<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 1, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________________ to
Commission File Number: 0-24954
U.S. Foodservice
(Exact name of registrant as specified in its charter)
Delaware 52-1634568
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9755 Patuxent Woods Drive 21046
Columbia, Maryland (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (410) 312-7100
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____
------
The number of shares of the registrant's common stock, par value $.01 per
share, outstanding at February 11, 2000 was 101,873,236 shares.
1
<PAGE>
U.S. FOODSERVICE
INDEX
-----
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
July 3, 1999 and January 1, 2000 3
Condensed Consolidated Statements of Income
and Comprehensive Income
Three and six months ended December 26, 1998
and January 1, 2000 4
Condensed Consolidated Statements of Cash Flows
Three and six months ended December 26, 1998
and January 1, 2000 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Part II. Other Information
Item 2. Change in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS July 3, January 1,
1999* 2000
---------- ----------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 79,660 $ 66,255
Receivables, net 234,107 408,256
Residual interest on accounts
receivable sold 102,369 102,103
Inventories 428,193 467,978
Other current assets 31,949 44,739
Deferred income taxes 18,853 19,086
---------- ----------
Total current assets 895,131 1,108,417
Property and equipment, net 454,033 468,492
Goodwill and other noncurrent assets 663,710 712,414
---------- ----------
Total assets $2,012,874 $2,289,323
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 698 $ 625
Current obligations under capital leases 6,206 6,202
Accounts payable 393,597 370,047
Accrued expenses 114,690 117,747
---------- ----------
Total current liabilities 515,191 494,621
Noncurrent liabilities
Long-term debt 533,869 793,204
Obligations under capital leases 24,671 22,310
Deferred income taxes 13,051 18,855
Other noncurrent liabilities 96,713 74,168
---------- ----------
Total liabilities 1,183,495 1,403,158
Commitments and contingent liabilities
Stockholders' equity 829,379 886,165
---------- ----------
Total liabilities and stockholders' equity $2,012,874 $2,289,323
========== ==========
</TABLE>
* Amounts were derived from the Company's audited consolidated balance
sheet.
SEE ACCOMPANYING NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
December 26, January 1, December 26, January 1,
1998 2000 1998 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 1,533,089 $ 1,674,952 $ 3,011,459 $ 3,357,835
Cost of sales 1,251,007 1,360,852 2,459,400 2,731,986
----------- ------------ ----------- ------------
Gross profit 282,082 314,100 552,059 625,849
Operating expenses 226,686 246,901 447,694 500,965
Amortization of intangible assets 4,147 4,732 8,077 9,236
----------- ------------ ----------- ------------
Income from operations 51,249 62,467 96,288 115,648
Interest expense and other financing
costs, net 16,476 17,208 32,672 31,849
----------- ------------ ----------- ------------
Income before income taxes
and extraordinary charge 34,773 45,259 63,616 83,799
Provision for income taxes 14,165 17,982 26,096 33,409
----------- ------------ ----------- ------------
Income before extraordinary charge 20,608 27,277 37,520 50,390
Extraordinary charge, net of
income tax benefit 2,748 2,748
----------- ------------ ----------- ------------
Net income and comprehensive income $ 17,860 $ 27,277 $ 34,772 $ 50,390
Basic earnings per common share:
Before extraordinary charge $ 0.22 $ 0.27 $ 0.40 $ 0.50
Extraordinary charge (0.02) - (0.02) -
----------- ------------ ----------- ------------
Basic earnings per common share $ 0.20 $ 0.27 $ 0.38 $ 0.50
=========== ============ =========== ============
Basic weighted average number of shares
of common stock outstanding 95,072,000 101,557,000 94,078,000 101,499,000
Diluted earnings per common share:
Before extraordinary charge $ 0.21 $ 0.27 $ 0.39 $ 0.49
Extraordinary charge (0.02) - (0.02) -
----------- ------------ ----------- ------------
Diluted earnings per common share $ 0.19 $ 0.27 $ 0.37 $ 0.49
=========== ============ =========== ============
Diluted weighted average number of shares
Of common stock outstanding 96,454,000 102,102,000 95,398,000 102,176,000
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
December 26, January 1,
1998 2000
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 34,772 $ 50,390
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 29,984 30,067
Write-off deferred financing costs 1,247
Other adjustments (1,107) 1,527
Changes in working capital, net of effects
from acquisitions (110,530) (258,385)
--------- --------
Net cash used in operating activities (45,634) (176,401)
--------- --------
Cash flows from investing activities
Additions to property and equipment (35,216) (24,234)
Cost of businesses acquired, net of cash acquired (8,438) (73,409)
Proceeds from disposal of property 7,322 7,685
Proceeds from sale of manufacturing division assets 20,755
Other (535) 1,130
--------- --------
Net cash provided by (used in) investing activities (16,112) (88,828)
--------- --------
Cash flows from financing activities
Increase under revolving credit line, net 153,300 255,346
Decrease in long-term debt, net (93,515) (2,658)
Principal payments under capital lease obligations (3,116) (2,365)
Proceeds from employee stock purchases 6,796 2,003
Other 4,950 (502)
--------- --------
Net cash provided by financing activities 68,415 251,824
--------- --------
Net increase (decrease) in cash and cash equivalents 6,669 (13,405)
Cash and cash equivalents:
Beginning of period 57,817 79,660
--------- --------
End of period $ 64,486 $ 66,255
========= ========
</TABLE>
5
<PAGE>
U.S. FOODSERVICE AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements of U.S. Foodservice and its
consolidated subsidiaries (the "Company") at January 1, 2000 and for the three-
month and six-month periods ended December 26, 1998 and January 1, 2000 included
herein are unaudited, but include all adjustments (consisting only of normal
recurring entries) which the Company's management believes to be necessary for
the fair presentation of the financial position, results of operations and cash
flows of the Company as of and for the periods presented. Interim results are
not necessarily indicative of results that may be expected for the full year.
In June 1999, the Company's Board of Directors approved a two-for-one stock
split in the form of a stock dividend paid on August 4, 1999 to stockholders of
record on July 20, 1999. Earnings per share, weighted average shares outstanding
and stock option information included in the accompanying condensed consolidated
financial statements and related notes have been adjusted to reflect this stock
split.
NOTE 2 - ACQUISITIONS
PARKWAY ACQUISITION- Effective December 21, 1999, the Company completed the
acquisition of three companies doing business as Parkway Food Service
("Parkway"), a broadline foodservice distributor located in Greensburg,
Pennsylvania. Under the terms of the acquisition agreement, the Company acquired
certain assets and assumed certain liabilities for 204,894 shares of the
Company's common stock and approximately $3.1 million in cash, payable in
specified increments, the last of which is due June 30, 2001. In addition, the
agreement includes a provision for future cash payments to the selling
shareholders contingent upon achievement of future gross profit and operating
expense performance targets. The transaction was accounted for as a purchase.
Results of Parkway for the period from December 21, 1999 to January 1, 2000 are
included in the Company's condensed consolidated statement of operations.
SUPERIOR ACQUISITION- Effective October 30, 1999, the Company completed the
acquisition of Superior Projects Mfg. Co. Limited Partnership and Christianson
Sales Co. Limited Partnership (collectively, "Superior"), a foodservice
equipment and supplies distributor located in New Brighton, Minnesota. Under the
terms of the acquisition agreement, the Company acquired all of the partnership
interests in Superior in exchange for approximately $59.1 million in cash. The
transaction was accounted for as a purchase. Results of Superior for the period
from October 30, 1999 through January 1, 2000 are included in the Company's
condensed consolidated statement of operations.
SOFCO ACQUISITION- On July 1, 1999, the Company completed the acquisition of
Sofco, Inc. ("Sofco"), a paper product distributor located in Scotia, New York.
The transaction was accounted for as a purchase.
WEBB ACQUISITION- Effective November 1, 1998, the Company completed the
acquisition of Joseph Webb Foods, Inc. ("Webb"), a broadline foodservice
distributor located in Vista, California. The transaction was accounted for as a
purchase.
HAAR ACQUISITION- Effective September 27, 1998, the Company completed the
acquisition of J.H. Haar & Sons, L.L.C. ("Haar"), a broadline foodservice
distributor serving the New York City metropolitan market. The transaction was
accounted for as a pooling of interests. Because Haar's total assets, net assets
and the results of operations were not material to the Company for any of the
fiscal years presented, the transaction was recorded as of September 27, 1998.
The tables below set forth pro forma information, in thousands, for the three-
month and six-month periods ended December 26, 1998 and January 1, 2000 giving
effect to the acquisitions of Parkway, Superior, Sofco, Webb and Haar as if such
acquisitions had been consummated as of June 27, 1998:
6
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended Six Months Ended
----------------------------------- ----------------------------------
December 26, 1998 January 1, 2000 December 26, 1998 January 1, 2000
------------------ --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Net sales $1,646,307 $1,708,636 $3,288,156 $3,456,377
Income before
extraordinary charge $ 20,414 $ 26,699 $ 36,880 $ 50,159
Net income $ 17,666 $ 26,699 $ 34,132 $ 50,159
Income per common share
before extraordinary charge
Basic $ 0.21 $ 0.26 $ 0.38 $ 0.49
Diluted $ 0.21 $ 0.26 $ 0.37 $ 0.49
Net income per common share
Basic $ 0.18 $ 0.26 $ 0.35 $ 0.49
Diluted $ 0.18 $ 0.26 $ 0.35 $ 0.49
</TABLE>
NOTE 3 - EARNINGS PER SHARE
The following table reconciles the Company's basic and diluted weighted average
share amounts used in computations of earnings per share ("EPS") (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- ----------------------------------
December 26, 1998 January 1, 2000 December 26, 1998 January 1, 2000
------------------ --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Basic EPS-
Weighted average
shares outstanding 95,072 101,557 94,078 101,499
Effective of Dilutive Securities:
Warrants 100 90 130 94
Common stock options 1,262 365 1,150 483
Other stock-based compensation
arrangements 20 90 40 100
Diluted EPS-
Weighted average
shares outstanding 96,454 102,102 95,398 102,176
</TABLE>
7
<PAGE>
NOTE 4 - RESTRUCTURING AND RELATED COSTS
On December 23, 1997, Rykoff-Sexton, Inc., the nation's third-largest broadline
foodservice distributor based on net sales, was merged into a wholly owned
subsidiary of U.S. Foodservice (the "acquisition"). In connection with the
acquisition, the Company recorded a $56.7 million restructuring charge during
the year ended June 27, 1998. The restructuring costs consisted primarily of
$26.8 million for change in control payments to former executives of Rykoff-
Sexton, $12.2 million for severance and benefits, $10.8 million for future lease
commitments and $6.9 million for idle facility and facility closure costs
related to the Company's plan to consolidate and realign certain operating units
and consolidate various overhead functions. As of January 1, 2000, execution of
the plan is substantially complete. To date, the Company has experienced no
significant changes to the restructuring plan. As of January 1, 2000, the
Company has completed the closure of all facilities included in the
restructuring plan.
In connection with Rykoff-Sexton's acquisition of US Foodservice, Inc. in May
1996, Rykoff-Sexton recorded a restructuring charge of $57.6 million ($35.7
million after tax) in the nine-week fiscal transition period ended June 29,
1996. The restructuring charge consisted of severance and employee benefits of
$10.7 million, lease related costs of $20.2 million and other closure and
integration costs of $26.7 million.
The following table summarizes the status of the Company's restructuring
reserves:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Severence Lease Idle Facility
and Benefits Commitments Cost Totals
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance July 3, 1999 $ 2,200 $ 19,000 $ 3,500 $ 24,700
Fiscal six-month period utilization (500) (7,500) (2,800) (10,800)
------- -------- ------- --------
Balance January 1, 2000 $ 1,700 $ 11,500 $ 700 $ 13,900
------- -------- ------- --------
- ---------------------------------------------------------------------------------------------------
</TABLE>
The Company expects to expend $2.3 million during the remainder of fiscal 2000.
The balance relates primarily to remaining lease commitments that are being paid
in various amounts through fiscal 2008.
NOTE 5 - RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activity. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
In accordance with the pronouncement, the Company will adopt SFAS No. 133, as
amended, in fiscal 2001. The Company is currently evaluating the impact, if any,
that SFAS No. 133 will have on its consolidated financial statements.
NOTE 6 - CONTINGENCIES
From time to time, the Company is involved in litigation and proceedings arising
out of the ordinary course of business. There are no pending material legal
proceedings or environmental investigations to which the Company is a party or
to which the property of the Company is subject as of the date of this report.
NOTE 7 - INDUSTRY SEGMENT INFORMATION
The Company has two reportable segments: broadline foodservice distribution
("Broadline") and other services ("Other Services"). Broadline, consisting of
approximately 40 operating locations, distributes over 43,000 food and non-food
related products to over 130,000 foodservice customers, including restaurants,
hotels, casinos, healthcare institutions and schools. Other Services represent
manufacturing operations, including the manufacturing operations purchased as
part of the acquisition of Sofco in the fourth quarter of fiscal 1999, and
contract and design services. In August 1998, the Company outsourced its Rykoff-
Sexton manufacturing division by selling the assets to a third party. Contract
and design services primarily involve the design of restaurants and eating
establishments.
8
<PAGE>
<TABLE>
<CAPTION>
Corporate
Other and
Broadline Services Eliminations Consolidated
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Three Months Ended January 1, 2000
Net sales $1,653,377 $21,575 $ 0 $1,674,952
Depreciation and amortization 15,017 214 0 15,231
Income (loss) from operations 74,439 1,110 (13,082) 62,467
Interest expense and other
financing costs, net 17,207 1 0 17,208
Income (loss) before income
taxes and extraordinary charge 57,186 1,155 (13,082) 45,259
Capital expenditures 10,421 218 0 10,639
Three Months Ended December 26, 1998
Net sales $1,517,104 $15,985 $ 0 $1,533,089
Depreciation and amortization 14,883 48 0 14,931
Income (loss) from operations 61,922 788 (11,461) 51,249
Interest expense and other
financing 16,476 0 0 16,476
costs, net
Income (loss) before income
taxes and extraordinary charge 45,406 788 (11,461) 34,733
Capital expenditures 17,552 52 0 17,604
Six Months Ended January 1, 2000
Net sales $3,316,919 $40,916 $ 0 $3,357,835
Depreciation and amortization 29,715 352 0 30,067
Income (loss) from operations 141,532 1,776 (27,660) 115,648
Interest expense and other
financing costs, net 31,855 (6) 0 31,849
Income (loss) before income
taxes and extraordinary charge 109,631 1,828 (27,660) 83,799
Total assets 2,255,863 33,460 0 2,289,323
Capital expenditures 24,016 218 0 24,234
Six Months Ended December 26, 1998
Net sales $2,976,089 $51,829 ($16,459) $3,011,459
Depreciation and amortization 29,453 531 0 29,984
Income (loss) from operations 116,326 3,412 (23,450) 96,288
Interest expense and other
financing costs, net 32,672 0 0 32,672
Income (loss) before income
taxes and extraordinary charge 83,654 3,412 (23,450) 63,616
Total assets 1,996,243 24,948 0 2,021,191
Capital expenditures 35,145 71 0 35,216
</TABLE>
Corporate and eliminations consist of inter-segment sales and inter-company
accounts.
NOTE 8 - SUBSEQUENT EVENTS
On February 8, 2000, the Company announced its decision to close its San
Fransisco operation and to reduce the number of employees throughout the
Company. The one-time costs related to the closure of the San Fransisco
location are estimated to be $20 million and include restructuring costs, asset
impairment charges, facility disposition costs, severance costs and expected
operating losses of the San Fransisco operation in the third quarter of fiscal
2000. Approximately $10 million of this total will be recorded as
restructuring and asset impairment costs in the third quarter of fiscal 2000.
