Share. The rights of the
Series A Preferred Stock are protected by customary antidilution provisions.
Because of the nature of the Series A Preferred Stock's dividend, liquidation
and voting rights, Rykoff-Sexton expects that the value of the one two-hundredth
of a share of Series A Preferred Stock purchasable (as described above) upon the
exercise of each Rykoff-Sexton Right to approximate the value of one Rykoff-
Sexton Common Share.
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The Rykoff-Sexton Rights Agreement and the Rykoff-Sexton Rights have
certain anti-takeover effects. The Rykoff-Sexton Rights cause substantial
dilution to a person or group that attempts to acquire Rykoff-Sexton on terms
not approved by the Rykoff-Sexton Board of Directors. The Rykoff-Sexton Rights
should not interfere with any merger or other business combination approved by
the Rykoff-Sexton Board of Directors because of the ability of the Rykoff-Sexton
Board of Directors and the Rykoff-Sexton Rights Agent to amend the Rykoff-Sexton
Rights Agreement (and with respect to the Merger, the Rykoff-Sexton Board of
Directors has exercised this ability by approving the Rykoff-Sexton Rights Plan
Amendment) and because the Rykoff-Sexton Rights can be redeemed by the Rykoff-
Sexton Board of Directors at the Redemption Price until 30 days following the
public announcement that a person or group of affiliated and associated persons
has acquired beneficial ownership of 15% or more of the outstanding Rykoff-
Sexton Common Shares.
The terms of the Rykoff-Sexton Rights Agreement can be amended by Rykoff-
Sexton and the Rykoff-Sexton Rights Agent, but following a Distribution Date no
amendment can adversely affect the interests of holders of the Rykoff-Sexton
Rights.
Preferred Stock
Under the Rykoff-Sexton Charter, the Rykoff-Sexton Board of Directors has
the authority, without further action by the stockholders, to issue up to
10,000,000 shares of Rykoff-Sexton Preferred Stock in one or more series and to
fix the voting powers, designations, preferences and the relative,
participating, optional or other special rights and qualifications, limitations
and restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series. To date, the Rykoff-Sexton Board of Directors has so
fixed only the Series A Preferred Stock. Because Rykoff-Sexton's Board of
Directors has the power to establish the preferences and rights of the shares of
any additional series of Rykoff-Sexton Preferred Stock, it may afford holders of
any such Rykoff-Sexton Preferred Stock preferences, powers and rights (including
voting rights), senior to the rights of holders of Rykoff-Sexton Common Shares,
that could adversely affect the holders of Rykoff-Sexton Common Shares.
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COMPARATIVE RIGHTS OF JP FOODSERVICE STOCKHOLDERS AND
RYKOFF-SEXTON STOCKHOLDERS
Rykoff-Sexton is a Delaware corporation and a public company, and the
rights of its stockholders are governed by Delaware law, the Rykoff-Sexton
Charter, the Rykoff-Sexton By-laws and the Rykoff-Sexton Rights Agreement.
Following the Merger, the Rykoff-Sexton stockholders will hold shares in JP
Foodservice, which is also a Delaware corporation and a public company, and
their rights as JP Foodservice stockholders will be governed by Delaware law,
the JP Foodservice Charter, the JP Foodservice By-laws and the JP Foodservice
Rights Agreement.
Certain significant differences between the rights of JP Foodservice
stockholders and Rykoff-Sexton stockholders are summarized below. This summary
is not intended to be relied upon as an exhaustive list or detailed description
of the provisions discussed and is qualified in its entirety by the JP
Foodservice Charter, the JP Foodservice By-laws and the JP Foodservice Rights
Agreement and by the Rykoff-Sexton Charter, the Rykoff-Sexton By-laws and the
Rykoff-Sexton Rights Agreement, to which Rykoff-Sexton stockholders are
referred. See "Description of JP Foodservice Capital Stock" and "Description of
Rykoff-Sexton Capital Stock." The Standstill Agreement also contains provisions
relating to, among other things, the right of the ML Entities to designate
representatives to serve on the Board of Directors, removal of such
representatives and the filling of vacancies. The Standstill Agreement will,
from and after the Effective Time, be for the benefit of, and will be
enforceable by, JP Foodservice to the same extent and in the same manner as the
Standstill Agreement benefits and is enforceable by Rykoff-Sexton prior to the
Merger. See "Other Agreements--Standstill Agreement."
Authorized Shares of Capital Stock; Dividend Rights
JP Foodservice. The JP Foodservice Charter authorizes the issuance of
75,000,000 JP Foodservice Common Shares and 5,000,000 shares of JP Foodservice
Preferred Stock, 350,000 of which have been designated as Series A Preferred
Stock. As of June 28, 1997, 22,589,913 JP Foodservice Common Shares were issued
and outstanding and no shares of JP Foodservice Preferred Stock were issued and
outstanding. The shares of JP Foodservice Preferred Stock may be issued from
time to time by the JP Foodservice Board of Directors in one or more series, and
the variations, relative rights and preferences as between different series of
each class may be fixed and determined by resolution of the JP Foodservice Board
of Directors with respect to voting rights, the rate of dividend, redemption,
liquidation payments, sinking fund provisions, conversion and the number of
shares constituting any series.
During the time that any series of JP Foodservice Preferred Stock is
outstanding, if the terms of such series provide, no dividends may be declared
or paid by the JP Foodservice Board of Directors on the JP Foodservice Common
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Shares, unless dividends on all outstanding shares of JP Foodservice Preferred
Stock for the current and all past dividend periods have been declared and paid
or provision made for the payment thereof.
Rykoff-Sexton. The Rykoff-Sexton Charter authorizes the issuance of
40,000,000 Rykoff-Sexton Common Shares and 10,000,000 shares of Rykoff-Sexton
Preferred Stock, 50,000 of which have been designated as Series A Preferred
Stock. As of June 28, 1997, 28,286,219 Rykoff-Sexton Common Shares were issued,
of which 28,014,305 were outstanding, and no shares of Rykoff-Sexton Preferred
Stock were issued and outstanding. The shares of Rykoff-Sexton Preferred Stock
may be issued from time to time by the Rykoff-Sexton Board of Directors in one
or more series, and the variations, relative rights and preferences as between
different series of each class may be fixed and determined by resolution of the
Rykoff-Sexton Board of Directors with respect to voting rights, the rate of
dividend, redemption, liquidation payments, sinking fund provisions, conversion
and the number of shares constituting any series.
During the time that any series of Rykoff-Sexton Preferred Stock is
outstanding, no dividends may be declared or paid by the Rykoff-Sexton Board of
Directors on the Rykoff-Sexton Common Shares, unless dividends on all
outstanding shares of Rykoff-Sexton Preferred Stock for the current and all past
dividend periods have been declared and paid or provision made for the payment
thereof.
Voting Rights
JP Foodservice. Subject to the voting rights of holders of any then
outstanding JP Foodservice Preferred Stock, each JP Foodservice Common Share is
entitled to one vote on each matter submitted to a vote of the stockholders of
JP Foodservice. JP Foodservice Common Shares are not entitled to any cumulative
voting rights.
Rykoff-Sexton. Subject to the voting rights of holders of any then
outstanding Rykoff-Sexton Preferred Stock, each Rykoff-Sexton Common Share is
entitled to one vote on each matter submitted to a vote of the stockholders of
Rykoff-Sexton. Rykoff-Sexton Common Shares are not entitled to any cumulative
voting rights.
Supermajority Voting Requirements; Business Combinations
JP Foodservice and Rykoff-Sexton are subject to the provisions of
Section 203 of the DGCL. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless (i)
prior to such date, the board approved either the business combination or the
transaction that resulted in the
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stockholder becoming an interested stockholder, (ii) upon consummation of the
transaction that resulted in such person becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding, for purposes of
determining the number of shares outstanding, shares owned by certain directors
or certain employee stock plans), or (iii) on or after the date the stockholder
became an interested stockholder, the business combination is approved by the
board of directors and authorized by the affirmative vote (and not by written
consent) of at least two-thirds of the outstanding voting stock excluding that
stock owned by the interested stockholder. A "business combination" includes a
merger, asset sale or other transaction resulting in a financial benefit to the
interested stockholder. A "interested stockholder" is a person who (other than
the corporation and any direct or indirect majority-owned subsidiary of the
corporation), together with affiliates and associates, owns (or, as an affiliate
or associate, within three years prior, did own) 15% or more of the
corporation's outstanding voting stock.
JP Foodservice. The JP Foodservice Charter and By-laws do not have
supermajority voting requirements for business combinations or other matters.
Rykoff-Sexton. In addition to any greater vote than may be required under
Section 203, the DGCL generally requires the affirmative vote of the holders of
a majority of the outstanding stock of a corporation entitled to vote on the
matter to approve a merger, consolidation or dissolution of the corporation or a
disposition of all or substantially all of the corporation's assets. The Rykoff-
Sexton Charter, however, contains provisions regarding the vote required to
approve certain business combinations or other significant corporate
transactions involving Rykoff-Sexton and an individual, corporation or other
entity with beneficial ownership of a number of Rykoff-Sexton Common Shares
which exceeds 5% of the outstanding Rykoff-Sexton Common Shares (a "Related
Person").
The Rykoff-Sexton Charter requires the affirmative vote or consent of the
holders of not less than 80% of the outstanding shares of stock of Rykoff-Sexton
entitled to vote on the matter: (i) to adopt any agreement for, or to approve,
the merger or consolidation of Rykoff-Sexton or any subsidiary (within the
meaning of the Rykoff-Sexton Charter) with or into any Related Person; (ii) to
authorize any sale, lease, transfer, exchange or other disposition to any
Related Person of all or substantially all of the assets of Rykoff-Sexton or any
such subsidiary; (iii) to authorize the issuance or transfer by Rykoff-Sexton or
any such subsidiary of any Rykoff-Sexton voting securities or voting securities
of any such subsidiary in exchange or payment for securities or assets of any
Related Person, if such authorization is otherwise required by law or by any
agreement between Rykoff-Sexton and any national securities exchange or by any
other agreement to which Rykoff-Sexton or any such subsidiary is a party; (iv)
to adopt any plan for the dissolution of Rykoff-Sexton; or (v) to adopt any
amendment, change or repeal of the foregoing provisions. Such 80% affirmative
vote will not be required, however, if
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the Rykoff-Sexton Board of Directors by resolution approves a memorandum of
understanding with such Related Person setting forth the principal terms of the
transaction and if such transaction is substantially consistent therewith. Such
resolution must be adopted by 80% of the directors who were elected and acting
members of the Rykoff-Sexton Board of Directors prior to the time such Related
Person became the beneficial owner of 5% or more of the outstanding Rykoff-
Sexton Common Shares entitled to vote in elections of directors. The DGCL,
including Section 203 thereof, applies to the approval of the transactions
listed above notwithstanding any such resolution.
A separate provision of the Rykoff-Sexton Charter requires the affirmative
vote of the holders of at least 80% of the outstanding Rykoff-Sexton Common
Shares not beneficially owned by any Related Person that is a party or
beneficiary of or has proposed the transaction or matter to be voted upon to
approve the following transactions (each a "Business Combination"): (i) any
merger or consolidation of Rykoff-Sexton with or into a Related Person or
affiliate or associate of a Related Person; (ii) any sale, lease, exchange,
transfer or other disposition of at least 10% of the assets of Rykoff-Sexton or
a subsidiary to or with a Related Person or an affiliate or associate of a
Related Person; (iii) a merger into or consolidation with Rykoff-Sexton or a
subsidiary, of a Related Person or an affiliate or associate of a Related
Person; (iv) any sale, lease, exchange, transfer or other disposition to Rykoff-
Sexton or a subsidiary of all or any part of the assets of a Related Person or
affiliate or associate of a Related Person; (v) any reclassification or
recapitalization of Rykoff-Sexton Common Shares consummated within three years
after a Related Person becomes a Related Person that would have the effect of
increasing the voting power of such Related Person or an affiliate or associate
of such Related Person; and (vi) any agreement, contract or other arrangement
providing for any of the transactions described above. A Business Combination
does not include, however, a parent-subsidiary merger pursuant to Section 253 of
the DGCL or any transaction involving a Related Person who has been a Related
Person for at least three years or involving an affiliate or associate of such
Related Person. Such 80% affirmative vote will not be required to approve a
Business Combination, however, (i) if certain price criteria and procedural
requirements are satisfied or (ii) a majority of the "Continuing Directors" of
the Rykoff-Sexton Board of Directors adopt a resolution approving the Business
Combination. "Continuing Directors" mean all members of the Rykoff-Sexton Board
of Directors except any director who (i) while serving as a member of the
Rykoff-Sexton Board of Directors is a Related Person who is a party to or
beneficiary of or has proposed the transaction or matter to be voted upon, or is
an affiliate or associate of such Related Person, or any representative of such
persons, or (ii) became a member of the Rykoff-Sexton Board of Directors
following the date upon which such a Related Person became a Related Person,
unless such director is recommended or elected to succeed a Continuing Director
by a majority of the Continuing Directors.
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Appraisal Rights
JP Foodservice. The JP Foodservice Charter does not provide for appraisal
rights other than those rights designated by the DGCL. The DGCL provides for
appraisal rights only in the case of certain mergers or consolidations and not
(unless the certificate of incorporation of a corporation so provides) in the
case of other mergers, a sale or transfer of all or substantially all of its
assets or an amendment to its certificate of incorporation. In addition, the
DGCL does not provide appraisal rights in connection with a merger or
consolidation (unless the certificate of incorporation of a corporation so
provides) to the holders of shares of a constituent corporation listed on a
national securities exchange (or designated as a national market system security
by the National Association of Securities Dealers, Inc.) or held of record by
more than 2,000 stockholders, unless the applicable agreement of merger or
consolidation requires the holders of such shares to receive, in exchange for
such shares, any property other than shares of stock of the resulting or
surviving corporation, shares of stock of any other corporation listed on a
national securities exchange (or designated as described above) or held of
record by more than 2,000 holders, cash in lieu of fractional shares or any
combination of the foregoing. The DGCL also denies appraisal rights to the
stockholders of the surviving corporation in a merger if such merger did not
require for its approval the vote of the stockholders of such surviving
corporation.
Rykoff-Sexton. In addition to the appraisal rights provided for by the
DGCL, the Rykoff-Sexton Charter provides for appraisal rights in the event of a
merger under Section 253 of the DGCL of Rykoff-Sexton into another corporation
that has been a Related Person or an affiliate or associate of a Related Person
for less than three years, provided that the DGCL does not give voting rights to
the Rykoff-Sexton stockholders with respect to such merger.
Special Meetings of Stockholders
JP Foodservice. The JP Foodservice By-laws provide that special meetings
may be called (i) by the Chairman of the Board or by (ii) the JP Foodservice
Board of Directors pursuant to a resolution adopted by a majority of the total
number of directors which JP Foodservice would have if there were no vacancies
on the Board. The stockholders of JP Foodservice do not have the right to
request or call a special meeting of stockholders.
Rykoff-Sexton. The Rykoff-Sexton Charter provides that special meetings of
stockholders may be called by the Chairman of the Board or the President, or
must be called at the written request of 75% of the directors then in office.
The stockholders of Rykoff-Sexton do not have the right to request or call a
special meeting of stockholders.
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Stockholder Action Without a Meeting
The JP Foodservice Charter and the Rykoff-Sexton Charter each expressly
prohibit stockholder action by written consent.
Stockholder Proposal Procedures
JP Foodservice. The JP Foodservice Charter requires that notice of
proposals by stockholders to be brought before any annual meeting must be
delivered to JP Foodservice not less than 90 days prior to the date of the
meeting, if such meeting is to be held on or after the anniversary of the
previous year's annual meeting (or not less than 60 days, if the meeting is to
be held on a day which is within 30 days preceding the anniversary of the
previous year's annual meeting, or, with respect to any other annual meeting, on
or before the 15th day following the date of public disclosure of the meeting
date). The notice must set forth, as to each matter the stockholder proposes to
bring before the annual meeting, (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name, age and business and residential
addresses, as they appear on JP Foodservice's records, of the stockholder
proposing such business, (iii) the class and number of shares of JP Foodservice
capital stock which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business.
Rykoff-Sexton. None of the DGCL, the Rykoff-Sexton Charter or the Rykoff-
Sexton By-laws expressly governs the manner in which Rykoff-Sexton stockholders
may bring business (other than nominations for the election of directors) before
a meeting of stockholders. See "--Nominations of Directors."
Stockholder Rights Plan
JP Foodservice. JP Foodservice is a party to the JP Foodservice Rights
Plan. See "The Merger--Amendments to Rights Plans" and "Description of JP
Foodservice Capital Stock--Common Shares, Rights and Series A Preferred Stock--
Rights."
Rykoff-Sexton. Rykoff-Sexton is party to the Rykoff-Sexton Rights
Agreement. See "The Merger--Amendments to Rights Plans" and "Description of
Rykoff-Sexton Capital Stock--Common Shares, Rights and Series A Preferred
Stock--Rights."
Classified Board of Directors
Under their respective Charters and By-laws, each of JP Foodservice and
Rykoff-Sexton has a classified board of directors divided into three classes,
with directors serving staggered three-year terms.
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Nominations of Directors
JP Foodservice. The JP Foodservice By-laws provide that nominations for the
election of directors will be made by the Nominating Committee of the JP
Foodservice Board of Directors. The JP Foodservice Charter provides that any
stockholder wishing to nominate persons for election as directors at an annual
meeting must deliver to the Secretary of JP Foodservice at JP Foodservice's
principal office in Columbia, Maryland a written notice of the stockholder's
intention to make such a nomination. The stockholder is required to furnish the
notice not later than 90 days prior to the date that is one year from the date
of the most recent preceding meeting of stockholders. The notice must include
the following information: (i) the name and address of record of the stockholder
who intends to make the nomination, (ii) a representation that the stockholder
is a holder of record of JP Foodservice Common Shares and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice, (iii) the name, age, business and residential addresses and
principal occupation or employment of each nominee, (iv) a description of all
arrangements or understandings between the stockholder and each proposed nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the stockholder, (v) such
other information regarding each proposed nominee as would be required to be
included in a proxy statement filed pursuant to the rules and regulations of the
SEC and (vi) the written consent of each proposed nominee to serve as a director
of JP Foodservice if so elected.
Rykoff-Sexton. The Rykoff-Sexton By-laws provide that nominations for the
election of directors can be made by the Rykoff-Sexton Board of Directors, a
proxy committee appointed by the Rykoff-Sexton Board of Directors or any
stockholder entitled to vote in the election of directors. The Rykoff-Sexton By-
laws require that stockholders entitled to vote in the election of directors
generally may nominate one or more persons for election as directors if written
notice of intent to make a nomination at a meeting of stockholders is delivered
to Rykoff-Sexton's Secretary (i) with respect to an election to be held at an
annual meeting of stockholders, not less than 90 days prior to such annual
meeting, and (ii) with respect to an election to be held at a special meeting of
stockholders, not later than the close of business on the seventh day following
the date on which notice of such special meeting is first given to stockholders.
Such stockholder's notice must set forth: (i) the name and address of the
stockholder; (ii) a representation that the stockholder is a holder of record of
stock of Rykoff-Sexton entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting; (iii) a description of all arrangements or
understandings between the stockholder and each nominee or other person or
persons pursuant to which each nomination is to be made by the stockholder;
(iv) such other information regarding each nominee that would have been required
to be
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included in a proxy statement filed pursuant to the proxy rules of the SEC;
and (v) the consent of each nominee to serve as a director if elected.
Removal of Directors
JP Foodservice. Under the DGCL, JP Foodservice directors may be removed at
any time, for cause, by the vote of a majority of the outstanding capital stock
of JP Foodservice entitled to vote at an election of directors.
Rykoff-Sexton. The Rykoff-Sexton Charter and By-laws provide that any
director may be removed at any time, for cause, by the vote of a majority of the
outstanding capital stock of Rykoff-Sexton entitled to vote at an election of
directors.
Vacancies in the Board of Directors
JP Foodservice. The JP Foodservice Charter and By-laws provide that when
any vacancy occurs in the JP Foodservice Board of Directors, whether by reason
of an increase in the number of members composing the JP Foodservice Board of
Directors, or otherwise, a majority of the remaining members of the JP
Foodservice Board of Directors, even though less than a quorum, may appoint a
director or directors to fill such vacancy or vacancies.
Rykoff-Sexton. The Rykoff-Sexton Charter and By-laws provide that any
vacancy in the Rykoff-Sexton Board of Directors, whether by reason of an
increase in the number of members composing the Rykoff-Sexton Board of
Directors, or otherwise, shall be filled by the affirmative vote of a majority
of the Continuing Directors.
Indemnification
The JP Foodservice By-laws and the Rykoff-Sexton Charter provide for
indemnification by JP Foodservice and Rykoff-Sexton, respectively, to the
fullest extent permitted by the DGCL, of their officers, directors, employees
and agents.
Limitation of Personal Liability of Directors
JP Foodservice. The JP Foodservice Charter eliminates the personal
liability of JP Foodservice directors for monetary damages resulting from
breaches of their fiduciary duty. It does not, however, eliminate liability for
breaches of a director's duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, violations
under Section 174 of the DGCL concerning the unlawful payment of dividends or
stock redemptions or repurchases, or any transaction from which the director
derives an improper benefit.
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Rykoff-Sexton, The Rykoff-Sexton Charter eliminates the personal liability
of Rykoff-Sexton directors to the same extent as the JP Foodservice Charter
eliminates the personal liability of JP Foodservice directors.
Amendment of Charter Documents
JP Foodservice. The JP Foodservice Charter may be amended pursuant to the
DGCL by a majority vote of the total number of shares outstanding and entitled
to vote thereon. If any such amendment would adversely affect the rights of any
holders of shares of a class or series of stock, the vote of the holders of a
majority of all outstanding shares of the class or series, voting as a class, is
also necessary to authorize such amendment.
Rykoff-Sexton. Under the Rykoff-Sexton Charter, the amendment, repeal or
adoption of provisions of such document relating to (i) the removal of directors
or the filling of director vacancies or the classification of the Rykoff-Sexton
Board of Directors, (ii) restrictions on stockholders taking action by written
consent and (iii) special meetings of stockholders requires the affirmative vote
of the holders of at least 80% of the outstanding Rykoff-Sexton Common Shares.
Such 80% affirmative vote is not required, however, if a majority of the
Continuing Directors adopt a resolution approving such amendment or repeal
proposal and such proposal receives the affirmative vote of the holders of at
least a majority of the Rykoff-Sexton Common Shares.
The amendment, repeal or adoption of provisions of the Rykoff-Sexton
Charter relating to Business Combinations requires the affirmative vote of the
holders of at least 80% of the outstanding Rykoff-Sexton Common Shares not
beneficially owned by any Related Person who is a beneficiary of or has proposed
the transaction. Such 80% affirmative vote, however, is not required if a
majority of the Continuing Directors adopt a resolution approving such amendment
or repeal proposal and the holders of at least a majority of the outstanding
Rykoff-Sexton Common Shares affirmatively approve such proposal.
Under the DGCL all other amendments to the Rykoff-Sexton Charter must be
approved by the affirmative vote of holders of a majority of shares of capital
stock of Rykoff-Sexton entitled to vote generally in the election of directors,
unless a class vote is required under the DGCL.
Amendment of By-Laws
JP Foodservice. The JP Foodservice Charter provides that the Board of
Directors is authorized to adopt, amend or repeal the JP Foodservice By-laws.
The JP Foodservice By-laws further provide that the JP Foodservice By-laws may
be adopted, amended or repealed by the affirmative vote of a majority of the
directors then in office. Under the DGCL, the grant of such a power to a
corporation's board
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of directors will not divest the stockholders of the power, nor limit their
power, to adopt, amend or amend the corporation's by-laws.
Rykoff-Sexton. The Rykoff-Sexton Charter provides that the Board of
Directors is authorized to make, alter or repeal the Rykoff-Sexton By-laws. The
Rykoff-Sexton By-laws further provide that they may be altered, amended or
repealed or new by-laws adopted by the stockholders or by the affirmative vote
of a majority of the directors then in office.
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LEGAL MATTERS
A legal opinion to the effect that the JP Foodservice Common Shares offered
hereby, when issued in accordance with the Merger Agreement, will be validly
issued and fully paid and nonassessable, has been rendered by Hogan & Hartson
L.L.P., counsel to JP Foodservice.
EXPERTS
JP Foodservice. The historical consolidated financial statements of JP
Foodservice as of June 29, 1996 and July 1, 1995, and for each of the three
years in the period ended June 29, 1996 incorporated by reference in this Joint
Proxy Statement/Prospectus have been so incorporated in reliance on the report
of Price Waterhouse LLP, independent public accountants, given on the authority
of said firm as experts in accounting and auditing.
Valley Industries, Inc. The combined financial statements of Valley
Industries, Inc. and Subsidiaries and Z Leasing Company (A General Partnership)
as of January 31, 1994, 1995 and 1996 and for each of the years in the three-
year period ended January 31, 1996, appearing in JP Foodservice's Current Report
on Form 8-K filed for a reportable event dated June 28, 1996, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of such firm as experts in accounting and
auditing.
Arrow Paper and Supply Co. The combined financial statements of Arrow Paper
and Supply Co., Inc. and Affiliate as of December 29, 1995, appearing in JP
Foodservice's Current Report on Form 8-K filed for a reportable event dated
July 17, 1996, have been incorporated by reference herein and in the
registration statement in reliance upon the report of Blum Shapiro and Company,
P.C., independent public accountants, and upon the authority of such firm as
experts in accounting and auditing.
Rykoff-Sexton. The audited consolidated financial statements of Rykoff-
Sexton and subsidiaries as of April 27, 1996 and April 29, 1995, and for each of
the three years in the period ended April 27, 1996 incorporated by reference in
this Joint Proxy Statement/Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
US Foodservice. The audited consolidated financial statements of US
Foodservice, Inc. as of December 30, 1995 and December 31, 1994, and for each of
the three years in the period ended December 30, 1995 incorporated by reference
in this Joint Proxy Statement/Prospectus have been audited by Arthur Andersen
LLP,
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independent public accountants, as indicated in their reports with respect
thereto and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
H&O Foods. The audited consolidated financial statements of H&O Foods as of
October 31, 1995 and December 31, 1994 and for the ten months ended October 31,
1995 and the year ended December 31, 1994 incorporated by reference herein, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the JP Foodservice
1997 annual meeting of stockholders must have been received by the Secretary of
JP Foodservice at JP Foodservice's principal office in Columbia, Maryland no
later than June 19, 1997, to be included in JP Foodservice's proxy, notice of
meeting and proxy statement relating to such meeting.
If the Merger Agreement is adopted by Rykoff-Sexton stockholders and the
Merger is consummated, Rykoff-Sexton's 1997 annual meeting of stockholders will
not occur. If the Merger is not consummated, proposals by stockholders intended
to be presented at the Rykoff-Sexton 1997 annual meeting of stockholders must
have been received by the Secretary of Rykoff-Sexton at Rykoff-Sexton's
principal office in Wilkes-Barre, Pennsylvania no later than May 29, 1997, to be
included in Rykoff'-Sexton's proxy, notice of meeting and proxy statement
relating to such meeting.
OTHER MATTERS
The Board of Directors of JP Foodservice is aware of no other matter that
will be presented for action at the JP Foodservice Special Meeting and the Board
of Directors of Rykoff-Sexton is aware of no other matter that will be presented
for action at the Rykoff-Sexton Special Meeting. If any other matter requiring a
vote of the stockholders arising from the conduct of the meeting properly comes
before the JP Foodservice Special Meeting or the Rykoff-Sexton Special Meeting,
as the case may be, the persons authorized under management proxies will vote
and act according to their best judgments in light of the conditions then
prevailing.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
JP FOODSERVICE, INC.,
HUDSON ACQUISITION CORP.
AND
RYKOFF-SEXTON, INC.
