-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AOdJb3xusW7VBZQCFKHJhm7RB4VYsltu4H0yeqtVpWlhX08b8w3qQzDdjAM+zFiL pO4JDLvHjUNMZ9Kt1cglXw== 0000950109-97-006028.txt : 19970924 0000950109-97-006028.hdr.sgml : 19970924 ACCESSION NUMBER: 0000950109-97-006028 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970923 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JP FOODSERVICE INC CENTRAL INDEX KEY: 0000928395 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & GENERAL LINE [5141] IRS NUMBER: 521634568 STATE OF INCORPORATION: DE FISCAL YEAR END: 0629 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-12601 FILM NUMBER: 97684242 BUSINESS ADDRESS: STREET 1: 9830 PATUXENT WOODS WY CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4103127100 MAIL ADDRESS: STREET 1: 9830 PATUXENT WOODS WAY CITY: COLUMBIA STATE: MD ZIP: 21046 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 28, 1997. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-24954 JP FOODSERVICE, INC. -------------------- (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.) 9830 Patuxent Woods Drive Columbia, Maryland 21046 - ------------------------------- ------------------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (410) 312-7100 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Stock New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. X -------- The aggregate market value of the registrant's voting stock held by non- affiliates of the registrant at September 15, 1997 was approximately $666 million. The number of shares of the registrant's Common Stock, $.01 par value, outstanding on September 15, 1997 was 22,606,308. DOCUMENTS INCORPORATED BY REFERENCE Certain information in the Proxy Statement for the 1997 Annual Meeting of Stockholders of the registrant is incorporated by reference into Part III hereof. TABLE OF CONTENTS ----------------- PART I Item 1. Business.......................................................... 4 Item 2. Properties........................................................ 14 Item 3. Legal Proceedings................................................. 15 Item 4. Submission of Matters to a Vote of Security Holders............... 15 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................................................... 15 Item 6. Selected Financial Data........................................... 17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 18 Item 7A. Quantitative and Qualitative Disclosure about Market Risk......... 23 Item 8. Financial Statements and Supplementary Data....................... 23 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure............................................ 24 PART III Item 10. Directors and Executive Officers of the Registrant................ 24 Item 11. Executive Compensation............................................ 24 Item 12. Security Ownership of Certain Beneficial Owners and Management.... 24 Item 13. Certain Relationships and Related Transactions.................... 24 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K... 25
2 This Report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include management's expectations and objectives regarding the Company's future financial position, operating results and business strategy. These statements are subject to risks and uncertainties that could cause the Company's actual operating results to differ materially. Such risks and uncertainties include the sensitivity of the Company's business to national and regional economic conditions, difficulties in achieving cost savings and synergies in integrating acquired businesses, and increased competitive pressures in the Company's industry. The Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 23, 1997 discusses some of the important factors that could cause JP Foodservice, Inc.'s actual results to differ materially from those in such forward-looking statements. 3 PART I Item 1. Business - ---------------- General JP Foodservice, Inc. (the "Company" or "JP Foodservice") is a broadline distributor of food and related products to restaurants and other institutional foodservice establishments in the Mid-Atlantic, Midwestern, Northeastern and Western regions of the United States. The Company ranks as the nation's fifth largest broadline foodservice distributor based on pro forma 1996 calendar year net sales, including the results of its acquisitions of foodservice distribution businesses consummated in fiscal 1997. JP Foodservice markets and distributes from its 15 full-service distribution centers over 30,000 national, private and signature brand items to over 34,000 foodservice customers, including restaurants, hotels and casinos, healthcare facilities, cafeterias and schools. This diverse customer base encompasses both independent (or "street") and multi-unit (or "chain") businesses. JP Foodservice's comprehensive product line provides its customers with a single source to satisfy substantially all of their foodservice needs. JP Foodservice supplemented its internal expansion in fiscal 1997 with an active program of strategic acquisitions to take advantage of growth opportunities from ongoing consolidation in the fragmented foodservice distribution industry. In the first quarter, JP Foodservice extended the scope of its distribution network into the Western region of the United States through its acquisition of Valley Industries, Inc. ("Valley"), a broadline distributor located in Las Vegas, Nevada. Also in the first quarter, pursuant to JP Foodservice's strategy to increase penetration of its existing service areas, JP Foodservice acquired Arrow Paper and Supply Co., Inc. ("Arrow"), a broadline distributor located in Connecticut serving the New England, New York, New Jersey and Pennsylvania markets. In the second quarter, JP Foodservice filled a gap in its Midwestern distribution network by acquiring Squeri Food Service, Inc., a broadline distributor located in Ohio serving the Greater Cincinnati, Dayton, Columbus, Indianapolis, Louisville and Lexington markets. In the fourth quarter, JP Foodservice strengthened its presence in the Mid-Atlantic region through its acquisition of Mazo-Lerch Company, Inc., a broadline distributor located in Virginia serving the District of Columbia, Virginia, Maryland, southern New Jersey and northern North Carolina markets. Recent Developments On June 30, 1997, the Company announced that it had entered into an agreement and plan of merger pursuant to which Rykoff-Sexton, Inc. ("Rykoff- Sexton") will be merged with and into a wholly-owned subsidiary of JP Foodservice and will become a wholly-owned subsidiary of JP Foodservice. In the merger, each outstanding share of Rykoff-Sexton common stock will be converted into the right to receive 0.84 of one share of JP Foodservice common stock. Consummation of the merger is subject to, among other things, approval by stockholders of each of the Company and Rykoff-Sexton and other customary conditions. The information in this Report does not reflect the anticipated effects of the merger on the Company's financial condition, operating results or business. For additional information regarding the merger, see the Company's Current Reports on Form 8-K dated June 30, 1997 and September 3, 1997 filed with the Securities and Exchange Commission and Note 17 to the Consolidated Financial Statements included elsewhere in this Report. 4 Foodservice Distribution Industry Companies in the foodservice distribution industry purchase, store, market and transport food products, paper products and other supplies and food- related items to establishments that prepare and serve meals to be eaten away from home. Foodservice distribution companies generally are classified as "broadline," "specialty" or "system" distributors. Broadline distributors offer a comprehensive range of food and related products from a single source of supply and provide foodservice establishments with the cost savings associated with large full-service deliveries. Specialty distributors generally are small, family-owned enterprises that supply only one or two product categories. System distributors typically supply a narrow range of products to a limited number of multi-unit businesses operating in a broad geographical area. Products and Services Products -------- The Company's product line encompasses a broad selection of canned and dry food products, fresh meats, poultry, seafood, frozen foods, fresh produce, dairy and other refrigerated products and related goods and supplies. Many of the Company's product offerings feature "center of the plate" or entree selections. The Company also distributes a wide variety of non-food products and equipment, including paper products, disposable napkins, plates, cups and cleaning supplies. In most locations, the Company also offers coffee and beverage equipment, supplies and service and, to a limited extent, tableware (such as china and silverware), glassware and light restaurant equipment and supplies. The following table sets forth the product categories of the items sold by the Company and the percentage of the Company's net sales generated by product category during each of the last three fiscal years.