In addition, the Company estimates that it will record a $2 million pre-tax
restructuring charge in the third quarter of fiscal 2000 related to the
employee reductions.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. All statements regarding the Company's expected financial position and
operating results, its business strategy, its financing plans, its ability to
realize anticipated cost savings and other benefits from acquisitions and its
ability to recover acquisition-related costs are forward-looking statements.
These statements are subject to risks and uncertainties that could cause the
Company's actual results to differ materially. Such risks and uncertainties
include the sensitivity of the Company's business to national and regional
economic conditions, the effects of inflation and deflation in food prices, the
highly competitive markets in which the Company operates and the Company's
ability to complete acquisitions and to integrate acquired businesses. The
Company's Annual Report on Form 10-K for the fiscal year ended July 3, 1999,
filed with the Securities and Exchange Commission on October 1, 1999, discusses
some of the important factors that could cause the Company's actual results to
differ materially from those in such forward-looking statements.
Net Sales
- ---------
The Company's net sales of $1.7 billion for the three months ended January 1,
2000 (the "2000 fiscal quarter") represented a 9.3% increase from the $1.5
billion net sales level achieved for the three months ended December 26, 1998
(the "1999 fiscal quarter"). For the six months ended January 1, 2000 (the "2000
fiscal six-month period"), net sales increased 11.5% to $3.4 billion from $3.0
billion for the six months ended December 26, 1998 (the "1999 fiscal six-month
period"). The acquisitions of J.H. Haar & Sons, L.L. C. ("Haar") and Joseph Webb
Foods, Inc. ("Webb") in the second quarter of fiscal 1999, Sofco, Inc. ("Sofco")
in the fourth quarter of fiscal 1999, and Superior Foods ("Superior") and
Parkway Food Service ("Parkway") in the 2000 fiscal quarter accounted for
approximately 5% of the net sales growth in the 2000 fiscal quarter and 6% of
the net sales growth in the 2000 fiscal six-month period.
Growth in both independent "street" sales and multi-unit "chain" account sales
contributed to the remaining increase in net sales. Street sales increased
13.6% and chain account sales increased 2.8% in the 2000 fiscal quarter.
Primarily as a result of the Company's sales training initiatives, street sales
as a percentage of net sales increased to 62.0% in the 2000 fiscal quarter from
59.6% in the 1999 fiscal quarter.
Gross Profit
- ------------
The Company's gross profit margins increased to 18.8% in the 2000 fiscal quarter
and to 18.6% in the 2000 fiscal six-month period from gross profit margins of
18.4% and 18.3% in the 1999 fiscal quarter and the 1999 fiscal six-month period,
respectively. The increases were primarily attributable to an increase in street
sales as a percentage of net sales, more effective purchasing programs and an
increase in proprietary brand sales. Gross margins are generally higher for
street accounts than for chain accounts and for proprietary brand products than
for national brand products of comparable quality. Proprietary brand product
sales increased by 9.3% in the 2000 fiscal quarter over the prior corresponding
quarter primarily due to the shift in sales mix towards more street sales and to
the launch of the Company's consolidated line of proprietary products in the
fourth quarter of fiscal 1999.
Operating Expenses
- ------------------
Operating expenses increased by 8.9%, or $20.2 million, in the 2000 fiscal
quarter and by 11.9%, or $53.3 million, in the 2000 fiscal six-month period over
the 1999 fiscal quarter and 1999 fiscal six-month period, respectively. As a
percentage of net sales, operating expenses decreased to 14.7% in the 2000
fiscal quarter from 14.8% in the 1999 fiscal quarter and were 14.9% in both the
2000 fiscal six-month period and the 1999 fiscal six-month period. The decrease
for the 2000 fiscal quarter was primarily attributable to increased sales force
productivity, greater efficiency in operations and the effect of spreading
administrative expenses over a larger base of net sales.
Amortization of Intangible Assets
- ----------------------------------------------------
Amortization of goodwill and other intangible assets totaled $4.7 million in the
2000 fiscal quarter and $9.2 million in the 2000 fiscal six-month period,
compared to $4.1 million in the 1999 fiscal quarter and $8.1 million in the 1999
fiscal six-month period. The increases were attributable to the goodwill
recorded in connection with the Webb, Sofco, Superior and Parkway acquisitions.
Income from Operations
- ----------------------
Income from operations increased to $62.5 million in the 2000 fiscal quarter
from $51.2 million in the 1999 fiscal quarter and to $115.6 million in the 2000
fiscal six-month period from $96.3 million in the 1999 fiscal six-month period.
The increases were primarily attributable to the increases in net sales and
gross profit margin in the current periods.
10
<PAGE>
Interest Expense and Other Financing Costs, Net
- -----------------------------------------------
Interest expense and other financing costs increased $0.7 million, or 4.4%, in
the 2000 fiscal quarter primarily due to an increase in the Company's average
debt levels, higher interest rates and increased investment in working capital.
Interest expense and other financing costs decreased $0.8 million, or 2.5%, for
the 2000 fiscal six-month period primarily due to interest expense savings in
the first quarter of fiscal 2000. These savings resulted from the redemption
and retirement in fiscal 1999 of $120.2 million principal amount of Rykoff-
Sexton's 8 7/8% senior subordinated notes due 2003.
Provision for Income Taxes
- ---------------------------
During the 2000 fiscal quarter and 2000 fiscal six-month period, the Company
recognized income tax expense at an effective rate of 39.7% and 39.9%,
respectively, compared to 40.8% and 41.0% for the prior corresponding periods.
Extraordinary Charge
- --------------------
During the 1999 fiscal quarter, the Company recorded an extraordinary charge of
$2.7 million, net of a $1.8 million income tax benefit, related to the
redemption and retirement of $75.1 million principal amount of Rykoff-Sexton's 8
7/8% senior subordinated notes due 2003. The extraordinary charge consisted of a
$3.3 million redemption premium paid to note holders and the write-off of $1.2
million of unamortized deferred financing costs.
Liquidity and Capital Resources
- -------------------------------
As of January 1, 2000, the Company's total long-term indebtedness, including
current portion, was $822.3 million, with an overall weighted average interest
rate of 6.9%, excluding deferred financing costs. Long-term borrowing increased
by $250.3 million during the 2000 fiscal six-month period primarily as a result
of increases in working capital and net cash of $73.4 million used in
acquisitions.
The Company's working capital balance, excluding current portion of long-term
debt, of $620.6 million at January 1, 2000 increased by $233.8 million from the
balance at July 3, 1999. The higher working capital balance was primarily
attributable to increased net sales, increased inventory levels in preparation
for new orders starting in the third fiscal quarter, working capital related to
acquisitions and seasonal increases in inventory and receivables. The Company
expects its working capital investment to decrease by over $125 million over its
next two fiscal quarters.
In the 2000 fiscal quarter, the Company announced a stock repurchase program.
Through January 1, 2000, the Company has repurchased a total of 113,400 shares
of common stock for $1.9 million.
The Company made $24.2 million of capital expenditures in the 2000 fiscal six-
month period, primarily for facility expansion projects. During the fiscal 2000
six-month period, the Company realized $7.7 million from the sale of redundant
facilities. The Company estimates that assets held for sale at January 1, 2000
will generate proceeds in excess of $10.5 million.
From time to time, the Company acquires other foodservice businesses. Any such
business may be acquired for cash, common stock of the Company, or a combination
of cash and common stock.
As of January 1, 2000, $705.5 million of borrowings and $19.5 million of letters
of credit were outstanding under the Company's credit facility and an additional
$25.0 million remained available to finance the Company's working capital needs
and to meet the Company's other liquidity requirements. The Company also has
an uncommitted line of credit with a financial institution and committed lines
of credit with two financial institutions available for short-term borrowings.
The combined maximum available under these lines of credit is $100.0 million, of
which the Company had $60.0 million outstanding at January 1, 2000. In addition,
the Company sells $353.0 million of accounts receivable on a revolving basis
under accounts receivable securitization arrangements. The Company believes that
the combination of the cash flow generated from operations, additional leasing
activity, sales of duplicate assets and borrowings under the credit facility
will be sufficient to enable it to finance its growth and meet its currently
projected capital expenditures and other liquidity requirements for at least the
next twelve months.
Information Systems and the Impact of the Year 2000
- ---------------------------------------------------
Through the first weeks of calendar year 2000, the Company completed the
transition from calendar year 1999 to calendar year 2000 without any major
problems or disruptions as a result of Year 2000 issues. The Company believes
that it was able to complete all modifications necessary to be Year 2000
compliant and is not aware of any substantial issues or problems with in-house
systems, products sold to the Company's customers, or systems and services
provided by vendors. To date, Year 2000 problems have had a minimal effect on
the Company's business. However, the Company will continue to maintain
contingency plans with respect to its third-party relationships. Although the
Company has not been made a party to any litigation or arbitration proceeding to
date involving its products or services and related to Year 2000 compliance
issues, the Company may be required in the future to defend its products or
services in such proceedings, or to negotiate resolutions of claims based on
Year 2000 issues.
11
<PAGE>
Changes in Accounting Standards
- -------------------------------
During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activity. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
In accordance with the pronouncement, the Company will adopt SFAS No. 133, as
amended, in fiscal 2001. The Company is currently evaluating the impact, if any,
that SFAS No. 133 will have on its consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's major market risk exposure is to changing interest rates. The
Company's policy is to manage interest rates through the use of a combination of
fixed and floating rate debt. The Company uses interest rate swap, cap and
collar contracts to manage its exposure to fluctuations in interest rates on
floating long-term debt. The Company has implemented management monitoring
processes designed to minimize the impact of sudden and sustained changes in
interest rates. As of January 1, 2000, the Company's long-term debt consisted
of fixed rate and variable rate debt of $30.9 million and $791.4 million,
respectively. Substantially all of the Company's floating rate debt is based on
LIBOR. As of January 1, 2000, the Company had effectively capped its interest
rate exposure at 6.85% on $100 million of floating-rate debt through September
24, 2001, at 5.97% on approximately $70.0 million of its floating-rate debt
through March 2000, and at 7.0% on $129.0 million of floating-rate debt through
November 1, 2003.
The Company sells accounts receivable on a revolving basis under accounts
receivable securitization arrangements. The proceeds received from sales of
receivables under these arrangements, which are accounted for under SFAS No.
125, are based to a large extent on LIBOR. The Company also uses fixed-rate
capital leases to finance certain of its trucks and trailers.
The Company currently does not use foreign currency forward contracts or
commodity contracts and currently does not have any material foreign currency
exposure.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) Effective December 21, 1999, U.S. Foodservice issued 204,894 shares of
its common stock valued at approximately $3.4 million to the former stockholders
of the Parkway companies, David L. Reese and James H. Reese, in consideration of
U.S. Foodservice's acquisition of the Parkway companies. The Parkway companies
include Parkway Provision Company, Reese Associates, Inc. and Diamond Meat and
Food Service Company. See Note 2 to the financial statements appearing elsewhere
in this report. In connection with this issuance, U.S. Foodservice relied on the
exemption from registration under the Securities Act of 1933 provided in Section
4(2) of the Act. U.S. Foodservice did not engage in any advertising or general
solicitation in connection with the offer and sale of the securities. In
addition, U.S. Foodservice provided or made available information concerning
U.S. Foodservice and the common stock, obtained investment representations from
the selling stockholders and placed restrictive legends on the certificates
evidencing such securities.
Item 4. Submission of Matters to a Vote of Security Holders
(a) U.S. Foodservice held its 1999 annual meeting of stockholders on
November 18, 1999.
(b) The following sets forth information regarding each matter voted
upon at the 1999 annual meeting. There were 101,499,523 shares of common stock
outstanding as of the record date for, and entitled to vote at, the 1999 annual
meeting.
Proposal No. 1. The stockholders approved election of both of the
nominees to the board of directors. The tabulation of votes on this proposal is
as follows:
<TABLE>
Nominee For Withheld
------- --- ---------
<S> <C> <C>
Mark P. Kaiser 87,507,062 155,216
Jeffrey D. Serkes 87,474,164 188,114
</TABLE>
12
<PAGE>
Proposal No. 2. The stockholders approved a proposal to amend U.S.
Foodservice's restated certificate of incorporation to increase the number of
authorized shares of capital stock from 155,000,000 shares to 405,000,000 shares
and to increase the number of authorized shares of common stock from 150,000,000
shares to 400,000,000 shares. The tabulation of votes on this proposal is as
follows:
<TABLE>
<S> <C>
For 62,582,072
Against 24,986,149
Abstain 94,057
Total Shares Voted 87,662,278
Broker Non-Votes 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The Company files herewith the following exhibits:
4.1 Restated Certificate of Incorporation of the Company, as amended.
Filed as Exhibit 4.1 to Amendment No. 1 to U.S. Foodservice's
Registration Statement on Form S-3 (No. 333-93453) and incorporated
herein by reference.
10.1 Loan Agreement, dated as of November 24, 1999, among U.S.
Foodservice, Inc. and JP Foodservice Distributors, Inc., as
Borrowers, U.S. Foodservice and the subsidiaries identified on the
signature pages thereto, as Guarantors, and Wachovia Bank, N.A, as
Lender.
10.2 Loan Agreement, dated as of December 3, 1999, among U.S.
Foodservice, Inc. and JP Foodservice Distributors, Inc., as
Borrowers, U.S. Foodservice and the subsidiaries identified on the
signature pages thereto, as Guarantors, and Wells Fargo Bank, as
Lender.
10.3 Loan Agreement, dated as of December 10, 1999, among U.S.
Foodservice, Inc. and JP Foodservice Distributors, Inc., as
Borrowers, U.S. Foodservice and the subsidiaries identified on the
signature pages thereto, as Guarantors, and First Union National
Bank, as Lender.
10.4.1 Loan Agreement, dated as of January 20, 2000, among U.S.
Foodservice, Inc. and JP Foodservice Distributors, Inc., as
Borrowers, U.S. Foodservice and the subsidiaries identified on the
signature pages thereto, as Guarantors, and Fleet National Bank, as
Lender.
10.4.2 Revolving Credit Note, dated as of January 20, 2000, made by U.S.
Foodservice, Inc. and JP Foodservice Distributors, Inc. and payable
to the order of Fleet National Bank.
10.5 Addendum To Employment Agreement, dated as of December 23, 1999,
between U.S. Foodservice and James L. Miller.
10.6 Addendum To Employment Agreement, dated as of December 23, 1999,
between U.S. Foodservice and Mark P. Kaiser.
10.7 Addendum To Employment Agreement, dated as of December 23, 1999,
between U.S. Foodservice and David M. Abramson.
27.1 Financial Data Schedule.
(b) The following Current Reports on Form 8-K were filed by U.S.
Foodservice during the period covered by this report:
<TABLE>
<CAPTION>
Date of Report Item Reported
- -------------- -------------
<S> <C>
October 4, 1999 Item 5 (amendment and restatement of rights agreement)
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
November 2, 1999 Item 5 (announcement of stock repurchase program)
</TABLE>
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. FOODSERVICE
(Registrant)
Date: February 15, 2000 /s/ George T. Megas
-----------------------------------------
George T. Megas, Executive Vice President
and Chief Financial Officer
(Duly Authorized and Principal
Financial Officer)
15
<PAGE>
EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of
November 24, 1999 among U.S. Foodservice, Inc., a Delaware corporation, and JP
Foodservice Distributors, Inc., a Delaware corporation (collectively, the
"Borrowers"), U.S. Foodservice, a Delaware corporation (the "Parent") and those
subsidiaries of the Borrowers identified on the signature pages hereto (together
with each other subsidiary which may become a party hereto by execution of a
joinder agreement and the Parent, the "Guarantors"); and Wachovia Bank, N.A.