DATED AS OF JUNE 30, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1. The Merger................................. 2
SECTION 1.2. Closing.................................... 2
SECTION 1.3. Effective Time............................. 2
SECTION 1.4. Effects of the Merger...................... 2
SECTION 1.5. Certificate of Incorporation and By-laws
of the Surviving Corporation and JPFI...... 3
SECTION 1.6. Directors and Officers..................... 3
SECTION 1.7. Reservation of Right to Revise
Transaction................................ 5
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1. Effect on Capital Stock.................... 5
SECTION 2.2. Exchange of Certificates................... 8
SECTION 2.3. Certain Adjustments........................ 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of RSI...... 12
(a) Organization, Standing and
Corporate Power....................... 12
(b) Subsidiaries.......................... 13
(c) Capital Structure..................... 13
(d) Authority; Noncontravention........... 15
(e) SEC Documents; Undisclosed
Liabilities........................... 17
(f) Information Supplied.................. 17
(g) Absence of Certain Changes or Events.. 18
(h) Compliance with Applicable Laws;
Litigation............................ 19
(i) Absence of Changes in Benefit Plans... 20
(j) ERISA Compliance...................... 20
(k) Taxes................................. 22
(l) Voting Requirements................... 23
(m) State Takeover Statutes;
Certain Provisions of RSI
Certificate........................... 23
(n) Accounting Matters.................... 24
(o) Brokers............................... 24
(p) Opinion of Financial Advisor.......... 24
(q) Ownership of JPFI Common Stock........ 25
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(r) Intellectual Property................. 25
(s) Certain Contracts..................... 25
(t) RSI Rights Agreement.................. 26
(u) Environmental Liability............... 26
SECTION 3.2. Representations and Warranties of JPFI..... 27
(a) Organization, Standing and Corporate
Power................................. 27
(b) Subsidiaries.......................... 27
(c) Capital Structure..................... 28
(d) Authority; Noncontravention........... 29
(e) SEC Documents; Undisclosed
Liabilities........................... 31
(f) Information Supplied.................. 32
(g) Absence of Certain Changes or Events.. 32
(h) Compliance with Applicable Laws;
Litigation............................ 33
(i) Absence of Changes in Benefit Plans... 34
(j) ERISA Compliance...................... 34
(k) Taxes................................. 36
(l) Voting Requirements................... 37
(m) State Takeover Statutes;
Certificate of Incorporation.......... 37
(n) Accounting Matters.................... 37
(o) Brokers............................... 38
(p) Opinion of Financial Advisors......... 38
(q) Ownership of RSI Common Stock......... 38
(r) Intellectual Property................. 38
(s) Certain Contracts..................... 39
(t) JPFI Rights Agreement................. 39
(u) Environmental Liability............... 40
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business....................... 40
SECTION 4.2. No Solicitation or Negotiations........... 45
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Preparation of the Form S-4 and the Joint
Proxy Statement; Stockholders Meetings.... 46
SECTION 5.2. Letters of RSI's Accountants.............. 47
SECTION 5.3. Letters of JPFI's Accountants............. 48
SECTION 5.4. Access to Information; Confidentiality.... 48
SECTION 5.5. Best Efforts.............................. 49
SECTION 5.6. Employment Agreements..................... 50
SECTION 5.7. Indemnification, Exculpation and
Insurance................................. 50
SECTION 5.8. Fees and Expenses......................... 51
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SECTION 5.9. Public Announcements...................... 52
SECTION 5.10. Affiliates................................ 52
SECTION 5.11. NYSE Listing.............................. 52
SECTION 5.12. Tax Treatment............................. 53
SECTION 5.13. Pooling of Interests...................... 53
SECTION 5.14. Standstill Agreements; Confidentiality
Agreements................................. 53
SECTION 5.15. Post-Merger Operations.................... 53
SECTION 5.16. Conveyance Taxes.......................... 53
SECTION 5.17 8 7/8% Indenture........................... 53
SECTION 5.18 Certain Tax Matters........................ 54
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation to
Effect the Merger......................... 54
SECTION 6.2. Conditions to Obligations of JPFI......... 56
SECTION 6.3. Conditions to Obligations of RSI.......... 56
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination............................... 57
SECTION 7.2. Effect of Termination..................... 59
SECTION 7.3. Amendment................................. 59
SECTION 7.4. Extension; Waiver......................... 59
SECTION 7.5. Termination Expenses ..................... 60
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and
Warranties................................ 60
SECTION 8.2. Notices................................... 61
SECTION 8.3. Definitions............................... 61
SECTION 8.4. Interpretation............................ 62
SECTION 8.5. Counterparts.............................. 63
SECTION 8.6. Entire Agreement; No Third-Party
Beneficiaries............................. 63
SECTION 8.7. Governing Law............................. 63
SECTION 8.8. Assignment................................ 63
SECTION 8.9. Consent to Jurisdiction................... 63
SECTION 8.10. Headings, Etc............................. 64
SECTION 8.11. Severability.............................. 64
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Exhibit A Form of RSI Stock Option Agreement
Exhibit B Form of JPFI Stock Option Agreement
Exhibit C Form of Support Agreement
Exhibit D Form of JPFI Affiliate Letter
Exhibit E Form of RSI Affiliate Letter
Exhibit F Form of Amendment to Amended and Restated By-
Laws of JPFI
Exhibit G Form of Employment Agreement with Mark Van
Stekelenburg
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of June 30, 1997,
among JP FOODSERVICE, INC., a Delaware corporation ("JPFI"),
HUDSON ACQUISITION CORP. ("Merger Sub"), a Delaware corporation
and a wholly-owned subsidiary of JPFI, and RYKOFF-SEXTON, INC.,
a Delaware corporation ("RSI").
WHEREAS, the respective Boards of Directors of JPFI,
Merger Sub and RSI have each approved the merger of RSI with
and into Merger Sub (the "Merger"), upon the terms and subject
to the conditions set forth in this Agreement, whereby each
issued and outstanding share of common stock, par value $.10
per share, of RSI ("RSI Common Stock", which reference shall be
deemed to include the associated RSI Rights (as defined in Sec-
tion 3.1(c) attached thereto), other than shares owned by JPFI
or RSI, will be converted into the right to receive the Merger
Consideration (as defined in Section 1.7); and
WHEREAS, the respective Boards of Directors of JPFI,
Merger Sub and RSI have each determined that the Merger and the
other transactions contemplated hereby are consistent with, and
in furtherance of, their respective business strategies and
goals and are in the best interests of their respective stock-
holders; and
WHEREAS, as a condition to, and on the date im-
mediately following, the execution of this Agreement, JPFI and
RSI will enter into a stock option agreement (the "RSI Option
Agreement") attached hereto as Exhibit A and a stock option
agreement (the "JPFI Option Agreement" and, together with the
RSI Option Agreement, the "Option Agreements") attached hereto
as Exhibit B; and
WHEREAS, for federal income tax purposes, it is in-
tended that the Merger will qualify as a reorganization under
the provisions of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is
intended that the Merger will be accounted for as a pooling of
interests transaction under United States generally accepted
accounting principles ("GAAP"); and
WHEREAS, as a condition to, and immediately follow-
ing, the execution of this Agreement, JPFI and certain stock-
holders of RSI will enter into, and RSI will execute an ac-
knowledgment to, a support agreement (the "Support Agreement")
attached hereto as Exhibit C; and
WHEREAS, JPFI and RSI desire to make certain repre-
sentations, warranties, covenants and agreements in connection
<PAGE>
with the Merger and also to prescribe various conditions to the
Merger;
NOW, THEREFORE, in consideration of the representa-
tions, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject
to the conditions set forth in this Agreement, and in ac-
cordance with the Delaware General Corporation Law (the
"DGCL"), RSI shall be merged with and into Merger Sub at the
Effective Time (as defined in Section 1.3). Following the Ef-
fective Time, the separate corporate existence of RSI shall
cease and Merger Sub shall be the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all
the rights and obligations of RSI in accordance with the DGCL.
SECTION 1.2. Closing. The closing of the Merger
(the "Closing") will take place at 10:00 a.m., New York City
time, on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in
Article VI, unless another time or date is agreed to by the
parties hereto. The Closing will be held at such location in
the City of New York as is agreed to by the parties hereto.
SECTION 1.3. Effective Time. Subject to the provi-
sions of this Agreement, as soon as practicable on the Closing
Date, the parties shall cause the Merger to be consummated by
filing a certificate of merger or other appropriate documents
(in any such case, the "Certificate of Merger") executed in
accordance with the relevant provisions of the DGCL and shall
make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certifi-
cate of Merger is duly filed with the Secretary of State of
Delaware, or at such subsequent date or time as JPFI and RSI
shall agree and specify in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as
the "Effective Time").
SECTION 1.4. Effects of the Merger. The Merger
shall have the effects set forth in Section 259 of the DGCL.
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SECTION 1.5. Certificate of Incorporation and By-
laws of the Surviving Corporation and JPFI. (a) At the Effec-
tive Time, the Certificate of Incorporation and the by-laws of
Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation and by-laws of
the Surviving Corporation, in each case until thereafter
amended in accordance with applicable law; provided, however,
that Article First of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows:
The name of the Corporation (which is hereinafter
referred to as the "Corporation") is Rykoff-Sexton,
Inc.
(b) At the Effective Time, the by-laws of JPFI shall
be amended as set forth in Exhibit F and, as so amended, such
by-laws shall be the by-laws of JPFI until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.6. Directors and Officers. (a) As of the
Effective Time, James L. Miller shall be Chairman and Chief
Executive Officer of JPFI and Mark Van Stekelenburg shall be
Vice Chairman and President of JPFI and, subject to Section
1.6(b), shall be nominated for election to the class of direc-
tors of the JPFI Board of Directors whose terms shall expire in
1998.
(b) Prior to the Effective Time, JPFI shall (i) in-
crease the number of members of the Board of Directors of JPFI
to 17; (ii) take such action as may be necessary such that the
Board of Directors of JPFI, immediately following the Effective
Time, is comprised of (A) nine individuals, including each of
the incumbent members of the JPFI Board of Directors (or their
replacements), no fewer than five of whom shall be outside di-
rectors, as selected by JPFI prior to the Effective Time, plus
(B) seven individuals, no fewer than four of whom shall be out-
side directors, two of whom shall be individuals designated by
Merrill Lynch Capital Partners, Inc., one of whom shall be Mark
Van Stekelenburg, and four of whom shall be current incumbents
of the RSI Board of Directors who are not employees of RSI or
its subsidiaries or affiliated with Merrill Lynch Capital Part-
ners Inc. to be selected by RSI prior to the Effective Time,
and (C) one additional person to be designated by the Chairman
of JPFI following the Merger; provided that no person shall be
deemed not to be an outside director for purposes of this Sec-
tion 1.6(b) solely because such person is or has been an ML
Director (as defined in Section 3.1(d)); and (iii) take such
action as may be necessary such that two of the three classes
of the JPFI Board of Directors shall be comprised of six direc-
tors each, three of whom shall be incumbent directors of the
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JPFI Board of Directors pursuant to clause (ii)(A) of this Sec-
tion 1.6(b) and three of whom shall be designated as directors
by RSI pursuant to clause (ii)(B) of this Section 1.6(b), and
the third class of the JPFI Board of Directors shall be com-
prised of five directors, three of whom shall be incumbent di-
rectors of the JPFI Board of Directors pursuant to clause
(ii)(A) of this Section 1.6(b), one of whom shall be designated
as a director by RSI pursuant to clause (ii)(B) of this Section
1.6(b) and one of whom shall be designated as a director by the
Chairman of JPFI pursuant to clause (ii)(C) of this Section
1.6(b). The two directors who shall be designated by Merrill
Lynch Capital Partners, Inc. shall be appointed, one each, to
the class of directors whose terms expire in 1999 and 2000,
respectively. Of the four directors to be selected by RSI pur-
suant to clause (ii)(B) of the first sentence of this Section
1.6(b), James I. Maslon shall be appointed to the class of di-
rectors whose terms expire in 1998, and Bernard Sweet shall be
appointed to the class of directors whose terms expire in 1999.
(c) As of the Effective Time, the JPFI Board of Di-
rectors shall initially have three committees, as follows: an
audit committee, a compensation committee and a nominating com-
mittee. Each committee will be comprised of four directors,
two of whom shall be designated by JPFI, one of whom shall be
designated by RSI and one of whom shall be designated by mutual
agreement of JPFI and RSI. The initial chairman of each of the
of the audit committee, the compensation committee and the
nominating committee shall be, until such chairman's replace-
ment is duly designated by the JPFI Board of Directors, the
JPFI director who is currently the incumbent chairman of such
committee; provided, however, that in the event any of such
chairs becomes vacant for any reason prior to the Effective
Time, the chairman shall be the person thereafter designated by
the JPFI Board of Directors pursuant to the Certificate of In-
corporation and By-Laws of JPFI. One member of the nominating
committee of the JPFI Board of Directors (and of an executive
committee thereof, if such a committee is established) shall be
designated by Merrill Lynch Capital Partners, Inc. as RSI's
designee thereon.
(d) Except as set forth in Section 1.6(a), the di-
rectors and officers of Merger Sub immediately prior to the
Effective Time shall be the initial directors and officers of
the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By-Laws of the Sur-
viving Corporation.
(e) It is currently contemplated that the first
three vacancies on the JPFI Board of Directors to occur follow-
ing the Effective Time shall not be filled, but that in each
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<PAGE>
case the number of directors shall be reduced, so that the to-
tal number of directors constituting the JPFI Board of Direc-
tors shall thereafter be 14.
SECTION 1.7. Reservation of Right to Revise Transac-
tion. If each of RSI, Merger Sub and JPFI agree, the parties
hereto, prior to the receipt of the RSI Stockholder Approval
and the JPFI Stockholder Approval (each as defined herein), may
change the method of effecting the business combination between
JPFI and RSI, and each party shall cooperate in such efforts,
including to provide for (a) a merger of RSI with and into
JPFI, or (b) mergers (to occur substantially simultaneously) of
separate subsidiaries of a Delaware corporation jointly formed
by JPFI and RSI for such purpose into each of JPFI and RSI;
provided, however, that no such change shall (i) alter or
change the amount or kind of consideration to be issued to
holders of RSI Common Stock as provided for in this Agreement
(the "Merger Consideration"), other than, in the case of clause
(b) above, the identity of the issuer thereof, (ii) adversely
affect the proposed accounting treatment for the Merger or the
tax treatment to JPFI, RSI or their respective stockholders as
a result of receiving the Merger Consideration, or (iii) mate-
rially delay receipt of any approval referred to in Section
6.1(c) or the consummation of the transactions contemplated by
this Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1. Effect on Capital Stock. As of the
Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, RSI or the holder of any shares of
the following securities:
(a) Cancellation of Treasury Stock and JPFI-Owned
Stock. Each share of RSI Common Stock that is owned by RSI,
Merger Sub or JPFI shall automatically be cancelled and retired
and shall cease to exist, and no consideration shall be deliv-
ered in exchange therefor.
(b) Conversion of RSI Common Stock. Subject to Sec-
tion 2.2(e), each issued and outstanding share of RSI Common
Stock (other than shares to be cancelled in accordance with
Section 2.1(a)) shall be converted into the right to receive
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<PAGE>
0.84 (the "Exchange Ratio") validly issued, fully paid and non-
assessable shares of common stock, par value $.01 per share
("JPFI Common Stock"), of JPFI. As of the Effective Time, all
such shares of RSI Common Stock shall no longer be outstanding
and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing
any such shares of RSI Common Stock shall cease to have any
rights with respect thereto, except the right to receive the
Merger Consideration and any cash in lieu of fractional shares
of JPFI Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with
Section 2.2, without interest.
(c) Conversion of Merger Sub Common Stock. Each
share of common stock, par value $0.10 per share, of Merger Sub
("Merger Sub Common Stock") issued and outstanding immediately
prior to the Effective Time shall remain outstanding as a val-
idly issued, fully paid and nonassessable share of common stock
of the Surviving Corporation.
(d) JPFI Common Stock. At and after the Effective
Time, each share of JPFI Common Stock issued and outstanding
immediately prior to the Closing Date shall remain an issued
and outstanding share of common stock of JPFI and shall not be
affected by the Merger.
(e) Options and Warrants. (i) RSI will take all
action necessary such that, at the Effective Time, each option
granted by RSI to purchase shares of RSI Common Stock which is
outstanding and exercisable immediately prior thereto shall
cease to represent a right to acquire shares of RSI Common
Stock and shall be converted into an option to purchase shares
of JPFI Common Stock in an amount and at an exercise price de-
termined as provided below (and otherwise, in the case of op-
tions, subject to the terms of the RSI Stock Plans (as defined
in Section 3.1(c)) and the agreements evidencing grants there-
under) (the "Assumed Options"):
(1) The number of shares of JPFI Common Stock
to be subject to the new option shall be equal to the
product of the number of shares of RSI Common Stock
subject to the original option and the Exchange Ra-
tio, provided that any fractional shares of JPFI Com-
mon Stock resulting from such multiplication shall be
rounded to the nearest whole share; and
(2) The exercise price per share of JPFI Common
Stock under the new option shall be equal to the ex-
ercise price per share of RSI Common Stock under the
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<PAGE>
original option divided by the Exchange Ratio, pro-
vided that such exercise price shall be rounded to
the nearest whole cent.
(ii) The adjustment provided herein with respect to
any options that are "incentive stock options" (as defined in
Section 422 of the Code) shall be and is intended to be ef-
fected in a manner that is consistent with Section 424(a) of
the Code. The duration and other terms of the new options
shall be the same as the original options except that all ref-
erences to RSI shall be deemed to be references to JPFI.
(iii) At the Effective Time, the warrants, dated May
17, 1996, between RSI and each of Teachers Insurance and Annu-
ity Association of America, the Nippon Credit Bank, Ltd. and
Dresdner Bank AG (each, an "Assumed Warrant") shall be assumed
by JPFI and shall constitute a warrant to acquire, otherwise on
the same terms and conditions as were applicable under such
Assumed Warrant, a number of shares of JPFI Common Stock equal
to the number of JPFI Common Shares that a holder of such As-
sumed Warrant would have received in the Merger if such holder
had exercised such Assumed Warrant for shares of RSI Common
Stock immediately prior to the Effective Time, at a price per
share equal to the aggregate exercise price for the shares of
RSI Common Stock subject thereto divided by the number of JPFI
Common Shares that a holder of such Assumed Warrant would have
received in the Merger if such holder had exercised such As-
sumed Warrant for shares of RSI Common Stock immediately prior
to the Effective Time.
(iv) As soon as practicable following the Effective
Time, JPFI shall deliver, upon due surrender of the Assumed
Options and Assumed Warrants, to holders of Assumed Options and
Assumed Warrants appropriate option and warrant agreements rep-
resenting the right to acquire JPFI Common Stock on the same
terms and conditions as contained in the Assumed Options and
Assumed Warrants (except as otherwise set forth in this Section
2.1(e)). Except as expressly contemplated herein, JPFI shall
comply with the terms of the RSI Stock Plans as they apply to
the Assumed Options. JPFI shall take all corporate action nec-
essary to reserve for issuance a sufficient number of shares of
JPFI Common Stock for delivery upon exercise of the Assumed
Options and Assumed Warrants in accordance with this Section
2.1(e). JPFI shall file a registration statement on Form S-8
(or any successor form) or on another appropriate form, ef-
fective as of, or reasonably promptly following, the Effective
Time, with respect to JPFI Common Stock subject to the Assumed
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<PAGE>
Options and shall use commercially reasonable efforts to main-
tain the effectiveness of such registration statement or regis-
tration statements (and maintain the current status of the pro-
spectus or prospectuses contained therein) for so long as the
Assumed Options remain outstanding and exercisable. With re-
spect to those individuals who, subsequent to the Effective
Time, will be subject to the reporting requirements of Section
16 of the Exchange Act, JPFI shall administer the Hudston Stock
Plans, where applicable, in a manner that complies with Rule
16b-3 promulgated under the Exchange Act.
SECTION 2.2. Exchange of Certificates. (a) Ex-
change Agent. As of the Effective Time, JPFI shall enter into
an agreement with such bank or trust company as may be desig-
nated by JPFI and reasonably satisfactory to RSI (the "Exchange
Agent") which shall provide that JPFI shall deposit with the
Exchange Agent as of the Effective Time, for the benefit of the
holders of shares of RSI Common Stock, for exchange in ac-
cordance with this Article II, through the Exchange Agent, cer-
tificates representing the shares of JPFI Common Stock (such
shares of JPFI Common Stock, together with any dividends or
distributions with respect thereto with a record date after the
Effective Time, any Excess Shares (as defined in Section
2.2(e)) and any cash (including cash proceeds from the sale of
the Excess Shares) payable in lieu of any fractional shares of
JPFI Common Stock being hereinafter referred to as the "Ex-
change Fund") issuable pursuant to Section 2.1 in exchange for
outstanding shares of RSI Common Stock.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall
mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented out-
standing shares of RSI Common Stock (the "Certificates") whose
shares were converted into the right to receive the Merger Con-
sideration pursuant to Section 2.1, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, and shall
be in such form and have such other provisions as JPFI and RSI
may reasonably specify) and (ii) instructions for use in sur-
rendering the Certificates in exchange for the Merger Consider-
ation. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be re-
quired by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of JPFI Common Stock
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<PAGE>
which such holder has the right to receive pursuant to the pro-
visions of this Article II, certain dividends or other distri-
butions in accordance with Section 2.2(c) and cash in lieu of
any fractional share of JPFI Common Stock in accordance with
Section 2.2(e), and the Certificate so surrendered shall forth-
with be cancelled. Notwithstanding anything to the contrary
contained herein, no certificate representing JPFI Common Stock
or cash in lieu of a fractional share interest shall be deliv-
ered to a person who is an affiliate of RSI for purposes of
qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board
and applicable Securities and Exchange Commission ("SEC") rules
and regulations, unless such person has executed and delivered
an agreement in the form of Exhibit E hereto. In the event of
a surrender of a Certificate representing shares of RSI Common
Stock which are not registered in the transfer records of RSI
under the name of the person surrendering such Certificate, a
certificate representing the proper number of shares of JPFI
Common Stock may be issued to a person other than the person in
whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such issu-
ance shall pay any transfer or other taxes required by reason
of the issuance of shares of JPFI Common Stock to a person
other than the registered holder of such Certificate or estab-
lish to the satisfaction of JPFI that such tax has been paid or
is not applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration which the holder
thereof has the right to receive in respect of such Certificate
pursuant to the provisions of this Article II, certain divi-
dends or other distributions in accordance with Section 2.2(c)
and cash in lieu of any fractional share of JPFI Common Stock
in accordance with Section 2.2(e). No interest shall be paid
or will accrue on any cash payable to holders of Certificates
pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions with respect to
JPFI Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of JPFI Common Stock represented
thereby, and, in the case of Certificates representing RSI Com-
mon Stock, no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 2.2(e), and all
such dividends, other distributions and cash in lieu of frac-
tional shares of JPFI Common Stock shall be paid by JPFI to the
Exchange Agent and shall be included in the Exchange Fund, in
each case until the surrender of such Certificate in accordance
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<PAGE>
with this Article II. Subject to the effect of applicable es-
cheat or similar laws, following surrender of any such Certifi-
cate there shall be paid to the holder of the certificate rep-
resenting whole shares of JPFI Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender,
the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to
such whole shares of JPFI Common Stock and, in the case of Cer-
tificates representing RSI Common Stock, the amount of any cash
payable in lieu of a fractional share of JPFI Common Stock to
which such holder is entitled pursuant to Section 2.2(e) and
(ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective
Time and with a payment date subsequent to such surrender pay-
able with respect to such whole shares of JPFI Common Stock.
(d) No Further Ownership Rights in RSI Common Stock.
All shares of JPFI Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this
Article II (including any cash paid pursuant to this Article
II) shall be deemed to have been issued (and paid) in full sat-
isfaction of all rights pertaining to the shares of RSI Common
Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date
prior to the Effective Time which may have been declared or
made by RSI on such shares of RSI Common Stock which remain
unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of RSI Common Stock which
were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to JPFI,
the Surviving Corporation or the Exchange Agent for any reason,
they shall be cancelled and exchanged as provided in this Ar-
ticle II, except as otherwise provided by law.
(e) No Fractional Shares. (i) Nothstanding any-
thing to the contrary contained herein, no certificates or
scrip representing fractional shares of JPFI Common Stock shall
be issued upon the surrender for exchange of Certificates, no
dividend or distribution of JPFI shall relate to such frac-
tional share interests and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a
stockholder of JPFI. In lieu of the issuance of such frac-
tional shares, JPFI shall pay each former holder of RSI Common
Stock an amount in cash equal to the product obtained by multi-
plying (A) the fractional share interest to which such former
holder (after taking into account all shares of RSI Common
Stock held at the Effective Time by such holder) would other-
wise be entitled by (B) the average of the closing prices of
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the JPFI Common Stock as reported on the NYSE Composite Report-
ing Tape (as reported in The Wall Street Journal, or, if not
reported therein, any other authoritative source) during the
ten trading days preceding the fifth trading day prior to the
Closing Date (such average, the "Average JPFI Price").
(ii) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of Cer-
tificates formerly representing RSI Common Stock with respect
to any fractional share interests, the Exchange Agent shall
make available such amounts to such holders of Certificates
formerly representing RSI Common Stock subject to and in ac-
cordance with the terms of Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to the holders of
the Certificates for six months after the Effective Time shall
be delivered to JPFI, upon demand, and any holders of the Cer-
tificates who have not theretofore complied with this Article
II shall thereafter look only to JPFI for payment of their
claim for Merger Consideration, any dividends or distributions
with respect to JPFI Common Stock and any cash in lieu of frac-
tional shares of JPFI Common Stock.
(g) No Liability. None of JPFI, RSI, Merger Sub,
the Surviving Corporation or the Exchange Agent shall be liable
to any person in respect of any shares of JPFI Common Stock,
any dividends or distributions with respect thereto, any cash
in lieu of fractional shares of JPFI Common Stock or any cash
from the Exchange Fund, in each case delivered to a public of-
ficial pursuant to any applicable abandoned property, escheat
or similar law.
(h) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund, as di-
rected by JPFI, on a daily basis. Any interest and other in-
come resulting from such investments shall be paid to JPFI.
(i) Lost Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an af-
fidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such rea-
sonable amount as the Surviving Corporation may direct as in-
demnity against any claim that may be made against it with re-
spect to such Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the
Merger Consideration and, if applicable, any unpaid dividends
and distributions on shares of JPFI Common Stock deliverable in
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respect thereof and any cash in lieu of fractional shares, in
each case pursuant to this Agreement.
SECTION 2.3. Certain Adjustments. If between the
date hereof and the Effective Time, the outstanding shares of
RSI Common Stock or of JPFI Common Stock shall be changed into
a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities shall be
declared thereon with a record date within such period, the
Exchange Ratio shall be adjusted accordingly to provide to the
holders of RSI Common Stock the same economic effect as contem-
plated by this Agreement prior to such reclassification, re-
capitalization, split-up, combination, exchange or dividend.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of RSI.
Except as disclosed in the Disclosure Schedule delivered by RSI
to JPFI prior to the execution of this Agreement (the "RSI Dis-
closure Schedule") and making reference to the particular sub-
section of this Agreement to which exception is being taken,
RSI represents and warrants to JPFI as follows:
(a) Organization, Standing and Corporate Power. (i)
Each of RSI and its subsidiaries (as defined in Section 8.3) is
a corporation or other legal entity duly organized, validly
existing and in good standing (with respect to jurisdictions
which recognize such concept) under the laws of the jurisdic-
tion in which it is organized and has the requisite corporate
or other power, as the case may be, and authority to carry on
its business as now being conducted, except, as to subsidiar-
ies, for those jurisdictions where the failure to be so orga-
nized, existing or in good standing individually or in the ag-
gregate would not have a material adverse effect (as defined in
Section 8.3) on RSI. Each of RSI and its subsidiaries is duly
qualified or licensed to do business and is in good standing
(with respect to jurisdictions which recognize such concept) in
each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those juris-
dictions where the failure to be so qualified or licensed or to
be in good standing individually or in the aggregate would not
have a material adverse effect on RSI.
(ii) RSI has delivered to JPFI prior to the execution
of this Agreement complete and correct copies of any amendments
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to its certificate of incorporation (the "RSI Certificate") and
by-laws not filed as of the date hereof with the RSI Filed SEC
Documents (as defined in Section 3.1(g)).
(iii) In all material respects, the minute books of
RSI and its subsidiaries contain accurate records of all meet-
ings and accurately reflect all other actions taken by the
stockholders, the Board of Directors and all committees of the
Board of Directors of RSI (or, as the case may be, each of its
subsidiaries) since January 1, 1995.