Percentage of Net Sales Fiscal Year Ended -------------------------------------------- July 1, 1995 June 29, 1996 June 28, 1997 ------------ ------------- ------------- Canned and dry products.... 27% 26% 28% Meats...................... 20 20 19 Other frozen foods......... 18 18 17 Poultry.................... 9 10 10 Seafood.................... 8 8 7 Dairy products............. 8 9 8 Perishable food products... 4 3 5 Paper products............. 4 4 4 Equipment and supplies..... 1 1 1 Janitorial supplies........ 1 1 1 --- --- --- Total net sales........... 100% 100% 100% === === ===
5 National Brands. JP Foodservice supplies more than 27,000 national brand items, which currently account for approximately 86% of the Company's net sales. National brand products represent a greater proportion of the Company's product line than the product lines of the Company's principal competitors. Management believes that national brands are attractive to chain accounts and other customers seeking consistent product quality throughout their operations. The Company's national brand strategy has promoted closer relationships with many national suppliers, who provide important sales and marketing support to the Company. Private Brands. JP Foodservice offers its customers an expanding line of products under its JP(TM), JP Power(R), and Harvest Value(R) private brands. The Company currently offers over 1,400 private brand products, including frozen and canned goods, fruits, vegetables and meats, through its JP Gold(TM) (highest quality), JP Blue(TM), JP Red(TM), Chef's Variety(R) and Harvest Value(R) private labels, and approximately 70 cleaning products under its JP Power(R) brand. The Company has developed the multi-tier quality system to meet the specific requirements of different market segments. Signature Brands. The Company offers its customers an exclusive and expanding line of signature products which are comparable in quality to national brand items and priced competitively with such items. The Company markets these products under the names Roseli(R) (Italian-style products), Hilltop Hearth(R) (bread and bakery products), JP Foodservice, Inc. Cattleman's Choice(TM) and JP Foodservice, Inc. Cattleman's Selection(TM) (meats), Patuxent Farms(R) (processed meats), el Pasado Authentic Mexican Cuisine with a Touch of the Past(TM) (Mexican-style products), Rituals(R) (gourmet coffee), Beijing Chef(TM) (Oriental-style products), Magnifry(TM) and Magnifries(TM) (oil and french fries) and Harbor Banks(TM) (seafood products). The Company currently offers more than 1,800 signature brand items. Private and signature brand items enable the Company to offer its customers product alternatives to comparable national brands across a wide range of prices. The Company historically has sold a significantly lower proportion of proprietary private and signature brand products than its primary competitors, whose proprietary brand sales have accounted for 30% to over 60% of their sales volume. Sales of the Company's proprietary brands represented 14% of net sales in fiscal 1997. Although it intends to continue to emphasize sales of national brand products, the Company plans to expand sales of its private and signature brand product lines through national and local advertising, representation at national food shows and at food shows sponsored by the Company at its branches, and training of its sales force regarding the attributes of these products. Services -------- To strengthen its customer relationships and increase account penetration, JP Foodservice offers the following types of value-added services: . Management Support and Assistance. The Company's sales force assists customers in managing their foodservice operations more efficiently and profitably by providing advice and assistance on product selection, menu planning and recipes, nutritional information, inventory analysis and product costing and marketing strategies. The Company also provides in-service training of customer personnel. 6 . Specialized Market Services. The Company offers services and programs tailored to specialized markets. For example, through its integrated service program, called DirectCare Meals Menus and More(R), the Company provides healthcare service providers with special nutritional plans, customized software packages (JP directAdvantage(R)), a variety of marketing services and in-service training of institutional personnel. In order to be eligible to participate in this program, healthcare institutions must maintain a specified minimum volume of purchases from the Company. . Customized Technology. The Company offers its customers a proprietary hand-held computer system, the JP Connection(R), which automates many restaurant management functions, including the management and re-ordering of product inventory. The system automatically re-orders products directly through the Company's mainframe computer. The Company also has recently introduced its proprietary software package, Tranzmit(TM), which has upgraded the electronic order entry system utilized by its sales personnel by equipping them with laptop computers which it believes enables the sales force to present product and menu ideas, take orders and prepare presentations more efficiently. Through this upgrade, the Company provides its customers with an enhanced personal computer- based order entry system. . Publications. The Company promotes active customer use of its other products and services through the distribution of professionally printed publications, including its biweekly newsletter, JP foodNews(R). The Company's publications highlight selected products, including proprietary private and signature brand items, present menu suggestions, provide nutritional information and include recipes using the Company's products. Customers also may participate, at no cost, in the Company's recipe program, To Your Taste(R), in which the Company furnishes participants every two weeks with recipe cards that describe new menu concepts. Customers The Company's customer base of over 34,000 accounts encompasses a wide variety of foodservice establishments. The Company's chain customers include Old Country Buffet, Perkins Family Restaurants, Subway, Eurest Dining Services, Ruby Tuesday and Pizzeria Uno. The Company also is a foodservice supplier to the United States Congress, Fenway Park and other prominent institutions. The following table sets forth the segments of the Company's customer base by type of customer for fiscal 1997.