("Lender").
BACKGROUND
WHEREAS, Borrowers and Lender desire to enter into a revolving credit
facility pursuant to which Lender will make credit available to Borrowers for
the purposes hereinafter set forth; and
WHEREAS, as a condition to making such revolving credit facility available
to Borrowers, Lender has required, among other things, the Guarantors to
guarantee all of the Borrowers' obligations arising under this Agreement and any
other instruments or agreements executed pursuant hereto (collectively, the
"Loan Documents").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS
1.1. Applicable Margin
"Applicable Margin" shall mean, for purposes of calculating (i) the
applicable interest rate for any day for any Eurodollar Loan or (ii) the
applicable rate for the Facility Fee for any day for purposes of Section 2.3
hereof, the applicable margin corresponding to the Total Debt Ratio described
below in effect as of the most recent Determination Date:
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Applicable Applicable
Margin Margin
Pricing Total Debt for for
Level Ratio Eurodollar Loans Facility Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equal to or less than
II 4.0 to 1.0 but greater 112.5 bps 25.0 bps
than 3.5 to 1.0
- -------------------------------------------------------------------------------------------------
I Equal to or less than 102.5 bps 25.0 bps
3.5 to 1.0
- -------------------------------------------------------------------------------------------------
</TABLE>
Determination of the appropriate Applicable Margins based on the Total Debt
Ratio shall be made as of each Determination Date. The Total Debt Ratio in
effect as of a Determination Date shall establish the Applicable Margins that
shall be effective as of the date designated by Lender as the Applicable Margin
Change Date. Lender shall determine the Applicable Margins as of each
Determination Date occurring after the Facility Closing Date and shall promptly
notify Borrowers of the Applicable Margins so determined and of the related
Applicable Margin Change Date. Such determinations by Lender of the Applicable
Margins shall be rebuttably presumptive evidence thereof. As of the Facility
Closing Date and until the first Applicable Margin Date, (a) the Applicable
Margin for purposes of calculating the applicable interest rate for any
Eurodollar Loan shall be 112.5 bps and (b) the Applicable Margin for purposes of
calculating the Facility Fee shall be 25 bps. All of the terms in this Section
1.1 shall have the meanings set forth in the Existing Credit Agreement (as
defined below), except for the terms Applicable Margin and Facility Fee, which
shall have the meanings set forth in this Agreement.
1.2. Existing Credit Agreement
"Existing Credit Agreement" shall mean that certain 364-Day Credit
Agreement dated as of December 23, 1997 among Borrowers, the lenders that are
parties thereto from time to time and Bank of America, N.A., as Administrative
Agent, Banc of America Securities LLC (formerly NationsBanc Montgomery
Securities LLC and NationsBank Montgomery Securities, Inc.) and Chase
Securities, Inc., as Co-Arrangers, The Chase Manhattan Bank, as Syndication
Agent, and Bank of America, NT & SA, as Documentation Agent.
1.3. Existing Guaranty Agreement
"Existing Guaranty Agreement" shall mean that certain 364-Day Guaranty
Agreement dated as of December 23, 1997 among the Guarantors and Bank of
America, N.A., as agent.
2
<PAGE>
1.4. Incorporated Definitions
The defined terms contained in Article I of the Existing Credit
Agreement (hereinafter referred to collectively as the "Incorporated
Definitions") which are used in the Incorporated Loan Provisions, the
Incorporated Representations and Warranties, the Incorporated Covenants, the
Incorporated Events of Default, the Incorporated Guaranty and the Incorporated
Miscellaneous Provisions (all as defined below, collectively, the "Incorporated
Terms") are hereby incorporated by reference into this Agreement to the same
extent and with the same effect as if set forth fully herein; provided, however,
that all references to the Administrative Agent and the Lenders in the
Incorporated Terms shall be deemed to be references to Lender.
2. LOANS
2.1. Revolving Credit Loan
Subject to the terms and conditions hereof, during the period
beginning on the date hereof (the "Facility Closing Date") and ending on the
Revolving Period Termination Date, as the same may be extended pursuant to the
Incorporated Loan Provisions (as hereinafter defined), Lender shall make
advances (all such advances, collectively, the "Revolving Credit Loan") to
Borrowers in such amounts as Borrowers shall request from time to time, provided
that the maximum aggregate outstanding principal amount of the Revolving Credit
Loan shall at no time exceed $25,000,000 (the "Commitment"). Each such advance
hereunder may consist of Base Rate Loans or Eurodollar Loans (or a combination
thereof), as Borrowers may request. Each such advance shall be made upon written
or e-mail notice of Borrowers received by the Lender not later than 1:00 PM
Eastern Time three (3) Business Days prior to the date of the proposed advance,
and the amount of such proposed advance shall not be in an amount of less than
$100,000. Each such notice shall specify whether such advance shall consist of
Base Rate Loans, Eurodollar Loans or a combination thereof, and for each
Eurodollar Loan that is requested, the Interest Period with respect thereto.
Borrowers may borrow, repay and reborrow, subject to the limitations set forth
above. The aggregate outstanding principal amount of the Revolving Credit Loan
as of the Revolving Period Termination Date, together with all accrued and
unpaid interest thereon, shall be due and payable in full on the earlier of (i)
364 days following the Revolving Period Termination Date, as the same may have
been extended as aforesaid, and (ii) the Maturity Date; provided, however, that
under no circumstances (including without limitation one or more extensions of
the Revolving Period Termination Date pursuant to the Incorporated Loan
Provisions referred to in Section 2.2 below) shall the Maturity Date be later
than December 23, 2002.
3
<PAGE>
2.2. Interest, Extension of Term and Additional Provisions
Reference is made to the provisions contained in Sections 2.01(d) and
2.01(e), Sections 3.03 through 3.09 and Sections 4.04 through 4.06 of the
Existing Credit Agreement (hereinafter referred to as the "Incorporated Loan
Provisions"). The Incorporated Loan Provisions are hereby incorporated by
reference into this Agreement to the same extent and with the same effect as if
set forth fully herein and shall inure to the benefit of Lender, without giving
effect to any waiver, amendment, modification or replacement of the Existing
Credit Agreement or any term or provision thereof occurring subsequent to the
date of this Agreement, except to the extent otherwise specifically provided in
Section 7 hereof; provided, however, that (a) all references in the Existing
Credit Agreement to the Applicable Margin shall be deemed to be references to
the Applicable Margin as defined in Section 1.1 hereof; (b) the references to
the Closing Date (within the definition of Revolving Period Termination Date
referenced in Section 2.01(e) and as used in Section 3.09(g) of the Existing
Credit Agreement), shall be deemed to be references to the Facility Closing
Date; (c) the references to Loans and Revolving Loans in the Existing Credit
Agreement shall be deemed to be references to the Revolving Credit Loan as
defined herein; (d) the Prime Rate shall be Lender's prime rate in effect at its
principal office; (e) the reference to the Credit Documents (within the
definition of Credit Obligations) shall be deemed to be a reference to the Loan
Documents hereunder; and (f) the reference to "this Agreement" in Section
3.09(a) of the Existing Credit Agreement shall be deemed to be a reference to
this Agreement.
2.3. Facility Fee
In consideration of the Commitment, Borrowers agree to pay to Lender a
facility fee (the "Facility Fee"): (a) for the period from the Facility Closing
Date to the Revolving Period Termination Date, on the aggregate Commitment, and
(b) for the period from the Revolving Period Termination Date to the Maturity
Date (as defined in the Existing Credit Agreement), on the aggregate Revolving
Credit Loan outstanding, computed at a per annum rate equal to the Applicable
Margin for each day during the applicable period. The Facility Fee shall be
payable quarterly in arrears on the fifteenth (15/th/) day of each January,
April, July and October and on the Maturity Date for the immediately preceding
fiscal quarter (or portion thereof).
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS
Reference is made to the Existing Credit Agreement and the
representations and warranties of Borrowers contained in Article IX of the
Existing Credit Agreement (hereinafter referred to as the "Incorporated
Representations and Warranties") and the covenants contained in Articles VI, VII
and VIII of the Existing Credit Agreement (hereinafter referred to as the
"Incorporated
4
<PAGE>
Covenants"). The Incorporated Representations and Warranties and the
Incorporated Covenants are hereby incorporated by reference into this Agreement
to the same extent and with the same effect as if set forth fully herein and
shall inure to the benefit of Lender, without giving effect to any waiver,
amendment, modification or replacement of the Existing Credit Agreement or any
term or provision thereof occurring subsequent to the date of this Agreement,
except to the extent otherwise specifically provided in Section 7 hereof;
provided, however, that (a) the reference to "this Agreement" and the Credit
Documents in Articles VI and VII and in the definition of Material Adverse
Effect in the Existing Credit Agreement shall be deemed to be references to this
Agreement and the Loan Documents, respectively, and (b) the references to
Default and Event of Default shall be modified as provided in Section 5 hereof.
4. CONDITIONS PRECEDENT
4.1. Conditions Precedent to First Advance of the Revolving Credit Loan on
or after the Date Hereof
The obligation of Lender to make the first advance of the Revolving
Credit Loan on or after the date hereof is subject to the satisfaction (in the
reasonable judgment of Lender), at or before the date of such advance, of the
following conditions precedent:
4.1.1. Representations and Warranties; Compliance
All representations and warranties made by Borrowers in this Agreement
or any of the other Loan Documents and by the Guarantors in the Incorporated
Guaranty shall be true and correct in all material respects on and as of the
date of such advance with the same force and effect as though such
representations and warranties had been made on and as of the date of such
advance. All of the agreements, terms, covenants, and conditions required by
this Agreement to be complied with and performed by Borrowers prior to the date
of such advance shall have been complied with and performed.
4.1.2. Documents
Borrowers shall deliver to Lender copies of all documents and other
items reasonably requested by Lender evidencing Borrowers' and the Guarantors'
authority to enter into and perform this Agreement and the other Loan Documents.
4.1.3. Executed Loan Documents
Borrowers shall deliver to Lender fully executed copies of all the
Loan Documents.
5
<PAGE>
4.2. Conditions Precedent to the Second and Each Subsequent Advance of the
Revolving Credit Loan
The obligation of Lender to make the second and each subsequent
advance of the Revolving Credit Loan is subject to the satisfaction (in the
reasonable judgment of Lender), as of the date of each such advance, of the
conditions precedent specified in Section 4.1.1 hereof.
5. EVENTS OF DEFAULT AND REMEDIES
Reference is made to the Existing Credit Agreement and the events of
default and remedies set forth in Article X of the Existing Credit Agreement
(hereinafter referred to as the "Incorporated Events of Default"). The
Incorporated Events of Default are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein and shall inure to the benefit of Lender, without giving effect to any
waiver, amendment, modification or replacement of the Existing Credit Agreement
or any term or provision thereof occurring subsequent to the date of this
Agreement, except to the extent otherwise specifically provided in Section 7
hereof; provided, however, that all references to "Loans," "this Agreement" or
the "Guaranty Agreement" in Article X of the Existing Credit Agreement shall be
deemed to be references to the Revolving Credit Loan, this Agreement and the
Incorporated Guaranty, respectively.
6. GUARANTY
Reference is made to the Existing Guaranty Agreement and the
agreements of the Guarantors contained in Section 1 through Section 11 and
Section 13 through Section 21 of the Existing Guaranty Agreement (hereinafter
referred to as the "Incorporated Guaranty"). The Incorporated Guaranty is hereby
incorporated by reference into this Agreement to the same extent and with the
same effect as if set forth fully herein and shall inure to the benefit of
Lender, without giving effect to any waiver, amendment, modification or
replacement of the Existing Guaranty Agreement or any term or provision thereof
occurring subsequent to the date of this Agreement, except to the extent
otherwise specifically provided in Section 7 hereof; provided, however, that (a)
the references to the Credit Agreement, the Credit Documents, the Loan, the
Commitments and to "this Guaranty Agreement" thereunder shall be deemed to be
references to this Agreement, the Loan Documents, the Revolving Credit Loan, the
Commitment and this Section 6, respectively (except that any cross-references in
the Existing Guaranty Agreement to Sections and definitions in the Existing
Credit Agreement shall not be modified by the foregoing proviso), (b) the notice
address set forth in Section 17(a) of the Existing Guaranty Agreement shall be
deemed to be 9755 Patuxent Woods Drive, Columbia, Maryland 21046, Attention of
Treasurer
6
<PAGE>
(Facsimile No. 410-309-6296), and (c) the notice address set forth in Section
17(b) of the Existing Guaranty Agreement shall be deemed to be Wachovia Bank,
N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303, Attention of Vice
President (Facsimile No. 404-332-6898).
7. MISCELLANEOUS PROVISIONS
Reference is made to the Existing Credit Agreement and the
miscellaneous provisions contained in Article XII of the Existing Credit
Agreement (hereinafter referred to as the "Incorporated Miscellaneous
Provisions"). The Incorporated Miscellaneous Provisions (and all other relevant
provisions of the Existing Credit Agreement related thereto) are hereby
incorporated by reference into this Agreement to the same extent and with the
same effect as if set forth fully herein and shall inure to the benefit of
Lender, without giving effect to any waiver, amendment, modification or
replacement of the Existing Credit Agreement or any term or provision thereof
occurring subsequent to the date of this Agreement, except to the extent
otherwise specifically provided in the following provisions of this Section 7;
provided, however, that the notice address set forth in Section 12.01(a) of the
Existing Credit Agreement shall be deemed to be 9755 Patuxent Woods Drive,
Columbia, Maryland 21046, Attention of Treasurer (Facsimile No. 410-309-6296)
and provided, further, that the notice address set forth in Section 12.01(b) of
the Existing Credit Agreement shall be deemed to be Wachovia Bank, N.A., 191
Peachtree Street, N.E., Atlanta, Georgia 30303, Attention of Vice President
(Facsimile No. 404-332-6898).
In the event a waiver is granted under the Existing Credit Agreement
or the existing Guaranty Agreement or an amendment or modification is executed
with respect to the Existing Credit Agreement or the Existing Guaranty
Agreement, and such waiver, amendment and/or modification affects the
Incorporated Terms, then such waiver, amendment or modification shall be
effective with respect to the Incorporated Terms as incorporated by reference
into this Agreement only if consented to in writing by Lender. In the event of
any replacement of the Existing Credit Agreement or the Existing Guaranty
Agreement with a similar credit facility or guaranty agreement, as applicable
(in either case, the "New Facility"), the provisions contained in the New
Facility which correspond to the Incorporated Terms shall be deemed to be the
"Incorporated Terms" hereunder only if consented to in writing by Lender and, if
such consent is not granted or if the Existing Credit Agreement or the Existing
Guaranty Agreement is terminated and not replaced, then the definitions,
representations and warranties, covenants, events of default and miscellaneous
provisions contained in Articles I, IX, VI, VII, VIII, X and XII, the loan
provisions contained in Sections 2.01(d) and 2.01(e), Sections 3.03 through 3.09
and Sections 4.04 through 4.06 of the Existing Credit Agreement, and the
guaranty provisions contained in Sections 1 through Section 11 and Section 13
through Section 21 of the Existing Guaranty Agreement (together with any
waivers,
7
<PAGE>
modifications or amendments approved in accordance with this Section 7) shall
continue to be the Incorporated Terms hereunder.