(b) Subsidiaries. Exhibit 21 to RSI's Annual Report
on Form 10-K for the fiscal year ended April 27, 1996 includes
all the subsidiaries of RSI which as of the date of this Agree-
ment are Significant Subsidiaries (as defined in Rule 1-02 of
Regulation S-X of the SEC). All the outstanding shares of
capital stock of, or other equity interests in, each such Sig-
nificant Subsidiary have been validly issued and are fully paid
and nonassessable and are owned directly or indirectly by RSI,
free and clear of all pledges, claims, liens, charges, encum-
brances and security interests of any kind or nature whatsoever
(collectively, "Liens") and free of any other restriction (in-
cluding any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests),
other than Liens and restrictions imposed by RSI's debt agree-
ments included as exhibits to the RSI Filed SEC Documents.
(c) Capital Structure. The authorized capital stock
of RSI consists of 40,000,000 shares of RSI Common Stock and
10,000,000 shares of preferred stock, par value $.10 per share
("RSI Preferred Stock"). At the close of business on June 25,
1997: (i) 27,969,503 shares of RSI Common Stock were issued
and outstanding; (ii) 271,020 shares of RSI Common Stock were
held by RSI in its treasury; (iii) no shares of RSI Preferred
Stock were issued and outstanding; (iv) 1,479,113 shares of RSI
Common Stock were reserved for issuance pursuant to all stock
option, restricted stock or other stock-based compensation,
benefits or savings plans, agreements or arrangements in which
current or former employees or directors of RSI or its subsid-
iaries participate as of the date hereof (including, without
limitation, the 1980 Stock Option Plan, the 1988 Stock Option
and Compensation Plan, the RSI 1989 Director Stock Option Plan,
the RSI 1993 Director Stock Option Plan, the 1995 Key Employees
Stock Option and Compensation Plan, the RSI Convertible Award
Plan (Officer and Key Employee Edition), the RSI Convertible
Award Plan (Director Edition), the Amended and Restated Manage-
ment Stock Option Plan of WS Holdings Corporation, the Amended
and Restated US Foodservice Inc. 1992 Stock Option Plan and the
Amended and Restated US Foodservice Inc. 1993 Stock Option
Plan), complete and correct copies of which, in each case as
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<PAGE>
amended as of the date hereof, have been filed as exhibits to
the RSI Filed SEC Documents or delivered to JPFI (such plans,
collectively, the "RSI Stock Plans"); (v) 331,761 shares of RSI
Common Stock were reserved for issuance upon conversion of the
Assumed Warrants and (vi) 125,000 shares of RSI Preferred Stock
were reserved for issuance upon exercise of preferred stock
purchase rights (the "RSI Rights") issued pursuant to the
Amended and Restated Rights Agreement, dated as of May 15,
1996, by and between RSI and ChaseMellon Shareholder Services
L.L.C., as rights agent (as successor to Chemical Bank) (the
"RSI Rights Agreement"). Section 3.1(c) of the RSI Disclosure
Schedule sets forth a complete and correct list, as of June 27,
1997, of the number of shares of RSI Common Stock subject to
employee stock options or other rights to purchase or receive
RSI Common Stock granted under the RSI Stock Plans (col-
lectively, "RSI Employee Stock Options"), the dates of grant
and exercise prices thereof. All outstanding shares of capital
stock of RSI are, and all shares which may be issued will be,
when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as
set forth in this Section 3.1(c) and except for changes since
June 27, 1997 resulting from the issuance of shares of RSI Com-
mon Stock pursuant to the RSI Employee Stock Options or as ex-
pressly permitted by this Agreement, (x) there are not issued,
reserved for issuance or outstanding (A) any shares of capital
stock or other voting securities of RSI, (B) any securities of
RSI or any RSI subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of
RSI, (C) any warrants, calls, options or other rights to ac-
quire from RSI or any RSI subsidiary, and any obligation of RSI
or any RSI subsidiary to issue, any capital stock, voting secu-
rities or securities convertible into or exchangeable or exer-
cisable for capital stock or voting securities of RSI, and (y)
there are no outstanding obligations of RSI or any RSI subsid-
iary to repurchase, redeem or otherwise acquire any such secu-
rities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. There are no outstand-
ing (A) securities of RSI or any RSI subsidiary convertible
into or exchangeable or exercisable for shares of capital stock
or other voting securities or ownership interests in any RSI
subsidiary, (B) warrants, calls, options or other rights to
acquire from RSI or any RSI subsidiary, and any obligation of
RSI or any RSI subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital
stock, voting securities or ownership interests in, any RSI
subsidiary or (C) obligations of RSI or any RSI subsidiary to
repurchase, redeem or otherwise acquire any such outstanding
securities of RSI subsidiaries or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities.
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<PAGE>
Except as described in Section 3.1(b), neither RSI nor any RSI
subsidiary is a party to any agreement restricting the purchase
or transfer of, relating to the voting of, requiring registra-
tion of, or granting any preemptive or, except as provided by
the terms of the RSI Employee Stock Options, antidilutive
rights with respect to, any securities of the type referred to
in the two preceding sentences. Other than the RSI subsidiar-
ies, RSI does not directly or indirectly beneficially own any
securities or other beneficial ownership interests in any other
entity except for non-controlling investments made in the ordi-
nary course of business in entities which are not individually
or in the aggregate material to RSI and its subsidiaries as a
whole.
(d) Authority; Noncontravention. RSI has all requi-
site corporate power and authority to enter into this Agree-
ment, each of the Option Agreements and, subject, in the case
of the Merger, to the RSI Stockholder Approval (as defined in
Section 3.1(l)), to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agree-
ment and each of the Option Agreements by RSI and the consumma-
tion by RSI of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on
the part of RSI, subject, in the case of the Merger, to the RSI
Stockholder Approval. This Agreement has been, and the Option
Agreements will be, duly executed and delivered by RSI and,
assuming the due authorization, execution and delivery thereof
by JPFI, constitutes (or will constitute, as the case may be)
the legal, valid and binding obligation of RSI, enforceable
against RSI in accordance with their terms. The execution and
delivery of this Agreement does not, and the execution and de-
livery of the Option Agreements and the consummation of the
transactions contemplated hereby and thereby and compliance
with the provisions of this Agreement and the Option Agreements
will not, conflict with, or result in any violation of, or de-
fault (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or ac-
celeration of any obligation or loss of a benefit under, or
result in the creation of any Lien upon any of the properties
or assets of RSI or any of its subsidiaries or (assuming the
consummation of the transactions contemplated hereby without
giving effect to Section 1.7) in any restriction on the conduct
of JPFI's business or operations under, (i) the RSI Certificate
or the by-laws of RSI or the comparable organizational docu-
ments of any of its subsidiaries, (ii) except as contemplated
by Section 5.17, any loan or credit agreement, note, bond,
mortgage, indenture, trust document, lease or other agreement,
instrument, permit, concession, franchise, license or similar
authorization applicable to RSI or any of its subsidiaries or
their respective properties or assets or (iii) subject to the
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<PAGE>
governmental filings and other matters referred to in the fol-
lowing sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to RSI or any of its
subsidiaries or their respective properties or assets, other
than, in the case of clauses (ii) and (iii), any such con-
flicts, violations, defaults, rights, losses, restrictions or
Liens that individually or in the aggregate would not (x) have
a material adverse effect on RSI or JPFI or (y) reasonably be
expected to impair the ability of RSI to perform its obliga-
tions under this Agreement and the Option Agreements. No con-
sent, approval, order or authorization of, action by or in re-
spect of, or registration, declaration or filing with, any fed-
eral, state, local or foreign government, any court, admin-
istrative, regulatory or other governmental agency, commission
or authority or any nongovernmental self-regulatory agency,
commission or authority (a "Governmental Entity") is required
by or with respect to RSI or any of its subsidiaries in con-
nection with the execution and delivery of this Agreement or
the Option Agreements by RSI or the consummation by RSI of the
transactions contemplated hereby and thereby, except for (1)
the filing of a pre-merger notification and report form by RSI
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"); (2) the filing with the SEC of (A)
a proxy statement relating to the RSI Stockholders Meeting (as
defined in Section 5.1(b)) (such proxy statement, together with
the proxy statement relating to the JPFI Stockholders Meeting
(as defined in Section 5.1(c)), in each case as amended or
supplemented from time to time, the "Joint Proxy Statement"),
and (B) such reports under Section 13(a), 13(d), 15(d) or 16(a)
of the Securities Exchange Act of 1934, as amended (the "Ex-
change Act"), as may be required in connection with this Agree-
ment, the Option Agreements and the transactions contemplated
hereby and thereby; (3) the filing of the Certificate of Merger
with the Secretary of State of Delaware and appropriate docu-
ments with the relevant authorities of other states in which
RSI is qualified to do business and such filings with Govern-
mental Entities to satisfy the applicable requirements of state
securities or "blue sky" laws; and (4) such consents, approv-
als, orders or authorizations the failure of which to be made
or obtained individually or in the aggregate would not (x) have
a material adverse effect on RSI or (y) reasonably be expected
to impair the ability of RSI to perform its obligations under
this Agreement. The entry into the Support Agreement by the
Stockholders (as defined in the Support Agreement) and the con-
summation of the transactions contemplated thereby has been
approved by the RSI Board of Directors in the manner contem-
plated by Section 3.1(a) of that certain Standstill Agreement
(the "Standstill Agreement"), dated as of May 17, 1996, by and
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<PAGE>
between RSI and the ML Entities (as defined therein). The en-
try into this Agreement and the consummation of the transac-
tions contemplated hereby has been agreed to by a majority of
the ML Directors (as defined in the Standstill Agreement) for
all purposes of the Standstill Agreement as may be relevant to
effecting the transactions contemplated by this Agreement and
the Support Agreement (including, without limitation, Section
2.2(a) thereof).
(e) SEC Documents; Undisclosed Liabilities. RSI has
filed all required registration statements, prospectuses, re-
ports, schedules, forms, statements and other documents (in-
cluding exhibits and all other information incorporated
therein) with the SEC since December 31, 1994 (the "RSI SEC
Documents"). As of their respective dates, the RSI SEC Docu-
ments complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to
such RSI SEC Documents, and none of the RSI SEC Documents when
filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not mislead-
ing. The financial statements of RSI included in the RSI SEC
Documents comply as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in ac-
cordance with GAAP (except, in the case of unaudited state-
ments, as permitted by Form 10-Q of the SEC) applied on a con-
sistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consoli-
dated financial position of RSI and its consolidated subsid-
iaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-
end audit adjustments). RSI has not treated as restructuring
charges any significant expenses that RSI would otherwise have
expensed against operating income in the ordinary course of
business. Except (i) as reflected in such financial statements
or in the notes thereto or (ii) for liabilities incurred in
connection with this Agreement, the Option Agreements or the
transactions contemplated hereby or thereby, neither RSI nor
any of its subsidiaries has any liabilities or obligations of
any nature which, individually or in the aggregate, would have
a material adverse effect on RSI.
(f) Information Supplied. None of the information
supplied or to be supplied by RSI specifically for inclusion or
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incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by JPFI in connection with
the issuance of JPFI Common Stock in the Merger (the "Form
S-4") will, at the time the Form S-4 becomes effective under
the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not mis-
leading or (ii) the Joint Proxy Statement will, at the date it
is first mailed to RSI's stockholders or at the time of the RSI
Stockholders Meeting, contain any untrue statement of a mate-
rial fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. The Joint Proxy Statement will comply as
to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except
that no representation or warranty is made by RSI with respect
to statements made or incorporated by reference therein based
on information supplied by JPFI specifically for inclusion or
incorporation by reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except
for liabilities incurred in connection with this Agreement, the
Option Agreements or the transactions contemplated hereby and
thereby, and except as permitted by Section 4.1(a), since April
27, 1996, RSI and its subsidiaries have conducted their busi-
ness only in the ordinary course consistent with past practice
or as disclosed in any RSI SEC Document filed since such date
and prior to the date hereof, and there has not been (i) any
material adverse change (as defined in Section 8.3) in RSI,
(ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with
respect to any of RSI's capital stock, (iii) any split, combi-
nation or reclassification of any of RSI's capital stock or any
issuance or the authorization of any issuance of any other se-
curities in respect of, in lieu of or in substitution for
shares of RSI's capital stock, except for issuances of RSI Com-
mon Stock upon exercise or conversion of RSI Employee Stock
Options, in each case awarded prior to the date hereof in ac-
cordance with their present terms or issued pursuant to Section
4.1(a), (iv)(A) any granting by RSI or any of its subsidiaries
to any current or former director, executive officer or other
key employee of RSI or its subsidiaries of any increase in com-
pensation, bonus or other benefits, except for normal increases
as a result of promotions, normal increases of base pay in the
ordinary course of business or as was required under any em-
ployment agreements in effect as of April 27, 1996 or disclosed
in Section 3.1(i) of the RSI Disclosure Schedule, (B) any
granting by RSI or any of its subsidiaries to any such current
or former director, executive officer or key employee of any
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<PAGE>
increase in severance or termination pay, or (C) any entry by
RSI or any of its subsidiaries into, or any amendment of, any
employment, deferred compensation, consulting, severance, ter-
mination or indemnification agreement with any such current or
former director, executive officer or key employee, (v) except
insofar as may have been disclosed in RSI SEC Documents filed
and publicly available prior to the date of this Agreement (as
amended to the date hereof, the "RSI Filed SEC Documents") or
required by a change in GAAP, any change in accounting methods,
principles or practices by RSI materially affecting its assets,
liabilities or business, (vi) except insofar as may have been
disclosed in the RSI Filed SEC Documents, any tax election that
individually or in the aggregate would have a material adverse
effect on RSI or any of its tax attributes or any settlement or
compromise of any material income tax liability, or (vii) any
action taken by RSI or any of the RSI subsidiaries during the
period from April 28, 1996 through the date of this Agreement
that, if taken during the period from the date of this Agree-
ment through the Effective Time, would constitute a breach of
Section 4.1(a).
(h) Compliance with Applicable Laws; Litigation.
(i) RSI, its subsidiaries and employees hold all permits, li-
censes, variances, exemptions, orders, registrations and ap-
provals of all Governmental Entities which are required for the
operation of the businesses of RSI and its subsidiaries (the
"RSI Permits"), except where the failure to have any such RSI
Permits individually or in the aggregate would not have a mate-
rial adverse effect on RSI. RSI and its subsidiaries are in
compliance with the terms of the RSI Permits and all applicable
statutes, laws, ordinances, rules and regulations, except where
the failure so to comply individually or in the aggregate would
not have a material adverse effect on RSI. As of the date of
this Agreement, except as disclosed in the RSI Filed SEC Docu-
ments, no action, demand, requirement or investigation by any
Governmental Entity and no suit, action or proceeding by any
person, in each case with respect to RSI or any of its subsid-
iaries or any of their respective properties, is pending or, to
the knowledge (as defined in Section 8.3) of RSI, threatened,
other than, in each case, those the outcome of which individu-
ally or in the aggregate would not (A) have a material adverse
effect on RSI or (B) reasonably be expected to impair the abil-
ity of RSI to perform its obligations under this Agreement or
the Option Agreements or prevent or materially delay the con-
summation of any of the transactions contemplated hereby or
thereby.
(ii) Neither RSI nor any RSI subsidiary is subject to
any outstanding order, injunction or decree which has had or,
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insofar as can be reasonably foreseen, individually or in the
aggregate will have, a material adverse effect on RSI.
(i) Absence of Changes in Benefit Plans. RSI has
delivered to JPFI true and complete copies of (i) all severance
and employment agreements of RSI with directors, executive of-
ficers or key employees, (ii) all severance programs and poli-
cies of each of RSI and each RSI subsidiary, and (iii) all
plans or arrangements of RSI and each RSI subsidiary relating
to its employees which contain change in control provisions, in
each case which has not been filed as an exhibit to a RSI Filed
SEC Document. Since April 27, 1996, there has not been any
adoption or amendment in any material respect by RSI or any of
its subsidiaries of any collective bargaining agreement, em-
ployment agreement, consulting agreement, severance agreement
or any material bonus, pension, profit sharing, deferred com-
pensation, incentive compensation, stock ownership, stock pur-
chase, stock option, phantom stock, retirement, vacation, sev-
erance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding providing benefits to
any current or former employee, officer or director of RSI or
any of its wholly owned subsidiaries (collectively, the "RSI
Benefit Plans"), or any material change in any actuarial or
other assumption used to calculate funding obligations with
respect to any RSI pension plans, or any material change in the
manner in which contributions to any RSI pension plans are made
or the basis on which such contributions are determined. Since
April 27, 1996, neither RSI nor any RSI subsidiary has amended
any RSI Employee Stock Options or any RSI Stock Plans to ac-
celerate the vesting of, or release restrictions on, awards
thereunder, or to provide for such acceleration in the event of
a change in control.
(j) ERISA Compliance. (i) With respect to the RSI
Benefit Plans, no event has occurred and, to the knowledge of
RSI, there exists no condition or set of circumstances, in con-
nection with which RSI or any of its subsidiaries could be sub-
ject to any liability that individually or in the aggregate
would have a material adverse effect on RSI under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
the Code or any other applicable law.
(ii) Each RSI Benefit Plan has been administered in
accordance with its terms, except for any failures so to admin-
ister any RSI Benefit Plan that individually or in the ag-
gregate would not have a material adverse effect on RSI. RSI,
its subsidiaries and all the RSI Benefit Plans have been oper-
ated, and are, in compliance with the applicable provisions of
ERISA, the Code and all other applicable laws and the terms of
all applicable collective bargaining agreements, except for any
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failures to be in such compliance that individually or in the
aggregate would not have a material adverse effect on RSI.
Each RSI Benefit Plan that is intended to be qualified under
Section 401(a) or 401(k) of the Code has received a favorable
determination letter from the Internal Revenue Service ("IRS")
that it is so qualified and each trust established in connec-
tion with any RSI Benefit Plan that is intended to be exempt
from federal income taxation under Section 501(a) of the Code
has received a determination letter from the IRS that such
trust is so exempt. To the knowledge of RSI, no fact or event
has occurred since the date of any determination letter from
the IRS which is reasonably likely to affect adversely the
qualified status of any such RSI Benefit Plan or the exempt
status of any such trust.
(iii) Neither RSI nor any of its subsidiaries has in-
curred any unsatisfied liability under Title IV of ERISA (other
than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course). No RSI Benefit
Plan has incurred an "accumulated funding deficiency" (within
the meaning of Section 302 of ERISA or Section 412 of the Code)
whether or not waived. To the knowledge of RSI, there are not
any facts or circumstances that would materially change the
funded status of any RSI Benefit Plan that is a "defined ben-
efit" plan (as defined in Section 3(35) of ERISA) since the
date of the most recent actuarial report for such plan. Each
RSI Benefit Plan that is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA is set forth on Section
3.1(j)(iii) of the RSI Disclosure Schedule.
(iv) With respect to each of the RSI Benefit Plans
(other than any multiemployer plan) that is subject to Title IV
of ERISA, the present value of accrued benefits under each such
plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such
plan's actuary with respect to such plan, did not, as of its
latest valuation date, exceed the then current value of the
aggregate assets of such plans allocable to such accrued bene-
fits in any material respect. With respect to any RSI Benefit
Plan that is a multiemployer plan, (A) neither RSI nor any of
its subsidiaries has any contingent liability under Section
4204 of ERISA, and no circumstances exist that present a mate-
rial risk that any such plan will go into reorganization, and
(B) the aggregate withdrawal liability of RSI and its subsid-
iaries, computed as if a complete withdrawal by RSI and any of
its subsidiaries had occurred under each such RSI Benefit Plan
on the date hereof, would not be material.
(v) No RSI Benefit Plan provides medical benefits
(whether or not insured), with respect to current or former
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employees after retirement or other termination of service
(other than coverage mandated by applicable law or benefits,
the full cost of which is borne by the current or former em-
ployee) other than individual arrangements the amounts of which
are not material.
(vi) RSI has previously provided to JPFI a copy of
each collective bargaining or other labor union contract ap-
plicable to persons employed by RSI or any of its subsidiaries
to which RSI or any of its subsidiaries is a party. No collec-
tive bargaining agreement is being negotiated or renegotiated
by RSI or any of its subsidiaries. As of the date of this
Agreement, there is no labor dispute, strike or work stoppage
against RSI or any of its subsidiaries pending or, to the
knowledge of RSI, threatened which may interfere with the re-
spective business activities of RSI or any of its subsidiaries,
except where such dispute, strike or work stoppage individually
or in the aggregate would not have a material adverse effect on
RSI. As of the date of this Agreement, to the knowledge of
RSI, none of RSI, any of its subsidiaries or any of their re-
spective representatives or employees has committed any mate-
rial unfair labor practice in connection with the operation of
the respective businesses of RSI or any of its subsidiaries,
and there is no material charge or complaint against RSI or any
of its subsidiaries by the National Labor Relations Board or
any comparable governmental agency pending or threatened in
writing.
(vii) No employee of RSI will be entitled to any mate-
rial payment, additional benefits or any acceleration of the
time of payment or vesting of any benefits under any RSI Ben-
efit Plan as a result of the transactions contemplated by this
Agreement (either alone or in conjunction with any other event
such as a termination of employment), except that substantially
all RSI Employee Stock Options will vest as of the date on
which RSI Stockholder Approval is obtained.
(k) Taxes. (i) Each of RSI and its subsidiaries
has filed all material tax returns and reports required to be
filed by it (taking into account all applicable extensions) and
all such returns and reports are complete and correct in all
material respects, or requests for extensions to file such re-
turns or reports have been timely filed, granted and have not
expired, except to the extent that such failures to file, to be
complete or correct or to have extensions granted that remain
in effect individually or in the aggregate would not have a
material adverse effect on RSI. RSI and each of its subsidiar-
ies has paid (or RSI has paid or caused to be paid on its be-
half) all taxes (as defined herein) shown as due on such re-
turns, and the most recent financial statements contained in
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the RSI Filed SEC Documents reflect an adequate reserve in ac-
cordance with GAAP for all taxes payable by RSI and its subsid-
iaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No deficiencies for any taxes have, to the
knowledge of RSI, been proposed, asserted or assessed against
RSI or any of its subsidiaries that are not adequately reserved
for, except for deficiencies that individually or in the ag-
gregate would not have a material adverse effect on RSI. The
federal income tax returns of RSI and each of its subsidiaries
consolidated in such returns for tax years through 1993 (1992
in the case of U.S. Foodservice and its subsidiaries) have
closed by virtue of the applicable statute of limitations.
(iii) Neither RSI nor any of its subsidiaries has
taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger
from qualifying as a reorganization within the meaning of Sec-
tion 368(a) of the Code.
(iv) As used in this Agreement, "taxes" shall include
all (x) federal, state, local or foreign income, property,
sales, excise and other taxes or similar governmental charges,
including any interest, penalties or additions with respect
thereto, (y) liability for the payment of any amounts of the
type described in (x) as a result of being a member of an af-
filiated, consolidated, combined or unitary group, and (z) li-
ability for the payment of any amounts described in (x) or (y)
as a result of being party to any tax sharing agreement or as a
result of any express or implied obligation to indemnify any
other person with respect to the payment of any amounts of the
type described in clause (x) or (y).
(l) Voting Requirements. The affirmative vote at
the RSI Stockholders Meeting (the "RSI Stockholder Approval")
of the holders of a majority of all outstanding shares of RSI
Common Stock to adopt this Agreement is the only vote of the
holders of any class or series of RSI's capital stock necessary
to approve and adopt this Agreement and the transactions con-
templated hereby, including the Merger.
(m) State Takeover Statutes; Certain Provisions of
RSI Certificate. The Board of Directors of RSI has adopted a
resolution or resolutions approving this Agreement and the Op-
tion Agreements and the transactions contemplated hereby and
thereby and, assuming the accuracy of JPFI's representation and
warranty contained in Section 3.2(q), (a) such approval consti-
tutes approval of the Merger and the other transactions contem-
plated hereby and by the Option Agreements by the RSI Board of
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Directors under (i) the provisions of Section 203 of the DGCL
such that Section 203 of the DGCL does not apply to this Agree-
ment, the Option Agreements and the transactions contemplated
hereby and thereby and (ii) Section A.2. of Article Fourteenth
of the RSI Certificate such that the 80% vote otherwise re-
quired by Article Fourteenth does not apply to this Agreement,
the Option Agreements or the transactions contemplated hereby
or thereby; and (b) for purposes of Article Twelfth of the RSI
Certificate ("Article Twelfth"), such approval constitutes ap-
proval of this Agreement and the Option Agreements and the
transactions contemplated hereby and thereby (and the RSI Board
of Directors has conclusively determined, pursuant to Article
Twelfth, that such agreements together constitute the "memoran-
dum of understanding" contemplated by Article Twelfth) for pur-
poses of Section B of Article Twelfth such that the 80% vote
otherwise required by Article Twelfth does not apply to this
Agreement, the Option Agreements or the transactions contem-
plated hereby or thereby. To the knowledge of RSI, except for
Section 203 of the DGCL (which has been rendered inapplicable),
no state takeover statute is applicable to the Merger or the
other transactions contemplated hereby.
(n) Accounting Matters. To its knowledge, neither
RSI nor any of its affiliates (as such term is used in Section
5.10) has taken or agreed to take any action (including, with-
out limitation, in connection with any RSI Stock Plan or any
agreement thereunder) that would prevent the business combi-
nation to be effected by the Merger from being accounted for as
a "pooling of interests" and RSI has no reason to believe that
the Merger will not qualify for "pooling of interests" account-
ing.
(o) Brokers. No broker, investment banker, finan-
cial advisor or other person other than Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") and Wasserstein
Perella & Co., Inc. ("Wasserstein") , the fees and expenses of
which will be paid by RSI, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commis-
sion in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of RSI.
RSI has furnished to JPFI true and complete copies of all
agreements under which any such fees or expenses are payable
and all indemnification and other agreements related to the
engagement of the persons to whom such fees are payable.
(p) Opinions of Financial Advisors. RSI has re-
ceived the opinions of Merrill Lynch and Wasserstein, each
dated the date of this Agreement, to the effect that, as of
such date, the Exchange Ratio for the conversion of RSI Common
Stock into JPFI Common Stock is fair from a financial point of
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<PAGE>
view to holders of shares of RSI Common Stock (other than JPFI
and its affiliates), signed copies of which opinions have been
delivered to JPFI, it being understood and agreed by JPFI that
such opinions are for the benefit of the Board of Directors of
RSI and may not be relied upon by JPFI, its affiliates or any
of their respective stockholders.
(q) Ownership of JPFI Common Stock. To the knowl-
edge of RSI, as of the date hereof (and before giving effect to
the JPFI Option Agreement, which will be entered into im-
mediately after the execution of this Agreement), neither RSI
nor, to its knowledge without independent investigation, any of
its affiliates, (i) beneficially owns (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, or (ii) is
party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each
case, shares of capital stock of JPFI.
(r) Intellectual Property. RSI and its subsidiaries
own or have a valid license to use all trademarks, service
marks, trade names, patents and copyrights (including any reg-
istrations or applications for registration of any of the fore-
going) (collectively, the "RSI Intellectual Property") neces-
sary to carry on its business substantially as currently con-
ducted except for such RSI Intellectual Property the failure of
which to own or validly license individually or in the ag-
gregate would not have a material adverse effect on RSI. Nei-
ther RSI nor any such subsidiary has received any notice of in-
fringement of or conflict with, and, to RSI's knowledge, there
are no infringements of or conflicts (i) with the rights of
others with respect to the use of, or (ii) by others with re-
spect to, any RSI Intellectual Property that individually or in
the aggregate, in either such case, would have a material ad-
verse effect on RSI.