Percentage Type of Customer of Net Sales - ---------------- ------------ Restaurants...................................................... 63% Limited menu establishments...................................... 12 Hotels and casinos............................................... 7 Healthcare institutions.......................................... 4 Schools and colleges............................................. 3 Other............................................................ 11 --- 100% ===
7 Street Customers. The Company's street customers are independent restaurants, hotels, schools and other foodservice businesses. Street customers are serviced directly by commission sales personnel who personally call on customers, place orders, coordinate product delivery and provide the services offered to these customers. Street accounts represented approximately 57% of the Company's net sales in fiscal 1997. The Company pursues a long-term strategy of increasing street account sales as a percentage of net sales by attempting to expand sales to street customers at a faster rate than sales to chain customers. Chain Customers. The majority of the Company's chain customers consist of franchises or corporate-owned units of national or regional family dining and other restaurant "concepts" and, to a lesser extent, hotels and other regional institutional operators. The Company has developed strong working relationships with its chain accounts, which have enabled these accounts, in conjunction with the Company, to develop distribution programs tailored to precise delivery and product specifications. These distribution programs have created operating and cost efficiencies for both the chain customers and the Company. Chain customers generally are serviced by salaried sales and service representatives who coordinate the procurement and delivery of all products throughout the system from a central location. Gross profit margins generally are lower for chain customers than for street customers. However, because there are typically no commission sales costs related to chain account sales and because chain customers usually have larger deliveries to individual locations, sales and delivery costs generally are lower for chain accounts than for street accounts. Chain accounts represented approximately 43% of the Company's net sales in fiscal 1997. The Company's business strategy emphasizes supporting the growth of its existing chain accounts. Many of the Company's current chain customers, primarily restaurants, are experiencing more rapid sales growth than other types of foodservice businesses. The Company also targets new chain customers which it believes represent attractive growth opportunities. The Company intends to continue to focus on those new accounts that are located primarily within the Company's current distribution network and that can benefit from the Company's existing product line and service capabilities. No single customer accounted for more than 7% of the Company's net sales in fiscal 1997. Consistent with industry practice, the Company has no long-term contract with any customer that may not be canceled by either party at its option. Sales and Marketing JP Foodservice's principal marketing activities at June 28, 1997 were conducted by approximately 760 street sales, 90 chain sales and 130 customer service representatives. The Company's sales and service representatives are responsible for soliciting and processing orders, servicing customers by telephone, reviewing account balances and assisting with new product information. In addition, the Company's sales representatives advise customers on menu selection, methods of preparing and serving food and other operating issues. The Company provides an in-house training program for its entry-level sales and service representatives, which 8 includes seminars, on-the-job training and direct one-on-one supervision by experienced sales personnel. The Company's commission program is designed to reward account profitability and promote sales growth. The Company systematically measures the profitability of each account and product segment and modifies its incentive program accordingly. The Company maintains sales offices at each of its 15 full-service distribution centers and at four additional locations in Pennsylvania, Illinois, South Dakota and Nevada. The Company employs sales and marketing staff at both the corporate and branch levels to solicit and manage relationships with multi- unit chain accounts. The Company supplements its market presence with advertising campaigns in national and regional trade publications, which typically focus on the Company's services and its ability to service targeted industry segments. The Company supports this effort with a variety of promotional services and programs, including its biweekly newspaper, JP foodNews(R), and its recipe program, To Your Taste(R). Distribution The Company distributes its products out of its 15 full-service distribution centers located in Massachusetts, Connecticut, Pennsylvania, Maryland, Minnesota, Indiana, Illinois, Iowa, Nevada, Ohio, Virginia and Delaware, and extends this geographic coverage through remote distribution locations including, among others, facilities in Indiana, Ohio, Maryland, Michigan, Vermont, Nevada and New Jersey. The Company's customers generally are located within 150 miles of one of the Company's distribution centers, although the Company's distribution network and reciprocal arrangements with other distributors enable the Company to serve customers outside of its principal service areas. Services to both street and chain customers are supported by the same distribution facilities and equipment. The 15 full-service distribution centers have a total of approximately 2.1 million square feet of warehouse space. Each distribution center operates from a warehouse complex that contains dry, refrigerated and frozen storage areas as well as office space for sales, marketing, distribution and administration personnel. Products are delivered to the Company's distribution centers by manufacturers, common carriers and the Company's own fleet of trucks. The Company employs a management information system which, together with its centralized purchasing operations, enables it to lower its inbound transportation costs by making optimal use of its own fleet of trucks or by consolidating deliveries into full truckloads. Orders from multiple suppliers or multiple distribution centers are consolidated into single truckloads for efficient use of available vehicle capacity and return-trip hauls. Orders typically are entered electronically by the commission sales force with the appropriate distribution center through a hand-held computer device or laptop computer. These devices facilitate order entry through the use of pre-coded price lists which automatically price 9 orders, apply pricing controls and allow the sales representative to review the gross profit of each order at the time of sale. Customers also have the option to place orders by telephone to service representatives at each of the branches. Certain large customers place orders through a direct connection to the Company's mainframe computer by means of a computer terminal, personal computer or touch tone telephone, or through the Company's proprietary restaurant inventory and management system, the JP Connection(R). Under all forms of order placement, the salesperson or customer is notified immediately about product availability, which facilitates instant product substitution, if necessary. Products are reserved automatically at the time of order, thereby ensuring complete fulfillment of orders upon delivery. Customers' orders are assembled in the warehouse, sorted and shrink-wrapped to ensure