The Borrowers and Guarantors hereby represent and warrant to the
Lender that they have (i) initiated a review and assessment of their respective
businesses and operations that could be adversely affected by the risk that
computer applications used by the Borrowers and the Guarantors may be unable to
recognize and perform properly date sensitive functions involving certain dates
prior to and any date after December 31, 1999 (the "Year 2000 Problem"), (ii)
developed contingency plans for addressing the Year 2000 Problem and (iii) made
inquiry regarding the ability of their principal suppliers and customers to
address the Year 2000 Problem. The Borrowers and the Guarantors are taking what
they consider to be reasonable steps to prevent major interruptions in their
respective businesses and operations due to the Year 2000 Problem, which steps
are expected to minimize but not eliminate the risk of the Year 2000 Problem.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
BORROWERS:
U.S. FOODSERVICE, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
JP FOODSERVICE DISTRIBUTORS, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
GUARANTORS:
U.S. FOODSERVICE
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
CHRISTIANSON SALES CO. LIMITED
PARTNERSHIP
By: USF/Christianson Sales GP
Holdings, LLC
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
SUPERIOR PRODUCTS MFG. CO.
LIMITED PARTNERSHIP
By: USF/Superior Products GP
Holdings, LLC
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
9
<PAGE>
E&H DISTRIBUTING CO.
HARRISON'S PRIME MEATS &
PROVISIONS, INC.
ILLINOIS FRUIT & PRODUCE CORP.
TRANS-PORTE, INC.
EL PASADO, INC.
RITUALS COFFEE COMPANY
ROSELI PRODUCTS CORPORATION
SQUERI FOOD SERVICE, INC.
NEVADA BAKING COMPANY, INC.
OUTWEST MEAT COMPANY
HILLTOP HEARTH BAKERIES, INC.
CROSS VALLEY FARMS, INC.
BIGGERS BROTHERS, INC.
BRB HOLDINGS, INC.
F.H. BEVEVINO & COMPANY, INC.
FOOD DISTRIBUTION CONCEPTS, INC.
JOHN SEXTON & CO.
KING'S FOODSERVICE, INC.
ROANOKE RESTAURANT SERVICE, INC.
TARGETED SPECIALTY SERVICES, INC.
U.S. FOODSERVICE OF ATLANTA, INC.
U.S. FOODSERVICE OF ILLINOIS, INC.
U.S. SYSTEMS DISTRIBUTION, INC.
WHITE SWAN, INC.
J.H. HAAR & SONS, L.L.C.
U.S. FOODSERVICE OF BUFFALO, INC.
SOUTHTOWNS SEAFOOD, INC.
SOFCO, INC.
S.&O. PROPERTY CORPORATION
SQP, INC.
USF/CHRISTIANSON SALES GP
HOLDINGS, LLC
USF/CHRISTIANSON SALES LP
HOLDINGS, LLC
NEXT DAY GOURMET, INC.
USF/SUPERIOR PRODUCTS GP
HOLDINGS, LLC
USF/SUPERIOR PRODUCTS LP
HOLDINGS, LLC
JOSEPH WEBB FOODS, INC.
PACIFIC JADE, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
for each of the foregoing
10
<PAGE>
LENDER:
WACHOVIA BANK, N.A.
By: /s/ Fitzhugh L. Wickham
--------------------------
Name: Fitzhugh L. Wickham
Title: Vice President
11
<PAGE>
EXHIBIT 10.2
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of December
3, 1999 among U.S. Foodservice, Inc., a Delaware corporation formerly known as
Rykoff-Sexton, Inc., and JP Foodservice Distributors, Inc., a Delaware
corporation (collectively, the "Borrowers"), U.S. Foodservice, a Delaware
corporation formerly known as JP Foodservice, Inc. (the "Parent") and those
subsidiaries of the Borrowers identified on the signature pages hereto (together
with each other subsidiary which may become a party hereto by execution of a
joinder agreement and the Parent, the "Guarantors"); and Wells Fargo Bank,
National Association ("Lender").
BACKGROUND
WHEREAS, Borrowers and Lender desire to enter into a revolving credit
facility pursuant to which Lender will make credit available to Borrowers for
the purposes hereinafter set forth; and
WHEREAS, as a condition to making such revolving credit facility available
to Borrowers, Lender has required, among other things, the Guarantors to
guarantee all of the Borrowers' obligations arising under this Agreement and any
other instruments or agreements executed pursuant hereto (collectively, the
"Loan Documents").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS
1.1. Applicable Margin
"Applicable Margin" shall mean, for purposes of calculating (i) the
applicable interest rate for any day for any Eurodollar Loan or (ii) the
applicable rate for the Facility Fee for any day for purposes of Section 2.3
hereof, the applicable margin corresponding to the Total Debt Ratio described
below in effect as of the most recent Determination Date:
<PAGE>
- -------------------------------------------------------------------------------
Applicable Applicable
Margin Margin
Pricing Total Debt for for
Level Ratio Eurodollar Loans Facility Fee
- -------------------------------------------------------------------------------
Equal to or less
II than 4.0 to 1.0 but 112.5 bps 25.0 bps
greater than 3.5 to
1.0
- -------------------------------------------------------------------------------
I Equal to or less 102.5 bps 25.0 bps
than 3.5 to 1.0
- -------------------------------------------------------------------------------
Determination of the appropriate Applicable Margins based on the Total Debt
Ratio shall be made as of each Determination Date. The Total Debt Ratio in
effect as of a Determination Date shall establish the Applicable Margins that
shall be effective as of the date designated by Lender as the Applicable Margin
Change Date. Lender shall determine the Applicable Margins as of each
Determination Date occurring after the Facility Closing Date and shall promptly
notify Borrowers of the Applicable Margins so determined and of the related
Applicable Margin Change Date. Such determinations by Lender of the Applicable
Margins shall be rebuttably presumptive evidence thereof. As of the Facility
Closing Date and until the first Applicable Margin Date, (a) the Applicable
Margin for purposes of calculating the applicable interest rate for any
Eurodollar Loan shall be 112.5 bps and (b) the Applicable Margin for purposes of
calculating the Facility Fee shall be 25 bps. All of the terms in this Section
1.1 shall have the meanings set forth in the Existing Credit Agreement (as
defined below), except for the terms Applicable Margin and Facility Fee, which
shall have the meanings set forth in this Agreement.
1.2. Existing Credit Agreement
"Existing Credit Agreement" shall mean that certain 364-Day Credit
Agreement dated as of December 23, 1997 among Borrowers, the lenders that are
parties thereto from time to time and Bank of America, N.A., as Administrative
Agent, Bank of America, LLC (formerly NationsBanc Montgomery Securities LLC and
NationsBank Montgomery Securities, Inc.) and Chase Securities, Inc., as Co-
Arrangers, The Chase Manhattan Bank, as Syndication Agent, and Bank of America,
NT & SA, as Documentation Agent, without giving effect to any waiver, amendment,
modification or replacement of such 364-Day Credit Agreement or any term or
provision thereof occurring subsequent to (or otherwise not reflected in) the
copy thereof most recently delivered to the Lender prior to the date of this
Agreement, except to the extent otherwise specifically provided in Section 7
hereof.
2
<PAGE>
1.3. Existing Guaranty Agreement
"Existing Guaranty Agreement" shall mean that certain 364-Day Guaranty
Agreement dated as of December 23, 1997 among the Guarantors and Bank of
America, N.A., as agent.
1.4. Incorporated Definitions
The defined terms contained in Article I of the Existing Credit
Agreement (hereinafter referred to collectively as the "Incorporated
Definitions") which are used in other Incorporated Definitions, the Incorporated
Loan Provisions, the Incorporated Representations and Warranties, the
Incorporated Covenants, the Incorporated Events of Default, the Incorporated
Guaranty and the Incorporated Miscellaneous Provisions (all as defined below,
including the Incorporated Definitions, being collectively referred to herein as
the "Incorporated Terms") are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein; provided, however, that, as used in this Agreement (including the
Incorporated Terms), the following terms have the meanings set forth below:
(i) All references to the Administrative Agent, the Lenders and
the Required Lenders in the Incorporated Terms shall be
deemed to be references to the Lender.
(ii) All references in the Existing Credit Agreement to the
Applicable Margin shall be deemed to be references to the
Applicable Margin as defined in Section 1.1 hereof.
(iii) All references to Loans and Revolving Loans shall be deemed
to be references to advances under the Revolving Credit Loan
as defined herein.
(iv) All references to the "Prime Rate" shall be deemed to be
references to the rate announced from time to time by the
Lender as its "base" or "prime" rate of interest (it being
understood that such rate is solely for reference and may
not be the lowest rate charged by the Lender to its
customers).
(v) All references to Default and Event of Default shall be
modified as provided in Section 5 hereof.
(vi) All references to the Commitments shall be deemed to be
references to the Commitment.
(vii) All references to the "Maturity Date" shall mean November
22, 2000, as the same may be extended with the written
consent of the Lender.
3
<PAGE>
2. LOANS
2.1. Revolving Credit Loan
Subject to the terms and conditions hereof, during the period
beginning on the date hereof (the "Facility Closing Date") and ending on the
Revolving Period Termination Date, as the same may be extended pursuant to the
Incorporated Loan Provisions (as hereinafter defined), Lender shall make
advances (all such advances, collectively, the "Revolving Credit Loan") to
Borrowers in such amounts as Borrowers shall request from time to time, provided
that the maximum aggregate outstanding principal amount of the Revolving Credit
Loan shall at no time exceed $15,000,000 (the "Commitment"). Each such advance
hereunder may consist of Base Rate Loans or Eurodollar Loans (or a combination
thereof), as Borrowers may request. Each such advance shall be made upon
written or e-mail notice of Borrowers received by the Lender not later than 1:00
PM Eastern Time three (3) Business Days prior to the date of the proposed
advance, and the amount of such proposed advance shall not be in an amount of
less than $100,000. Each such notice shall specify whether such advance shall
consist of Base Rate Loans, Eurodollar Loans or a combination thereof, and for
each Eurodollar Loan that is requested, the Interest Period with respect
thereto. Borrowers may borrow, repay and reborrow, subject to the limitations
set forth above. The aggregate outstanding principal amount of the Revolving
Credit Loan as of the Revolving Period Termination Date, together with all
accrued and unpaid interest thereon, shall be due and payable in full on the
earlier of (i) 364 days following the Revolving Period Termination Date, as the
same may have been extended as aforesaid, and (ii) the Maturity Date; provided,
however, that under no circumstances (including without limitation one or more
extensions of the Revolving Period Termination Date pursuant to the Incorporated
Loan Provisions referred to in Section 2.2 below) shall the Maturity Date be
later than December 23, 2002.
2.2. Interest, Extension of Term and Additional Provisions
Reference is made to the provisions contained in Sections 2.01(d) and
2.01(e), Sections 3.03 through 3.07, Section 3.09 and Sections 4.04 through 4.06
of the Existing Credit Agreement (hereinafter referred to as the "Incorporated
Loan Provisions"). The Incorporated Loan Provisions are hereby incorporated by
reference into this Agreement to the same extent and with the same effect as if
set forth fully herein and shall inure to the benefit of Lender; provided,
however, that (a) the references to the Closing Date (within the definition of
Revolving Period Termination Date referenced in Section 2.01(e) and as used in
Section 3.09(g) of the Existing Credit Agreement) shall be deemed to be
references to the Facility Closing Date; (b) the reference to the Credit
Documents (within the definition of Credit Obligations) shall be deemed to be a
reference to the Loan Documents hereunder;
4
<PAGE>
and (c) the reference to "this Agreement" in Section 3.09(a) of the Existing
Credit Agreement shall be deemed to be a reference to this Agreement.
2.3. Facility Fee
In consideration of the Commitment, Borrowers agree to pay to Lender a
facility fee (the "Facility Fee"): (a) for the period from the Facility Closing
Date to the Revolving Period Termination Date, on the aggregate Commitment, and
(b) for the period from the Revolving Period Termination Date to the Maturity
Date (as defined in the Existing Credit Agreement), on the aggregate Revolving
Credit Loan outstanding, computed at a per annum rate equal to the Applicable
Margin for each day during the applicable period. The Facility Fee shall be
payable quarterly in arrears on the fifteenth (15/th/) day of each January,
April, July and October and on the Maturity Date for the immediately preceding
fiscal quarter (or portion thereof).
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS
Reference is made to the Existing Credit Agreement and the
representations and warranties of Borrowers contained in Article IX of the
Existing Credit Agreement (hereinafter referred to as the "Incorporated
Representations and Warranties") and the covenants contained in Articles VI, VII
and VIII of the Existing Credit Agreement (hereinafter referred to as the
"Incorporated Covenants"). The Incorporated Representations and Warranties and
the Incorporated Covenants are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein and shall inure to the benefit of Lender; provided, however, that the
reference to "this Agreement" and the Credit Documents in Articles VI and VII
and in the definition of Material Adverse Effect in the Existing Credit
Agreement shall be deemed to be references to this Agreement and the Loan
Documents, respectively.
4. CONDITIONS PRECEDENT
The obligation of Lender to make any advance of the Revolving Credit
Loan is subject to the satisfaction (in the reasonable judgment of Lender), at
or before the date of such advance, of the following conditions precedent:
4.1. Representations and Warranties; Compliance
All representations and warranties made by Borrowers in this Agreement
or any of the other Loan Documents and by the Guarantors in the Incorporated
Guaranty shall be true and correct in all material respects on and as of the
date of such advance with the same force and effect as though such
representations and warranties had been made on and as of the date of such
5
<PAGE>
advance. All of the agreements, terms, covenants, and conditions required by
this Agreement to be complied with and performed by Borrowers prior to the date
of such advance shall have been complied with and performed. No Default or Event
of Default shall exist and be continuing either prior to or immediately after
giving effect to such advance.
4.2. Documents
With respect to the first such advance only, Borrowers shall deliver
to Lender copies of all documents and other items reasonably requested by Lender
evidencing Borrowers' and the Guarantors' authority to enter into and perform
this Agreement and the other Loan Documents.
4.3. Executed Loan Documents
With respect to the first such advance only, Borrowers shall deliver
to Lender fully executed copies of all the Loan Documents.
5. EVENTS OF DEFAULT AND REMEDIES
Reference is made to the Existing Credit Agreement and the events of
default and remedies set forth in Article X of the Existing Credit Agreement
(hereinafter referred to as the "Incorporated Events of Default"). The
Incorporated Events of Default are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein and shall inure to the benefit of Lender; provided, however, that all
references to "this Agreement" or the "Guaranty Agreement" in Article X of the
Existing Credit Agreement shall be deemed to be references to this Agreement,
including Incorporated Terms, and the Incorporated Guaranty, respectively. In
addition to the Events of Default incorporated by reference, the occurrence of
any Event of Default under the Existing Credit Agreement shall constitute an
Event of Default under this Agreement and the Incorporated Terms.
6. GUARANTY
Reference is made to the Existing Guaranty Agreement and the
agreements of the Guarantors contained in Section 1 through Section 11 and
Section 13 through Section 21 of the Existing Guaranty Agreement (hereinafter
referred to as the "Incorporated Guaranty"). The Incorporated Guaranty is
hereby incorporated by reference into this Agreement to the same extent and with
the same effect as if set forth fully herein and shall inure to the benefit of
Lender; provided, however, that (a) the references to the Credit Agreement, the
Credit Documents and to "this Guaranty Agreement" thereunder shall be deemed to
be references to this Agreement, the Loan Documents and this Section 6,
respectively
6
<PAGE>
(except that any cross-references in the Existing Guaranty Agreement to Sections
and definitions in the Existing Credit Agreement shall not be modified by the
foregoing proviso), (b) the notice address set forth in Section 17(a) of the
Existing Guaranty Agreement shall be deemed to be 9755 Patuxent Woods Drive,
Columbia, Maryland 21046, Attention of Vice President -Finance and Controller
(Facsimile No. 410-309-6296), and (c) the notice address set forth in Section
17(b) of the Existing Guaranty Agreement shall be deemed to be Wells Fargo Bank,
National Association, Sixth & Marquette, MAC-N9305-031, Minneapolis, Minnesota
55479, Attention of David Kopolow, Vice President/Sr. Banker (Facsimile No. 612-
667-2276).