(s) Certain Contracts. Except as set forth in the
RSI Filed SEC Documents, neither RSI nor any of its subsidiar-
ies is a party to or bound by (i) any "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K of
the SEC), (ii) any non-competition agreement or any other
agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or
any material portion of the business of RSI and its subsidiar-
ies (including, for purposes of this Section 3.1(s), JPFI and
its subsidiaries, assuming the Merger has taken place), taken
as a whole, is or would be conducted, (iii) any exclusive sup-
ply or purchase contracts or any exclusive requirements con-
tracts or (iv) any contract or other agreement which would pro-
hibit or materially delay the consummation of the Merger or any
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<PAGE>
of the transactions contemplated by this Agreement (all con-
tracts of the type described in clauses (i) and (ii) being re-
ferred to herein as "RSI Material Contracts"). RSI has deliv-
ered to JPFI, prior to the execution of this Agreement, com-
plete and correct copies of all RSI Material Contracts not
filed as exhibits to the RSI Filed SEC Documents. Each RSI
Material Contract is valid and binding on RSI (or, to the ex-
tent a RSI subsidiary is a party, such subsidiary) and is in
full force and effect, and RSI and each RSI subsidiary have in
all material respects performed all obligations required to be
performed by them to date under each RSI Material Contract,
except where such noncompliance, individually or in the ag-
gregate, would not have a material adverse effect on RSI. Nei-
ther RSI nor any RSI subsidiary knows of, or has received no-
tice of, any violation or default under (nor, to the knowledge
of RSI, does there exist any condition which with the passage
of time or the giving of notice or both would result in such a
violation or default under) any RSI Material Contract.
(t) RSI Rights Agreement. RSI has taken all action
(including, if required, redeeming all of the outstanding pre-
ferred stock purchase rights issued pursuant to the RSI Rights
Agreement or amending the RSI Rights Agreement) so that the
entering into of this Agreement, the RSI Option Agreement and
the Support Agreement, the Merger, the acquisition of shares
pursuant to the RSI Option Agreement and the other transactions
contemplated hereby and thereby do not and will not result in
the grant of any rights to any person under the RSI Rights
Agreement or enable or require the RSI Rights to be exercised,
distributed or triggered.
(u) Environmental Liability. There are no legal,
administrative, arbitral or other proceedings, claims, actions,
causes of action, private environmental investigations or reme-
diation activities or governmental investigations of any nature
pending or threatened against RSI or any of its subsidiaries
seeking to impose, or that could reasonably be expected to re-
sult in the imposition of, on RSI or any of its subsidiaries,
any liability or obligation arising under common law or under
any local, state or federal environmental statute, regulation
or ordinance, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), which liability or obligation could rea-
sonably be expected to have a material adverse effect on RSI.
To the knowledge of RSI, there is no reasonable basis for any
such proceeding, claim, action or governmental investigation
that would impose any liability or obligation that could rea-
sonably be expected to have a material adverse effect on RSI.
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<PAGE>
SECTION 3.2. Representations and Warranties of JPFI
and Merger Sub. Except as disclosed in the Disclosure Schedule
delivered by JPFI and Merger Sub to RSI prior to the execution
of this Agreement (the "JPFI Disclosure Schedule") and making
reference to the particular subsection of this Agreement to
which exception is being taken, JPFI and Merger Sub jointly and
severally represent and warrant to RSI as follows:
(a) Organization, Standing and Corporate Power. (i)
Each of JPFI and its subsidiaries is a corporation or other le-
gal entity duly organized, validly existing and in good stand-
ing (with respect to jurisdictions which recognize such con-
cept) under the laws of the jurisdiction in which it is orga-
nized and has the requisite corporate or other power, as the
case may be, and authority to carry on its business as now be-
ing conducted, except, as to subsidiaries, for those jurisdic-
tions where the failure to be so organized, existing or in good
standing individually or in the aggregate would not have a ma-
terial adverse effect on JPFI. Each of JPFI and its subsidiar-
ies is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such
concept) in each jurisdiction in which the nature of its busi-
ness or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified or
licensed or to be in good standing individually or in the ag-
gregate would not have a material adverse effect on JPFI.
(ii) JPFI has delivered to RSI prior to the execution
of this Agreement complete and correct copies of any amendments
to its certificate of incorporation (the "JPFI Certificate")
and by-laws not filed as of the date hereof with the JPFI Filed
SEC Documents (as defined in Section 3.2(g)).
(iii) In all material respects, the minute books of
JPFI and its subsidiaries contain accurate records of all meet-
ings and accurately reflect all other actions taken by the
stockholders, the Board of Directors and all committees of the
Board of Directors of JPFI (or, as the case may be, each of its
subsidiaries) since January 1, 1995.
(b) Subsidiaries. Exhibit 21 to JPFI's Annual Re-
port on Form 10-K for the fiscal year ended June 29, 1996 in-
cludes all the subsidiaries of JPFI which as of the date of
this Agreement are Significant Subsidiaries. All the outstand-
ing shares of capital stock of, or other equity interests in,
each such Significant Subsidiary have been validly issued and
are fully paid and nonassessable and are owned directly or in-
directly by JPFI, free and clear of all Liens and free of any
other restriction (including any restriction on the right to
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<PAGE>
vote, sell or otherwise dispose of such capital stock or other
ownership interests).
(c) Capital Structure. The authorized capital stock
of JPFI consists of 75,000,000 shares of JPFI Common Stock and
5,000,000 shares of preferred stock, par value $.01 per share
("JPFI Preferred Stock"). At the close of business on June 24,
1997: (i) 22,588,688.61 shares of JPFI Common Stock were is-
sued and outstanding (including shares of restricted JPFI Com-
mon Stock); (ii) no shares of JPFI Common Stock were held by
JPFI in its treasury; (iii) no shares of JPFI Preferred Stock
were issued and outstanding; (iv) 4,264,329 shares of JPFI Com-
mon Stock were reserved for issuance pursuant to all stock op-
tion, restricted stock or other stock-based compensation, ben-
efits or savings plans, agreements or arrangements in which
current or former employees or directors of JPFI or its subsid-
iaries participate as of the date hereof, including, without
limitation, the JPFI 1994 Stock Incentive Plan, the JPFI Stock
Option Plan for Outside Directors and the JPFI 1994 Employee
Stock Purchase Plan, complete and correct copies of which, in
each case as amended as of the date hereof, have been filed
with the JPFI Filed SEC Documents or delivered to RSI (such
plans, collectively, the "JPFI Stock Plans"); and (v) 350,000
shares of JPFI Preferred Stock were reserved for issuance upon
exercise of preferred share purchase rights issued pursuant to
the Rights Agreement, dated as of February 19, 1996, between
JPFI and The Bank of New York, as rights agent (the "JPFI
Rights Agreement"). Section 3.2(c) of the JPFI Disclosure
Schedule sets forth a complete and correct list, as of June 24,
1997, of the number of shares of JPFI Common Stock subject to
employee stock options or other rights to purchase or receive
JPFI Common Stock granted under the JPFI Stock Plans (col-
lectively, "JPFI Employee Stock Options"), the dates of grant
and exercise prices thereof. All outstanding shares of capital
stock of JPFI are, and all shares which may be issued pursuant
to this Agreement or otherwise will be, when issued, duly au-
thorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth in this Sec-
tion 3.2(c), and except for changes since June 24, 1997 re-
sulting from the issuance of shares of JPFI Common Stock pur-
suant to the JPFI Employee Stock Options or as expressly per-
mitted by this Agreement, (x) there are not issued, reserved
for issuance or outstanding (A) any shares of capital stock or
other voting securities of JPFI, (B) any securities of JPFI or
any JPFI subsidiary convertible into or exchangeable or exer-
cisable for shares of capital stock or voting securities of
JPFI, (C) any warrants, calls, options or other rights to ac-
quire from JPFI or any JPFI subsidiary, and any obligation of
JPFI or any JPFI subsidiary to issue, any capital stock, voting
securities or securities convertible into or exchangeable or
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<PAGE>
exercisable for capital stock or voting securities of JPFI, and
(y) there are no outstanding obligations of JPFI or any JPFI
subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. There are no outstand-
ing (A) securities of JPFI or any JPFI subsidiary convertible
into or exchangeable or exercisable for shares of capital stock
or other voting securities or ownership interests in any JPFI
subsidiary, (B) warrants, calls, options or other rights to
acquire from JPFI or any JPFI subsidiary, and any obligation of
JPFI or any JPFI subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital
stock, voting securities or ownership interests in, any JPFI
subsidiary or (C) obligations of JPFI or any JPFI subsidiary to
repurchase, redeem or otherwise acquire any such outstanding
securities of JPFI subsidiaries or to issue, deliver or sell,
or cause to be issued, delivered or sold, any such securities.
Neither JPFI nor any JPFI subsidiary is a party to any agree-
ment restricting the purchase or transfer of, relating to the
voting of, requiring registration of, or granting any preemp-
tive or, except as provided by the terms of the JPFI Employee
Stock Options, antidilutive rights with respect to, any securi-
ties of the type referred to in the two preceding sentences.
Other than the JPFI subsidiaries, JPFI does not directly or
indirectly beneficially own any securities or other beneficial
ownership interests in any other entity except for non-
controlling investments made in the ordinary course of business
in entities which are not individually or in the aggregate ma-
terial to JPFI and its subsidiaries as a whole.
(d) Authority; Noncontravention. Each of JPFI and
Merger Sub has all requisite corporate power and authority to
enter into this Agreement, and JPFI has all requisite corporate
power and authority to enter into the Option Agreements and the
Support Agreement and, subject to the JPFI Stockholder Approval
(as defined in Section 3.2(l)), to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement by each of JPFI and Merger Sub, and the execu-
tion and delivery of the Option Agreements and the Support
Agreement by JPFI and the consummation by JPFI and Merger Sub
of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part
of JPFI and Merger Sub, subject, in the case of the Merger and
the issuance of JPFI Common Stock in connection with the
Merger, to the JPFI Stockholder Approval. This Agreement has
been, and the Support Agreement and Option Agreements will be,
duly executed and delivered by JPFI (and, in the case of this
Agreement, by Merger Sub) and, assuming the due authorization,
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execution and delivery thereof by RSI, constitute (or will con-
stitute, as the case may be) the legal, valid and binding obli-
gation of JPFI (and, in the case of this Agreement, Merger
Sub), enforceable against JPFI (and, in the case of this Agree-
ment, Merger Sub) in accordance with their terms. The execu-
tion and delivery of this Agreement does not, and the execution
and delivery of the Option Agreements and the consummation of
the transactions contemplated hereby and thereby and compliance
with the provisions of this Agreement, the Support Agreement
and the Option Agreements will not, conflict with, or result in
any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termina-
tion, cancellation or acceleration of any obligation or loss of
a benefit under, or result in the creation of any Lien upon any
of the properties or assets of JPFI or any of its subsidiaries
or (assuming the consummation of the transactions contemplated
hereby without giving effect to Section 1.7) in any restriction
on the conduct of JPFI's business or operations under, (i) the
JPFI Certificate or the by-laws of JPFI or the comparable orga-
nizational documents of any of its subsidiaries, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, trust
document, lease or other agreement, instrument, permit, conces-
sion, franchise, license or similar authorization applicable to
JPFI or any of its subsidiaries or their respective properties
or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judg-
ment, order, decree, statute, law, ordinance, rule or regula-
tion applicable to JPFI or any of its subsidiaries or their
respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, de-
faults, rights, losses, restrictions or Liens that individually
or in the aggregate would not (x) have a material adverse ef-
fect on JPFI or (y) reasonably be expected to impair the abil-
ity of JPFI or Merger Sub to perform its obligations under this
Agreement (and, in the case of JPFI individually, under the
Option Agreements and the Support Agreement). No consent, ap-
proval, order or authorization of, action by, or in respect of,
or registration, declaration or filing with, any Governmental
Entity is required by or with respect to JPFI or any of its
subsidiaries in connection with the execution and delivery of
this Agreement by JPFI and Merger Sub, or the execution and
delivery by JPFI of the Option Agreements and the Support
Agreement, or the consummation by JPFI or Merger Sub of the
transactions contemplated hereby or thereby, except for (1) the
filing of a pre-merger notification and report form by JPFI
under the HSR Act; (2) the filing with the SEC of (A) the Joint
Proxy Statement relating to the JPFI Stockholders Meeting, (B)
the Form S-4 and (C) such reports under Section 13(a), 13(d),
15(d) or 16(a) of the Exchange Act as may be required in con-
nection with this Agreement and the Option Agreements and the
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<PAGE>
transactions contemplated hereby and thereby; (3) the filing of
the Certificate of Merger with the Secretary of State of Dela-
ware and appropriate documents with the relevant authorities of
other states in which JPFI is qualified to do business and such
filings with Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; (4) such
filings with and approvals of the NYSE to permit the shares of
JPFI Common Stock that are to be issued in the Merger and under
the RSI Stock Plans to be listed on the NYSE; and (5) such con-
sents, approvals, orders or authorizations the failure of which
to be made or obtained individually or in the aggregate would
not (x) have a material adverse effect on JPFI or (y) reason-
ably be expected to impair the ability of JPFI or Merger Sub to
perform its obligations under this Agreement.
(e) SEC Documents; Undisclosed Liabilities. JPFI
has filed all required registration statements, prospectuses,
reports, schedules, forms, statements and other documents (in-
cluding exhibits and all other information incorporated
therein) with the SEC since December 31, 1994 (the "JPFI SEC
Documents"). As of their respective dates, the JPFI SEC Docu-
ments complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder
applicable to such JPFI SEC Documents, and none of the JPFI SEC
Documents when filed contained any untrue statement of a mate-
rial fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The financial statements of JPFI in-
cluded in the JPFI SEC Documents comply as to form, as of their
respective dates of filing with the SEC, in all material re-
spects with applicable accounting requirements and the pub-
lished rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP (except, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (ex-
cept as may be indicated in the notes thereto) and fairly
present the consolidated financial position of JPFI and its
consolidated subsidiaries as of the dates thereof and the con-
solidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited state-
ments, to normal year-end audit adjustments). JPFI has not
treated as restructing charges any significant expenses that
JPFI would otherwise have expensed against operating income in
the ordinary course of business. Except (i) as reflected in
such financial statements or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement, the
Option Agreements or the transactions contemplated hereby or
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thereby, neither JPFI nor any of its subsidiaries has any li-
abilities or obligations of any nature which, individually or
in the aggregate, would have a material adverse effect on JPFI.
(f) Information Supplied. None of the information
supplied or to be supplied by JPFI specifically for inclusion
or incorporation by reference in (i) the Form S-4 will, at the
time the Form S-4 becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or neces-
sary to make the statements therein not misleading or (ii) the
Joint Proxy Statement will, at the date it is first mailed to
JPFI's stockholders or at the time of the JPFI Stockholders
Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
The Form S-4 and the Joint Proxy Statement will comply as to
form in all material respects with the requirements of the Se-
curities Act and the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made
by JPFI with respect to statements made or incorporated by ref-
erence therein based on information supplied by RSI specifi-
cally for inclusion or incorporation by reference in the Form
S-4 or the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except
for liabilities incurred in connection with this Agreement, the
Option Agreements or the transactions contemplated hereby or
thereby, and except as permitted by Section 4.1(b), since June
29, 1996, JPFI and its subsidiaries have conducted their busi-
ness only in the ordinary course consistent with past practice
or as disclosed in any JPFI SEC Document filed since such date
and prior to the date hereof, and there has not been (i) any
material adverse change in JPFI, (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether
in cash, stock or property) with respect to any of JPFI's capi-
tal stock, (iii) any split, combination or reclassification of
any of JPFI's capital stock or any issuance or the authoriza-
tion of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of JPFI's capital stock,
except for issuances of JPFI Common Stock upon exercise or con-
version of JPFI Employee Stock Options, in each case awarded
prior to the date hereof in accordance with their present terms
or issued pursuant to Section 4.1(b), (iv)(A) any granting by
JPFI or any of its subsidiaries to any current or former direc-
tor, executive officer or other key employee of JPFI or its
subsidiaries of any increase in compensation, bonus or other
benefits, except for normal increases as a result of promo-
tions, normal increases of base pay in the ordinary course of
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business or as was required under any employment agreements in
effect as of June 29, 1996, (B) any granting by JPFI or any of
its subsidiaries to any such current or former director, execu-
tive officer or key employee of any increase in severance or
termination pay, or (C) any entry by JPFI or any of its subsid-
iaries into, or any amendment of, any employment, deferred com-
pensation, consulting, severance, termination or indemnifica-
tion agreement with any such current or former director, execu-
tive officer or key employee, (v) except insofar as may have
been disclosed in JPFI SEC Documents filed and publicly avail-
able prior to the date of this Agreement (as amended to the
date hereof, the "JPFI Filed SEC Documents") or required by a
change in GAAP, any change in accounting methods, principles or
practices by JPFI materially affecting its assets, liabilities
or business, (vi) except insofar as may have been disclosed in
the JPFI Filed SEC Documents, any tax election that individu-
ally or in the aggregate would have a material adverse effect
on JPFI or any of its tax attributes or any settlement or com-
promise of any material income tax liability or (vii) any ac-
tion taken by JPFI or any of the JPFI subsidiaries during the
period from June 30, 1996 through the date of this Agreement
that, if taken during the period from the date of this Agree-
ment through the Effective Time, would constitute a breach of
Section 4.1(b).
(h) Compliance with Applicable Laws; Litigation.
(i) JPFI, its subsidiaries and employees hold all permits, li-
censes, variances, exemptions, orders, registrations and ap-
provals of all Governmental Entities which are required for the
operation of the businesses of JPFI and its subsidiaries (the
"JPFI Permits") except where the failure to have any such JPFI
Permits individually or in the aggregate would not have a mate-
rial adverse effect on JPFI. JPFI and its subsidiaries are in
compliance with the terms of the JPFI Permits and all ap-
plicable statutes, laws, ordinances, rules and regulations,
except where the failure so to comply individually or in the
aggregate would not have a material adverse effect on JPFI. As
of the date of this Agreement, except as disclosed in the JPFI
Filed SEC Documents, no action, demand, requirement or investi-
gation by any Governmental Entity and no suit, action or pro-
ceeding by any person, in each case with respect to JPFI or any
of its subsidiaries or any of their respective properties, is
pending or, to the knowledge of JPFI, threatened, other than,
in each case, those the outcome of which individually or in the
aggregate would not (A) have a material adverse effect on JPFI
or (B) reasonably be expected to impair the ability of JPFI or
Merger Sub to perform its obligations under this Agreement or
the Option Agreements or prevent or materially delay the con-
summation of any of the transactions contemplated hereby or
thereby.
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(ii) Neither JPFI nor any JPFI subsidiary is subject
to any outstanding order, injunction or decree which has had
or, insofar as can be reasonably foreseen, individually or in
the aggregate will have, a material adverse effect on JPFI.
(i) Absence of Changes in Benefit Plans. JPFI has
delivered to RSI true and complete copies of (i) all severance
and employment agreements of JPFI with directors, executive of-
ficers or key employees, (ii) all severance programs and poli-
cies of each of JPFI and each JPFI subsidiary, and (iii) all
plans or arrangements of JPFI and each JPFI subsidiary relating
to its employees which contain change in control provisions, in
each case which has not been filed as an exhibit to the JPFI
Filed SEC Documents. Since June 29, 1996, there has not been
any adoption or amendment in any material respect by JPFI or
any of its subsidiaries of any collective bargaining agreement,
employment agreement, consulting agreement, severance agreement
or any material bonus, pension, profit sharing, deferred com-
pensation, incentive compensation, stock ownership, stock pur-
chase, stock option, phantom stock, retirement, vacation, sev-
erance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding providing benefits to
any current or former employee, officer or director of JPFI or
any of its wholly owned subsidiaries (collectively, the "JPFI
Benefit Plans"), or any material change in any actuarial or
other assumption used to calculate funding obligations with
respect to any JPFI pension plans, or any material change in
the manner in which contributions to any JPFI pension plans are
made or the basis on which such contributions are determined.
Since June 29, 1996, neither JPFI nor any JPFI subsidiary has
amended any JPFI Employee Stock Options or any JPFI Stock Plans
to accelerate the vesting of, or release restrictions on,
awards thereunder, or to provide for such acceleration in the
event of a change in control.
(j) ERISA Compliance. (i) With respect to the JPFI
Benefit Plans, no event has occurred and, to the knowledge of
JPFI, there exists no condition or set of circumstances, in
connection with which JPFI or any of its subsidiaries could be
subject to any liability that individually or in the aggregate
would have a material adverse effect on JPFI under ERISA, the
Code or any other applicable law.
(ii) Each JPFI Benefit Plan has been administered in
accordance with its terms, except for any failures so to admin-
ister any JPFI Benefit Plan that individually or in the ag-
gregate would not have a material adverse effect on JPFI.
JPFI, its subsidiaries and all the JPFI Benefit Plans have been
operated, and are, in compliance with the applicable provisions
of ERISA, the Code and all other applicable laws and the terms
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of all applicable collective bargaining agreements, except for
any failures to be in such compliance that individually or in
the aggregate would not have a material adverse effect on JPFI.
Each JPFI Benefit Plan that is intended to be qualified under
Section 401(a) or 401(k) of the Code has received a favorable
determination letter from the IRS that it is so qualified and
each trust established in connection with any JPFI Benefit Plan
that is intended to be exempt from federal income taxation un-
der Section 501(a) of the Code has received a determination
letter from the IRS that such trust is so exempt. To the
knowledge of JPFI, no fact or event has occurred since the date
of any determination letter from the IRS which is reasonably
likely to affect adversely the qualified status of any such
JPFI Benefit Plan or the exempt status of any such trust.
(iii) Neither JPFI nor any of its subsidiaries has in-
curred any unsatisfied liability under Title IV of ERISA (other
than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course). No JPFI Benefit
Plan has incurred an "accumulated funding deficiency" (within
the meaning of Section 302 of ERISA or Section 412 of the Code)
whether or not waived. To the knowledge of JPFI, there are not
any facts or circumstances that would materially change the
funded status of any JPFI Benefit Plan that is a "defined ben-
efit" plan (as defined in Section 3(35) of ERISA) since the
date of the most recent actuarial report for such plan.
(iv) With respect to each of the JPFI Benefit Plans
(other than any multiemployer plan) that is subject to Title IV
of ERISA, the present value of accrued benefits under each such
plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such
plan's actuary with respect to such plan, did not, as of its
latest valuation date, exceed the then current value of the
aggregate assets of such plans allocable to such accrued bene-
fits in any material respect. With respect to any JPFI Benefit
Plan that is a multiemployer plan, (A) neither JPFI nor any of
its subsidiaries has any contingent liability under Section
4204 of ERISA, and no circumstances exist that present a mate-
rial risk that any such plan will go into reorganization, and
(B) the aggregate withdrawal liability of JPFI and its subsid-
iaries, computed as if a complete withdrawal by JPFI and any of
its subsidiaries had occurred under each such JPFI Benefit Plan
on the date hereof, would not be material.
(v) No JPFI Benefit Plan provides medical benefits
(whether or not insured), with respect to current or former
employees after retirement or other termination of service
(other than coverage mandated by applicable law or benefits,
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the full cost of which is borne by the current or former em-
ployee) other than individual arrangements the amounts of which
are not material.
(vi) JPFI has previously provided to RSI a copy of
each collective bargaining or other labor union contract ap-
plicable to persons employed by JPFI or any of its subsidiaries
to which JPFI or any of its subsidiaries is a party. No col-
lective bargaining agreement is being negotiated or renegoti-
ated by JPFI or any of its subsidiaries. As of the date of
this Agreement, there is no labor dispute, strike or work stop-
page against JPFI or any of its subsidiaries pending or, to the
knowledge of JPFI, threatened which may interfere with the re-
spective business activities of JPFI or any of its subsidiar-
ies, except where such dispute, strike or work stoppage indi-
vidually or in the aggregate would not have a material adverse
effect on JPFI. As of the date of this Agreement, to the
knowledge of JPFI, none of JPFI, any of its subsidiaries or any
of their respective representatives or employees has committed
any material unfair labor practice in connection with the op-
eration of the respective businesses of JPFI or any of its sub-
sidiaries, and there is no material charge or complaint against
JPFI or any of its subsidiaries by the National Labor Relations
Board or any comparable governmental agency pending or threat-
ened in writing.
(vii) No employee of JPFI will be entitled to any ma-
terial payment, additional benefits or any acceleration of the
time of payment or vesting of any benefits under any JPFI Ben-
efit Plan as a result of the transactions contemplated by this
Agreement (either alone or in conjunction with any other event
such as a termination of employment).
(k) Taxes. (i) Each of JPFI and its subsidiaries
has filed all material tax returns and reports required to be
filed by it (taking into account applicable extensions) and all
such returns and reports are complete and correct in all mate-
rial respects, or requests for extensions to file such returns
or reports have been timely filed, granted and have not ex-
pired, except to the extent that such failures to file, to be
complete or correct or to have extensions granted that remain
in effect individually or in the aggregate would not have a
material adverse effect on JPFI. JPFI and each of its subsid-
iaries has paid (or JPFI has paid or caused to be paid on its
behalf) all taxes shown as due on such returns, and the most
recent financial statements contained in the JPFI Filed SEC
Documents reflect an adequate reserve in accordance with GAAP
for all taxes payable by JPFI and its subsidiaries for all tax-
able periods and portions thereof accrued through the date of
such financial statements.
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(ii) No deficiencies for any taxes have, to the
knowledge of JPFI, been proposed, asserted or assessed against
JPFI or any of its subsidiaries that are not adequately re-
served for, except for deficiencies that individually or in the
aggregate would not have a material adverse effect on JPFI.
None of the federal income tax returns of JPFI and each of its
subsidiaries consolidated in such returns have closed by virtue
of the applicable statute of limitations.
(iii) Neither JPFI nor any of its subsidiaries has
taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger
from qualifying as a reorganization within the meaning of Sec-
tion 368(a) of the Code.
(l) Voting Requirements. The affirmative vote at
the JPFI Stockholders Meeting (the "JPFI Stockholder Approval")
of the holders of a majority of shares of JPFI Common Stock
present in person or by proxy at a duly convened and held meet-
ing of JPFI stockholders is the only vote of the holders of any
class or series of JPFI's capital stock necessary to approve
and adopt this Agreement and the transactions contemplated
hereby, including the Merger and the issuance of the JPFI Com-
mon Stock pursuant to the Merger.
(m) State Takeover Statutes; Certificate of Incorpo-
ration. The Board of Directors of JPFI has approved this
Agreement, the Option Agreements, the Support Agreement and the
transactions contemplated hereby and thereby, and, assuming the
accuracy of RSI's representation and warranty contained in Sec-
tion 3.1(q), such approval constitutes approval of the Merger
and the other transactions contemplated hereby and thereby by
the JPFI Board of Directors under the provisions of Section 203
of the DGCL such that Section 203 does not apply to this Agree-
ment, the Option Agreements, the Support Agreement or the
transactions contemplated hereby and thereby. To the knowledge
of JPFI, no state takeover statute other than Section 203 of
the DGCL (which has been rendered inapplicable) is applicable
to the Merger or the other transactions contemplated hereby.
(n) Accounting Matters. To its knowledge, neither
JPFI nor any of its affiliates (as such term is used in Section
5.10) has taken or agreed to take any action (including, with-
out limitation, in connection with any JPFI Stock Plan or any
agreement thereunder) that would prevent the business combina-
tion to be effected by the Merger from being accounted for as a
pooling of interests, and JPFI has no reason to believe that
the Merger will not qualify for "pooling of interest" account-
ing.
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(o) Brokers. No broker, investment banker, finan-
cial advisor or other person, other than Goldman Sachs & Co.
("Goldman"), Smith Barney Inc. ("Smith Barney") and PaineWebber
Inc., the fees and expenses of which will be paid by JPFI, is
entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transac-
tions contemplated by this Agreement based upon arrangements
made by or on behalf of JPFI. JPFI has furnished to RSI true
and complete copies of all agreements under which any such fees
or expenses are payable and all indemnification and other
agreements related to the engagement of the persons to whom
such fees are payable.
(p) Opinions of Financial Advisors. JPFI has re-
ceived the opinions of Goldman and Smith Barney, each dated the
date of this Agreement, each to the effect that, as of such
date, the Exchange Ratio for the conversion of RSI Common Stock
into JPFI Common Stock is fair from a financial point of view
to JPFI, signed copies of which opinions have been delivered to
RSI, it being understood and agreed by RSI that such opinions
are for the benefit of the Board of Directors of JPFI and may
not be relied upon by RSI, its affiliates or any of their re-
spective stockholders.