order completeness. The products are staged automatically according to the required delivery sequence. Products are delivered door-to-door, typically on the day following placement of the order. The Company delivers its products through its fleet of over 1,000 tractor-trailer and straight trucks, each of which is equipped with separate temperature-controlled compartments. In dispatching trucks, the Company employs a computerized routing system designed to optimize delivery efficiency and minimize drive time, wait time and excess mileage. The majority of the Company's fleet utilizes on-board computer systems that monitor vehicle speeds, fuel efficiency, idle time and other vital statistical information. The Company collects and analyzes such data in an effort to continually monitor and improve transportation efficiency and reduce costs. In certain geographic markets, the Company utilizes its remote redistribution facilities to achieve a higher level of customer service. Products are transported in large tractor-trailers or double trailers to the redistribution facility, where the loads are then transferred to smaller equipment for delivery in the normal fashion. Suppliers At June 28, 1997, JP Foodservice employed approximately 30 purchasing agents with expertise in specific product lines to purchase products for the Company from approximately 2,400 suppliers located throughout the United States and overseas. Substantially all types of products distributed by the Company are available from a variety of suppliers, and the Company is not dependent on any single source of supply. The management of all purchasing operations from the Company's corporate headquarters in Columbia, Maryland results in lower costs through increased purchasing leverage with suppliers and greater ordering efficiency. To maximize the benefits of its centralized purchasing function, the Company attempts to concentrate purchases with selected suppliers. Through this strategy, the Company is able to buy high-quality products on advantageous terms. The Company cooperates closely with these suppliers to promote new and existing products. The suppliers assist in training the Company's sales force and customers regarding new products, new trends in the industry and new menu ideas, and collaborate with the Company in advertising and promoting these products both through printed advertisements and through annual branch-sponsored food shows and national trade shows. 10 Through its centralized purchasing department, the Company is able to monitor the quality of the products offered by various suppliers and ensure consistency of product quality across its distribution network. The concentration of purchasing power at the corporate level often provides the Company's buyers with early access to new product concepts which, if attractive, can be quickly introduced to the Company's customers. The Company maintains a comprehensive quality control and assurance program that at June 28, 1997 actively involved approximately 90 employees in daily quality control activities. The program is managed by members of the central purchasing department, including product group managers who each manage specific segments of the product line and product line managers who purchase products for the 15 branches, and is supported at each branch by the merchandising manager, the branch buyer and an inventory control specialist. The quality control process includes the selection of suppliers and the policing of quality standards through product sampling at both the Company's corporate offices and branch locations and through visits to growing fields, manufacturing facilities and storage operations. The Company requires all of its suppliers and manufacturers to maintain specified levels of product liability insurance and to name the Company as an additional insured on the applicable insurance policies. Proprietary Information Systems Except for the branches acquired in fiscal 1997, the ordering, shipment, storage and delivery of the Company's products are managed through a centralized information system that allows all of the Company's distribution facilities and its corporate headquarters to obtain information on a "real-time" basis regarding the Company's inventory, product availability, customers, sales, financial reports, truck routing and other significant operating areas. The Company's facilities utilize common information systems that permit them to access and consolidate invoices, inventory data, customer records and financial information, thereby ensuring consistency of product, sales and financial information. In coordination with its integrated information systems, the Company employs, at both the corporate and branch levels, a proprietary strategic information system that allows it to analyze systematically the profitability of customer accounts, sales territories and product groups. However, without additional upgrades, the Company's existing system will be unable to perform its functions beyond the year 2000. Therefore, beginning in fiscal 1997, the Company began the development of an enhanced distributed processing computer system to replace its existing, mainframe-based, system. The system will work on a real-time, on-line mode and is written in a fourth generation programming language which will facilitate future enhancements. The Company contemplates putting all of its operations on this new system before the year 2000. Competition The foodservice distribution industry is extremely fragmented, with over 3,000 companies in operation in 1997. In recent years, the foodservice distribution industry has been characterized by significant consolidation and the emergence of larger competitors. The Company competes in each of its markets with at least one other large national distribution 11 company, generally SYSCO Corp. or Alliant Foodservice, Inc., as well as with numerous regional and local distributors. JP Foodservice believes that, although price is an important consideration, distributors in the foodservice industry compete principally on the basis of service, product quality and customer relations. The Company attributes its ability to compete effectively against smaller regional and local distributors in part to its wider product selection, the cost advantages resulting from its size and centralized purchasing operations and its ability to offer broad and consistent market coverage. The Company competes effectively against other broadline distributors primarily by providing its customers with accurate and timely fulfillment of orders and an array of value-added services. The Company typically competes against other foodservice distribution companies for potential acquisitions. The Company believes that its financial resources and its ability to offer owners of acquisition targets an interest in the combined business through ownership of the Company's common stock provides the Company with an advantage over many of its competitors. Regulation The Company's operations are subject to regulation by state and local health departments, the U.S. Department of Agriculture and the Food and Drug Administration, which generally impose standards for product quality and sanitation. The Company's facilities generally are inspected at least annually by state or federal authorities. The Company's relationship with its fresh food suppliers with respect to the grading and commercial acceptance of produce shipments is governed by the Federal Produce and Agricultural Commodities Act, which specifies standards for sale, shipment, inspection and rejection of agricultural products. The Company also is subject to regulation by state authorities for the accuracy of its weighing and measuring devices. Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, generally are not directly applicable to the Company. Certain of the Company's distribution facilities have underground and above-ground storage tanks for diesel fuel and other petroleum products, which are subject to laws regulating such storage tanks. Such laws have not had a material adverse effect on the capital expenditures, earnings or competitive position of the Company. Certain hazardous substances have been released on the site of the Company's Boston branch. The Massachusetts Department of Environmental Protection has advised the Company that such agency has entered into an administrative consent decree with three parties responsible under Massachusetts law to clean up hazardous substances in areas contiguous to the site. The agency also advised the Company in 1990 that, as the current owner of the site, the Company also may be deemed to be a responsible party under Massachusetts law for hazardous substances on the site. The Company has not been the subject of any action or proceeding seeking to require 12 it to remove hazardous substances from the site or to make payment in respect of the cleanup of the site or related costs. In June 1996, the Massachusetts Department of Environmental Protection advised the Company that, based on the information currently available to it, the agency is not requiring the Company to remove hazardous substances from the site. The Company has been indemnified against any losses it may incur in connection with hazardous substances on the site, and does not believe resolution of this matter will have a material adverse effect on its financial condition or operating results. Intellectual Property The Company has proprietary rights to a number of trademarks used in its business, including trademarks used in connection with the marketing of its private and signature brand products, its proprietary restaurant inventory and management system and a variety of customized service programs. A number of these trademarks are registered with the U.S. Patent and Trademark Office, each for an initial period of ten or twenty years, which is renewable for additional ten year periods for as long as the Company continues to use the trademarks. The Company considers its trademarks to be of material importance to its business plans. Equipment and Machinery Equipment and machinery owned by the Company and used in its operations consist principally of electronic data processing equipment and product handling equipment. The Company also operates a fleet of over 1,000 vehicles, consisting of tractors, trailers and straight trucks, which are used for long hauls and local deliveries. At June 28, 1997, the Company owned approximately 40% of these vehicles and leased the remainder. See Note 11 to the Consolidated Financial Statements included elsewhere in this Report. The Company outsources its data center operations pursuant to a five- year contract which expires on December 31, 1997 and which may be extended by the Company. As the Company's business needs warrant, it can either increase or decrease the amount of computer capacity it purchases upon short notice to the vendor. Management believes that this arrangement provides the Company with more reliable and flexible service at a lower cost than the Company could achieve by operating its own data center. The Company regularly evaluates the capacity of its various facilities and equipment and makes capital investments to expand capacity where necessary. In fiscal 1997, the Company spent $33 million on capital expenditures, primarily for new trucks and trailers, investment in laptop computers for the sales force and expansion of its distribution centers in Allentown, Pennsylvania, Fort Wayne, Indiana and Las Vegas, Nevada. The Company will undertake expansion or replacement of its facilities as and when needed to accommodate the Company's growth. Facility expansion costs are expected to total approximately $9 million in fiscal 1998. Executive Officers of the Company Who Are Not Directors George T. Megas, age 44, joined the Company in 1991 as Vice President- Finance, with responsibility for the accounting, treasury and finance functions. Mr. Megas, a Certified Public Accountant, previously served as the Corporate Controller for Strategic Planning Associates, Inc., a management consulting firm, from 1979 to 1990, when it was acquired by Mercer 13 Management Consulting, and served as a Controller for certain regions of Mercer Management Consulting until 1991. Employees At the end of fiscal 1997, the Company had approximately 3,700 full- time employees, of whom approximately 150 were employed in corporate management and administration and approximately 2,300 of whom were hourly employees. Approximately 920 of the Company's employees were covered by collective bargaining contracts with 11 different local unions which are associated with the International Brotherhood of Teamsters. Collective bargaining contracts, covering approximately 350 employees, will expire during fiscal 1998. Other than a temporary action involving Squeri in the spring of 1993, the Company has not experienced any labor disputes or work stoppages. The Company believes that its relationships with its employees are satisfactory. Item 2. Properties - ------------------- The Company occupies its corporate headquarters in Columbia, Maryland, which consists of 30,800 square feet of office space, pursuant to a lease which expires on December 31, 2003. The Company's 15 full-service distribution centers contain a total of approximately 2.1 million square feet of warehouse space. The centers contain dry, refrigerated and frozen storage areas and office space for the sales and administrative operations of the branch. The following chart provides information on the approximate size and ownership of each of the Company's distribution centers.
Location Area in Square Feet Owned/Leased -------- ------------------- ------------ Las Vegas, Nevada......... 258,000 Owned and Leased Norwich, Connecticut...... 200,000 Owned Baltimore, Maryland....... 187,000 Owned Altoona, Pennsylvania..... 164,000 Owned Minneapolis, Minnesota.... 160,000 Owned Allentown, Pennsylvania... 155,000 Owned Boston, Massachusetts..... 149,000 Owned Streator, Illinois........ 146,000 Owned Hartford Connecticut...... 141,000 Owned Des Moines, Iowa.......... 131,000 Owned Fort Wayne, Indiana....... 131,000 Owned Alexandria, Virginia...... 112,000 Owned Cincinnati, Ohio.......... 87,000 Owned Sandston, Virginia........ 59,000 Leased Seaford, Delaware......... 45,000 Leased --------- Total............. 2,125,000 =========
14 Item 3. Legal Proceedings - -------------------------- From time to time, the Company is involved in litigation and proceedings arising out of the ordinary course of its business. There are no pending material legal proceedings to which the Company is a party or to which the property of the Company is subject. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ There were no matters submitted to the Company's security holders in the fourth quarter of fiscal 1997. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder - -------------------------------------------------------------------------- Matters - ------- The common stock of JP Foodservice (the "Common Stock") has been listed on the New York Stock Exchange ("NYSE") under the symbol "JPF" since December 31, 1996. Prior to December 31, 1996, the Common Stock was quoted on the Nasdaq National Market under the symbol "JPFS." The table below sets forth, for the periods indicated, the reported high and low bid prices of the Common Stock on the Nasdaq National Market prior to December 31, 1996 and, beginning on December 31, 1996, the reported high and low sales prices on the NYSE Composite Tape.