7. MISCELLANEOUS PROVISIONS
Reference is made to the Existing Credit Agreement and the
miscellaneous provisions contained in Article XII of the Existing Credit
Agreement (hereinafter referred to as the "Incorporated Miscellaneous
Provisions"). The Incorporated Miscellaneous Provisions (and all other relevant
provisions of the Existing Credit Agreement related thereto) are hereby
incorporated by reference into this Agreement to the same extent and with the
same effect as if set forth fully herein and shall inure to the benefit of
Lender; provided, however, that the notice address set forth in Section 12.01(a)
of the Existing Credit Agreement shall be deemed to be 9755 Patuxent Woods
Drive, Columbia, Maryland 21046, Attention of Vice President - Finance and
Controller (Facsimile No. 410-309-6296) and provided, further, that the notice
address set forth in Section 12.01(b) of the Existing Credit Agreement shall be
deemed to be Wells Fargo Bank, National Association, Sixth & Marquette, MAC-
N9305-031, Minneapolis, Minnesota 55479, Attention of David Kopolow, Vice
President/Sr. Banker (Facsimile No. 612-667-2276).
In the event a waiver is granted under the Existing Credit Agreement
or the existing Guaranty Agreement or an amendment or modification is executed
with respect to the Existing Credit Agreement or the Existing Guaranty
Agreement, and such waiver, amendment and/or modification affects the
Incorporated Terms, then such waiver, amendment or modification shall be
effective with respect to the Incorporated Terms as incorporated by reference
into this Agreement only if consented to in writing by Lender. In the event of
any replacement of the Existing Credit Agreement or the Existing Guaranty
Agreement with a similar credit facility or guaranty agreement, as applicable
(in either case, the "New Facility"), the provisions contained in the New
Facility which correspond to the Incorporated Terms shall be deemed to be the
"Incorporated Terms" hereunder only if consented to in writing by Lender and, if
such consent is not granted or if the Existing Credit Agreement or the Existing
Guaranty Agreement is terminated and not replaced, then the definitions,
representations and warranties, covenants, events of default and miscellaneous
provisions contained in Articles I, IX, VI, VII, VIII, X and XII, the loan
provisions contained in Sections 2.01(d) and 2.01(e), Sections 3.03 through
3.07, Section 3.09 and Sections 4.04 through 4.06 of the Existing Credit
Agreement,
7
<PAGE>
and the guaranty provisions contained in Section 1 through Section 11 and
Section 13 through Section 21 of the Existing Guaranty Agreement (together with
any waivers, modifications or amendments approved in accordance with this
Section 7) shall continue to be the Incorporated Terms hereunder.
In the event of a conflict between any of the Incorporated Terms and
the terms of this Agreement set forth at length herein, the terms set forth
herein shall govern.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
BORROWERS:
U.S. FOODSERVICE, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
JP FOODSERVICE DISTRIBUTORS, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
8
<PAGE>
GUARANTORS:
U.S. FOODSERVICE
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
CHRISTIANSON SALES CO. LIMITED
PARTNERSHIP
By: USF/Christianson Sales GP
Holdings, LLC
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
SUPERIOR PRODUCTS MFG. CO.
LIMITED PARTNERSHIP
By: USF/Superior Products GP
Holdings, LLC
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
9
<PAGE>
E&H DISTRIBUTING CO.
HARRISON'S PRIME MEATS &
PROVISIONS, INC.
ILLINOIS FRUIT & PRODUCE CORP.
TRANS-PORTE, INC.
EL PASADO, INC.
RITUALS COFFEE COMPANY
ROSELI PRODUCTS CORPORATION
SQUERI FOOD SERVICE, INC.
NEVADA BAKING COMPANY, INC.
OUTWEST MEAT COMPANY
HILLTOP HEARTH BAKERIES, INC.
CROSS VALLEY FARMS, INC.
BIGGERS BROTHERS, INC.
BRB HOLDINGS, INC.
F.H. BEVEVINO & COMPANY, INC.
FOOD DISTRIBUTION CONCEPTS, INC.
JOHN SEXTON & CO.
KING'S FOODSERVICE, INC.
ROANOKE RESTAURANT SERVICE, INC.
TARGETED SPECIALTY SERVICES, INC.
U.S. FOODSERVICE OF ATLANTA, INC.
U.S. FOODSERVICE OF ILLINOIS, INC.
U.S. SYSTEMS DISTRIBUTION, INC.
WHITE SWAN, INC.
J.H. HAAR & SONS, L.L.C.
U.S. FOODSERVICE OF BUFFALO, INC.
SOUTHTOWNS SEAFOOD, INC.
SOFCO, INC.
S.&O. PROPERTY CORPORATION
SQP, INC.
USF/CHRISTIANSON SALES GP
HOLDINGS, LLC
USF/CHRISTIANSON SALES LP
HOLDINGS, LLC
NEXT DAY GOURMET, INC.
USF/SUPERIOR PRODUCTS GP
HOLDINGS, LLC
USF/SUPERIOR PRODUCTS LP
HOLDINGS, LLC
JOSEPH WEBB FOODS, INC.
PACIFIC JADE, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
for each of the foregoing
10
<PAGE>
LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ David Y. Kopolow
----------------------
Name: David Y. Kopolow
Title: Vice President
By: /s/ Mark H. Halldorson
------------------------
Name: Mark H. Halldorson
Title: Officer
11
<PAGE>
EXHIBIT 10.3
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of December
10, 1999 among U.S. Foodservice, Inc., a Delaware corporation, and JP
Foodservice Distributors, Inc., a Delaware corporation (collectively, the
"Borrowers"); U.S. Foodservice, a Delaware corporation (the "Parent") and those
subsidiaries of the Borrowers identified on the signature pages hereto (together
with each other subsidiary which may become a party hereto by execution of a
joinder agreement and the Parent, the "Guarantors"); and First Union National
Bank, a national banking association ("Lender").
BACKGROUND
WHEREAS, Borrowers and Lender desire to enter into a revolving credit
facility pursuant to which Lender will make credit available to Borrowers for
the purposes hereinafter set forth; and
WHEREAS, as a condition to making such revolving credit facility available
to Borrowers, Lender has required, among other things, the Guarantors to
guarantee all of the Borrowers' obligations arising under this Agreement and any
other instruments or agreements executed pursuant hereto (collectively, the
"Loan Documents").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS
1.1. Applicable Margin
"Applicable Margin" shall mean, for purposes of calculating (i) the
applicable interest rate for any day for any Eurodollar Loan or (ii) the
applicable rate for the Facility Fee for any day for purposes of Section 2.3
hereof, the applicable margin corresponding to the Total Debt Ratio described
below in effect as of the most recent Determination Date:
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Applicable Applicable
Margin Margin
Pricing Total Debt for for
Level Ratio Eurodollar Loans Facility Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equal to or less than
II 4.0 to 1.0 but greater 112.5 bps 25.0 bps
than 3.5 to 1.0
- -------------------------------------------------------------------------------------------------
I Equal to or less than 102.5 bps 25.0 bps
3.5 to 1.0
- -------------------------------------------------------------------------------------------------
</TABLE>
Determination of the appropriate Applicable Margins based on the Total Debt
Ratio shall be made as of each Determination Date. The Total Debt Ratio in
effect as of a Determination Date shall establish the Applicable Margins that
shall be effective as of the date designated by Lender as the Applicable Margin
Change Date. Lender shall determine the Applicable Margins as of each
Determination Date occurring after the Facility Closing Date and shall promptly
notify Borrowers of the Applicable Margins so determined and of the related
Applicable Margin Change Date. Such determinations by Lender of the Applicable
Margins shall be rebuttably presumptive evidence thereof. As of the Facility
Closing Date and until the first Applicable Margin Change Date, (a) the
Applicable Margin for purposes of calculating the applicable interest rate for
any Eurodollar Loan shall be 112.5 bps and (b) the Applicable Margin for
purposes of calculating the Facility Fee shall be 25 bps. All of the terms in
this Section 1.1 shall have the meanings set forth in the Existing Credit
Agreement (as defined below), except for the terms Applicable Margin and
Facility Fee, which shall have the meanings set forth in this Agreement.
1.2. Existing Credit Agreement
"Existing Credit Agreement" shall mean that certain 364-Day Credit
Agreement dated as of December 23, 1997 among Borrowers, the lenders that are
parties thereto from time to time and Bank of America, N.A., as Administrative
Agent, Bank of America, LLC (formerly NationsBanc Montgomery Securities LLC and
NationsBank Montgomery Securities, Inc.) and Chase Securities, Inc., as Co-
Arrangers, The Chase Manhattan Bank, as Syndication Agent, and Bank of America,
NT & SA, as Documentation Agent.
2
<PAGE>
1.3. Existing Guaranty Agreement
"Existing Guaranty Agreement" shall mean that certain 364-Day Guaranty
Agreement dated as of December 23, 1997 among the Guarantors and Bank of
America, N.A., as agent.
1.4. Incorporated Definitions
The defined terms contained in Article I of the Existing Credit
Agreement (hereinafter referred to collectively as the "Incorporated
Definitions") which are used in the Incorporated Loan Provisions, the
Incorporated Representations and Warranties, the Incorporated Covenants, the
Incorporated Events of Default, the Incorporated Guaranty and the Incorporated
Miscellaneous Provisions (all as defined below, collectively, the "Incorporated
Terms") are hereby incorporated by reference into this Agreement to the same
extent and with the same effect as if set forth fully herein; provided, however,
that all references to the Administrative Agent, the Required Lenders and the
Lenders in the Incorporated Terms shall be deemed to be references to Lender,
and, provided further, that all other terms used but not otherwise defined in
this Agreement shall have the meanings set forth in the Existing Credit
Agreement.
2. LOANS
2.1. Revolving Credit Loan
Subject to the terms and conditions hereof, during the period
beginning on the date hereof (the "Facility Closing Date") and ending on the
Revolving Period Termination Date, Lender shall make advances (all such
advances, collectively, the "Revolving Credit Loan") to Borrowers in such
amounts as Borrowers shall request from time to time, provided that the maximum
aggregate outstanding principal amount of the Revolving Credit Loan shall at no
time exceed $25,000,000 (the "Commitment"). Each such advance hereunder may
consist of Base Rate Loans or Eurodollar Loans (or a combination thereof), as
Borrowers may request. Each such advance shall be made upon written or e-mail
notice of Borrowers received by the Lender not later than 1:00 PM Eastern Time
three (3) Business Days prior to the date of the proposed advance, and the
amount of such proposed advance shall not be in an amount of less than $100,000.
Each such notice shall specify whether such advance shall consist of Base Rate
Loans, Eurodollar Loans or a combination thereof, and for each Eurodollar Loan
that is requested, the Interest Period with respect thereto. If Borrowers shall
fail to specify in any such notice (i) an applicable Interest Period in the case
of a Eurodollar Loan, then such notice shall be deemed to be a request for an
Interest Period of one month, or (ii) the type of Revolving Credit Loan
requested, then such notice shall be deemed to be a request for a Base Rate Loan
hereunder. Borrowers may borrow, repay and reborrow, subject to the limitations
set forth above. The aggregate outstanding
3
<PAGE>
principal amount of the Revolving Credit Loan as of the Revolving Period
Termination Date, together with all accrued and unpaid interest thereon, shall
be due and payable in full on the Revolving Period Termination Date. For
purposes of this Agreement, the "Revolving Period Termination Date" shall mean
the date which is 364 days after the Facility Closing Date.
2.2. Interest and Additional Provisions
Reference is made to the provisions contained in Section 2.01(d),
Section 2.03, Section 3.01, Section 3.02(a), Sections 3.03 through 3.09 and
Sections 4.04 through 4.06 of the Existing Credit Agreement (hereinafter
referred to as the "Incorporated Loan Provisions"). The Incorporated Loan
Provisions are hereby incorporated by reference into this Agreement to the same
extent and with the same effect as if set forth fully herein and shall inure to
the benefit of Lender, without giving effect to any waiver, amendment,
modification or replacement of the Existing Credit Agreement or any term or
provision thereof occurring subsequent to the date of this Agreement, except to
the extent otherwise specifically provided in Section 7 hereof; provided,
however, that (a) all references in the Existing Credit Agreement to the
Applicable Margin shall be deemed to be references to the Applicable Margin as
defined in Section 1.1 hereof; (b) the reference to the Closing Date (as used in
Section 3.09(g) of the Existing Credit Agreement) shall be deemed to be a
reference to the Facility Closing Date; (c) the references to Loans and
Revolving Loans in the Existing Credit Agreement shall be deemed to be
references to the Revolving Credit Loan as defined herein; (d) the Prime Rate
shall be Lender's prime rate in effect at its principal office; (e) the Federal
Funds Effective Rate shall be, for any day, the interest rate reported on
Telerate page 5 as the opening federal funds rate; if, for any reason, such rate
is not then available, then the Federal Funds Effective Rate shall mean a daily
rate which is determined by Lender to be the rate at which federal funds are
being offered for sale in the national federal funds market at opening; and the
Federal Funds Effective Rate for holidays or weekends shall be the same as the
rate for the most immediate preceding Business Day; (f) the Eurodollar Rate
shall mean for the Interest Period for each Eurodollar Loan comprising part of
the same borrowing (including conversions, extensions and renewals), the per
annum rate for U.S. dollar deposits with a maturity equal to the number of
months corresponding to such Interest Period, as reported on Telerate page 3750
as of 11:00 a.m., London time, on the second London business day before the
relevant Interest Period begins (or if not so reported, then as determined by
the Lender from another recognized source or interbank quotation); (g) the
references to the Credit Documents (within the definition of Credit Obligations
and in Sections 3.01 and 3.09(f) of the Existing Credit Agreement) shall be
deemed to be a reference to the Loan Documents hereunder; (h) the reference to
"this Agreement" in Section 3.09(a) of the Existing Credit Agreement shall be
deemed to be a reference to this Agreement; (i) the reference in Section 3.03 of
the Existing Credit Agreement to Section 5.02(d) of the Existing Credit
Agreement shall be deemed deleted; (j) the
4
<PAGE>
reference in Section 3.04 of the Existing Credit Agreement to Section 2.01(b) of
the Existing Credit Agreement and the reference in Section 3.07 of the Existing
Credit Agreement to Section 2.01 of the Existing Credit Agreement shall each be
deemed to be a reference to Section 2.1 of this Agreement; (k) the references to
the Revolving Committed Amount (as used in Section 2.03 of the Existing Credit
Agreement) shall be deemed to be references to the Commitment as defined in
Section 1.1 hereof; and (l) the references to Competitive Loans and the
conversion or prepayment thereof in Sections 2.03 and 3.02(a) of the Existing
Credit Agreement shall be deemed deleted.
2.3. Facility Fee
In consideration of the Commitment, Borrowers agree to pay to Lender
a facility fee (the "Facility Fee") for the period from the Facility Closing
Date to the Revolving Period Termination Date, on the aggregate Commitment,
computed at a per annum rate equal to the Applicable Margin for each day during
the applicable period. The Facility Fee shall be payable quarterly in arrears on
the fifteenth (15th) day of each January, April, July and October and on the
Revolving Period Termination Date for the immediately preceding fiscal quarter
(or portion thereof).