(q) Ownership of RSI Common Stock. To the knowledge
of JPFI, as of the date hereof or at any time within twelve
months prior to the date of this Agreement (and before giving
effect to the RSI Option Agreement, which will be entered into
immediately after the execution of this Agreement) neither JPFI
nor, to its knowledge without independent investigation, any of
its affiliates, (i) beneficially owns (as defined in either
Rule 13d-3 under the Exchange Act or in Article Fourteenth of
the RSI Certificate of Incorporation) or owned, directly or in-
directly, or (ii) is or was party to any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of, in each case, shares of capital stock of RSI.
(r) Intellectual Property. JPFI and its subsidiar-
ies own or have a valid license to use all trademarks, service
marks, trade names, patents and copyrights (including any reg-
istrations or applications for registration of any of the fore-
going) (collectively, the "JPFI Intellectual Property") neces-
sary to carry on its business substantially as currently con-
ducted, except for such JPFI Intellectual Property the failure
of which to own or validly license individually or in the ag-
gregate would not have a material adverse effect on JPFI. Nei-
ther JPFI nor any such subsidiary has received any notice of
infringement of or conflict with, and, to JPFI's knowledge,
there are no infringements of or conflicts (i) with the rights
of others with respect to the use of, or (ii) by others with
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respect to, any JPFI Intellectual Property that individually or
in the aggregate, in either such case, would have a material
adverse effect on JPFI.
(s) Certain Contracts. Except as set forth in the
JPFI Filed SEC Documents, neither JPFI nor any of its subsid-
iaries is a party to or bound by (i) any "material contract"
(as such term is defined in item 601(b)(10) of Regulation S-K
of the SEC), (ii) any non-competition agreement or any other
agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or
any material portion of the business of JPFI and its subsidiar-
ies (including RSI and its subsidiaries, assuming the Merger
had taken place), taken as a whole, is or would be conducted,
(iii) any exclusive supply or purchase contracts or any exclu-
sive requirements contracts or (iv) any contract or other
agreement which would prohibit or materially delay the consum-
mation of the Merger or any of the transactions contemplated by
this Agreement (all contracts of the type described in clauses
(i) and (ii) being referred to herein as "JPFI Material Con-
tracts"). JPFI has delivered to RSI, prior to the execution of
this Agreement, complete and correct copies of all JPFI Mate-
rial Contracts not filed as exhibits to the JPFI Filed SEC
Documents. Each JPFI Material Contract is valid and binding on
JPFI (or, to the extent a JPFI subsidiary is a party, such sub-
sidiary) and is in full force and effect, and JPFI and each
JPFI subsidiary have in all material respects performed all
obligations required to be performed by them to date under each
JPFI Material Contract, except where such noncompliance, indi-
vidually or in the aggregate, would not have a material adverse
effect on JPFI. Neither JPFI nor any JPFI subsidiary knows of,
or has received notice of, any violation or default under (nor,
to the knowledge of JPFI, does there exist any condition which
with the passage of time or the giving of notice or both would
result in such a violation or default under) any JPFI Material
Contract.
(t) JPFI Rights Agreement. JPFI has taken all ac-
tion (including, if required, redeeming all of the outstanding
preferred stock purchase rights issued pursuant to the JPFI
Rights Agreement or amending the JPFI Rights Agreement) so that
the entering into of this Agreement, the JPFI Option Agreement
and the Merger, the acquisition of shares pursuant to the JPFI
Option Agreement and the other transactions contemplated hereby
and thereby do not and will not result in the grant of any
rights to any person under the JPFI Rights Agreement or enable
or require the JPFI Rights to be exercised, distributed or
triggered.
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(u) Environmental Liability. There are no legal,
administrative, arbitral or other proceedings, claims, actions,
causes of action, private environmental investigations or reme-
diation activities or governmental investigations of any nature
pending or threatened against JPFI or any of its subsidiaries
seeking to impose, or that could reasonably be expected to re-
sult in the imposition, on JPFI or any of its subsidiaries, of
any liability or obligation arising under common law or under
any local, state or federal environmental statute, regulation
or ordinance, including, without limitation, CERCLA, which li-
ability or obligation could reasonably be expected to have a
material adverse effect on JPFI. To the knowledge of JPFI,
there is no reasonable basis for any such proceeding, claim,
action or governmental investigation that would impose any li-
ability or obligation that could reasonably be expected to have
a material adverse effect on JPFI.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business. (a) Conduct of
Business by RSI. Except as set forth in Section 4.1(a) of the
RSI Disclosure Schedule, as otherwise expressly contemplated by
this Agreement or as consented to by JPFI in writing, such con-
sent not to be unreasonably withheld or delayed, during the
period from the date of this Agreement to the Effective Time,
RSI shall, and shall cause its subsidiaries to, carry on their
respective businesses in the ordinary course consistent with
past practice and in compliance in all material respects with
all applicable laws and regulations and, to the extent consis-
tent therewith, use all reasonable efforts to preserve intact
their current business organizations, use reasonable efforts to
keep available the services of their current officers and other
key employees and preserve their relationships with those per-
sons having business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at the Ef-
fective Time. Without limiting the generality of the foregoing
(but subject to the above exceptions), during the period from
the date of this Agreement to the Effective Time, RSI shall
not, and shall not permit any of its subsidiaries to:
(i) other than dividends and distributions by a
direct or indirect wholly owned subsidiary of RSI to its
parent, or by a subsidiary that is partially owned by RSI
or any of its subsidiaries, provided that RSI or any such
subsidiary receives or is to receive its proportionate
share thereof, or regular semi-annual dividends not to
exceed $.03 per share, (x) declare, set aside or pay any
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dividends on, make any other distributions in respect of,
or enter into any agreement with respect to the voting of,
any of its capital stock, (y) split, combine or reclassify
any of its capital stock or issue or authorize the issu-
ance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, except
for issuances of RSI Common Stock upon the exercise of RSI
Employee Stock Options or the Assumed Warrants, in each
case, outstanding as of the date hereof in accordance with
their present terms (including cashless exercise) or is-
sued pursuant to Section 4.1(a)(ii) or (z) purchase, re-
deem or otherwise acquire any shares of capital stock of
RSI or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any
such shares or other securities (except, in the case of
clause (z), for the deemed acceptance of shares upon cash-
less exercise of RSI Employee Stock Options outstanding on
the date hereof, or in connection with withholding obliga-
tions relating thereto);
(ii) issue, deliver, sell, pledge or otherwise
encumber or subject to any Lien any shares of its capital
stock, any other voting securities or any securities con-
vertible into, or any rights, warrants or options to ac-
quire, any such shares, voting securities or convertible
securities (other than the issuance of RSI Common Stock
upon the exercise or conversion of RSI Employee Stock Op-
tions or the Assumed Warrants, in each case, outstanding
as of the date hereof in accordance with their present
terms or the issuance of RSI Employee Stock Options (and
shares of RSI Common Stock upon the exercise thereof)
granted after the date hereof in the ordinary course of
business consistent with past practice for employees (so
long as such additional amount of RSI Common Stock subject
to RSI Employee Stock Options issued to such employees
does not exceed 250,000 shares of RSI Common Stock in the
aggregate);
(iii) amend its certificate of incorporation, by-
laws or other comparable organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion
of the assets of, or by any other manner, any business or
any person, or, except for transactions in the ordinary
course of business consistent with past practice pursuant
to contracts or agreements in force at the date of this
Agreement or pursuant to RSI's current capital and op-
erating budgets (in each case, as previously provided to
JPFI), make any material investment either by purchase of
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stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any
other individual, corporation or other entity other than a
subsidiary of RSI;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of
any of its properties or assets (including securitiza-
tions), other than in the ordinary course of business con-
sistent with past practice;
(vi) take any action that would cause the repre-
sentations and warranties set forth in Section 3.1(g) and
qualified as to materiality to be no longer true and cor-
rect or, if not so qualified, to be no longer true and
correct in all material respects;
(vii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or en-
dorse, or otherwise as an accommodation become responsible
for the obligations of any person for borrowed money,
other than pursuant to a revolving credit facility or re-
ceivables facility in effect as of the date hereof, in the
ordinary course of business consistent with past practice;
(viii) settle any material claim, action or pro-
ceeding involving money damages, except in the ordinary
course of business consistent with past practice;
(ix) enter into or terminate any material con-
tract or agreement, or make any change in any of its mate-
rial leases or contracts, other than amendments or renew-
als of contracts and leases without material adverse
changes of terms; or
(x) authorize, or commit or agree to take, any
of the foregoing actions;
provided that the limitations set forth in this Section 4.1(a)
(other than clause (iii)) shall not apply to any transaction
between RSI and any wholly owned subsidiary or between any
wholly owned subsidiaries of RSI.
(b) Conduct of Business by JPFI. Except as set
forth in Section 4.1(b) of the JPFI Disclosure Schedule, as
otherwise expressly contemplated by this Agreement or as con-
sented to by RSI in writing, such consent not to be unreason-
ably withheld or delayed, during the period from the date of
this Agreement to the Effective Time, JPFI shall, and shall
cause its subsidiaries to, carry on their respective businesses
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in the ordinary course consistent with past practice and in
compliance in all material respects with all applicable laws
and regulations and, to the extent consistent therewith, use
all reasonable efforts to preserve intact their current busi-
ness organizations, use reasonable efforts to keep available
the services of their current officers and other key employees
and preserve their relationships with those persons having bus-
iness dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing (but subject
to the above exceptions), during the period from the date of
this Agreement to the Effective Time, JPFI shall not, and shall
not permit any of its subsidiaries to:
(i) other than dividends and distributions by a
direct or indirect wholly owned subsidiary of JPFI to its
parent, or by a subsidiary that is partially owned by JPFI
or any of its subsidiaries, provided that JPFI or any such
subsidiary receives or is to receive its proportionate
share thereof, (x) declare, set aside or pay any dividends
on, make any other distributions in respect of, or enter
into any agreement with respect to the voting of, any of
its capital stock, (y) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in sub-
stitution for shares of its capital stock, except for is-
suances of JPFI Common Stock upon the exercise of JPFI
Employee Stock Options outstanding as of the date hereof
in accordance with their present terms (including cashless
exercise) or issued pursuant to Section 4.1(b)(ii) or (z)
purchase, redeem or otherwise acquire any shares of capi-
tal stock of JPFI or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to
acquire any such shares or other securities (except, in
the case of clause (z), for the deemed acceptance of
shares upon cashless exercise of JPFI Employee Stock Op-
tions, or in connection with withholding obligations re-
lating thereto);
(ii) issue, deliver, sell, pledge or otherwise
encumber or subject to any Lien any shares of its capital
stock, any other voting securities or any securities con-
vertible into, or any rights, warrants or options to ac-
quire, any such shares, voting securities or convertible
securities (other than the issuance of JPFI Common Stock
upon the exercise of JPFI Employee Stock Options outstand-
ing as of the date hereof in accordance with their present
terms or the issuance of JPFI Employee Stock Options (and
shares of JPFI Common Stock upon the exercise thereof)
granted after the date hereof in the ordinary course of
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business consistent with past practice for employees (so
long as such additional amount of JPFI Common Stock sub-
ject to JPFI Employee Stock Options issued to employees
does not exceed 300,000 shares of JPFI Common Stock in the
aggregate);
(iii) except as contemplated hereby, amend its
certificate of incorporation, by-laws or other comparable
organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion
of the assets of, or by any other manner, any business or
any person, or, except for transactions in the ordinary
course of business consistent with past practice pursuant
to contracts or agreements in force at the date of this
Agreement or pursuant to JPFI's current capital and oper-
ating budgets (in each case, as previously provided to
RSI), make any material investment either by purchase of
stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any
other individual, corporation or other entity other than a
subsidiary of JPFI;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of
any of its properties or assets (including securitiza-
tions), other than in the ordinary course of business con-
sistent with past practice;
(vi) take any action that would cause the repre-
sentations and warranties set forth in Section 3.2(g) and
qualified as to materiality to be no longer be true and
correct or or, if not so qualified, to be no longer true
and correct in all material respects;
(vii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or en-
dorse, or otherwise as an accommodation become responsible
for the obligations of any person for borrowed money,
other than pursuant to a revolving credit facility or re-
ceivables facility in effect as of the date hereof, in the
ordinary course of business consistent with past practice;
(viii) settle any claim, action or proceeding in-
volving money damages, except in the ordinary course of
business consistent with past practice;
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(ix) enter into or terminate any material con-
tract or agreement, or make any change in any of its mate-
rial leases or contracts, other than amendments or renew-
als of contracts and leases without material adverse
changes of terms; or
(x) authorize, or commit or agree to take, any
of the foregoing actions;
provided that the limitations set forth in this Section 4.1(b)
(other than clause (iii)) shall not apply to any transaction
between JPFI and any wholly owned subsidiary or between any
wholly owned subsidiaries of JPFI.
(c) Other Actions. Except as required by law, RSI
and JPFI shall not, and shall not permit any of their respec-
tive subsidiaries to, voluntarily take any action that would,
or that could reasonably be expected to, result in (i) any of
the representations and warranties of such party set forth in
this Agreement that are qualified as to materiality becoming
untrue at the Effective Time, (ii) any of such representations
and warranties that are not so qualified becoming untrue in any
material respect at the Effective Time, or (iii) any of the
conditions to the Merger set forth in Article VI not being sat-
isfied.
(d) Advice of Changes. RSI and JPFI shall promptly
advise the other party orally and in writing to the extent it
has knowledge of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such repre-
sentation or warranty that is not so qualified becoming untrue
or inaccurate in any material respect, (ii) the failure by it
to comply in any material respect with or satisfy in any mate-
rial respect any covenant, condition or agreement to be com-
plied with or satisfied by it under this Agreement and (iii)
any change or event having, or which, insofar as can reasonably
be foreseen, could reasonably be expected to have a material
adverse effect on such party or on the truth of such party's
representations and warranties or the ability of the conditions
set forth in Article VI to be satisfied; provided, however,
that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of
the parties under this Agreement.
SECTION 4.2. No Solicitation or Negotiations. (a)
Neither JPFI nor RSI shall, directly or indirectly, solicit or
encourage (including by way of furnishing information), or au-
thorize any individual, corporation or other entity to solicit
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or encourage (including by way of furnishing information), from
any third party any inquiries or proposals relating to, or con-
duct negotiations or discussions with any third party with re-
spect to, or take any other action to facilitate any inquiries
or the making of any proposal that constitutes, or that may
reasonably be expected to lead to, any proposal or offer relat-
ing to the disposition of its business or assets, or the acqui-
sition of its voting securities, or the merger or consolidation
of it or any of its subsidiaries with or into any corporation
or other entity other than as provided in this Agreement, the
Option Agreements or the Support Agreement (and each party
shall promptly notify the other of all of the relevant details
relating to all inquiries and proposals which it may receive
relating to any such matters).
(b) Nothing contained in Section 4.2(a) or Section
5.1 shall prohibit RSI or JPFI from taking and disclosing to
its respective stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Preparation of the Form S-4 and the
Joint Proxy Statement; Stockholders Meetings. (a) As soon as
practicable following the date of this Agreement, RSI and JPFI
shall prepare and file with the SEC the Joint Proxy Statement,
and JPFI shall prepare and file with the SEC the Form S-4, in
which the Joint Proxy Statement will be included as a prospec-
tus. Each of RSI and JPFI shall use best efforts to have the
Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. RSI will use all
best efforts to cause the Joint Proxy Statement to be mailed to
RSI's stockholders, and JPFI will use all best efforts to cause
the Joint Proxy Statement to be mailed to JPFI's stockholders,
in each case as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. JPFI shall also
take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required to be taken
under any applicable state securities laws in connection with
the issuance of JPFI Common Stock in the Merger and RSI shall
furnish all information concerning RSI and the holders of RSI
Common Stock as may be reasonably requested in connection with
any such action. No filing of, or amendment or supplement to,
the Form S-4 or the Joint Proxy Statement will be made by JPFI
without RSI's prior consent (which shall not be unreasonably
withheld) and without providing RSI the opportunity to review
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and comment thereon. JPFI will advise RSI, promptly after it
receives notice thereof, of the time when the Form S-4 has be-
come effective or any supplement or amendment has been filed,
the issuance of any stop order, the suspension of the qualifi-
cation of the JPFI Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request
by the SEC for amendment of the Joint Proxy Statement or the
Form S-4 or comments thereon and responses thereto or requests
by the SEC for additional information. If at any time prior to
the Effective Time any information relating to RSI or JPFI, or
any of their respective affiliates, officers or directors,
should be discovered by RSI or JPFI which should be set forth
in an amendment or supplement to any of the Form S-4 or the
Joint Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not mis-
leading, the party which discovers such information shall
promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of RSI and JPFI.
(b) RSI shall, as promptly as practicable after the
Form S-4 is declared effective under the Securities Act, duly
call, give notice of, convene and hold a meeting of its stock-
holders (the "RSI Stockholders Meeting") in accordance with the
DGCL for the purpose of obtaining the RSI Stockholder Approval
and shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby.
(c) JPFI shall, as promptly as practicable after the
Form S-4 is declared effective under the Securities Act, duly
call, give notice of, convene and hold a meeting of its stock-
holders (the "JPFI Stockholders Meeting") in accordance with
the DGCL for the purpose of obtaining the JPFI Stockholder Ap-
proval and shall, through its Board of Directors, recommend to
its stockholders the approval and adoption of this Agreement,
the Merger and the other transactions contemplated hereby.
(d) JPFI and RSI will use best efforts to hold the
RSI Stockholders Meeting and the JPFI Stockholders Meeting on
the same date and as soon as reasonably practicable after the
date hereof.
SECTION 5.2. Letters of RSI's Accountants. (a) RSI
shall use best efforts to cause to be delivered to JPFI two
letters from RSI's independent accountants, one dated a date
within two business days before the date on which the Form S-4
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shall become effective and one dated a date within two business
days before the Closing Date, each addressed to JPFI, in form
and substance reasonably satisfactory to JPFI and customary in
scope and substance for comfort letters delivered by indepen-
dent public accountants in connection with registration state-
ments similar to the Form S-4.
(b) RSI shall use best efforts to cause to be deliv-
ered to JPFI and JPFI's independent accountants a letter from
RSI's independent accountants addressed to JPFI and RSI, dated
as of the date the Form S-4 is declared effective and as of the
Closing Date, stating that accounting for the Merger as a pool-
ing of interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations is appropriate
if the Merger is closed and consummated as contemplated by this
Agreement.
SECTION 5.3. Letters of JPFI's Accountants. (a)
JPFI shall use best efforts to cause to be delivered to RSI two
letters from JPFI's independent accountants, one dated a date
within two business days before the date on which the Form S-4
shall become effective and one dated a date within two business
days before the Closing Date, each addressed to RSI, in form
and substance reasonably satisfactory to RSI and customary in
scope and substance for comfort letters delivered by indepen-
dent public accountants in connection with registration state-
ments similar to the Form S-4.
(b) JPFI shall use best efforts to cause to be de-
livered to RSI and RSI's independent accountants a letter from
JPFI's independent accountants, addressed to RSI and JPFI,
dated as of the date the Form S-4 is declared effective and as
of the Closing Date, stating that accounting for the Merger as
a pooling of interests under Opinion 16 of the Accounting Prin-
ciples Board and applicable SEC rules and regulations is ap-
propriate if the Merger is closed and consummated as contem-
plated by this Agreement.
SECTION 5.4. Access to Information; Confidentiality.
Subject to the Confidentiality Agreements dated April 22, 1997,
each as amended as of June 13, 1997, between JPFI and RSI (the
"Confidentiality Agreements"), and subject to applicable law,
each of RSI and JPFI shall, and shall cause each of its respec-
tive subsidiaries to, afford to the other party and to the of-
ficers, employees, accountants, counsel, financial advisors and
other representatives of such other party, reasonable access
during normal business hours during the period prior to the
Effective Time to all their respective properties, books, con-
tracts, commitments, personnel and records (provided that such
access shall not interfere with the business or operations of
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such party) and, during such period, each of RSI and JPFI
shall, and shall cause each of its respective subsidiaries to,
furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or
state securities laws and (b) all other information concerning
its business, properties and personnel as such other party may
reasonably request. No review pursuant to this Section 5.4
shall affect any representation or warranty given by the other
party hereto. Each of RSI and JPFI will hold, and will cause
its respective officers, employees, accountants, counsel, fi-
nancial advisors and other representatives and affiliates to
hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreements.
SECTION 5.5. Best Efforts. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of
the parties agrees to use best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to as-
sist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effec-
tive, in the most expeditious manner practicable, the Merger
and the other transactions contemplated by this Agreement, in-
cluding (i) the obtaining of all necessary actions or nonac-
tions, waivers, consents and approvals from Governmental Enti-
ties and the making of all necessary registrations and filings
and the taking of all steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding
by, any Governmental Entity, (ii) the obtaining of all neces-
sary consents, approvals or waivers, and any necessary or ap-
propriate financing arrangements, from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated by this Agree-
ment, including seeking to have any stay or temporary restrain-
ing order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this
Agreement.
(b) In connection with and without limiting the
foregoing, RSI and JPFI shall (i) take all action necessary to
ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to this Agreement, the Op-
tion Agreements, the Support Agreement or any of the transac-
tions contemplated hereby and thereby and (ii) if any state
takeover statute or similar statute or regulation becomes ap-
plicable to such agreements or transactions, take all action
necessary to ensure that such transactions may be consummated
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as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute
or regulation on the Merger and the other transactions contem-
plated by this Agreement.
SECTION 5.6. Employment Agreements. (a) From and
after the Effective Time, JPFI will, and will cause Merger Sub
to, honor in accordance with their respective terms, and assume
and agree to perform, in the same manner and to the same extent
that RSI would be required to do if the Merger had not taken
place, the RSI Benefit Plans, the RSI Stock Plans (subject to
Section 2.1(e)) and all employment, severance and change in
control agreements in effect as of the date hereof. For the
purpose of any such Plan or agreement that contains a provision
relating to a change in control of RSI and that is disclosed as
such on Section 5.6(a) of the RSI Disclosure Schedule, JPFI
acknowledges that the consummation of the Merger constitutes
such a change in control. RSI and JPFI will cooperate on and
after the date of this Agreement to develop appropriate em-
ployee benefit plans, programs and arrangements, including, but
not limited to, executive and incentive compensation, stock
option and supplemental executive retirement plans, for employ-
ees and directors of the Surviving Corporation and its subsid-
iaries from and after the Effective Time. Nothing in this Sec-
tion 5.6 shall be interpreted as preventing the Surviving Cor-
poration from amending, modifying or terminating any RSI Stock
Plans or RSI Benefit Plans, or other contracts, arrangements,
commitments or understandings, in accordance with their terms
and applicable law, or be deemed to constitute an employment
contract between JPFI or the Surviving Corporation and any in-
dividual, or a waiver of JPFI's or the Surviving Corporation's
right to discharge any employee at any time, with or without
cause.
(b) Each of RSI and JPFI will take the actions indi-
cated on Section 5.6(b) of the RSI Disclosure Schedule to be
taken by it at or prior to the time specified therein, includ-
ing the execution, at the Effective Time, of an employment
agreement with Mark Van Stekelenburg in the form attached to
this Agreement as Exhibit G.
SECTION 5.7. Indemnification, Exculpation and Insur-
ance. (a) JPFI agrees to maintain in effect in accordance
with their terms all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to
the Effective Time existing as of the date of this Agreement in
favor of the current or former directors or officers of RSI and
its subsidiaries (and any of their respective predecessors,
including, without limitation, US Foodservice Inc., a Delaware
corporation ("US Foodservice"), that was merged within and into
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USF Acquisition Corporation on May 17, 1996) as provided in
their respective certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification
agreements of RSI or in Section 7.13 of the Agreement and Plan
of Merger dated February 2, 1996, among RSI, USF Acquisition
Corporation and US Foodservice. In addition, from and after
the Effective Time, directors and officers of RSI who become
directors or officers of JPFI will be entitled to the same in-
demnity rights and protections, and directors' and officers'
liability insurance, as are afforded from time to time to other
directors and officers of JPFI.
(b) In the event that JPFI or any of its successors
or assigns (i) consolidates with or merges into any other per-
son and is not the continuing or surviving corporation or en-
tity of such consolidation or merger or (ii) transfers or con-
veys all or substantially all of its properties and assets to
any person, then, and in each such case, proper provision will
be made so that the successors and assigns of JPFI assume the
obligations set forth in this Section 5.7.
(c) JPFI shall use its best efforts to provide to
RSI's current directors and officers, for six years after the
Effective Time, liability insurance covering acts or omissions
occurring prior to the Effective Time with respect to those
persons who are currently covered by RSI's directors' and offi-
cers' liability insurance policy on terms with respect to such
coverage and amount no less favorable than those of such policy
in effect on the date hereof, provided that in no event shall
JPFI be required to expend more than 200% of the current amount
expended by RSI to maintain such coverage.
(d) The provisions of this Section 5.7 (i) are in-
tended to be for the benefit of, and will be enforceable by,
each indemnified party, his or her heirs and his or her repre-
sentatives and (ii) are in addition to, and not in substitution
for, any other rights to indemnification or contribution that
any such person may have by contract or otherwise.
SECTION 5.8. Fees and Expenses. All fees and ex-
penses incurred in connection with the Merger, this Agreement,
and the transactions contemplated by this Agreement shall be
paid by the party incurring such fees or expenses, whether or
not the Merger is consummated, except (x) to the extent set
forth in Section 7.5 hereof and (y) that each of JPFI and RSI
shall bear and pay one-half of the costs and expenses incurred
in connection with (1) the filing, printing and mailing of the
Form S-4 and the Joint Proxy Statement (including SEC filing
fees) and (2) the filings of the pre-merger notification and
report forms under the HSR Act (including filing fees).
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SECTION 5.9. Public Announcements. JPFI and RSI
will consult with each other before issuing, and provide each
other the opportunity to review, comment upon and concur with,
and use reasonable efforts to agree on, any press release or
other public statements with respect to the transactions con-
templated by this Agreement, the Option Agreements and the Sup-
port Agreement, including the Merger, and shall not issue any
such press release or make any such public statement prior to
such consultation, except as either party may determine is re-
quired by applicable law, court process or by obligations pur-
suant to any listing agreement with any national securities
exchange or stock market. The parties agree that the initial
press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
SECTION 5.10. Affiliates. (a) As soon as practi-
cable after the date hereof, RSI shall deliver to JPFI a letter
identifying all persons who may be deemed to be, at the time
this Agreement is submitted for adoption by the stockholders of
RSI, "affiliates" of RSI for purposes of Rule 145 under the
Securities Act or for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and
regulations, and such list shall be updated as necessary to
reflect changes from the date hereof. RSI shall use best ef-
forts to cause each person identified on such list to deliver
to JPFI not less than 30 days prior to the Effective Time, a
written agreement substantially in the form attached as Exhibit
E hereto. JPFI shall use best efforts to cause all persons who
are "affiliates" of JPFI for purposes of qualifying the Merger
for pooling of interests accounting treatment under Opinion 16
of the Accounting Principles Board and applicable SEC rules and
regulations to deliver to RSI not less than 30 days prior to
the Effective Time, a written agreement substantially in the
form of the fourth paragraph of Exhibit D hereto.
(b) JPFI shall use reasonable best efforts to pub-
lish no later than 45 days after the end of the first month
after the Effective Time in which there are at least 30 days of
post Merger combined operations (which month may be the month
in which the Effective Time occurs), combined sales and net
income figures as contemplated by and in accordance with the
terms of SEC Accounting Series Release No. 135.
SECTION 5.11. NYSE Listing. JPFI shall use best ef-
forts to cause the JPFI Common Stock issuable under Article II
to be approved for listing on the NYSE, subject to official
notice of issuance, as promptly as practicable after the date
hereof, and in any event prior to the Closing Date.
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SECTION 5.12. Tax Treatment. Each of JPFI and RSI
shall use best efforts to cause the Merger to qualify as a re-
organization under the provisions of Section 368 of the Code
and to obtain the opinions of counsel referred to in Section
6.1(g). The parties will characterize the Merger as such a
reorganization for purposes of all tax returns and other fil-
ings.
SECTION 5.13. Pooling of Interests. Each of RSI and
JPFI shall use best efforts to cause the transactions contem-
plated by this Agreement, including the Merger, to be accounted
for as a pooling of interests under Opinion 16 of the Account-
ing Principles Board and applicable SEC rules and regulations,
and such accounting treatment to be accepted by the SEC, and
each of RSI and JPFI agrees that it shall take no action that
would cause such accounting treatment not to be obtained.