Fiscal Year Ended June 29, 1996 First Quarter.......................................... $18.00 $12.75 Second Quarter......................................... 19.75 15.25 Third Quarter.......................................... 22.75 18.00 Fourth Quarter......................................... 25.00 18.00 Fiscal Year Ended June 28, 1997 First Quarter.......................................... $26.00 $20.50 Second Quarter......................................... 28.75 20.38 Third Quarter.......................................... 29.25 25.75 Fourth Quarter......................................... 30.19 26.00 Fiscal Year Ending June 27, 1998 First Quarter (through September 15, 1997)............. $32.44 $28.25
As of September 15, 1997, there were 292 holders of record and approximately 7,600 beneficial holders of the Common Stock. On September 15, 1997, the reported closing sale price of the Common Stock on the NYSE Composite Tape was $29.88 per share. 15 The Company has never declared or paid cash dividends on its Common Stock and does not anticipate doing so in the foreseeable future. The current policy of the Company's Board of Directors is to retain all earnings to support operations and to finance the expansion of the Company's business. The terms of the Company's revolving credit facility (the "Bank Facility") and the Company's outstanding senior notes restrict the Company's ability to pay cash dividends on the Common Stock. Pursuant to such terms, the amount of dividends payable to JP Foodservice, Inc. by JP Foodservice Distributors, Inc. ("JP"), the Company's principal operating subsidiary, and certain of JP's subsidiaries, together with the aggregate amount of restricted investments by such entities, may not exceed the sum of (i) 50% of the cumulative consolidated net income of JP and such subsidiaries after November 22, 1994, plus (ii) the net cash proceeds to JP from the issuance or sale on or after November 22, 1994 of capital stock of JP or from contributions to the common equity capital of JP, plus (iii) any net return of capital from investments in or advances to certain subsidiaries or restricted investments, plus (iv) $1.0 million. 16 Item 6. Selected Financial Data - -------------------------------- (Dollars in thousands, except per share amounts)
Fiscal Year Ended ------------------------------------------------------------------ July 3, July 2, July 1, June 29, June 28, Statement of Operations Data: 1993 /(1)/ 1994 1995 1996 1997 ---- ---- ---- ---- ---- Net sales................................................... $1,152,709 $1,178,826 $1,288,315 $1,449,303 $1,691,913 Cost of sales............................................... 953,701 979,108 1,069,494 1,198,797 1,396,223 --------- --------- --------- --------- --------- Gross profit................................................ 199,008 199,718 218,821 250,506 295,690 Operating expenses.......................................... 166,976 163,917 177,490 202,953 232,435 Amortization of intangible assets........................... 2,266 2,265 2,263 2,338 2,918 Stock compensation charge................................... -- -- 709 -- -- --------- --------- --------- --------- --------- Income from operations...................................... 29,766 33,536 38,359 45,215 60,337 Interest expense and other financing charge costs, net/(2)/. 38,577 32,255 22,074 15,187 16,522 Nonrecurring charges........................................ -- -- -- 1,517 5,400/(3)/ --------- --------- --------- --------- --------- Income (loss) before income taxes and extraordinary charge.. (8,811) 1,281 16,285 28,511 38,415 Recovery of (provision for) income taxes.................... 2,191 (1,579) (7,358) (11,598) (16,167) --------- --------- --------- --------- --------- Income (loss) before extraordinary charge................... (6,620) (298) 8,927 16,913 22,248 Extraordinary charge........................................ -- -- 4,590 -- -- --------- --------- --------- --------- --------- Net income (loss)........................................... (6,620) (298) 4,337 16,913 22,248 Preference dividends........................................ (2,427) (504) (40) -- -- --------- --------- --------- --------- --------- Net income (loss) applicable to common stockholders......... $ (9,047) $ (802) $ 4,297 $ 16,913 $ 22,248 ========= ========= ========= ========= ========= Per Share Data: Net income (loss) per common share: Before extraordinary charge............................ $ (1.95) $ (0.17) $ 0.68 $ 0.90 $ 1.02 Extraordinary charge................................... -- -- 0.35 -- -- --------- --------- --------- --------- --------- Net income (loss) per common share.......................... $ (1.95) $ (0.17) $ 0.33 $ 0.90 $ 1.02 ========= ========= ========= ========= ========= Weighted average number of shares of common stock outstanding............................................ 4,633,371 4,633,371 13,103,798 18,808,738 21,862,254 Balance Sheet Data: Working capital............................................. $109,537 $ 94,038 $ 109,326 $ 120,866 $ 153,424 Total assets................................................ 376,768 386,726 415,212 448,279 524,148 Long-term debt, excluding current maturities................ 326,205 279,152 160,166 168,647 168,515 Mandatorily redeemable stock................................ -- -- 2,388 -- -- Stockholders' equity (deficit).............................. (62,086) (24,255) 110,105 128,149 228,946
- ------------------ (1) 53-week fiscal year. (2) Includes discount on sales of trade accounts receivable and amortization of loan acquisition costs. (3) Reflects transaction-related fees required to complete the Company's acquisitions of Valley and Squeri, which were accounted for as poolings of interests. 17 Item 7. Management's Discussion and Analysis of - ------------------------------------------------- Financial Condition and Results of Operations --------------------------------------------- General Overview. In recent years, the Company's net sales have increased predominantly as a result of internal expansion through continued growth in street account and chain account sales. The Company has increased its street account sales through growth of its street sales force, improved sales productivity and the implementation of new street sales promotion programs. The Company's chain account sales have increased as a result of the continued growth in sales to existing accounts and the development of relationships with new accounts. The Company's gross profit margin has improved in part as a result of an increase in sales of private and signature brand products as a percentage of the Company's net sales. Acquisitions. JP Foodservice supplemented its internal expansion in fiscal 1997 with an active program of strategic acquisitions to take advantage of growth opportunities from ongoing consolidation in the fragmented foodservice distribution industry. In the first quarter, JP Foodservice extended the scope of its distribution network into the Western region of the United States through its acquisition of Valley Industries, Inc. ("Valley"), a broadline distributor located in Las Vegas, Nevada. Also in the first quarter, pursuant to JP Foodservice's strategy to increase penetration of its existing service areas, JP Foodservice acquired Arrow Paper and Supply Co., Inc. ("Arrow"), a broadline distributor located in Connecticut serving the New England, New York, New Jersey and Pennsylvania markets. In the second quarter, JP Foodservice filled a gap in its Midwestern distribution network by acquiring Squeri Food Service, Inc. ("Squeri"), a broadline distributor located in Ohio serving the greater Cincinnati, Dayton, Columbus, Indianapolis, Louisville and Lexington markets. In the fourth quarter, JP Foodservice strengthened its presence in the Mid-Atlantic region through its acquisition of Mazo-Lerch Company, Inc. ("Mazo-Lerch"), a broadline distributor located in Virginia serving the District of Columbia, Virginia, Maryland, southern New Jersey and northern North Carolina markets. The Valley and Squeri acquisitions were accounted for under the pooling of interests method of accounting, and accordingly, the operating results for all years presented have been restated to incorporate the results of Valley and Squeri. The Arrow and Mazo-Lerch acquisitions were accounted for under the purchase method of accounting, and accordingly, the operating results of Arrow and Mazo-Lerch are included only from the date of acquisition. The acquisition of Mazo-Lerch was completed in the fourth quarter of fiscal 1997 and, therefore, did not materially affect fiscal 1997 results. On June 30, 1997, the Company announced that it had entered into an agreement and plan of merger pursuant to which Rykoff-Sexton, Inc. will be merged with and into a wholly-owned subsidiary of JP Foodservice and will become a wholly-owned subsidiary of JP Foodservice. See "Business--Recent Developments." Rykoff-Sexton is the nation's third largest broadline foodservice distributor based on 1996 calendar year net sales. Following completion of the merger, which is expected to occur in the second quarter of fiscal 1998, JP Foodservice will have a nationwide distribution network capable of serving an area covering more than 85% of the country's population. 18 Fiscal Year. The Company's fiscal year ends on the Saturday closest to June 30. Consequently, the Company occasionally will have a 53-week fiscal year. Fiscal 1997, 1996 and 1995 each consisted of 52 weeks. Results of Operations The following table sets forth, for the last three fiscal years, certain income and expense items expressed as a percentage of net sales.