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS
3.1. Incorporation by Reference
Reference is made to the Existing Credit Agreement and the
representations and warranties of Borrowers contained in Article IX of the
Existing Credit Agreement (hereinafter referred to as the "Incorporated
Representations and Warranties") and the covenants contained in Articles VI, VII
and VIII of the Existing Credit Agreement (hereinafter referred to as the
"Incorporated Covenants"). The Incorporated Representations and Warranties and
the Incorporated Covenants are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein and shall inure to the benefit of Lender, without giving effect to any
waiver, amendment, modification or replacement of the Existing Credit Agreement
or any term or provision thereof occurring subsequent to the date of this
Agreement, except to the extent otherwise specifically provided in Section 7
hereof; provided, however, that, except as set forth in Section 3.2 hereof, in
Articles VI, VII, VIII and IX of the Existing Credit Agreement, (a) the
reference to "this Agreement" and the Credit Documents (and the references to
the preceding two terms in the definition of Material Adverse Effect) in the
Existing Credit Agreement shall be deemed to be references to this Agreement and
the Loan Documents, respectively; (b) the references to Default and Event of
Default shall be modified as provided in
5
<PAGE>
Section 5 hereof; (c) the references to the Closing Date shall be deemed to be
references to the Facility Closing Date; and (d) the references to the Guaranty
Agreement shall be deemed to be references to the Incorporated Guaranty; and (e)
the references to the Commitments shall be deemed to be references to the
Commitment.
3.2. Exceptions to Section 3.1 Proviso
The proviso set forth in Section 3.1 hereof shall not be applicable
to (a) the Schedules to the Existing Credit Agreement and the representations,
warranties and/or covenants concerning such Schedules, which shall continue to
set forth information and be provided as of December 23, 1997, respectively; (b)
the phrases "as of the date of this Agreement" or "on the date hereof" or words
of similar import in Articles VI, VII, VIII and IX of the Existing Credit
Agreement, which shall continue to be references to December 23, 1997; (c) the
references to the Closing Date in Sections 8.01(a) and 8.01(c) of the Existing
Credit Agreement, which shall continue to be references to December 23, 1997;
(d) the representation and warranty regarding Unrestricted Subsidiaries in
Section 9.02 of the Existing Credit Agreement, which shall continue to be
provided as of December 23, 1997; (e) the representation and warranty set forth
in the last sentence of Section 9.08 of the Existing Credit Agreement, which
shall continue to be provided as of December 23, 1997 and to refer to the
Existing Credit Agreement and the Credit Documents thereunder; (f) the Existing
Affiliate Agreements delivered to the Lender pursuant to Section 9.09(c) of the
Existing Credit Agreement, which shall be those agreements as in existence on
December 23, 1997; (g) the representation and warranty set forth in the last
sentence of Section 9.12(a) of the Existing Credit Agreement, which shall
continue to be provided as of the most recent valuation date prior to December
23, 1997; and (h) the representation and warranty set forth in the fourth
sentence of Section 9.13 and in Section 9.19 of the Existing Credit Agreement,
which shall continue to be provided as of December 23, 1997.
4. CONDITIONS PRECEDENT
4.1. Conditions Precedent to First Advance of the Revolving Credit Loan on
or after the Date Hereof
The obligation of Lender to make the first advance of the Revolving
Credit Loan on or after the date hereof is subject to the satisfaction (in the
reasonable judgment of Lender), at or before the date of such advance, of the
following conditions precedent:
4.1.1. Representations and Warranties; Compliance
All representations and warranties made by Borrowers in this
Agreement (including the Incorporated Representations and Warranties) or any of
the other Loan Documents and by the Guarantors in the Incorporated Guaranty
6
<PAGE>
shall be true and correct in all material respects on and as of the date of such
advance with the same force and effect as though such representations and
warranties had been made on and as of the date of such advance. All of the
agreements, terms, covenants, and conditions required by this Agreement to be
complied with and performed by Borrowers prior to the date of such advance shall
have been complied with and performed.
4.1.2. Documents
Borrowers shall deliver to Lender copies of all documents and other
items reasonably requested by Lender evidencing Borrowers' and the Guarantors'
authority to enter into and perform this Agreement and the other Loan Documents.
4.1.3. Executed Loan Documents
Borrowers shall deliver to Lender fully executed copies of all the
Loan Documents.
4.2. Conditions Precedent to the Second and Each Subsequent Advance of the
Revolving Credit Loan
The obligation of Lender to make the second and each subsequent
advance of the Revolving Credit Loan is subject to the satisfaction (in the
reasonable judgment of Lender), as of the date of each such advance, of the
conditions precedent specified in Section 4.1.1 hereof.
5. EVENTS OF DEFAULT AND REMEDIES
Reference is made to the Existing Credit Agreement and the events of
default and remedies set forth in Article X of the Existing Credit Agreement
(hereinafter referred to as the "Incorporated Events of Default"). The
Incorporated Events of Default are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein and shall inure to the benefit of Lender, without giving effect to any
waiver, amendment, modification or replacement of the Existing Credit Agreement
or any term or provision thereof occurring subsequent to the date of this
Agreement, except to the extent otherwise specifically provided in Section 7
hereof; provided, however, that all references to "Loans," "this Agreement," the
"Guaranty Agreement," the "Credit Documents" or the "Commitments" in Article X
of the Existing Credit Agreement shall be deemed to be references to the
Revolving Credit Loan, this Agreement, the Incorporated Guaranty, the Loan
Documents, and the Commitment, respectively, and provided further, that the
reference in Section 10.02 of the Existing Credit Agreement to the "voting
procedures in Section 12.07" shall be deemed deleted. In addition, any Event of
Default under the Existing Credit Agreement shall be an Event of Default
hereunder.
7
<PAGE>
6. GUARANTY
Reference is made to the Existing Guaranty Agreement and the
agreements of the Guarantors contained in Section 1 through Section 11 and
Section 13 through Section 21 of the Existing Guaranty Agreement (hereinafter
referred to as the "Incorporated Guaranty"). The Incorporated Guaranty is
hereby incorporated by reference into this Agreement to the same extent and with
the same effect as if set forth fully herein and shall inure to the benefit of
Lender, without giving effect to any waiver, amendment, modification or
replacement of the Existing Guaranty Agreement or any term or provision thereof
occurring subsequent to the date of this Agreement, except to the extent
otherwise specifically provided in Section 7 hereof; provided, however, that (a)
the references to the Credit Agreement, the Credit Documents, the Loan, the
Commitments and to "this Guaranty Agreement" thereunder shall be deemed to be
references to this Agreement, the Loan Documents, the Revolving Credit Loan, the
Commitment and this Section 6, respectively (except that any cross-references in
the Existing Guaranty Agreement to Sections and definitions in the Existing
Credit Agreement shall not be modified by the foregoing proviso), (b) the notice
address set forth in Section 17(a) of the Existing Guaranty Agreement shall be
deemed to be 9755 Patuxent Woods Drive, Columbia, Maryland 21046, Attention of
Treasurer (Facsimile No. 410-309-6296), and (c) the notice address set forth in
Section 17(b) of the Existing Guaranty Agreement shall be deemed to be First
Union National Bank, Attn: Portfolio Management, 1970 Chain Bridge Road, 3
South, McLean, VA 22102 (Facsimile: 703/760-6300).
7. MISCELLANEOUS PROVISIONS
Reference is made to the Existing Credit Agreement and the
miscellaneous provisions contained in Article XII of the Existing Credit
Agreement (hereinafter referred to as the "Incorporated Miscellaneous
Provisions"). The Incorporated Miscellaneous Provisions (and all other relevant
provisions of the Existing Credit Agreement related thereto) are hereby
incorporated by reference into this Agreement to the same extent and with the
same effect as if set forth fully herein and shall inure to the benefit of
Lender, without giving effect to any waiver, amendment, modification or
replacement of the Existing Credit Agreement or any term or provision thereof
occurring subsequent to the date of this Agreement, except to the extent
otherwise specifically provided in the following provisions of this Section 7;
provided, however, that (a) the references to the Credit Documents, "this
Agreement," the Loans and the Commitments in Article XII of the Existing Credit
Agreement shall be deemed to be references to the Loan Documents, this
Agreement, the Revolving Credit Loan and the Commitment, respectively; (b) the
notice address set forth in Section 12.01(a) of the Existing Credit Agreement
shall be deemed to be 9755 Patuxent Woods Drive, Columbia, Maryland 21046,
Attention of Treasurer (Facsimile No. 410-309-6296); and (c) the notice address
set forth in Section 12.01(b) of the Existing Credit Agreement shall be deemed
to be First Union
8
<PAGE>
National Bank, Attn: Portfolio Management, 1970 Chain Bridge Road, 3 South,
McLean, VA 22102 (Facsimile: 703/760-6300).
In the event a waiver is granted under the Existing Credit Agreement
or the existing Guaranty Agreement or an amendment or modification is executed
with respect to the Existing Credit Agreement or the Existing Guaranty
Agreement, and such waiver, amendment and/or modification affects the
Incorporated Terms, then such waiver, amendment or modification shall be
effective with respect to the Incorporated Terms as incorporated by reference
into this Agreement only if consented to in writing by Lender. In the event of
any replacement of the Existing Credit Agreement or the Existing Guaranty
Agreement with a similar credit facility or guaranty agreement, as applicable
(in either case, the "New Facility"), the provisions contained in the New
Facility which correspond to the Incorporated Terms shall be deemed to be the
"Incorporated Terms" hereunder only if consented to in writing by Lender and, if
such consent is not granted or if the Existing Credit Agreement or the Existing
Guaranty Agreement is terminated and not replaced, then the definitions,
representations and warranties, covenants, events of default and miscellaneous
provisions contained in Articles I, IX, VI, VII, VIII, X and XII, the loan
provisions contained in Section 2.01(d), Section 2.03, Section 3.01, Section
3.02(a), Sections 3.03 through 3.09 and Sections 4.04 through 4.06 of the
Existing Credit Agreement, and the guaranty provisions contained in Sections 1
through Section 11 and Section 13 through Section 21 of the Existing Guaranty
Agreement (together with any waivers, modifications or amendments set forth
herein or approved in accordance with this Section 7) shall continue to be the
Incorporated Terms hereunder.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
BORROWERS:
U.S. FOODSERVICE, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title:Treasurer
JP FOODSERVICE DISTRIBUTORS, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title:Treasurer
10
<PAGE>
GUARANTORS:
U.S. FOODSERVICE
By: /s/ Robert Gillison
-------------------
Name: Robert Gillison
Title:Treasurer
CHRISTIANSON SALES CO. LIMITED
PARTNERSHIP
By: USF/Christianson Sales GP
Holdings, LLC
By: /s/ Robert Gillison
-------------------
Name: Robert Gillison
Title: Treasurer
SUPERIOR PRODUCTS MFG. CO.
LIMITED PARTNERSHIP
By: USF/Superior Products GP
Holdings, LLC
By: /s/ Robert Gillison
-------------------
Name: Robert Gillison
Title:Treasurer
11
<PAGE>
E&H DISTRIBUTING CO.
HARRISON'S PRIME MEATS &
PROVISIONS, INC.
ILLINOIS FRUIT & PRODUCE CORP.
TRANS-PORTE, INC.
EL PASADO, INC.
RITUALS COFFEE COMPANY
ROSELI PRODUCTS CORPORATION
SQUERI FOOD SERVICE, INC.
NEVADA BAKING COMPANY, INC.
OUTWEST MEAT COMPANY
HILLTOP HEARTH BAKERIES, INC.
CROSS VALLEY FARMS, INC.
BIGGERS BROTHERS, INC.
BRB HOLDINGS, INC.
F.H. BEVEVINO & COMPANY, INC.
FOOD DISTRIBUTION CONCEPTS, INC.
JOHN SEXTON & CO.
KING'S FOODSERVICE, INC.
ROANOKE RESTAURANT SERVICE, INC.
TARGETED SPECIALTY SERVICES, INC.
U.S. FOODSERVICE OF ATLANTA, INC.
U.S. FOODSERVICE OF ILLINOIS, INC.
U.S. SYSTEMS DISTRIBUTION, INC.
WHITE SWAN, INC.
J.H. HAAR & SONS, L.L.C.
U.S. FOODSERVICE OF BUFFALO, INC.
SOUTHTOWNS SEAFOOD, INC.
SOFCO, INC.
S.&O. PROPERTY CORPORATION
SQP, INC.
USF/CHRISTIANSON SALES GP
HOLDINGS, LLC
USF/CHRISTIANSON SALES LP
HOLDINGS, LLC
NEXT DAY GOURMET, INC.
USF/SUPERIOR PRODUCTS GP
HOLDINGS, LLC
USF/SUPERIOR PRODUCTS LP
HOLDINGS, LLC
JOSEPH WEBB FOODS, INC.
PACIFIC JADE, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title:Treasurer
for each of the foregoing
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<PAGE>
LENDER:
FIRST UNION NATIONAL BANK
By:/s/ Barbara Gell Carroll
------------------------
Name: Barbara Gell Carroll
Title:Senior Vice President
13
<PAGE>
Exhibit 10.4.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of January
20, 2000 among U.S. Foodservice, Inc., a Delaware corporation, and JP
Foodservice Distributors, Inc., a Delaware corporation (collectively, the
"Borrowers"), U.S. Foodservice, a Delaware corporation (the "Parent") and those
subsidiaries of the Borrowers identified on the signature pages hereto (together
with each other subsidiary which may become a party hereto by execution of a
joinder agreement and the Parent, the "Guarantors"); and Fleet National Bank, a
national banking association ("Lender").
BACKGROUND
WHEREAS, Borrowers and Lender desire to enter into a revolving credit
facility pursuant to which Lender will make credit available to Borrowers for
the purposes hereinafter set forth; and
WHEREAS, as a condition to making such revolving credit facility available
to Borrowers, Lender has required, among other things, the Guarantors to
guarantee all of the Borrowers' obligations arising under this Agreement, the
Revolving Credit Note dated the date hereof by the Borrowers for the benefit of
the Lender, and any other instruments or agreements executed pursuant hereto
(collectively, the "Loan Documents").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS
1.1. Applicable Margin
"Applicable Margin" shall mean, for purposes of calculating (i) the
applicable interest rate for any day for any Eurodollar Loan or (ii) the
applicable rate for the Facility Fee for any day for purposes of Section 2.3
hereof, the applicable margin corresponding to the Total Debt Ratio described
below in effect as of the most recent Determination Date:
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Applicable Applicable
Margin Margin
Pricing Total Debt for for
Level Ratio Eurodollar Loans Facility Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equal to or less than
II 4.0 to 1.0 but greater 112.5 bps 25.0 bps
than 3.5 to 1.0
- -------------------------------------------------------------------------------------------------
I Equal to or less than 102.5 bps 25.0 bps
3.5 to 1.0
- -------------------------------------------------------------------------------------------------
</TABLE>
Determination of the appropriate Applicable Margins based on the Total Debt
Ratio shall be made as of each Determination Date. The Total Debt Ratio in
effect as of a Determination Date shall establish the Applicable Margins that
shall be effective as of the date designated by Lender as the Applicable Margin
Change Date. Lender shall determine the Applicable Margins as of each
Determination Date occurring after the Facility Closing Date and shall promptly
notify Borrowers of the Applicable Margins so determined and of the related
Applicable Margin Change Date. Such determinations by Lender of the Applicable
Margins shall be rebuttably presumptive evidence thereof. As of the Facility
Closing Date and until the first Applicable Margin Date, (a) the Applicable
Margin for purposes of calculating the applicable interest rate for any
Eurodollar Loan shall be 112.5 bps and (b) the Applicable Margin for purposes of
calculating the Facility Fee shall be 25 bps. All of the terms in this Section
1.1 shall have the meanings set forth in the Existing Credit Agreement (as
defined below), except for the terms Applicable Margin and Facility Fee, which
shall have the meanings set forth in this Agreement.