SECTION 5.14. Standstill Agreements; Confidentiality
Agreements. During the period from the date of this Agreement
through the Effective Time, except as JPFI and RSI otherwise
mutually agree pursuant to a written instrument, neither RSI
nor JPFI shall terminate, amend, modify or waive any provision
of any confidentiality or standstill agreement to which it or
any of its respective subsidiaries is a party. Except as JPFI
and RSI otherwise mutually agree pursuant to a written instru-
ment, during such period, RSI or JPFI, as the case may be,
shall enforce, to the fullest extent permitted under applicable
law, the provisions of any such agreement, including by obtain-
ing injunctions to prevent any breaches of such agreements and
to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having
jurisdiction.
SECTION 5.15. Post-Merger Operations. Following the
Effective Time, JPFI shall have its headquarters and principal
corporate offices in Columbia, Maryland.
SECTION 5.16. Conveyance Taxes. JPFI and RSI shall
cooperate in the preparation, execution and filing of all re-
turns, questionnaires, applications or other documents regard-
ing any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, re-
cording, registration and other fees or any similar taxes which
become payable in connection with the transactions contemplated
by this Agreement that are required or permitted to be filed on
or before the Effective Time.
SECTION 5.17. 8 7/8% Indenture. Merger Sub, as the
Surviving Corporation, agrees that it will comply with the pro-
visions of Section 11.1 of the Indenture, dated as of November
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1, 1993, between RSI, as issuer, and Norwest Bank Minnesota,
N.A., as trustee, as supplemented on May 1, 1996 (relating to a
mandatory tender to the holders of the 8-7/8% Senior Subordi-
nated Notes due 2003 thereunder upon a "change of control" (as
defined in such Indenture)).
SECTION 5.18. Certain Tax Matters. Provided that
the structure of the transaction as contemplated in Section 1.1
has not been revised pursuant to Section 1.7, each of RSI and
JPFI agrees that it will not treat the Merger as a change in
the ownership or effective control of RSI, or a change in the
ownership of a substantial portion of the assets of RSI, each
within the meaning of Section 280G of the Code, unless RSI or
JPFI, as the case may be, concludes, in its sole discretion,
that substantial authority (within the meaning of Section 6621
of the Code) does not exist for such position or unless other-
wise required by a determination (as defined in Section 1313 of
the Code).
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation
to Effect the Merger. The respective obligation of each party
to effect the Merger is subject to the satisfaction or waiver
on or prior to the Closing Date of the following conditions:
(a) Stockholder Approvals. Each of the RSI Stock-
holder Approval and the JPFI Stockholder Approval shall have
been obtained.
(b) HSR Act. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have expired.
(c) Governmental, Regulatory and Other Approvals.
(i) Other than the filing provided for under Section 1.3 and
filings pursuant to the HSR Act (which are addressed in Section
6.1(b)), all consents, approvals and actions of, filings with
and notices to any Governmental Entity required of RSI, JPFI or
any of their subsidiaries to consummate the Merger and the
other transactions contemplated hereby (together with the mat-
ters contemplated by Section 6.1(b), the "Requisite Regulatory
Approvals") shall have been obtained and (ii) except as would
not have a material adverse effect on any of RSI, JPFI or the
Surviving Corporation, the consents and approvals set forth on
Section 3.1(d) of the RSI Disclosure Schedule and Section
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3.2(d) of the JPFI Disclosure Schedule shall have been obtained
or shall no longer be required.
(d) No Injunctions or Restraints. No judgment, or-
der, decree, statute, law, ordinance, rule or regulation, en-
tered, enacted, promulgated, enforced or issued by any court or
other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints")
shall be in effect (i) preventing the consummation of the Merg-
er, or (ii) which otherwise is reasonably likely to have a ma-
terial adverse effect on RSI or JPFI, as applicable; provided,
however, that each of the parties shall have used its best ef-
forts to prevent the entry of any such Restraints and to appeal
as promptly as possible any such Restraints that may be en-
tered.
(e) Form S-4. The Form S-4 shall have become effec-
tive under the Securities Act prior to the mailing of the Joint
Proxy Statement by each of RSI and JPFI to their respective
stockholders and no stop order or proceedings seeking a stop
order shall be threatened by the SEC or shall have been initi-
ated by the SEC.
(f) NYSE Listing. The shares of JPFI Common Stock
issuable to RSI's stockholders as contemplated by Article II
shall have been approved for listing on the NYSE subject to
official notice of issuance.
(g) Tax Opinions. JPFI shall have received from
Wachtell, Lipton, Rosen & Katz, counsel to JPFI, and RSI shall
have received from Jones, Day, Reavis & Pogue, counsel to RSI,
an opinion, dated the Closing Date, substantially to the effect
that: (i) the Merger will constitute a "reorganization" within
the meaning of Section 368(a) of the Code, and JPFI and RSI
will each be a party to such reorganization within the meaning
of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by JPFI or RSI as a result of the Merger; (iii) no
gain or loss will be recognized by the stockholders of RSI upon
the exchange of their shares of RSI Common Stock solely for
shares of JPFI Common Stock pursuant to the Merger, except with
respect to cash, if any, received in lieu of fractional shares
of JPFI Common Stock; (iv) the aggregate tax basis of the
shares of JPFI Common Stock received solely in exchange for
shares of RSI Common Stock pursuant to the Merger (including
fractional shares of JPFI Common Stock for which cash is re-
ceived) will be the same as the aggregate tax basis of the
shares of RSI Common Stock exchanged therefor; and (v) the
holding period for shares of JPFI Common Stock received in ex-
change for shares of RSI Common Stock pursuant to the Merger
will include the holding period of the shares of RSI Common
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Stock exchanged therefor, provided such shares of RSI Common
Stock were held as capital assets by the stockholder at the
Effective Time.
In rendering such opinions, each of counsel for JPFI
and RSI shall be entitled to receive and rely upon representa-
tions of fact contained in certificates of officers of JPFI,
RSI and stockholders of RSI, which representations shall be in
form and substance satisfactory to such counsel.
(h) Pooling Letters. JPFI and RSI shall have re-
ceived letters from each of RSI's independent accountants and
JPFI's independent accountants, dated as of the Closing Date,
in each case addressed to JPFI and RSI, stating that the Merger
qualifies for accounting as a pooling of interests under Opin-
ion 16 of the Accounting Principles Board and applicable SEC
rules and regulations.
SECTION 6.2. Conditions to Obligations of JPFI. The
obligation of JPFI to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representa-
tions and warranties of RSI set forth herein shall be true and
correct both when made and at and as of the Closing Date, as if
made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date),
except where the failure of such representations and warranties
to be so true and correct (without giving effect to any limita-
tion as to "materiality" or "material adverse effect" set forth
therein) does not have, and is not likely to have, individually
or in the aggregate, a material adverse effect on RSI.
(b) Performance of Obligations of RSI. RSI shall
have performed in all material respects all obligations re-
quired to be performed by it under this Agreement at or prior
to the Closing Date.
(c) No Material Adverse Change. At any time after
the date of this Agreement there shall not have occurred any
material adverse change relating to RSI.
(d) RSI Rights Agreement. The RSI Rights issued
pursuant to the RSI Rights Agreement shall not have become non-
redeemable, exercisable, distributed or triggered pursuant to
the terms of such agreement.
SECTION 6.3. Conditions to Obligations of RSI. The
obligation of RSI to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
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(a) Representations and Warranties. The representa-
tions and warranties of JPFI set forth herein shall be true and
correct both when made and at and as of the Closing Date, as if
made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date),
except where the failure of such representations and warranties
to be so true and correct (without giving effect to any limita-
tion as to "materiality," or "material adverse effect" set
forth therein) does not have, and is not likely to have, indi-
vidually or in the aggregate, a material adverse effect on
JPFI.
(b) Performance of Obligations of JPFI. JPFI shall
have performed in all material respects all obligations re-
quired to be performed by it under this Agreement at or prior
to the Closing Date.
(c) No Material Adverse Change. At any time after
the date of this Agreement there shall not have occurred any
material adverse change relating to JPFI.
(d) JPFI Rights Agreement. The JPFI Rights issued
pursuant to the JPFI Rights Agreement shall not have become
nonredeemable, exercisable, distributed or triggered pursuant
to the terms of such agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be
terminated at any time prior to the Effective Time, and (except
in the case of 7.1(e) or 7.1(f)) whether before or after the
RSI Stockholder Approval or the JPFI Stockholder Approval:
(a) by mutual written consent of JPFI and RSI, if
the Board of Directors of each so determines by a vote of a
majority of its entire Board;
(b) by either the Board of Directors of JPFI or the
Board of Directors of RSI:
(i) if the Merger shall not have been consum-
mated by April 1, 1998; provided, however, that the right
to terminate this Agreement pursuant to this Section
7.1(b)(i) shall not be available to any party whose fail-
ure to perform any of its obligations under this Agreement
results in the failure of the Merger to be consummated by
such time;
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(ii) if the RSI Stockholder Approval shall not
have been obtained at a RSI Stockholders Meeting duly con-
vened therefor or at any adjournment or postponement
thereof;
(iii) if the JPFI Stockholder Approval shall not
have been obtained at a JPFI Stockholders Meeting duly
convened therefor or at any adjournment or postponement
thereof; or
(iv) if any Restraint having any of the effects
set forth in Section 6.1(d) shall be in effect and shall
have become final and nonappealable, or if any Governmen-
tal Entity that must grant a Requisite Regulatory Approval
has denied approval of the Merger and such denial has be-
come final and nonappealable; provided, that the party
seeking to terminate this Agreement pursuant to this Sec-
tion 7.1(b)(iv) shall have used best efforts to prevent
the entry of and to remove such Restraint or to obtain
such Requisite Regulatory Approval, as the case may be;
(c) by the Board of Directors of JPFI (provided that
JPFI is not then in material breach of any representation, war-
ranty, covenant or other agreement contained herein), if RSI
shall have breached or failed to perform in any material re-
spect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a con-
dition set forth in Section 6.2(a) or (b), and (B) is incapable
of being cured by RSI or is not cured within 45 days of written
notice thereof;
(d) by the Board of Directors of RSI (provided that
RSI is not then in material breach of any representation, war-
ranty, covenant or other agreement contained herein), if JPFI
shall have breached or failed to perform in any material re-
spect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a con-
dition set forth in Section 6.3(a) or (b), and (B) is incapable
of being cured by JPFI or is not cured within 45 days of writ-
ten notice thereof;
(e) by the Board of Directors of JPFI, at any time
prior to the RSI Stockholders Meeting, if the RSI Board of Di-
rectors shall have (A) failed to make, no later than the date
of the first mailing of the Joint Proxy Statement to the RSI
Stockholders, its recommendation referred to in Section 5.1(b),
(B) withdrawn such recommendation or (C) modified or changed
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such recommendation in a manner adverse to the interests of
JPFI; or
(f) by the Board of Directors of RSI, at any time
prior to the JPFI Stockholders Meeting, if the JPFI Board of
Directors shall have (A) failed to make, no later than the date
of the first mailing of the Joint Proxy Statement to the JPFI
Stockholders, its recommendation referred to in Section 5.1(c),
(B) withdrawn such recommendation or (C) modified or changed
such recommendation in a manner adverse to the interests of
RSI.
SECTION 7.2. Effect of Termination. In the event of
termination of this Agreement by either RSI or JPFI as provided
in Section 7.1, this Agreement shall forthwith become void and
have no effect, without any liability or obligation on the part
of JPFI or RSI, other than the provisions of the last sentence
of Section 5.4, Section 5.8, this Section 7.2, Section 7.5 and
Article VIII, which provisions shall survive such termination,
and except that, notwithstanding anything to the contrary con-
tained in this Agreement, neither JPFI nor RSI shall be re-
lieved or released from any liabilities or damages arising out
of its willful breach of any provision of this Agreement.
SECTION 7.3. Amendment. Subject to compliance with
applicable law, this Agreement may be amended by the parties
at any time before or after the RSI Stockholder Approval or the
JPFI Stockholder Approval; provided, however, that after any
such approval, there may not be, without further approval of
such the stockholders of RSI (in the case of the RSI Stockhold-
ers Approval) and the stockholders of JPFI (in the case of the
JPFI Stockholders Approval), any amendment of this Agreement
that changes the amount or the form of the consideration to be
delivered to the holders of RSI Common Stock hereunder, or
which by law otherwise requires the further approval of such
stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto and duly approved by the parties' respective Boards of
Directors or a duly designated committee thereof.
SECTION 7.4. Extension; Waiver. At any time prior
to the Effective Time, a party may, subject to the proviso of
Section 7.3, (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive
any inaccuracies in the representations and warranties of the
other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) waive compliance by
the other party with any of the agreements or conditions con-
tained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set
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forth in an instrument in writing signed on behalf of such
party. Any extension or waiver given in compliance with this
Section 7.4 or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent or
other failure.
SECTION 7.5. Termination Expenses. (a) In the
event of a termination of this Agreement and the abandonment of
the Merger at any time (i) by JPFI pursuant to Section 7.1(c)
(other than for a nonwillful breach of a representation, war-
ranty, covenant or agreement of RSI contained herein) or Sec-
tion 7.1(e) or (ii) by JPFI or RSI pursuant to Section
7.1(b)(ii) (if, at such time, in the case of clause (ii) of
this Section 7.5(a), any event has occurred that would give
JPFI the right to exercise the RSI Stock Option), and in order
to compensate JPFI for the expenses associated with the nego-
tiation of this Agreement and the other matters contemplated
hereby, RSI shall, within one business day following such ter-
mination, pay JPFI a fee of $30,000,000 in immediately avail-
able funds.
(b) In the event of a termination of this Agreement
and the abandonment of the Merger at any time (i) by RSI pursu-
ant to Section 7.1(d) (other than for a nonwillful breach of a
representation, warranty, covenant or agreement of JPFI con-
tained herein) or Section 7.1(f) or (ii) by JPFI or RSI pursu-
ant to 7.1(b)(iii) (if, at such time, in the case of clause
(ii) of this Section 7.5(b), any event has occurred that would
give RSI the right to exercise the JPFI Stock Option), and in
order to compensate RSI for the expenses associated with the
negotiation of this Agreement and the other matters contem-
plated hereby, JPFI shall, within one business day following
such termination, pay RSI a fee of $30,000,000 in immediately
available funds.
(c) A party's right to receive the fee contemplated
by this Section 7.5, and its ability to enforce the provisions
this Section 7.5, shall not be subject to approval by the
stockholders of either JPFI or RSI.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and War-
ranties. None of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this
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Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
SECTION 8.2. Notices. All notices, requests,
claims, demands and other communications under this Agreement
shall be in writing and shall be deemed given if delivered per-
sonally, telecopied (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to JPFI, to
JP Foodservice, Inc.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
Telecopy No: (410) 312-7149
Attention: David M. Abramson, Esq.
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52 Street
New York, New York 10019
Telecopy No.: (212) 403-2000
Attention: Edward D. Herlihy, Esq.
(b) if to Rykoff, to
Rykoff-Sexton, Inc.
1050 Warrenvill Road
Lisle, Illinois
Telecopy No. (717) 830-7112
Attention: Robert J. Harter, Jr., Esq.
with a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 10022
Telecopy No.: (312) 782-8585
Attention: Elizabeth Kitslaar, Esq.
SECTION 8.3. Definitions. For purposes of this
Agreement:
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(a) except for purposes of Section 5.10, an "affili-
ate" of any person means another person that directly or indi-
rectly, through one or more intermediaries, controls, is con-
trolled by, or is under common control with, such first person,
where "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of voting
securities, by contract, as trustee or executor, or otherwise;
(b) "material adverse change" or "material adverse
effect" means, when used in connection with RSI or JPFI, any
change, effect, event, occurrence or state of facts that is or
could reasonably be expected to be materially adverse to the
business, financial condition or results of operations of such
party and its subsidiaries taken as a whole;
(c) "person" means an individual, corporation, part-
nership, limited liability company, joint venture, association,
trust, unincorporated organization or other entity;
(d) a "subsidiary" of any person means another per-
son, an amount of the voting securities, other voting ownership
or voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other govern-
ing body (or, if there are no such voting interests, 50% or
more of the equity interests of which) is owned directly or
indirectly by such first person; and
(e) "knowledge" of any person which is not an indi-
vidual means the knowledge of such person's executive officers
or senior management of such person's operating divisions and
segments, in each case after reasonable inquiry.
SECTION 8.4. Interpretation. When a reference is
made in this Agreement to an Article, Section or Exhibit, such
reference shall be to an Article or Section of, or an Exhibit
to, this Agreement unless otherwise indicated. Whenever the
words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation". The words "hereof", "herein" and "here-
under" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any par-
ticular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any cer-
tificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to
the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any
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agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of stat-
utes) by succession of comparable successor statutes and refer-
ences to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted suc-
cessors and assigns.
SECTION 8.5. Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effec-
tive when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6. Entire Agreement; No Third-Party Ben-
eficiaries. This Agreement (including the documents and in-
struments referred to herein), the Option Agreements, the Sup-
port Agreement and the Confidentiality Agreements (a) consti-
tute the entire agreement, and supersede all prior agreements
and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement and (b)
except for the provisions of Section 5.7, are not intended to
confer upon any person other than the parties any rights or
remedies.
SECTION 8.7. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflict of laws thereof.
SECTION 8.8. Assignment. Neither this Agreement nor
any of the rights, interests or obligations under this Agree-
ment shall be assigned, in whole or in part, by operation of
law or otherwise by either of the parties hereto without the
prior written consent of the other party. Any assignment in
violation of the preceding sentence shall be void. Subject to
the preceding two sentences, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the par-
ties and their respective successors and assigns.
SECTION 8.9. Consent to Jurisdiction. Each of the
parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Dela-
ware or any Delaware state court in the event any dispute
arises out of this Agreement or any of the transactions contem-
plated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, and (c) agrees that it
will not bring any action relating to this Agreement or any of
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the transactions contemplated by this Agreement in any court
other than a federal court sitting in the State of Delaware or
a Delaware state court.
SECTION 8.10 Headings, Etc. The headings and table
of contents contained in this Agreement are for reference pur-
poses only and shall not affect in any way the meaning or in-
terpretation of this Agreement.
SECTION 8.11. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect, insofar as the foregoing can
be accomplished without materially affecting the economic ben-
efits anticipated by the parties to this Agreement. Upon such
determination that any term or other provision is invalid, il-
legal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to ef-
fect the original intent of the parties as closely as possible
to the fullest extent permitted by applicable law in an accept-
able manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, JPFI and RSI have caused this
Agreement to be signed by their respective officers thereunto
duly authorized, all as of the date first written above.
JP FOODSERVICE, INC.
By /s/ James L. Miller
Name: James L. Miller
Title: Chairman, President and
Chief Executive Officer
RYKOFF-SEXTON, INC.
By /s/ Mark Van Stekelenburg
Name: Mark Van Stekelenburg
Title: Chairman and
Chief Executive Officer
HUDSON ACQUISITION CORP.
By /s/ James L. Miller
Name: James L. Miller
Title: Chairman, President and
Chief Executive Officer
<PAGE>
[LETTERHEAD OF GOLDMAN SACHS APPEARS HERE]
APPENDIX B
June 30, 1997
Board of Directors
JP Foodservice, Inc.
9830 Patuxent Woods Drive
Columbia, MD 21046
Gentlemen:
You have requested our opinion as to the fairness to JP Foodservice, Inc. (the
"Company") of the exchange ratio of .84 shares of Common Stock, par value $.01
per share (the "Company Common Stock"), of the Company to be exchanged for each
outstanding share of Common Stock, par value $.10 per share (the "Shares"), of
Rykoff-Sexton, Inc. ("Rykoff-Sexton") (the "Exchange Ratio") pursuant to the
Agreement and Plan of Merger dated as of June 30, 1997 among the Company, Hudson
Acquisition Corp, a wholly-owned subsidiary of the Company, and Rykoff-Sexton
(the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement and having
acted as a co-managing underwriter for the Company with respect to the sale
of shares of common stock of the Company in November 1996. We have also
provided certain investment banking services from time to time for
Rykoff-Sexton, including advising Rykoff-Sexton on its merger with US
Foodservice Inc. in January 1996.
In connection with this opinion, we have reviewed, among other things, the
Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company
for the two fiscal years ended June 29, 1996, as well as financial and other
information concerning the Company for the three prior fiscal years, and for
Rykoff-Sexton for the five fiscal years ended April 27, 1996; certain interim
reports to stockholders and Quarterly Reports of the Company and Rykoff-Sexton
on Form 10-Q; certain other communications from the Company and Rykoff-Sexton to
its stockholders; and certain internal financial analyses and forecasts for the
Company and Rykoff-Sexton as prepared by their respective managements and
certain internal forecasts for the Company and Rykoff-Sexton on a combined basis
after giving effect to the merger of the Company and Rykoff-Sexton (the
"Merger"), including analyses and forecasts of certain operating efficiencies
and financial synergies (the "Synergies") expected to be achieved as a result of
the Merger prepared by the Company's management. We also have held discussions
with members of the senior management of the Company and Rykoff-Sexton regarding
the strategic rationale for, and benefits of, the Merger and the past and
current business operations and financial condition of their respective
companies as well as the future prospects of their respective companies on a
combined basis after giving effect to the Merger. In addition, we have reviewed
the reported price and trading activity for the Company's shares and Rykoff-
Sexton's shares, compared certain financial and stock market information for the
Company and Rykoff-Sexton with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the food service industry specifically
and in other industries generally and performed such other studies and analyses
as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In that regard, we have relied on the
managements of the Company and Rykoff-Sexton as to the reasonableness and
achievability of the financial and operating forecasts (and the assumptions and
bases therefor) provided to us, and with your consent we have assumed that such
forecasts, including without limitation the Synergies, reflect the best
currently available estimates and judgments of such respective managements and
that such projections and forecasts, including the Synergies, will be realized
in the amounts and time periods currently estimated by the managements of the
Company and Rykoff-Sexton. Further, in our evaluation of the Exchange Ratio, we
have assumed, with your permission, that the consummation of the Merger will not
result in a change of control of the Company. In addition, we have not made an
independent evaluation or appraisal of the assets or liabilities of the Company
or Rykoff-Sexton or any of their respective subsidiaries and we have not been
furnished with any such evaluation or appraisal. We have also assumed that the
Merger will be accounted for as a pooling of interests under generally accepted
accounting principles. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated by
the Agreement.
Based upon and subject to the foregoing and such other matters as we consider
relevant, it is our opinion that as of the date hereof the Exchange Ratio
pursuant to the Agreement is fair to the Company.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE>
[LETTERHEAD OF SMITH BARNEY APPEARS HERE]
APPENDIX C
June 30, 1997
The Board of Directors
JP Foodservice, Inc.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to JP Foodservice, Inc. ("JP Foodservice") of the consideration to be paid
by JP Foodservice pursuant to the terms and subject to the conditions set forth
in the Agreement and Plan of Merger, dated as of June 30, 1997 (the "Merger
Agreement"), by and among JP Foodservice, Hudson Acquisition Corp., a wholly
owned subsidiary of JP Foodservice ("Merger Sub"), and Rykoff-Sexton, Inc.
("Rykoff-Sexton"). As more fully described in the Merger Agreement, (i) Rykoff-
Sexton will be merged with and into Merger Sub (the "Merger") and (ii) each
outstanding share of the common stock, par value $0.10 per share, of Rykoff-
Sexton (the "Rykoff-Sexton Common Stock") will be converted into the right to
receive 0.84 (the "Exchange Ratio") of a share of the common stock, par value
$0.01 per share, of JP Foodservice (the "JP Foodservice Common Stock").
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of JP Foodservice and certain senior officers and other
representatives and advisors of Rykoff-Sexton concerning the businesses,
operations and prospects of JP Foodservice and Rykoff-Sexton. We examined
certain publicly available business and financial information relating to JP
Foodservice and Rykoff-Sexton as well as certain financial forecasts and other
information and data for JP Foodservice and Rykoff-Sexton which were provided to
or otherwise discussed with us by the respective managements of JP Foodservice
and Rykoff-Sexton, including information relating to certain strategic
implications and operational benefits anticipated to result from the Merger. We
reviewed the financial terms of the Merger as set forth in the Merger Agreement
in relation to, among other things: current and historical market prices and
trading volumes of JP Foodservice Common Stock and Rykoff-Sexton Common Stock;
the historical and projected earnings and other operating data of JP Foodservice
and Rykoff-Sexton; and the capitalization and financial condition of JP
Foodservice and Rykoff-Sexton. We considered, to the extent publicly available,
the financial terms of certain other similar transactions recently effected
which we considered relevant in evaluating the Merger and analyzed certain
financial, stock market and other publicly available information relating to the
businesses of other companies whose operations we considered relevant in
evaluating those of JP Foodservice and Rykoff-Sexton. We also evaluated the
potential pro forma financial impact of the Merger on JP Foodservice. In
addition to the foregoing, we conducted such other analyses and examinations and
considered such other financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the managements of JP Foodservice and Rykoff-Sexton that such
forecasts and other
<PAGE>
The Board of Directors
JP Foodservice, Inc.
June 30, 1997
Page 2
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of JP
Foodservice and Rykoff-Sexton as to the future financial performance of JP
Foodservice and Rykoff-Sexton and the strategic implications and operational
benefits anticipated to result from the Merger. We have assumed, with your
consent, that the Merger will be treated as a pooling of interests in accordance
with generally accepted accounting principles and as a tax-free reorganization
for federal income tax purposes. Our opinion, as set forth herein, relates to
the relative values of JP Foodservice and Rykoff-Sexton. We are not expressing
any opinion as to what the value of the JP Foodservice Common Stock actually
will be when issued to Rykoff-Sexton stockholders pursuant to the Merger or the
price at which the JP Foodservice Common Stock will trade subsequent to the
Merger. We have not made or been provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of JP
Foodservice or Rykoff-Sexton nor have we made any physical inspection of the
properties or assets of JP Foodservice or Rykoff-Sexton. We were not requested
to consider, and our opinion does not address, the relative merits of the Merger
as compared to any alternative business strategies that might exist for JP
Foodservice or the effect of any other transaction in which JP Foodservice might
engage. Our opinion is necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
Smith Barney has been engaged to render financial advisory services to JP
Foodservice in connection with the Merger and will receive a fee for such
services, which fee is contingent upon the consummation of the Merger. In the
ordinary course of our business, we and our affiliates may actively trade or
hold the securities of JP Foodservice and Rykoff-Sexton for our own account or
for the account of our customers and, accordingly, may at any time hold a long
or short position in such securities. We have in the past provided investment
banking services to JP Foodservice unrelated to the Merger, for which services
we have received compensation. In addition, we and our affiliates (including
Travelers Group Inc. and its affiliates) may maintain relationships with JP
Foodservice and Rykoff-Sexton.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of JP Foodservice in its evaluation of the
proposed Merger, and our opinion is not intended to and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on any
matter relating to the proposed Merger. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Smith Barney be
made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to JP Foodservice.
Very truly yours,
SMITH BARNEY INC.
<PAGE>
[LETTERHEAD OF MERRILL LYNCH APPEARS HERE]
APPENDIX D
June 30, 1997
Board of Directors
Rykoff-Sexton, Inc.
613 Baltimore Drive
East Mountain Corporate Center
Wilkes-Barre, PA 18702-7944
Members of the Board of Directors:
Rykoff-Sexton, Inc. (the "Company"), JP Foodservice, Inc. ("JP
Foodservice") and Hudson Acquisition Corp., a wholly owned subsidiary of JP
Foodservice ("Merger Sub"), propose to enter into an Agreement and Plan of
Merger, dated as of June 30, 1997 (the "Agreement"), pursuant to which a
strategic combination between the Company and JP Foodservice will be effected by
means of a merger (the "Merger") between the Company and Merger Sub in which
each outstanding share of the Company's common stock, par value $.10 per share
(the "Company Shares"), will be converted into the right to receive 0.84 shares
(the "Exchange Ratio") of the common stock of JP Foodservice, par value $.01 per
share (the "JP Foodservice Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair
from a financial point of view to the holders of the Company Shares, other than
JP Foodservice and its affiliates.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and JP Foodservice which we
deemed to be relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company and JP Foodservice, as
well as the amount and timing of the cost savings and related
expenses and synergies expected to result from the Merger (the
"Expected
<PAGE>
Synergies"), in each case furnished to us by the Company and JP
Foodservice;
(3) Conducted discussions with members of senior management and
representatives of the Company and JP Foodservice concerning the
matters described in clauses 1 and 2 above, as well as their
respective businesses and prospects before and after giving
effect to the Merger, and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the
Company Shares and the JP Foodservice Shares and compared them
with those of certain publicly traded companies which we deemed
to be relevant;
(5) Reviewed the results of operations of the Company and JP
Foodservice and compared them with those of certain publicly
traded companies which we deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which we deemed to
be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and JP Foodservice and their
financial and legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of current general economic, market and monetary
conditions.