Fiscal Year Ended ---------------------------- July 1, June 29, June 28, 1995 1996 1997 ------ ------ ------ Statement of Operations Data: Net sales................................ 100.00% 100.00% 100.00% Cost of sales............................ 83.01 82.72 82.52 ------ ------ ------ Gross profit............................. 16.99 17.28 17.48 Operating expenses....................... 13.78 14.00 13.74 Amortization of intangible assets........ 0.18 0.16 0.17 Stock compensation charge................ 0.06 -- -- ------ ------ ------ Income from operations................... 2.97 3.12 3.57 Interest expense and other financing costs, net.................. 1.71 1.05 0.98 Nonrecurring charges..................... -- 0.10 0.32 ------ ------ ------ Income before income taxes and extraordinary charge.................. 1.26 1.97 2.27 Provision for income taxes............... 0.57 0.80 0.96 ------ ------ ------ Income before extraordinary charge....... 0.69 1.17 1.31 Extraordinary charge on early extinguishment of debt................ (0.35) -- -- ------ ------ ------ Net income............................... 0.34% 1.17% 1.31% ====== ====== ======
The principal components of expenses include costs of sales, which represents the amount paid to manufacturers and growers for products sold, and operating expenses, which include selling (primarily labor-related) expenses, warehousing, transportation and other distribution costs, and administrative expenses. Because distribution and administrative expenses are relatively fixed in the short term, unexpected changes in the Company's net sales, such as those resulting from adverse weather, can have a significant short-term impact on operating income. The Company sells a significant proportion of its products at prices based on product cost plus a percentage markup. Periods of inflation in food prices result in higher product costs, which are reflected in higher sales prices and higher gross profits. The Company's operating results were positively affected by estimated food price inflation of less than 1.0%, 0.5% and 0.5% in fiscal 1997, 1996 and 1995, respectively. Gross margins generally are lower for chain accounts than for street accounts. However, because there are typically no commission sales costs related to chain account sales and because 19 chain accounts usually have larger deliveries to individual locations, sales and delivery costs generally are lower for chain accounts than for street accounts. Gross margins are generally higher for private label products than for national brand products of comparable quality. However, the Company incurs additional advertising and other marketing costs in promoting its private label products. Fiscal 1997 Compared to Fiscal 1996 ----------------------------------- Net Sales. Net sales increased 16.7% to $1.692 billion in fiscal 1997 from $1.449 billion in fiscal 1996. The Arrow acquisition accounted for net sales growth of 5.8%. Higher chain account and street sales both contributed to the Company's sales growth in fiscal 1997. An increase of 17.2% in chain account sales reflected the continued growth in sales to the Company's larger customers. As a percentage of net sales, chain account sales increased to 42.6% in fiscal 1997 from 42.4% in fiscal 1996. Street sales increased 16.4% over fiscal 1996 primarily as a result of the growth of the sales force and continued improvements in sales force productivity. Fiscal 1996 net sales were adversely affected by severe winter weather conditions in a majority of the Company's markets. Gross Profit. Gross profit margin increased to 17.5% in fiscal 1997 from 17.3% in fiscal 1996. The increase was primarily attributable to increased sales of the Company's private and signature brand products, which increased to 20.0% of street sales at the end of fiscal 1997 from 16.3% at the end of fiscal 1996. The Company also realized purchasing synergies through the consolidation of purchasing programs with the acquired entities. Operating Expenses. Operating expenses increased 14.5% to $232.4 million in fiscal 1997 from $203.0 million in fiscal 1996 primarily as a result of the increase in net sales. As a percentage of net sales, operating expenses decreased to 13.7% in fiscal 1997 from 14.0% in fiscal 1996. The decrease in operating expenses, as a percentage of net sales, resulted from distribution cost savings related to higher percentage of sales to chain accounts, increased penetration of street accounts, savings resulting from revised management compensation agreements relating to certain of the acquired businesses, and the absence of costs corresponding to those associated with the severe winter weather conditions experienced in a majority of the Company's markets in fiscal 1996. Income from Operations. Income from operations increased 33.4% to $60.3 million in fiscal 1997 from $45.2 million in fiscal 1996 primarily as a result of the fiscal 1997 increase in net sales, the increase in gross profit margin and the decrease in operating expenses as a percentage of sales. Operating margin increased to 3.6% in fiscal 1997 from 3.1% in fiscal 1996. Interest Expense and Other Financing Costs. Interest expense and other financing costs increased 8.8% to $16.5 million in fiscal 1997 from $15.2 million in fiscal 1996. The increase was primarily attributable to increased borrowings incurred in connection with the acquisitions consummated in fiscal 1997. 20 Nonrecurring Charge. In fiscal 1997, the Company recorded nonrecurring charges of $5.4 million principally related to transaction fees required to complete the Company's acquisitions of Valley and Squeri, which were accounted for as poolings of interests. Income Taxes. The provision for income taxes for fiscal 1997 increased $4.6 million over the provision for fiscal 1996. The increase in the provision was attributable to the Company's greater pretax profit level in fiscal 1997. The Company's effective tax rate of 42.1% for fiscal 1997 increased from the effective rate of 40.7% for fiscal 1996 primarily because of the non-deductible portion of the nonrecurring charges related to the acquisitions consummated in fiscal 1997. Fiscal 1996 Compared to Fiscal 1995 ----------------------------------- Net Sales. Net sales increased 12.5% to $1.449 billion in fiscal 1996 from $1.288 billion in fiscal 1995. Higher chain account and street sales both contributed to the Company's sales growth in fiscal 1996. Sales generated by foodservice businesses acquired by the Company in the last quarter of fiscal 1995 and the second quarter of fiscal 1996 accounted for 2.0% of this increase. An increase of 15.9% in chain account sales reflected the continued