1.2. Existing Credit Agreement
"Existing Credit Agreement" shall mean that certain 364-Day Credit
Agreement dated as of December 23, 1997 among Borrowers, the lenders that are
parties thereto from time to time and Bank of America, N.A., as Administrative
Agent, Bank of America Securities LLC (formerly NationsBanc Montgomery
Securities LLC and NationsBank Montgomery Securities, Inc.) and Chase
Securities, Inc., as Co-Arrangers, The Chase Manhattan Bank, as Syndication
Agent, and Bank of America, NT & SA, as Documentation Agent.
1.3. Existing Guaranty Agreement
"Existing Guaranty Agreement" shall mean that certain 364-Day
Guaranty Agreement dated as of December 23, 1997 among the Guarantors and Bank
of America, N.A., as agent.
2
<PAGE>
1.4. Incorporated Definitions
The defined terms contained in Article I of the Existing Credit
Agreement (hereinafter referred to collectively as the "Incorporated
Definitions") which are used in the Incorporated Loan Provisions, the
Incorporated Representations and Warranties, the Incorporated Covenants, the
Incorporated Events of Default, the Incorporated Guaranty and the Incorporated
Miscellaneous Provisions (all as defined below, collectively, the "Incorporated
Terms") are hereby incorporated by reference into this Agreement to the same
extent and with the same effect as if set forth fully herein; provided, however,
that all references to the Administrative Agent and the Lenders in the
Incorporated Terms shall be deemed to be references to Lender.
2. LOANS
2.1. Revolving Credit Loan
Subject to the terms and conditions hereof, during the period
beginning on the date hereof (the "Facility Closing Date") and ending on the
Revolving Period Termination Date, as the same may be extended pursuant to the
Incorporated Loan Provisions (as hereinafter defined), Lender shall make
advances (all such advances, collectively, the "Revolving Credit Loan") to
Borrowers in such amounts as Borrowers shall request from time to time, provided
that the maximum aggregate outstanding principal amount of the Revolving Credit
Loan shall at no time exceed $25,000,000 (the "Commitment"). Each such advance
hereunder may consist of Base Rate Loans or Eurodollar Loans (or a combination
thereof), as Borrowers may request. Each such advance shall be made upon
written or facsimile notice of Borrowers received by the Lender not later than
1:00 PM Eastern Time three (3) Business Days prior to the date of the proposed
advance, and the amount of such proposed advance shall not be in an amount of
less than $100,000. Each such notice shall specify whether such advance shall
consist of Base Rate Loans, Eurodollar Loans or a combination thereof, and for
each Eurodollar Loan that is requested, the Interest Period with respect
thereto. Borrowers may borrow, repay and reborrow, subject to the limitations
set forth above. The aggregate outstanding principal amount of the Revolving
Credit Loan as of the Revolving Period Termination Date, together with all
accrued and unpaid interest thereon, shall be due and payable in full on the
earlier of (i) 364 days following the Revolving Period Termination Date, as the
same may have been extended as aforesaid, and (ii) the Maturity Date; provided,
however, that under no circumstances (including without limitation one or more
extensions of the Revolving Period Termination Date pursuant to the Incorporated
Loan Provisions referred to in Section 2.2 below) shall the Maturity Date be
later than December 23, 2002.
The Borrowers hereby promise to pay to the Lender the aggregate
outstanding principal amount of the Revolving Credit Loan, plus all accrued and
3
<PAGE>
unpaid interest thereon, on the date such payment is due in accordance with the
immediately preceding sentence.
2.2. Interest, Extension of Term and Additional Provisions
Reference is made to the provisions contained in Sections 2.01(d) and
2.01(e), Section 2.03, Section 3.01, Section 3.02(a), Sections 3.03 through
3.09, Section 4.01 and Sections 4.04 through 4.06 of the Existing Credit
Agreement (hereinafter referred to as the "Incorporated Loan Provisions"). The
Incorporated Loan Provisions are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein and shall inure to the benefit of Lender, without giving effect to any
waiver, amendment, modification or replacement of the Existing Credit Agreement
or any term or provision thereof occurring subsequent to the date of this
Agreement, except to the extent otherwise specifically provided in Section 7
hereof; provided, however, that (a) all references in the Existing Credit
Agreement to the Applicable Margin shall be deemed to be references to the
Applicable Margin as defined in Section 1.1 hereof; (b) the references to the
Closing Date (within the definition of Revolving Period Termination Date
referenced in Section 2.01(e) and as used in Section 3.09(g) of the Existing
Credit Agreement), shall be deemed to be references to the Facility Closing
Date; (c) the references to Loans and Revolving Loans in the Existing Credit
Agreement shall be deemed to be references to the Revolving Credit Loan as
defined herein; (d) the Prime Rate shall be Lender's prime rate in effect at its
principal office; (e) the reference to the Credit Documents (within the
definition of Credit Obligations) shall be deemed to be a reference to the Loan
Documents hereunder; (f) the reference to "this Agreement" in Section 3.09(a) of
the Existing Credit Agreement shall be deemed to be a reference to this
Agreement; (g) the reference in Section 3.03 of the Existing Credit Agreement to
Section 5.02(d) of the Existing Credit Agreement shall be deemed deleted; (h)
the reference in Section 3.04 of the Existing Credit Agreement to Section
2.01(b) of the Existing Credit Agreement and the reference in Section 3.07 of
the Existing Credit Agreement to Section 2.01 of the Existing Credit Agreement
shall each be deemed to be a reference to Section 2.1 hereof; (i) the reference
in the first sentence of Section 4.01 to the office location of Lender shall be
deemed to refer to Lender's address as specified in Section 7 hereof, and the
reference therein to "Charlotte, North Carolina time" shall be deemed to refer
to the time in the time zone where such address is located; (j) the fourth
sentence of Section 4.01 (which begins "The Administrative Agent will
thereafter") shall be deemed deleted; (k) the references to the Revolving
Committed Amount (as used in Section 2.03 of the Existing Credit Agreement)
shall be deemed to be references to the Commitment as defined in Section 1.1
hereof; and (l) the references to Competitive Loans and the conversion or
prepayment thereof in Sections 2.03 and 3.02(a) of the Existing Credit Agreement
shall be deemed deleted.
4
<PAGE>
2.3. Facility Fee
In consideration of the Commitment, Borrowers agree to pay to Lender
a facility fee (the "Facility Fee"): (a) for the period from the Facility
Closing Date to the Revolving Period Termination Date, on the aggregate
Commitment, and (b) for the period from the Revolving Period Termination Date to
the Maturity Date (as defined in the Existing Credit Agreement), on the
aggregate Revolving Credit Loan outstanding, computed at a per annum rate equal
to the Applicable Margin for each day during the applicable period. The Facility
Fee shall be payable quarterly in arrears on the fifteenth (15/th/) day of each
January, April, July and October and on the Maturity Date for the immediately
preceding fiscal quarter (or portion thereof).
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS
Reference is made to the Existing Credit Agreement and the
representations and warranties of Borrowers contained in Article IX of the
Existing Credit Agreement (hereinafter referred to as the "Incorporated
Representations and Warranties") and the covenants contained in Articles VI, VII
and VIII of the Existing Credit Agreement (hereinafter referred to as the
"Incorporated Covenants"). The Incorporated Representations and Warranties and
the Incorporated Covenants are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein and shall inure to the benefit of Lender, without giving effect to any
waiver, amendment, modification or replacement of the Existing Credit Agreement
or any term or provision thereof occurring subsequent to the date of this
Agreement, except to the extent otherwise specifically provided in Section 7
hereof; provided, however, that (a) the reference to "this Agreement" and the
Credit Documents in Articles VI and VII and in the definition of Material
Adverse Effect in the Existing Credit Agreement shall be deemed to be references
to this Agreement and the Loan Documents, respectively, and (b) the references
to Default and Event of Default shall be modified as provided in Section 5
hereof.
4. CONDITIONS PRECEDENT
4.1. Conditions Precedent to First Advance of the Revolving Credit Loan on
or after the Date Hereof
The obligation of Lender to make the first advance of the Revolving
Credit Loan on or after the date hereof is subject to the satisfaction (in the
reasonable judgment of Lender), at or before the date of such advance, of the
following conditions precedent:
5
<PAGE>
4.1.1. Representations and Warranties; Compliance
All representations and warranties made by Borrowers in this Agreement
or any of the other Loan Documents and by the Guarantors in the Incorporated
Guaranty shall be true and correct in all material respects on and as of the
date of such advance with the same force and effect as though such
representations and warranties had been made on and as of the date of such
advance. All of the agreements, terms, covenants, and conditions required by
this Agreement to be complied with and performed by Borrowers prior to the date
of such advance shall have been complied with and performed.
4.1.2. Documents
Borrowers shall deliver to Lender copies of all documents and other
items reasonably requested by Lender evidencing Borrowers' and the Guarantors'
authority to enter into and perform this Agreement and the other Loan Documents.
4.1.3. Executed Loan Documents
Borrowers shall deliver to Lender fully executed copies of all the
Loan Documents.
4.2. Conditions Precedent to the Second and Each Subsequent Advance of the
Revolving Credit Loan
The obligation of Lender to make the second and each subsequent
advance of the Revolving Credit Loan is subject to the satisfaction (in the
reasonable judgment of Lender), as of the date of each such advance, of the
conditions precedent specified in Section 4.1.1 hereof.
5. EVENTS OF DEFAULT AND REMEDIES
Reference is made to the Existing Credit Agreement and the events of
default and remedies set forth in Article X of the Existing Credit Agreement
(hereinafter referred to as the "Incorporated Events of Default"). The
Incorporated Events of Default are hereby incorporated by reference into this
Agreement to the same extent and with the same effect as if set forth fully
herein and shall inure to the benefit of Lender, without giving effect to any
waiver, amendment, modification or replacement of the Existing Credit Agreement
or any term or provision thereof occurring subsequent to the date of this
Agreement, except to the extent otherwise specifically provided in Section 7
hereof; provided, however, that all references to "Loans," "this Agreement" or
the "Guaranty Agreement" in Article X of the Existing Credit Agreement shall be
deemed to be references to the Revolving Credit Loan, this Agreement and the
Incorporated Guaranty, respectively.
6
<PAGE>
6. GUARANTY
Reference is made to the Existing Guaranty Agreement and the
agreements of the Guarantors contained in Section 1 through Section 11 and
Section 13 through Section 21 of the Existing Guaranty Agreement (hereinafter
referred to as the "Incorporated Guaranty"). The Incorporated Guaranty is
hereby incorporated by reference into this Agreement to the same extent and with
the same effect as if set forth fully herein and shall inure to the benefit of
Lender, without giving effect to any waiver, amendment, modification or
replacement of the Existing Guaranty Agreement or any term or provision thereof
occurring subsequent to the date of this Agreement, except to the extent
otherwise specifically provided in Section 7 hereof; provided, however, that (a)
the references to the Credit Agreement, the Credit Documents, the Loan, the
Commitments and to "this Guaranty Agreement" thereunder shall be deemed to be
references to this Agreement, the Loan Documents, the Revolving Credit Loan, the
Commitment and this Section 6, respectively (except that any cross-references in
the Existing Guaranty Agreement to Sections and definitions in the Existing
Credit Agreement shall not be modified by the foregoing proviso), (b) the notice
address set forth in Section 17(a) of the Existing Guaranty Agreement shall be
deemed to be 9755 Patuxent Woods Drive, Columbia, Maryland 21046, Attention of
Treasurer (Facsimile No. 410-309-6296), and (c) the notice address set forth in
Section 17(b) of the Existing Guaranty Agreement shall be deemed to be Fleet
National Bank, 100 Federal Street, MA BOS 01-08-01, Boston, Massachusetts 02110,
Attention of Industrial Growth Team, David M. Harnisch, Vice President
(Facsimile No. 617-434-1955).
7. MISCELLANEOUS PROVISIONS
Reference is made to the Existing Credit Agreement and the
miscellaneous provisions contained in Article XII of the Existing Credit
Agreement (hereinafter referred to as the "Incorporated Miscellaneous
Provisions"). The Incorporated Miscellaneous Provisions (and all other relevant
provisions of the Existing Credit Agreement related thereto) are hereby
incorporated by reference into this Agreement to the same extent and with the
same effect as if set forth fully herein and shall inure to the benefit of
Lender, without giving effect to any waiver, amendment, modification or
replacement of the Existing Credit Agreement or any term or provision thereof
occurring subsequent to the date of this Agreement, except to the extent
otherwise specifically provided in the following provisions of this Section 7;
provided, however, that the notice address set forth in Section 12.01(a) of the
Existing Credit Agreement shall be deemed to be 9755 Patuxent Woods Drive,
Columbia, Maryland 21046, Attention of Treasurer (Facsimile No. 410-309-6296)
and provided, further, that the notice address set forth in Section 12.01(b) of
the Existing Credit Agreement shall be deemed to be Fleet National Bank, 100
Federal Street, MA BOS 01-08-01, Boston, Massachusetts 02110, Attention of
Industrial Growth Team, David M. Harnisch, Vice President (Facsimile No. 617-
434-1955).
7
<PAGE>
In the event a waiver is granted under the Existing Credit Agreement
or the existing Guaranty Agreement or an amendment or modification is executed
with respect to the Existing Credit Agreement or the Existing Guaranty
Agreement, and such waiver, amendment and/or modification affects the
Incorporated Terms, then such waiver, amendment or modification shall be
effective with respect to the Incorporated Terms as incorporated by reference
into this Agreement only if consented to in writing by Lender. In the event of
any replacement of the Existing Credit Agreement or the Existing Guaranty
Agreement with a similar credit facility or guaranty agreement, as applicable
(in either case, the "New Facility"), the provisions contained in the New
Facility which correspond to the Incorporated Terms shall be deemed to be the
"Incorporated Terms" hereunder only if consented to in writing by Lender and, if
such consent is not granted or if the Existing Credit Agreement or the Existing
Guaranty Agreement is terminated and not replaced, then the definitions,
representations and warranties, covenants, events of default and miscellaneous
provisions contained in Articles I, IX, VI, VII, VIII, X and XII, the loan
provisions contained in Sections 2.01(d) and 2.01(e), Section 2.03, Section
3.01, Section 3.02(a), Sections 3.03 through 3.09, Section 4.01 and Sections
4.04 through 4.06 of the Existing Credit Agreement, and the guaranty provisions
contained in Sections 1 through Section 11 and Section 13 through Section 21 of
the Existing Guaranty Agreement (together with any waivers, modifications or
amendments set forth herein or approved in accordance with this Section 7) shall
continue to be the Incorporated Terms hereunder.