In preparing our opinion, we have assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information and we
have not undertaken an independent evaluation or appraisal of any of the assets
or liabilities of the Company or JP Foodservice or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or JP Foodservice. With respect to the financial forecast information and the
Expected Synergies furnished to or discussed with us by the Company or JP
Foodservice, we have assumed that they have been reasonably prepared in good
faith and reflect the
2
<PAGE>
best currently available estimates and judgments of the Company's and JP
Foodservice's managements as to the expected future financial performance of,
and expenses and benefits to, the Company or JP Foodservice, as the case may be,
and the Expected Synergies, and that such forecasted results and Expected
Synergies will be realized in the amounts and at the times indicated thereby. We
express no opinion as to such financial forecast information and Expected
Synergies or the assumptions upon which they were based. We have further assumed
that the Merger will be accounted for as a pooling of interests under generally
accepted accounting principles and that it will qualify as a tax-free
reorganization for United States Federal income tax purposes. You have informed
us that in connection with the Agreement certain significant stockholders of the
Company who are affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated
are parties to and will be entering into various contractual arrangements with
respect to their existing Company Shares and with respect to the JP Foodservice
Shares to be received by them in the Merger. This opinion does not take into
account or in any way address the implications to such stockholders of such
contractual arrangements.
For purposes of rendering this opinion we have assumed, in all
respects material to our analysis, that the representations and warranties of
each party to the Agreement and all related documents and instruments
(collectively, the "Documents") contained therein are true and correct, that
each party to the Documents will perform all of the covenants and agreements
required to be performed by such party under such Documents and that all
conditions to the consummation of the Merger will be satisfied without waiver or
modification thereof. We have also assumed that all material governmental,
regulatory or other consents and approvals will be obtained in connection with
the Merger and that in the course of obtaining any necessary governmental,
regulatory or other consents and approvals, or any amendments, modifications or
waivers to any documents to which either the Company or JP Foodservice are
party, no restrictions will be imposed or amendments, modifications or waivers
made that would have any material adverse effect on the contemplated benefits to
the Company or its stockholders of the Merger.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the information made
available to us as of, the date hereof.
In connection with performing our services for the Company, we have
not been authorized by the Company or the Board of Directors to solicit, nor
have we solicited, third-party indications of interest for the acquisition of
all or any part of the Company.
We are acting as financial advisor to the Company in connection with
the Merger and will receive a fee from the Company for our services, a major
portion of which is contingent upon the consummation of the Merger. In
addition,
3
<PAGE>
the Company has agreed to indemnify us for certain liabilities arising out of
our engagement. We have, in the past, provided financial advisory and financing
services to the Company and/or its affiliates and may continue to do so and have
received fees for the rendering of such services. In addition, in the ordinary
course of our business, we may actively trade the Company Shares and other
securities of the Company, as well as the JP Foodservice Shares and other
securities of JP Foodservice, for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Certain of our affiliates own approximately 36% of the Company
Shares and have representatives serving on the Company's Board of Directors.
This opinion is for the use and benefit of the Board of Directors of
the Company. Our opinion does not address the merits of the underlying business
decision by the Company to engage in the Merger, and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed Merger.
We are not expressing any opinion herein as to the prices at or
trading ranges in which the Company Shares or the JP Foodservice Shares may
trade following the announcement or consummation of the Merger.
On the basis of and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the opinion that, as of
the date hereof, the Exchange Ratio provided for pursuant to the Agreement is
fair from a financial point of view to the holders of the Company Shares, other
than JP Foodservice and its affiliates.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
[signed]
4
<PAGE>
[LETTERHEAD OF WASSERTEIN PERELLA & CO APPEARS HERE]
APPENDIX E
June 30, 1997
Board of Directors
Rykoff-Sexton, Inc.
613 Baltimore Drive
East Mountain Corporate Center
Wilkes-Barre, PA 18702-7944
Members of the Board of Directors:
Rykoff-Sexton, Inc. (the "Company"), JP Foodservice, Inc. ("JP
Foodservice") and Hudson Acquisition Corp., a wholly owned subsidiary of JP
Foodservice ("Merger Sub"), propose to enter into an Agreement and Plan of
Merger, dated as of June 30, 1997 (the "Agreement"), pursuant to which a
strategic combination between the Company and JP Foodservice will be effected by
means of a merger (the "Merger") between the Company and Merger Sub in which
each outstanding share of the Company's common stock, par value $.10 per share
(the "Company Shares"), will be converted into the right to receive 0.84 shares
(the "Exchange Ratio") of the common stock of JP Foodservice, par value $.01 per
share (the "JP Foodservice Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair
from a financial point of view to the holders of the Company Shares, other than
JP Foodservice and its affiliates.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and JP Foodservice which we
deemed to be relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company and JP Foodservice, as
well as the amount and timing of the cost savings and related
expenses and synergies expected to result from the Merger (the
"Expected Synergies"), in each case furnished to us by the
Company and JP Foodservice;
<PAGE>
(3) Conducted discussions with members of senior management and
representatives of the Company and JP Foodservice concerning the
matters described in clauses 1 and 2 above, as well as their
respective businesses and prospects before and after giving
effect to the Merger, and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the
Company Shares and the JP Foodservice Shares and compared them
with those of certain publicly traded companies which we deemed
to be relevant;
(5) Reviewed the results of operations of the Company and JP
Foodservice and compared them with those of certain publicly
traded companies which we deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which we deemed to
be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and JP Foodservice and their
financial and legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of current general economic, market and monetary
conditions.
In preparing our opinion, we have assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information and we
have not undertaken an independent evaluation or appraisal of any of the assets
or liabilities of the Company or JP Foodservice or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or JP Foodservice. With respect to the financial forecast information and the
Expected Synergies furnished to or discussed with us by the Company or JP
Foodservice, we have assumed that they have been reasonably prepared in good
faith and reflect the best currently available estimates and judgments of the
Company's and JP Foodservice's managements as to the expected future financial
performance of,
-2-
<PAGE>
and expenses and benefits to, the Company or JP Foodservice, as the case may be,
and the Expected Synergies, and that such forecasted results and Expected
Synergies will be realized in the amounts and at the times indicated thereby. We
express no opinion as to such financial forecast information and Expected
Synergies or the assumptions upon which they were based. We have further assumed
that the Merger will be accounted for as a pooling of interests under generally
accepted accounting principles and that it will qualify as a tax-free
reorganization for United States Federal income tax purposes. You have informed
us that in connection with the Agreement certain significant stockholders of the
Company who are affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated
are parties to and will be entering into various contractual arrangements with
respect to their existing Company Shares and with respect to the JP Foodservice
Shares to be received by them in the Merger. This opinion does not take into
account or in any way address the implications to such stockholders of such
contractual arrangements.
For purposes of rendering this opinion we have assumed, in all
respects material to our analysis, that the representations and warranties of
each party to the Agreement and all related documents and instruments
(collectively, the "Documents") contained therein are true and correct, that
each party to the Documents will perform all of the covenants and agreements
required to be performed by such party under such Documents and that all
conditions to the consummation of the Merger will be satisfied without waiver or
modification thereof. We have also assumed that all material governmental,
regulatory or other consents and approvals will be obtained in connection with
the Merger and that in the course of obtaining any necessary governmental,
regulatory or other consents and approvals, or any amendments, modifications or
waivers to any documents to which either the Company or JP Foodservice are
party, no restrictions will be imposed or amendments, modifications or waivers
made that would have any material adverse effect on the contemplated benefits to
the Company or its stockholders of the Merger.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the information made
available to us as of, the date hereof.
In connection with performing our services for the Company, we have
not been authorized by the Company or the Board of Directors to solicit, nor
have we solicited, third-party indications of interest for the acquisition of
all or any part of the Company.
We are acting as financial advisor to the Company in connection with
the Merger and will receive a fee from the Company for our services, a major
portion of which is contingent upon the consummation of the Merger. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of our engagement. In the ordinary course of our business, we may actively
trade the
-3-
<PAGE>
Company Shares and other securities of the Company, as well as the JP
Foodservice Shares and other securities of JP Foodservice, for our own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of
the Company. Our opinion does not address the merits of the underlying business
decision by the Company to engage in the Merger, and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed Merger.
We are not expressing any opinion herein as to the prices at or
trading ranges in which the Company Shares or the JP Foodservice Shares may
trade following the announcement or consummation of the Merger.
On the basis of and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the opinion that, as of
the date hereof, the Exchange Ratio provided for pursuant to the Agreement is
fair from a financial point of view to the holders of the Company Shares, other
than JP Foodservice and its affiliates.
Very truly yours,
[signed]
-4-
<PAGE>
JP FOODSERVICE, INC.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
- ------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF JP FOODSERVICE, INC. FOR THE SPECIAL MEETING ON
____________, 1997 AT _______ AM
JP FOODSERVICE, INC.
9830 PATUXENT WOODS DRIVE, COLUMBIA, MD 21046
The undersigned appoints David M. Abramson and George T. Megas, and each of
them, with full power of substitution in each, the proxies of the undersigned,
to represent the undersigned and vote all shares of JP Foodservice, Inc. Common
Stock which the undersigned may be entitled to vote at the Special Meeting of
Stockholders to be held on ____________, 1997, and at any adjournment or
postponement thereof, as indicated on the reverse side. The undersigned further
authorizes such proxies to vote in their discretion upon such other matters as
may properly come before the Special Meeting or any adjournment or postponement
thereof. Receipt of Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1.
JP FOODSERVICE, INC. P.O. BOX 11069 NEW YORK, NY 10203-0069
(Continued, and to be signed and dated on reverse side.)
<PAGE>
1. Proposal to approve the issuance of JP Foodservice Common Shares in
connection with the Merger Agreement (are such term is defined in the enclosed
Joint Proxy Statement/Prospectus) as described in the enclosed Joint Proxy
Statement/Prospectus.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Special Meeting or any adjournment or
postponement thereof.
Change of Address and [_]
or Comments Mark Here
The signature on this Proxy should correspond exactly with
stockholder's name as printed to the left. In the case of
joint tenancies, co-executors or co-trustees, both should
sign. Persons signing as Attorney, Executor, Administrator,
Trustee or Guardian should give their full title.
Dated: , 1997
----- ------
Signature
Signature
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE
INK [X]
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.)
<PAGE>
RYKOFF-SEXTON, INC.
613 Baltimore Drive
Wilkes-Barre, Pennsylvania 18702
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mark Van Stekelenburg, Robert J. Harter,
Jr. and David F. McAnally as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and vote, as
designated on the other side, all the shares of Common Stock of Rykoff-Sexton,
Inc. held of record by the undersigned on _____________, 1997, at the Special
Meeting of Stockholders of Rykoff-Sexton, Inc. to be held at _________________
on _________, 1997, at __ a.m. local time, and any adjournments or postponements
thereof.
(Continued, and to be marked, dated and signed, on the other side)
<PAGE>
Please mark your votes as
indicated in this example [X]
in blue or black ink.
The Board of Directors recommends a vote FOR Proposal 1.
1. PROPOSAL TO ADOPT THE MERGER AGREEMENT
(as such term is defined in the enclosed
Joint Proxy Statement/Prospectus), the
provisions of which are described in the
enclosed Joint Proxy Statement/Prospectus.
FOR AGAINST ABSTAIN
[_] [_] [_]
2. In their discretion, the Proxies are authorized to transact such
other matters as may arise relating to the conduct of the
Special Meeting of Stockholders of Rykoff-Sexton, Inc. or any
adjournments or postponements thereof.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1, AND IN THE DISCRETION OF THE PROXIES
ON THE MATTERS DESCRIBED IN PROPOSAL 2.
Do you plan to attend this meeting?
YES NO
[_] [_]
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Signature(s)_______________________________________________________________
Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, administrator,
trustee or guardian, please give your full title as such. If a corporation,
please sign in full corporate name by the president or other authorized officer.
If a partnership, please sign the partnership's name by an authorized person.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Reference is made to the provisions of Article XII of the registrant's
Restated Certificate of Incorporation fled as Exhibit 3.1 hereto and the
provisions of Article XII of the registrant's Amended and Restated By-Laws filed
as Exhibit 3.2 hereto.
The registrant is a Delaware corporation, subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware (the "DGCL"). Section 145 of the DGCL provides for the
indemnification, under certain circumstances, of any person in connection with
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than derivative actions), brought or threatened involving
such person because of such person's service as a director, officer, employee or
agent of the corporation or such person's service in any such capacity with
respect to another corporation or other entity at the request of such
corporation.
The registrant's Amended and Restated By-laws provide for the
indemnification of the officers and directors of the registrant to the fullest
extent permitted by the DGCL. Article XII of the registrant's Amended and
Restated By-laws provides that each person who was or is made a party to (or is
threatened to be made a party to) any civil or criminal action, suit or
proceeding by reason of the fact that such person is or was a director of
officer of the registrant shall be indemnified and held harmless by the
registrant to the fullest extent authorized by the DGCL against all expense,
liability and loss (including, without limitation, attorneys' fees) incurred by
such person in connection therewith, if such persons 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 registrant and had no reason to believe that his conduct was
illegal.
Article XII of the registrant's Restated Certificate of Incorporation
provides that, to the fullest extent permitted by the DGCL, the registrant's
directors will not be personally liable to the registrant or its stockholders
for monetary damages resulting from a breach of their fiduciary duty as
directors. However, nothing contained in such Article XII shall eliminate or
limit the liability of directors (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit.
The registrant maintains directors and officers liability insurance,
which covers directors and officers of the registrant against certain claims or
liabilities arising out of the performance of their duties.
Item 21. Exhibits and Financial Statements Schedules.
(a) The following exhibits, as required by Item 601 of Regulation S-K,
are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
*2.1 Agreement and Plan of Merger, dated as of June 30, 1997 among JP
Foodservice, Inc. (the "Company"), Hudson Acquisition Corp. and
Rykoff-Sexton, Inc. (included as Appendix A to the
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
Joint Proxy Statement/Prospectus that is part of this
Registration Statement).
3.1 Restated Certificate of Incorporation of JP Foodservice, Inc.
(incorporated by reference to the Company's Registration
Statement on Form S-3 (Commission File No. 333-14039)).
3.2 Amended and Restated By-Laws of JP Foodservice, Inc.
(incorporated by reference to the Company's Registration
Statement on Form S-3 (Commission File No. 333-14039)).
4.1 Specimen of Certificate representing JP Foodservice, Inc. Common
Stock, $.01 par value (incorporated by reference to the Company's
Registration Statement on Form S-3 (Commission File No. 333-
27275)).
4.2 Rights Agreement, dated as of February 19, 1996, between JP
Foodservice, Inc. and The Bank of New York, as Rights Agent (the
"Rights Agreement") (incorporated by reference to Exhibit 1 of
the Company's Registration Statement on Form 8-A dated February
22, 1996).
4.3 Amendment No. 1 to Rights Agreement, dated as of May 17, 1996
(incorporated by reference to Exhibit 10.26 to Amendment No. 1 to
the Company's Registration Statement on Form S-3 (Commission File
No. 333-07321)).
4.4 Amendment No. 2 to Rights Agreement, dated as of September 26,
1996 (incorporated by reference to Exhibit 10.1 to Amendment No.
2 to the Company's Registration Statement on Form S-3 (Commission
File No. 333-14039)).
4.5 Amendment No. 3 to Rights Agreement, dated as of June 30, 1997
(incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K for reportable event dated June 30,
1997).
**5.1 Legal opinion of Hogan & Hartson L.L.P. with respect to the
validity of the securities registered hereby.
**8.1 Legal opinion of Wachtell, Lipton, Rosen & Katz with respect to
certain tax matters.
**8.2 Legal opinion of Jones, Day, Reavis & Pogue with respect to
certain tax matters.
*10.1 Form of Employment Agreement dated as of , 1997 by and
between JP Foodservice, Inc. and Mark Van Stekelenburg.
10.2 Stock Option Agreement dated as of June 30, 1997 between JP
Foodservice, Inc. and Rykoff-Sexton, Inc. (incorporated by
reference to Exhibit 99.1 of the Company's Current Report on Form
8-K for reportable event dated June 30, 1997).
10.3 Stock Option Agreement dated as of June 30, 1997 between Rykoff-
Sexton, Inc. and JP Foodservice, Inc. (incorporated by reference
to Exhibit 99.2 of the Company's Current Report on Form 8-K for
reportable event dated June 30, 1997).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.4 Support Agreement dated as of June 30, 1997 by and among JP
Foodservice, Inc. and certain stockholders of Rykoff-Sexton
(incorporated by reference to Exhibit 99.3 of the Company's
Current Report on Form 8-K for reportable event dated June 30,
1997).
*23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Price Waterhouse LLP.
*23.3 Consents of Arthur Andersen LLP.
*23.4 Consent of Blum Shapiro and Company, P.C.
**23.5 Consent of Hogan & Hartson LLP (contained in its opinion filed as
Exhibit 5.1).
**23.6 Consent of Wachtell, Lipton, Rosen & Katz (contained in its
opinion filed as Exhibit 8.1).
**23.7 Consent of Jones, Day, Reavis & Pogue (contained in its opinion
filed as Exhibit 8.2).
*24.1 Powers of Attorney (included in the signature page hereof).
*99.1 Consent of Goldman, Sachs & Co.
*99.2 Consent of Smith Barney Inc.
*99.3 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
*99.4 Consent of Wasserstein Perella & Co., Inc.
**99.5 Consent of Mark Van Stekelenburg.
*99.6 Consent of James I. Maslon.
**99.7 Consent of James P. Miscoll.
**99.8 Consent of Neil I. Sell.
**99.9 Consent of Bernard Sweet.
</TABLE>
- ---------------------
* Filed herewith.
** To be filed by amendment.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
II-3
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus that is a part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such offering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information caused for by the
other items of the applicable form.
(d) The undersigned registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (c) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a) (3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed
II-4
<PAGE>
subsequent to the effective date of the registration statements through the date
of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbia, Maryland, on
August 1, 1997.
JP FOODSERVICE, INC.
By: /s/ James L. Miller
------------------------------
James L. Miller
President and Chief Executive Officer
(Duly Authorized Officer)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James L. Miller, Lewis Hay, III and
George T. Megas, and each of them as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James L. Miller President, Chairman and Chief August 1, 1997
- --------------------------- Executive Officer and Director
James L. Miller (Principal Executive Officer)
/s/ Lewis Hay, III Senior Vice President and Chief August 1, 1997
- --------------------------- Financial Officer (Principal
Lewis Hay, III Financial Officer)
/s/ George T. Megas Vice President - Finance August 1, 1997
- --------------------------- (Principal Accounting Officer)
George T. Megas
/s/ Michael J. Drabb Director August 1, 1997
- ---------------------------
Michael J. Drabb
/s/ David M. Abramson Director August 1, 1997
- ---------------------------
David M. Abramson
/s/ Eric E. Glass Director August 1, 1997
- ---------------------------
Eric E. Glass
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Mark P. Kaiser Director August 1, 1997
- ---------------------------
Mark P. Kaiser
Director August 1, 1997
- ---------------------------
Paul I. Latta
/s/ Dean R. Silverman Director August 1, 1997
- ---------------------------
Dean R. Silverman
/s/ Jeffrey D. Serkes Director August 1, 1997
- ---------------------------
Jeffrey D. Serkes
</TABLE>
II-7
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
*2.1 Agreement and Plan of Merger, dated as of June 30, 1997 among JP
Foodservice, Inc. (the "Company"), Hudson Acquisition Corp. and
Rykoff-Sexton, Inc. (included as Appendix A to the Joint Proxy
Statement/Prospectus that is part of this Registration
Statement).
3.1 Restated Certificate of Incorporation of JP Foodservice, Inc.
(incorporated by reference to the Company's Registration
Statement on Form S-3 (Commission File No. 333-14039)).
3.2 Amended and Restated By-Laws of JP Foodservice, Inc.
(incorporated by reference to the Company's Registration
Statement on Form S-3 (Commission File No. 333-14039)).
4.1 Specimen of Certificate representing JP Foodservice, Inc. Common
Stock, $.01 par value (incorporated by reference to the Company's
Registration Statement on Form S-3 (Commission File No. 333-
27275)).
4.2 Rights Agreement, dated as of February 19, 1996, between JP
Foodservice, Inc. and The Bank of New York, as Rights Agent (the
"Rights Agreement") (incorporated by reference to Exhibit 1 of
the Company's Registration Statement on Form 8-A dated February
22, 1996).
4.3 Amendment No. 1 to Rights Agreement, dated as of May 17, 1996
(incorporated by reference to Exhibit 10.26 to Amendment No. 1 to
the Company's Registration Statement on Form S-3 (Commission File
No. 333-07321)).
4.4 Amendment No. 2 to Rights Agreement, dated as of September 26,
1996 (incorporated by reference to Exhibit 10.1 to Amendment No.
2 to the Company's Registration Statement on Form S-3 (Commission
File No. 333-14039)).
4.5 Amendment No. 3 to Rights Agreement, dated as of June 30, 1997
(incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K for reportable event dated June 30,
1997).
**5.1 Legal opinion of Hogan & Hartson L.L.P. with respect to the
validity of the securities registered hereby.
**8.1 Legal opinion of Wachtell, Lipton, Rosen & Katz with respect to
certain tax matters.
**8.2 Legal opinion of Jones, Day, Reavis & Pogue with respect to
certain tax matters.
*10.1 Form of Employment Agreement dated as of , 1997 by and
between JP Foodservice, Inc. and Mark Van Stekelenburg.
10.2 Stock Option Agreement dated as of June 30, 1997 between JP
Foodservice, Inc. and Rykoff-Sexton, Inc. (incorporated by
reference to Exhibit 99.1 of the Company's Current Report on Form
8-K for reportable event dated June 30, 1997).
10.3 Stock Option Agreement dated as of June 30, 1997 between Rykoff-
Sexton, Inc. and JP Foodservice, Inc. (incorporated by reference
to Exhibit 99.2 of the Company's Current Report on Form 8-K for
reportable event dated June 30, 1997).
10.4 Support Agreement dated as of June 30, 1997 by and among JP
Foodservice, Inc. and certain stockholders of Rykoff Sexton
(incorporated by reference to Exhibit 99.3 of the Company's
Current Report on Form 8-K for reportable event dated June 30,
1997).
*23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Price Waterhouse LLP.
*23.3 Consents of Arthur Andersen LLP.
*23.4 Consent of Blum Shapiro and Company, P.C.
**23.5 Consent of Hogan & Hartson LLP (contained in its opinion filed as
Exhibit 5.1).
**23.6 Consent of Wachtell, Lipton, Rosen & Katz (contained in its
opinion filed as Exhibit 8.1).
**23.7 Consent of Jones, Day, Reavis & Pogue (contained in its opinion
filed as Exhibit 8.2).
*24.1 Powers of Attorney (included in the signature page hereof).
*99.1 Consent of Goldman, Sachs & Co.
*99.2 Consent of Smith Barney Inc.
*99.3 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
*99.4 Consent of Wasserstein Perella & Co., Inc.
**99.5 Consent of Mark Van Stekelenburg.
*99.6 Consent of James I. Maslon.
**99.7 Consent of James P. Miscoll.
**99.8 Consent of Neil I. Sell.
**99.9 Consent of Bernard Sweet.
</TABLE>
- -------------------------
* Filed herewith
** To be filed amendment
<PAGE>
Exhibit 10.1
------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
__________day of____, 199_, by and between JP Foodservice, Inc., a Delaware
corporation (the "Company"), and Mark Van Stekelenburg (the "Executive").
WHEREAS, immediately prior to the date hereof, the Executive was the
President, Chief Executive Officer and Chairman of the Board of Rykoff-Sexton
Inc., a Delaware corporation ("RSI");
WHEREAS, immediately prior to the date hereof, the Executive was a
party to an Amended and Restated Employment Agreement with RSI, dated as of
February 2, 1996, as amended by a letter agreement dated June 9, 1997 (the
"Prior Agreement");
WHEREAS, pursuant to an Agreement and Plan of Merger dated June 30,
1997 (the "Merger Agreement") by and among the Company, RSI, and Hudson
Acquisition Corp. ("Merger Sub"), a Delaware corporation and a wholly-owned
subsidiary of the Company, as of the date hereof, RSI will be merged with and
into Merger Sub, with Merger Sub as the surviving entity (the "Merger");
WHEREAS, it is a condition precedent to effectuating the Merger that
the Executive enter into an employment agreement with the Company in the form
hereof, which agreement supersedes any previous employment agreement the
Executive may have had with RSI, including, but not limited to, the Prior
Agreement.
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. Employment. The Company hereby agrees to employ the Executive and
----------
the Executive hereby agrees to be in the employ of the Company upon the terms
and conditions herein set forth.
2. Term. Employment shall be for a term commencing on the closing
----
date of the Merger (the "Effective Date") and, subject to termination under
Section 8, expiring on the third anniversary of the Effective Date.
3. Duties of the Executive. The Executive shall serve as the Vice
-----------------------
Chairman and President of the Company. The Executive shall report solely to the
Chief Executive Officer and shall have those duties that are assigned to him by
the Chief Executive Officer. The Executive shall devote substantially all of
his normal
<PAGE>
working time and his best efforts, full attention and energies to the duties
assigned to him by the Chief Executive Officer. The Company shall use its best
efforts to cause the Executive to be elected as a member of its Board of
Directors (the "Board") and as Vice Chairman of the Board throughout the term of
this Agreement and shall include him in the management slate for election as a
director at every stockholders' meeting at which his term as a director would
otherwise expire. To the extent that it does not interfere with the Executive's
employment hereunder, the Executive may (a) serve as an officer or director of,
or otherwise participate in any non-competing entity and any education, welfare,
social, religious or civic organizations or (b) manage personal and family
investments. Nothing in this Section 3 shall be deemed to prohibit the Executive
from acquiring, directly or indirectly, solely as an investment, not more than
two percent (2%) of any class of securities of any entity that is registered
under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended,
including the regulations issued thereunder.
4. Compensation.
------------
(a) During the term of this Agreement, the Company shall pay to
the Executive a base salary of not less than $500,000 per annum, which base
salary may be increased (but not decreased) from time to time by the Board in
its sole discretion, payable at the times and in the manner consistent with the
Company's general policies regarding compensation of executive employees. The
Board may from time to time authorize such additional compensation to the
Executive, in cash or in property, as the Board may determine in its sole
discretion to be appropriate.
(b) In addition to base salary, the Executive shall be provided,
for each fiscal year ending during the term of this Agreement, an annual bonus
opportunity in cash and stock-based incentives at least equal to 100% of the
Executive's annual base salary. Each such annual bonus shall be paid no later
than the end of the third month of the fiscal year next following the fiscal
year for which the annual bonus is awarded, unless the Executive shall elect to
defer the receipt of such annual bonus.
5. Executive Benefits.
------------------
(a) During the term of this Agreement, the Executive shall be
entitled to participate in all savings and retirement plans, practices, policies
and programs applicable generally to other peer executives of the Company and
its subsidiaries.
(b) During the term of this Agreement, the Executive and/or the
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practice, policies
and
2
<PAGE>
programs provided by the Company and its subsidiaries (including, without
limitation, medical, prescription, dental, disability, employee life, group
life, accidental death and travel accident insurance plans and programs) to the
extent applicable generally to other peer executives of the Company and its
subsidiaries.
(c) During the term of this Agreement, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and financial
planning services, payment of club dues, use of an automobile and payment of
related expenses, as generally provided to other peer executives of the Company.