Right of Setoff. Except as otherwise set forth in the Lockbox
---------------
Agreement or in any other agreement which has the effect of restricting or
prohibiting a setoff by the Lender against any assets of the Parent, any
Borrower or any Guarantor, in addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, and regardless of the adequacy of any collateral, upon the occurrence
and during the continuance of an Event of Default, Lender is hereby authorized
at any time or from time to time, without presentment, demand, protest or other
notice of any kind to the Parent or the Borrowers or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special and in whatever currency
denominated) and any other Debt at any time held or owing by Lender (including,
without limitation, by branches and agencies of Lender wherever located) to or
for the credit or the account of the Parent, the Borrowers or any Guarantor
against and on account of the Credit Obligations and liabilities of the Parent,
the Borrowers or such Guarantor, as applicable, to Lender under this Agreement
or under any of the other Credit Documents, including, without limitation, all
interests in Credit Obligations purchased by Lender pursuant to Section 12.04(b)
of the Existing Credit Agreement and all other liabilities of any nature or
description arising out of or connected with this Agreement or any other Credit
Document, irrespective of whether or not Lender
8
<PAGE>
shall have made any demand hereunder and although said Credit Obligations or
liabilities, or any of them, shall be contingent or unmatured.
Maximum Rate. Notwithstanding anything to the contrary contained
------------
herein or in any other Loan Document, all agreements between the Borrowers and
Lender, whether now existing or hereafter arising, are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of acceleration
of the maturity of the indebtedness evidenced hereby or by any note or
otherwise, shall the amount paid or agreed to be paid to Lender for the use or
the forbearance of the indebtedness exceed the maximum permissible rate under
applicable law ("Maximum Rate"). As used herein, the term "applicable law"
shall mean the law in effect as of the date of this Agreement, provided however
that in the event there is a change in the applicable law which results in a
higher permissible rate of interest, then this Agreement shall be governed by
such new law as of its effective date. If due to any circumstance whatsoever,
fulfillment of any provision of this Agreement or any other Credit Document at
the time performance of such provision shall be due shall exceed the Maximum
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Maximum Rate. If
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Maximum Rate, such excess shall be applied to the
reduction of principal then outstanding and not to the payment of interest, or,
if such excess exceeds the principal then outstanding, such excess shall be
repaid to the Borrowers.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
BORROWERS:
U.S. FOODSERVICE, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
JP FOODSERVICE DISTRIBUTORS, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
GUARANTORS:
U.S. FOODSERVICE
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
CHRISTIANSON SALES CO. LIMITED
PARTNERSHIP
By: USF/Christianson Sales GP
Holdings, LLC
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
10
<PAGE>
SUPERIOR PRODUCTS MFG. CO.
LIMITED PARTNERSHIP
By: USF/Superior Products GP
Holdings, LLC
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
E&H DISTRIBUTING CO.
HARRISON'S PRIME MEATS &
PROVISIONS, INC.
ILLINOIS FRUIT & PRODUCE CORP.
TRANS-PORTE, INC.
EL PASADO, INC.
RITUALS COFFEE COMPANY
ROSELI PRODUCTS CORPORATION
SQUERI FOOD SERVICE, INC.
NEVADA BAKING COMPANY, INC.
OUTWEST MEAT COMPANY
HILLTOP HEARTH BAKERIES, INC.
CROSS VALLEY FARMS, INC.
BIGGERS BROTHERS, INC.
BRB HOLDINGS, INC.
F.H. BEVEVINO & COMPANY, INC.
FOOD DISTRIBUTION CONCEPTS, INC.
JOHN SEXTON & CO.
KING'S FOODSERVICE, INC.
ROANOKE RESTAURANT SERVICE, INC.
TARGETED SPECIALTY SERVICES, INC.
U.S. FOODSERVICE OF ATLANTA, INC.
U.S. FOODSERVICE OF ILLINOIS, INC.
U.S. SYSTEMS DISTRIBUTION, INC.
WHITE SWAN, INC.
J.H. HAAR & SONS, L.L.C.
U.S. FOODSERVICE OF BUFFALO, INC.
SOUTHTOWNS SEAFOOD, INC.
SOFCO, INC.
S.&O. PROPERTY CORPORATION
SQP, INC.
USF/CHRISTIANSON SALES GP
HOLDINGS, LLC
USF/CHRISTIANSON SALES LP
HOLDINGS, LLC
NEXT DAY GOURMET, INC.
USF/SUPERIOR PRODUCTS GP
HOLDINGS, LLC
USF/SUPERIOR PRODUCTS LP
HOLDINGS, LLC
11
<PAGE>
JOSEPH WEBB FOODS, INC.
PACIFIC JADE, INC.
HARBOR MARKETING, INC.
PARKWAY PROVISION COMPANY LLC
PATUXENT FARMS, INC.
WESTLUND PROVISIONS, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
for each of the foregoing
LENDER:
FLEET NATIONAL BANK,
a national banking association
By: /s/ David M. Harnisch
---------------------
Name: David M. Harnisch
Title: Vice President
12
<PAGE>
EXHIBIT 10.4.2
REVOLVING CREDIT NOTE
$ 25,000,000 January 20, 2000
FOR VALUE RECEIVED, U.S. Foodservice, Inc., a Delaware corporation,
and JP Foodservice Distributors, Inc., a Delaware corporation (collectively, the
"Borrowers"), jointly and severally promise to pay to the order of Fleet
National Bank, a national banking association (the "Lender"), at the times and
in the manner provided in that certain Loan Agreement, dated as of even date
herewith, among the Borrowers, the guarantors named therein and the Lender (the
"Loan Agreement"), the principal amount of Twenty Five Million Dollars
($25,000,000), or so much thereof as may be advanced from time to time under the
Loan Agreement and remain outstanding, together with accrued and unpaid interest
on each such advance at rates as in effect from time to time as determined
pursuant to Section 2 of the Loan Agreement.
All payments hereunder shall be made in lawful money of the United
States of America, without offset, at the address of the Lender specified in the
Loan Agreement.
This Note evidences the Revolving Credit Loan advanced or to be
advanced by the Lender to or for the benefit of the Borrowers as borrowers under
the Loan Agreement. The Loan Agreement contains, among other things, provisions
for the determination of interest rates, the fees payable in respect of this
Note, and acceleration of the payment of this Note upon the happening of certain
stated events.
The Borrowers promise to pay all costs and expenses (including without
limitation reasonable attorneys' fees and disbursements) incurred in connection
with the collection hereof.
The Borrowers hereby waive presentment, protest, demand, notice of
dishonor, and all other notices, and all defenses and pleas on the grounds of
any extension or extensions of the time of payments or the due dates of this
Note, in whole or in part, before or after maturity, with or without notice. No
renewal or extension of this Note, and no delay in enforcement of this Note or
in exercising any right or power hereunder, shall affect the liability of the
Borrowers.
No single or partial exercise by the Lender of any right or remedy
hereunder, under the Loan Agreement, or under any other instrument relating to
<PAGE>
the Loan Agreement shall preclude any other or further exercise thereof or the
exercise of any other rights or remedies.
This Note shall be governed by and construed under and in accordance
with the laws of the State of New York (but not including the choice of law
rules thereof).
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Note, or has caused this Note to be duly executed on its behalf, as of the day
and year first hereinabove set forth.
U.S. FOODSERVICE, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
JP FOODSERVICE DISTRIBUTORS, INC.
By: /s/ Robert Gillison
--------------------
Name: Robert Gillison
Title: Treasurer
<PAGE>
Exhibit 10.5
ADDENDUM TO EMPLOYMENT AGREEMENT
THIS ADDENDUM TO EMPLOYMENT AGREEMENT ("Addendum") is made as of the 23rd
day of December, 1999, by and between U.S. FOODSERVICE, a Delaware corporation
(the "Company"), and JAMES L. MILLER (the "Executive").
WHEREAS, the Company and the Executive entered into that certain Employment
Agreement dated as of January 4, 1996 (the "Employment Agreement"); and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Committee") has determined that the Executive shall be entitled to
receive certain post-retirement medical insurance and life insurance benefits;
and
WHEREAS, the parties desire to enter into this Addendum to reflect the
Company's agreement to provide such benefits to the Executive.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Post-retirement Medical Insurance and Life Insurance Benefits.
-------------------------------------------------------------
Provided the Executive continues in his present position with the Company
through the minimum retirement age of 55, upon the termination of employment at
any time thereafter for any reason other than a termination for Cause (as
defined in the U.S. Foodservice Supplemental Executive Retirement Plan (the
"SERP")), or upon his termination prior to attaining such age upon (i) his death
or Disability (as defined in the SERP), or with Good Reason (as defined in the
SERP), or (ii) upon his termination for any reason after the Effective Date (as
defined in Section 1(a) of the Agreement), the Executive will be entitled to
post-retirement medical insurance and life insurance benefits for himself, his
spouse and his dependents. Such benefits shall be as follows:
The Executive, his spouse and his dependents shall receive medical
coverage, without cost, under whatever the Company's health insurance plans
are in effect from time to time, maintaining the same type and level of
coverage as was in place prior to retirement. Such coverage shall be
provided to the Executive and the Executive's spouse until each of their
respective deaths, and to the Executive's dependents until such time as
such dependents attain the age of 21 (or such later date as such dependents
cease to qualify as dependents under the terms of the applicable policy).
The Executive shall receive continued life insurance coverage, without
charge, until age 65, in the same amount of coverage as in effect prior to
retirement, up to a maximum death benefit equal to two times his total
annual compensation (i.e.,
<PAGE>
the sum of his base salary and target bonus) as in effect prior to the
termination of his employment.
The provisions of this Section 1 shall survive the termination of the Agreement,
provided the Executive meets the qualification provisions set forth in the first
sentence of this section 1.
2. Effect on Agreement. Except as explicitly modified by the terms of
-------------------
this Addendum, the Agreement shall remain in full force and effect in accordance
with its terms.
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first set forth above.
U.S. FOODSERVICE
By: /s/ David M. Abramson
------------------------(SEAL)
Name: David M. Abramson
Title: Executive Vice President
EXECUTIVE
/s/ James L. Miller (SEAL)
---------------------------
James L. Miller
2
<PAGE>
Exhibit 10.6
ADDENDUM TO EMPLOYMENT AGREEMENT
THIS ADDENDUM TO EMPLOYMENT AGREEMENT ("Addendum") is made as of the 23rd
day of December, 1999, by and between U.S. FOODSERVICE, a Delaware corporation
(the "Company"), and MARK P. KAISER (the "Executive").
WHEREAS, the Company and the Executive entered into that certain Employment
Agreement dated as of January 4, 1996 (the "Employment Agreement"); and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Committee") has determined that the Executive shall be entitled to
receive certain post-retirement medical insurance benefits; and
WHEREAS, the parties desire to enter into this Addendum to reflect the
Company's agreement to provide such benefits to the Executive.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Post-retirement Medical Insurance Benefits. Provided the Executive
------------------------------------------
continues in his present position with the Company through the minimum
retirement age of 55, upon the termination of employment at any time thereafter
for any reason other than a termination for Cause (as defined in the U.S.
Foodservice Supplemental Executive Retirement Plan (the "SERP")), or upon his
termination prior to attaining such age upon (i) his death or Disability (as
defined in the SERP), or with Good Reason (as defined in the SERP), or (ii) upon
his termination for any reason after the Effective Date (as defined in Section
1(a) of the Agreement), the Executive will be entitled to post-retirement
medical insurance benefits for himself, his spouse and his dependents. Such
benefits shall be as follows:
The Executive, his spouse and his dependents shall receive medical
coverage, without cost, under whatever the Company's health insurance plans
are in effect from time to time, maintaining the same type and level of
coverage as was in place prior to retirement. Such coverage shall be
provided to the Executive and the Executive's spouse until each of their
respective deaths, and to the Executive's dependents until such time as
such dependents attain the age of 21 (or such later date as such dependents
cease to qualify as dependents under the terms of the applicable policy).
The provisions of this Section 1 shall survive the termination of the Agreement,
provided the Executive meets the qualification provisions set forth in the first
sentence of this section 1.
<PAGE>
2. Effect on Agreement. Except as explicitly modified by the terms of
-------------------
this Addendum, the Agreement shall remain in full force and effect in accordance
with its terms.
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first set forth above.
U.S. FOODSERVICE
By:/s/ James L. Miller (SEAL)
-------------------------
Name:James L. Miller
------------------------------
Title:Chairman, President and CEO
-----------------------------
EXECUTIVE
/s/ Mark P. Kaiser (SEAL)
---------------------------
Mark P. Kaiser
2
<PAGE>
Exhibit 10.7
ADDENDUM TO EMPLOYMENT AGREEMENT
THIS ADDENDUM TO EMPLOYMENT AGREEMENT ("Addendum") is made as of the 23rd
day of December, 1999, by and between U.S. FOODSERVICE, a Delaware corporation
(the "Company"), and DAVID M. ABRAMSON (the "Executive").
WHEREAS, the Company and the Executive entered into that certain Employment
Agreement dated as of June 10, 1996 (the "Employment Agreement"); and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Committee") has determined that the Executive shall be entitled to
receive certain post-retirement medical insurance benefits; and
WHEREAS, the parties desire to enter into this Addendum to reflect the
Company's agreement to provide such benefits to the Executive.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Post-retirement Medical Insurance Benefits. Provided the Executive
------------------------------------------
continues in his present position with the Company through the minimum
retirement age of 55, upon the termination of employment at any time thereafter
for any reason other than a termination for Cause (as defined in the U.S.
Foodservice Supplemental Executive Retirement Plan (the "SERP")), or upon his
termination prior to attaining such age upon (i) his death or Disability (as
defined in the SERP), or with Good Reason (as defined in the SERP), or (ii) upon
his termination for any reason after the Effective Date (as defined in Section
1(a) of the Agreement), the Executive will be entitled to post-retirement
medical insurance benefits for himself, his spouse and his dependents. Such
benefits shall be as follows:
The Executive, his spouse and his dependents shall receive medical
coverage, without cost, under whatever the Company's health insurance plans
are in effect from time to time, maintaining the same type and level of
coverage as was in place prior to retirement. Such coverage shall be
provided to the Executive and the Executive's spouse until each of their
respective deaths, and to the Executive's dependents until such time as
such dependents attain the age of 21 (or such later date as such dependents
cease to qualify as dependents under the terms of the applicable policy).
The provisions of this Section 1 shall survive the termination of the Agreement,
provided the Executive meets the qualification provisions set forth in the first
sentence of this section 1.
<PAGE>
2. Effect on Agreement. Except as explicitly modified by the terms of
-------------------
this Addendum, the Agreement shall remain in full force and effect in accordance
with its terms.
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first set forth above.
U.S. FOODSERVICE
By: /s/ James L. Miller
____________________________(SEAL)
Name: James L. Miller
____________________________
Title: Chairman, President and CEO
____________________________
EXECUTIVE
/s/ David M. Abramson (SEAL)
------------------------
David M. Abramson
2
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<PAGE>
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<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUL-01-2000 JUL-03-1999
<PERIOD-START> OCT-03-1999 SEP-26-1998
<PERIOD-END> JAN-01-2000 DEC-26-1998
<CASH> 66,255 0
<SECURITIES> 0 0
<RECEIVABLES> 510,359 0
<ALLOWANCES> 0 0
<INVENTORY> 467,978 0
<CURRENT-ASSETS> 1,108,417 0
<PP&E> 468,492 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 2,289,323 0
<CURRENT-LIABILITIES> 494,621 0
<BONDS> 0 0
0 0
0 0
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<TOTAL-LIABILITY-AND-EQUITY> 886,165 0
<SALES> 1,674,952 1,533,089
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<CGS> 1,360,852 1,251,007
<TOTAL-COSTS> 261,633 230,833
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 17,208 16,476
<INCOME-PRETAX> 45,259 34,733
<INCOME-TAX> 17,208 14,165
<INCOME-CONTINUING> 27,277 20,608
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 2,748
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<NET-INCOME> 27,277 17,860
<EPS-BASIC> 0.27 0.20
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