Without limiting the generality of the foregoing, and notwithstanding anything
herein to the contrary, the Company shall, during the term of this Agreement,
pay all of the Executive's dues and membership assessments of two country clubs,
one of which shall be the Riviera Country Club in Los Angeles, California, and
such other club memberships as are determined by the Executive and the Board to
be useful in connection with the Executive's duties on behalf of the Company.
The Company shall also reimburse the Executive for all reasonable expenses
incurred at such club(s) on behalf of the Company. In addition, without limiting
the generality of the foregoing, and notwithstanding anything herein to the
contrary, the Executive shall be entitled, during the term of this Agreement, at
the Company's expense, to the full use of a new car (including adequate
insurance for the Executive, automobile and occupants and full maintenance and
operating costs necessary and appropriate to maintain such car in prime and safe
operating condition). In the event the Executive terminates his employment for
any reason other than for Cause (as defined in Section 9(e)), the Executive
shall furthermore be offered the option to acquire the car at the lesser of the
book value of the car at the time of the Executive's termination of employment
or the lease purchase price provided for in any car lease between the Company
and any third party lessor at the time of the Executive's termination of
employment. The option to purchase after termination as provided for herein
shall be exercised by the Executive no later than 90 days after termination of
employment.
(d) During the term of this Agreement, the Executive shall be
entitled to at least four weeks of paid vacation per calendar year. The
Executive shall have the right to accrue and carry forward unused vacation.
(e) The Company shall provide reimbursement for relocation
expenses to the Columbia, Maryland area in accordance with RSI's past policies,
practices and procedures for senior executives; provided, however, that the
Company shall have the right to participate in all decisions relating to the
sale of the Executive's residence. Thereafter, reimbursement for relocation
expenses shall be in accordance with the Company's practice and procedures for
senior executives.
(f) The Executive's benefits under this Section 5 shall be
reduced to the extent that the Executive is or becomes entitled to receive
comparable benefits under the terms of the Prior Agreement or the Third Amended
3
<PAGE>
and Restated Change in Control Agreement between RSI and the Executive, dated
June 9, 1997 (the "Change in Control Agreement").
6. Expenses. During the term of this Agreement, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the policies, practices and procedures of
the Company.
7. Place of Performance. In connection with his employment by the
--------------------
Company, unless otherwise agreed by the Executive, the Executive shall be based
at the offices of the Company located in Columbia, Maryland, except for travel
reasonably required for Company business.
8. Termination.
-----------
(a) Involuntary Termination. The Executive's employment hereunder
may be terminated by the Company for any reason by written notice as provided in
Section 14(f). The Executive's Disability (as defined herein) during the term of
the Agreement shall constitute an involuntary termination of employment
hereunder, unless the Board expressly extends such employment for a specified
time thereafter. The Executive will be treated for purposes of this Agreement as
having been involuntarily terminated by the Company if the Executive terminates
his employment with the Company under the following circumstances: (i) the
assignment to the Executive of any duties inconsistent in any respect with the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
3 of this Agreement; (ii) any failure by the Company to comply with any of the
provisions of Section 4 of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive; (iii)
the Company's requiring the Executive to be based at any office or location
outside of Columbia, Maryland or more than 35 miles from the location provided
in Section 7 hereof or the Company's requiring the Executive to travel on
Company business to a substantially greater extent than required immediately
prior to the Effective Date; (iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly permitted by this
Agreement; or (v) during the 30-day period immediately following the first date,
after the Effective Date, on which a Change in Control (as defined below)
occurs, for any reason or without reason. For purposes of this Section 8(a), any
good faith determination by the Executive after the Effective Date as to whether
a termination by the Executive should be treated as an involuntary termination
by the Company shall be conclusive. Notwithstanding the foregoing, a termination
by the Company or by the Executive that is effective on or after the first
anniversary of the Effective Date shall not be considered an involuntary
termination, provided that the party terminating the Executive's employment
provides
4
<PAGE>
written notice of such termination to the other party at least 30 days. prior to
the effective date of such termination.
(b) Voluntary Termination. (i) By the Executive. The Executive
may voluntarily terminate the Agreement (including without limitation by
retirement) at any time by notice to the Company as provided in Section 14(f).
The Executive's death during the term of the Agreement shall constitute a
voluntary termination of employment for purposes of eligibility for Termination
Payments and Benefits as provided in Section 9.
(ii) By the Company. Notwithstanding the provisions of Section
8(a) above, the Company shall have the absolute right to terminate the
employment of the Executive effective on or after the first anniversary of the
Effective Date, and such termination shall not be considered an involuntary
termination, provided that the Company gives written notice of such termination
to the executive at least 30 days prior to the effective date of such
termination.
(c) Subject to Section 9 and any benefit continuation
requirements of applicable laws, in the event the Executive's employment
hereunder is voluntarily or involuntarily terminated for any reason whatsoever,
the compensation and benefits obligations of the Company under Sections 4 and 5
shall cease as of the effective date of such termination, except for any
compensation and benefits earned or accrued but unpaid through such date.
9. Termination Payments and Benefits. If the Executive's employment
---------------------------------
hereunder is involuntarily terminated by the Company other than for Cause (as
defined herein) prior to the end of the term of this Agreement, then the Company
shall be obligated to pay to the Executive certain termination payments and make
available certain benefits during the termination payment period, as follows:
(a) Termination Payment Period. The Termination Payment Period
shall be the fraction of a year, if any, remaining from the date of
termination to the first anniversary of the Effective Date.
(b) Calculation of Termination Payment. The termination payment
shall equal the product of the Termination Payment Period as set forth
above in subsection (a) multiplied by the sum of (i) the Executive's
-------------
highest annual base salary during the three-year period prior to the
Executive's termination plus (ii) the Executive's average annual cash
----
incentive compensation award during the three-year period prior to the
Executive's termination. For purposes of this subsection, (b) the
applicable three-year period shall include employment with RSI.
5
<PAGE>
(c) Method of Payment. The termination payment shall be paid to
the Executive in a lump sum payment in cash or by check or wire
transfer within five (5) days of the termination of the Executive's
employment.
(d) Benefits.
(i) Notwithstanding any provision to the contrary in
any option agreement or other agreement or in any plan, (x)
all of the Executive's outstanding stock options shall
immediately become exercisable and (y) all restrictions on
any other equity awards shall lapse and such awards shall
vest.
(ii) During the Termination Payment Period as set
forth above in subsection (a), the Company shall use its best
efforts to maintain in full force and effect for the
continued benefit of the Executive all employee welfare
benefit plans and perquisite programs in which the Executive
was entitled to participate immediately prior to the
Executive's termination or shall arrange to make available to
the Executive benefits substantially similar to those which
the Executive would otherwise have been entitled to receive
if his employment had not been terminated. Such welfare
benefits shall be provided to the Executive on the same terms
and conditions (including employee contributions toward the
premium payments) under which the Executive was entitled to
participate immediately prior to his termination. The Company
does not guarantee a favorable tax consequence to the
Executive for continued coverage and benefits under the
Company-sponsored plans nor will it indemnify the Executive
for such results except with respect to the life insurance
plan made available under Section 5.
(iii) Notwithstanding the foregoing, with respect to
the Executive's continued coverage under the Company's
medical and dental plan, or a successor plan, pursuant to
this provision, the Executive's "qualifying event" for
purposes of the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA") shall be his date of termination from
the Company.
6
<PAGE>
(iv) Any termination payments hereunder shall not be
taken into account for purposes of any retirement plan or
other benefit plan sponsored by the Company, except as
otherwise expressly required by such plans or applicable law.
(v) The Company shall provide to the Executive
reimbursement for relocation expenses on a basis consistent
with the Company's practices for senior executive.
(e) Termination for Cause. For purposes of this Agreement,
"Cause" shall mean
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties
with the Company or one of its subsidiaries (other than any
such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial
performance is delivered to the Executive by the Chief
Executive Officer which specifically identifies the manner in
which the Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and
demonstrably injurious to the Company, its successors or
assigns.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or
upon the instructions of the Chief Executive Officer or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly
adopted by the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and
7
<PAGE>
the Executive is given an opportunity, together with counsel, to be
heard before the Board), finding that, in the good faith opinion of
the Board, the Executive has engaged in the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof
in detail.
(f) Change in Control. A "Change in Control" of the Company
shall mean any of the following events that occurs after the Effective
Date:
(i) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person (as defined in Section 9(f)(ii)) other than the
Board; or
(ii) Any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") is or becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
50% or more of the Company's stock generally entitled to
vote for the election of directors ("Voting Stock") or the
consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Company or other transaction (a "Business
Transaction"), in each case, unless, following such Business
Transaction, (i) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Transaction) beneficially owns,
directly or indirectly, 50% or more of, respectively, the
then outstanding shares of Voting Stock of the Company or
the
8
<PAGE>
corporation resulting from such Business Transaction and
(ii) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Transaction were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action
of the Board, providing for such Business Transaction; or
(iii) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(iv) Notwithstanding the foregoing provisions of
subsection (f), the Merger shall not constitute a Change in
Control.
(g) Disability Defined. "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company, its successors or
assigns or its insurers and acceptable to the Executive or the
Executive's legal representative.
(h) No Obligation to Mitigate. The Executive is under no
obligation to mitigate damages or the amount of any payment provided
for hereunder by seeking other employment or otherwise; provided,
however, that the Executive's coverage under the Company's welfare
benefit plans will terminate when the Executive becomes covered under
any employee benefit plan made available by another employer and
covering the same type of benefits. The Executive shall notify the
Company within thirty (30) days after the commencement of any such
benefits.
(i) Effect of Change of Control Agreement and Prior Agreement.
The Executive's severance benefits under Section 9(d)(ii) of this
Agreement shall be reduced to the extent that the Executive is or
becomes entitled to receive comparable benefits under the terms of the
Prior Agreement or the "Change in Control Agreement".
(j) Certain Additional Payments by the Company.
(i) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the
9
<PAGE>
event it shall be determined that any payment or
distribution by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (including, without limitation, amounts
attributable to the acceleration of vesting of stock
options), but determined without regard to any additional
payments required under this Section 9(k)) (a "Payment")
would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 9(k)(i), if it shall be
determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to
the Executive such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment shall
be made to the Executive and the Payments, in the aggregate,
shall be reduced to the Reduced Amount.
(ii) Subject to the provisions of Section 9(k)(iii),
all determinations. required to be made under this Section
9(k), including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determination, shall be made by KPMG Peat Marwick or such
other certified public accounting firm as may be designated
by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event
that
10
<PAGE>
the Accounting Firm is serving as accountant or auditor
for the individual, entity or group effecting the Change of
Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to
this Section 9(k), shall be paid by the Company to the
Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting
Firm shall be the binding upon the Company and the
Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it
is possible that Cross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(k)(iii) and the Executive
thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit
of the Executive.
(iii) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days
after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration
of the 30-day period following the date on which it gives
such notice to the Company (or such shorter period ending on
the date than any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
11
<PAGE>
(A) give the Company any information reasonably
requested by the Company relating to such claim,
(B) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(C) cooperate with the Company in good faith in
order effectively to contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this Section 9(k)(iii), the Company shall
control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and
shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with
12
<PAGE>
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(iv) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section
9(k)(iii), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of
Section 9(k)(iii)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(k)(iii), a determination is
made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
10. Additional Covenants of the Executive.
-------------------------------------
(a) The Executive acknowledges that (i) the principal
business of the Company and its subsidiaries is the broadline
foodservice distribution business (the "Present Business"); (ii) the
Company and its subsidiaries constitute one of a limited number of
persons who have developed the Present Business; (iii) the Executive's
work for the Company and its subsidiaries has given and will continue
to give him access to the confidential affairs and proprietary
information of the Company and its subsidiaries not readily available
to the public; and (iv) the agreements and covenants of the Executive
contained in this Section 10 are essential to the business and
goodwill
13
<PAGE>
of the Company. Accordingly, the Executive covenants and agrees that:
(b) While employed by the Company and for a period of one
year following the termination of this Agreement, he will not, (I) in
any state (other than any Excluded State, as defined below) where
the Company or its subsidiaries is then conducting business, directly
or indirectly; (1) engage in the Present Business and any other
principal line of business developed by the Company or its
subsidiaries during the term of this Agreement which, in each case, is
then being conducted by the Company or its subsidiaries (hereinafter
collectively referred to as the "Company Business") for the
Executive's own account; (2) render any services in any capacity to
any person (other than the Company or its affiliates) engaged in such
activities; or (3) become interested in any person (other than the
Company or its affiliates) engaged in such activities as a partner,
shareholder, principal, agent, trustee, consultant or in any other
relationship or capacity; provided, however, that the Executive may
own, directly or indirectly, solely as an investment, securities of
any person which are traded on any national securities exchange or
NASDAQ if the Executive (A) is not a controlling person of, or a
member of a group which controls, such person and (B) does not,
directly or indirectly, own one percent (1%) or more of any class of
securities of such person, or (II) become an employee of, consultant
to, or otherwise render services to any of SYSCO Corporation, Alliant
Foodservice (formerly Kraft) or any of their respective affiliates or
successors. For purposes of this Section 10(a), "Excluded State"
shall mean any state in which annual sales of the Company Business in
the most recently completed fiscal year were less than $1 million.
(c) During the Employment Period and thereafter, the
Executive shall keep secret and retain in strictest confidence, and
shall not use for his benefit or the benefit of others, except in
connection with the business and affairs of the Company and its
affiliates, all confidential matters relating to the Company Business
and to the Company and its affiliates learned by the Executive
heretofore or hereafter, directly or indirectly, from the Company and
its affiliates, including any information concerning the business,
affairs, customers, clients, sources of supply and customer lists of
the Company and its affiliates (the "Confidential Company
Information") and shall not disclose them to anyone except with the
Company's express written consent and except for Confidential Company
Information which (1) is at the time of receipt or thereafter becomes
publicly known, through no breach of this Agreement by the Executive
or (2) is received from a third party not under an obligation to keep
such information confidential and without breach of this Agreement by
the Executive.
14
<PAGE>
These rights of the Company are in addition to and without limitation
to those rights and remedies available under common law for protection
of the types of such confidential information which constitute "trade
secrets" as construed under controlling law.
(d) For a period of one year following the termination of
this Agreement, the Executive shall not, without the Company's prior
written consent, directly or indirectly, knowingly solicit or
encourage to leave the employment of the Company and its subsidiaries,
any employee of the Company or any of its subsidiaries or hire any
employee who has left the employment of the Company or any of its
subsidiaries within one year of the termination of such employee's
employment with the Company or any of its subsidiaries.
(e) Any Confidential Company Information (including any
memoranda, notes, lists, records and other documents and all copies
thereof) made or compiled by the Executive or made available to the
Executive concerning the Company's Business or the Company or any of
its affiliates shall be the Company's property, shall be kept
confidential in accordance with the provisions of this Section 10 and
shall be delivered to the Company at any time on request.
(f) If the Executive breaches, or threatens to commit a
breach of, any of the provisions of Section 10 (the "Restrictive
Covenants"), the Company shall have the right and remedy, in addition
to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity, to have the Restrictive Covenants
specifically enforced by any court having equity jurisdiction,
including, without limitation, the right to an entry against the
Executive of restraining orders and injunctions (preliminary,
mandatory, temporary and permanent) against violations, threatened or
actual, and whether or not then continuing, of such covenants, it
being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
11. Arbitration. In the event of any dispute, controversy or
-----------
claim arising out of any provision of this Agreement (excluding, however, any
dispute, controversy or claim arising out of Section 10), the parties agree to
submit such dispute, controversy or claim to arbitration and that the
determination in such arbitration shall be final and binding. Arbitration shall
be effected in the State of Maryland by a panel of three arbitrators in
accordance with the commercial arbitration rules then in force of the American
Arbitration Association, which shall administer the arbitration and act as
appointing authority. In the event of any
15
<PAGE>
conflict between the rules and the provisions of this Section 11, the provisions
of this Section 11 shall govern. The arbitrators shall interpret this Agreement
in accordance with the substantive laws of the State of Maryland. Any judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof, with costs of the arbitration to be borne equally by the
parties, except that each party shall pay the fees and expenses of its own
counsel in the arbitration.
12. Legal Fees and Expenses. In the event of litigation between the
-----------------------
parties regarding interpretation or enforcement of this Agreement, the parties
agree that the prevailing party shall be entitled to recover reasonable
attorneys' and related fees and expenses incurred in connection with the
litigation.
13. Certain Agreements with RSI. From and after the Effective Date,
---------------------------
the Change in Control Agreement, the Prior Agreement and the Supplemental
Retirement Plan for the Executive, originally effective as of July 20, 1994, and
as amended effective June 19, 1995, between RSI and the Executive (the
"Supplemental Retirement Plan") shall remain in full force and effect. The
Company will, and will cause Merger Sub to, honor and perform the Change in
Control Agreement, the Prior Agreement and the Supplemental Retirement Plan in
accordance with their respective terms, as modified by this Section 15. The
commencement of the Executive's employment with the Company on the Effective
Date under the terms of this Agreement shall be treated as follows:
(a) For purposes of the Change in Control Agreement, the
employment of the Executive with RSI shall be treated as having been
terminated by RSI after the occurrence of a Change in Control other
than by reason of The Executive's death. The Date of Termination
shall be deemed to be the day immediately prior to the Effective Date;
provided, however, for purposes of Section 3(C) of the Change in
Control Agreement, the Date of Termination shall be deemed to be the
date of termination of the Executive's employment with the Company.
Except as modified by the preceding sentence, as used in this Section
13(a), the terms "Change in Control" and "Date of Termination" shall
have the meanings assigned to such terms in the Change in Control
Agreement. The applicable benefit plans and perquisite programs shall
be determined based upon those in effect at RSI immediately prior to
the Effective Date.
(b) For purposes of the Prior Agreement, the employment of
the Executive with RSI shall be treated as having been involuntarily
terminated by RSI other than for Cause. Such termination shall be
deemed to have been implemented with prior written notice and to be
effective on the day prior to the Effective Date; provided, however,
that (i) for purposes of the third paragraph of Section 9(d) of the
Prior Agreement, the Executive's "qualifying event"
16
<PAGE>
shall be deemed to be the date of termination with the Company, and
(ii) for purposes of Section 9(b) of the Prior Agreement, coverage by
the Company or any Affiliate shall not be taken into account. For
purposes of the second paragraph of Section 9(d) of the Prior
Agreement, the applicable benefit plans and perquisite programs shall
be determined based upon those in effect at RSI immediately prior to
the Effective Date.
(c) For purposes of the Supplemental Retirement Plan, the
employment of the Executive with RSI and all Affiliates shall be
treated as having been terminated other than by reason of his death or
an approved leave of absence. The Executive's Termination of
employment shall be deemed to occur on the date immediately prior to
the Effective Date; provided, however, that (i) for purposes of
Section 4.6 of the Supplemental Retirement Plan, the employment by the
Company or any affiliate on or after the Effective Date shall not be
treated as reemployment by the Employer or an Affiliate for purposes
of the Supplemental Retirement Plan, and (ii) the Executive's accrued
benefit under the Qualified Pension Plan for purposes of Section
4.1(a)(ii) of the Supplemental Retirement Plan shall be based on his
accrued benefit under the Qualified Pension Plan determined as of the
day immediately prior to the Effective Date. Except as provided in
this Section 13(c), the terms "Affiliate", "Termination of
Employment", "Qualified Pension Plan" and "Employer" shall have the
meanings assigned to such terms in the Supplemental Retirement Plan.
14. Miscellaneous.
---------------
(a) Affiliate Definition. "Affiliate" shall mean any person,
firm or corporation which directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
persons specified.
(b) Company, Successor and Assigns Definitions.
(i) The Company, its successors or assigns shall mean the Company and/or its
past, present and future affiliates, divisions, subsidiaries, facilities,
parents, successors, predecessors and assigns, and their respective past,
present and future officers, directors, managers, shareholders, agents,
representatives, attorneys and employees.
(ii) RSI, its successors or assigns shall mean RSI and/or its
past, present and future affiliates, divisions, subsidiaries,
facilities, parents, successors, predecessors and assigns, and their
respective
17
<PAGE>
past, present and future officers, directors, managers, shareholders,
agents, representatives, attorneys and employees.
(c) Amendments. This Agreement may be amended only by a
writing executed by each of the parties hereto.
(d) Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter
hereof, and supersedes all prior contracts, agreements, arrangements,
communications, discussions, representations and warranties, whether
oral or written, between the parties; provided, however, that the
Prior Agreement, the Change in Control Agreement and the Supplemental
Retirement Plan shall be subject to Section 13.
(e) Law and Interpretation. This Agreement shall be
governed by, construed and interpreted in accordance with the laws of
the State of Maryland. With respect to each and every term and
condition in this Agreement, the parties understand and agree that the
same have or has been mutually negotiated, prepared and drafted, and
that if at any time the parties hereto desire or are required to
interpret or construe any such term or condition or any agreement or
instrument subject hereto, no consideration shall be given to the
issue of which party hereto actually prepared, drafted or requested
any term or condition of this Agreement or any agreement or instrument
subject hereto.
(f) Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be
deemed to have been duly given (a) when received if personally
delivered, (b) within 12 hours after being sent by telecopy, with
telecopy confirmation, and (c) when received (as established by
written receipt) if sent by established overnight courier to the
parties (and to the persons to whom copies shall be sent) at:
To the Company: JP Foodservice, Inc.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
Telecopy No.: (410) 312-7149
Attention: David M. Abramson, Esq.
With a copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
18
<PAGE>
Attention: Edward D. Herlihy, Esq.
To the Executive: Mr. Mark Van Stekelenburg
34 Deverell Drive
North Barrington, Illinois 60010
Telecopy No.:
With a copy to:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Any party by notice given to the other party in accordance with this Section
14(f) may change the address or the persons to whom notices or copies thereof
shall be directed.
(g) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which together shall constitute one and the same instrument.
(h) Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns and heirs, as set forth herein, but no rights, obligations or
liabilities hereunder shall be assignable by the Executive without the prior
written consent of the Company, its successors or assigns.
(i) Waivers and Amendments. This Agreement may be
amended, superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either party of such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other further exercise thereof or the exercise of any
other such right, power or privilege.
(j) Headings. The headings in this Agreement are solely
for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
19
<PAGE>
IN WITNESS WHEREOF, the Executive has executed, and the Company has
caused its duly authorized representative to execute, this Agreement as of the
date first above written.
JP FOODSERVICE, INC.
By
----------------------------------
------------------------------------
Mark Van Stekelenburg
20
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Valley Industries, Inc. and
Z Leasing Company:
We consent to the incorporation by reference in the registration statement of JP
Foodservice, Inc. on Form S-4 of our report dated June 17, 1996, with respect to
the combined balance sheets of Valley Industries, Inc. and Subsidiaries and Z
Leasing Company (A General Partnership) as of January 31, 1996, 1995 and 1994
and the related combined statements of earnings, stockholders' and partners'
equity, and cash flows for each of the years in the three-year period ended
January 31, 1996, which report appears in JP Foodservice's Current Report on
Form 8-K dated June 28, 1996 and to the reference to our firm under the heading
"Experts" in such registration statement of JP Foodservice, Inc.
KPMG Peat Marwick LLP
Baltimore, Maryland
July 31, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 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 Foods, Inc. which is as of November 14, 1996,
which appears on page F-2 relating to the consolidated financial statements
contained in the JP Foodservice, Inc.'s Prospectus dated November 26, 1996 filed
pursuant to Rule 424(b) of the Securities Act. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Linthicum, Maryland
July 31, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports covering the financial
statements of US Foodservice Inc. and subsidiaries dated March 1, 1996 included
in Rykoff-Sexton, Inc.'s Registration Statement on Form S-4 (Registration No.
333-02175) and to all references to our Firm included in this Registration
Statement.
Philadelphia, Pennsylvania ARTHUR ANDERSEN LLP
July 31, 1997
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated June 7, 1996
included or incorporated by reference in Rykoff-Sexton, Inc.'s Form 10-K for the
year ended April 27, 1996 and to all references to our Firm included in this
Registration Statement.
Philadelphia, Pennsylvania ARTHUR ANDERSEN LLP
July 31, 1997
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports covering the financial
statements of H&O Foods, Inc. dated November 29, 1995 included in Rykoff-Sexton,
Inc.'s Current Report on Form 8-K dated November 1, 1995, as amended by Form
8-K/A-1 dated November 1, 1995 and to all references to our Firm included in
this Registration Statement.
Philadelphia, Pennsylvania ARTHUR ANDERSEN LLP
July 31, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Arrow Paper & Supply Company, Inc.
We consent to the incorporation by reference in the registration statement on
Form S-4 of JP Foodservice, Inc. of our report on the combined financial
statements of Arrow Paper & Supply Company and Affiliate as of December 29,
1995, which appears in JP Foodservice's Current Report on Form 8-K dated July
17, 1996 and to the reference to our firm under the heading "Experts" in such
registration statement of JP Foodservice, Inc.
Blum Shapiro & Company, P.C.
West Hartford, Connecticut
July 31, 1997
<PAGE>
[LETTERHEAD OF GOLDMAN SACHS APPEARS HERE]
Exhibit 99.1
August 1, 1997
The Board of Directors
JP Foodservice, Inc.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
Members of the Board:
Reference is made to our opinion letter dated June 30, 1997 with respect to the
proposed merger transaction involving JP Foodservice, Inc. ("JP Foodservice")
and Rykoff-Sexton, Inc. ("Rykoff-Sexton").
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of JP Foodservice in connection with its consideration of
the transaction contemplated therein and is not to be used, circulated, quoted
or otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion as Appendix B to the Joint Proxy Statement/Prospectus of JP Foodservice
and Rykoff-Sexton relating to the proposed merger.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the caption "Summary-Opinions of Financial Advisors to JP Foodservice" and
"The Merger-Opinions of Financial Advisors to JP Foodservice" and to the
inclusion of the foregoing opinion in the Joint Proxy Statement/Prospectus. In
providing such consent, except as may be required by the federal securities
laws, we do not intend that any person other than the Board of Directors rely
upon such opinion. In giving such consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
Goldman, Sachs & Co.
<PAGE>
Exhibit 99.2
The Board of Directors
JP Foodservice, Inc.
9830 Patuxent Woods Drive
Columbia, Maryland 21046
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of JP Foodservice, Inc. ("JP Foodservice") as Appendix C to the Joint
Proxy Statement/Prospectus of JP Foodservice and Rykoff-Sexton, Inc.
("Rykoff-Sexton") relating to the proposed merger transaction involving JP
Foodservice and Rykoff-Sexton and references thereto in such Joint Proxy
Statement/Prospectus under the captions "Summary-Opinions of Financial
Advisors - Opinions of Financial Advisors to JP Foodservice" and "The Merger-
Opinions of Financial Advisors to JP Foodservice." In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under, and we do not admit that we are "experts" for purposes of, the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
SMITH BARNEY INC.
August 1, 1997
<PAGE>
Exhibit 99.3
[LETTERHEAD OF MERRILL LYNCH APPEARS HERE]
We hereby consent to the use of our opinion letter dated June 30, 1997
to the Board of Directors of Rykoff-Sexton, Inc. included as Appendix D to the
Joint Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of Rykoff-Sexton, Inc.
with and into Hudson Acquisition Corp., a wholly owned subsidiary of JP
Foodservice, Inc. and to the references to such opinion in such Joint Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
August 1, 1997
<PAGE>
Exhibit 99.4
[LETTERHEAD OF WASSERSTEIN PERELLA APPEARS HERE]
We hereby consent to the use of our opinion letter dated June 30, 1997
to the Board of Directors of Rykoff-Sexton, Inc. included as Appendix E to the
Joint Proxy Statement/Prospectus which forms a part of the Registration
Statement of Form S-4 relating to the proposed merger of Rykoff-Sexton, Inc.
with and into Hudson Acquisition Corp., a wholly owned subsidiary of JP
Foodservice, Inc. and to the references to such opinion in such Joint Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
WASSERSTEIN PERELLA & CO., INC.
August 1, 1997
<PAGE>
Exhibit 99.6
CONSENT OF JAMES I. MASLON
I hereby consent to the references to, and information with respect to,
me in my capacity as a proposed member of the Board of Directors of the
Registrant wherever such references and information appear in the Registration
Statement, including the Joint Proxy Statement/Prospectus constituting a part
thereof, and all amendments thereof.
JAMES I. MASLON
Wilkes-Barre, Pennsylvania
August 1, 1997