growth in sales to the Company's larger customers and, to a lesser extent, the development of new chain account relationships, including the new prime supplier relationship announced with Pizzeria Uno, which commenced in January 1996. As a percentage of net sales, chain account sales increased to 42.4% in fiscal 1996 from 41.3% in fiscal 1995. Street sales increased 10.1% over fiscal 1995 primarily as a result of improved sales force productivity and the implementation of new street sales promotion programs. Fiscal 1996 net sales were adversely affected by severe winter weather conditions in a majority of the Company's markets. Gross Profit. Gross profit margin increased to 17.3% in fiscal 1996 from 17.0% in fiscal 1995. The increase was primarily attributable to increased sales of the Company's private and signature brand products, which increased to 16.3% of street sales at the end of fiscal 1996 from 12.3% at the end of fiscal 1995. The increase in sales of private and signature brand products more than offset the effects of the shift in customer mix to a higher percentage of sales to chain accounts. Operating Expenses. Operating expenses increased 14.3% to $203.0 million in fiscal 1996 from $177.5 million in fiscal 1995 primarily as a result of the increases in net sales. As a percentage of net sales, operating expenses increased to 14.0% in fiscal 1996 from 13.8% in fiscal 1995. The increase in operating expenses, as a percentage of net sales, resulted primarily from increased costs incurred in connection with the promotion of private and signature brand products and costs associated with the adverse winter weather conditions in a majority of the Company's markets in the third quarter of fiscal 1996. 21 Income from Operations. As a result of the increase in net sales and gross profit margin and the absence of any charge corresponding to the one-time stock compensation charge of $0.7 million recorded in fiscal 1995, income from operations increased 17.9% to $45.2 million in fiscal 1996 from $38.4 million in fiscal 1995. Operating margin increased to 3.1% in fiscal 1996 from 3.0% in fiscal 1995. Interest Expense and Other Financing Costs. Interest expense and other financing costs decreased 31.2% to $15.2 million in fiscal 1996 from $22.1 million in fiscal 1995. The decrease was primarily attributable to the repayment or refinancing of substantially all of the Company's indebtedness in connection with a recapitalization consummated in the second quarter of fiscal 1995 which included the Company's initial public offering of Common Stock. Nonrecurring Charge. On February 19, 1996, the Company terminated discussions with Sara Lee Corporation regarding a proposed combination of the Company and Sara Lee Corporation's wholly-owned subsidiary, PYA Monarch, Inc. As a result of the termination of these discussions, which began with a proposal submitted by Sara Lee Corporation in November 1995, the Company wrote off the costs incurred related to the proposed transaction (primarily special committee, legal and advisory fees) of approximately $1.5 million. Income Taxes. The provision for income tax for fiscal 1996 increased $4.2 million over the provision for fiscal 1995. The increase in the provision was attributable to the Company's greater pretax profit level in fiscal 1996. The Company's effective tax rate (before extraordinary charge) of 40.7% for fiscal 1996 decreased from the effective rate of 45.2% for fiscal 1995 primarily because of the effect on fiscal 1995 taxable income of the non-deductible stock compensation charge of $0.7 million. Liquidity and Capital Resources The Company historically has financed its operations and growth primarily with cash flow from operations, equity offerings, borrowings under its credit facilities, operating and capital leases and normal trade credit terms. The Company finances its investment in inventory principally with trade accounts payable. The Company's cash flow from operations was $25.8 million, $10.5 million and $13.5 million in fiscal 1997, fiscal 1996 and fiscal 1995, respectively. The Company's working capital requirement generally averages between 9% and 10% of annual sales. The Company's working capital balance at June 28, 1997 was $153.4 million. In the fourth quarter of fiscal 1997, the Company amended its bank revolving credit loan agreement to increase maximum permissible borrowings thereunder from $110 million to $175 million. As of June 28, 1997, the Company's long-term indebtedness, including current portion, was $177.9 million, with an overall weighted average interest rate of 7.3% (excluding deferred financing costs and costs of interest rate swaps and interest cap arrangements). As of the same 22 date, $63.7 million of borrowings and $11.7 million of letters of credit were outstanding under the Company's bank revolving credit loan agreement and an additional $99.6 million remained available to finance the Company's working capital requirements. The Company made capital expenditures of $33 million in fiscal 1997 and $20 million in fiscal 1996, primarily for new trucks and trailers, investment in laptop computers for the sales force and the expansion of the Company's distribution centers in Streator, Illinois; Boston, Massachusetts; Allentown, Pennsylvania; Fort Wayne, Indiana and Las Vegas, Nevada. The expenditures for new trucks and trailers were primarily funded from capital leases. The Company currently expects to make capital expenditures of approximately $31 million in fiscal 1998, including approximately $9 million to upgrade and expand its existing facilities. The Company believes that the combination of cash flow generated by its operations, additional capital leasing activity and borrowings under the bank revolving credit loan agreement will be sufficient to enable it to finance its growth and meet its projected capital expenditures and other short-term and long-term liquidity requirements. Management may determine that it is necessary or desirable to obtain financing for acquisitions through additional bank borrowings or the issuance of new debt or equity securities. Quarterly Results and Seasonability Historically, the Company's operating results have reflected seasonal variations. The Company experiences lower net sales and income from operations during its third quarter, which includes the winter months. The following table sets forth certain summary information with respect to the Company's operations for the most recent eight fiscal quarters.
(Dollars in thousands) Fiscal Year Ended June 29, 1996 Fiscal Year Ended June 28, 1997 ------------------------------------------------------------------------------------------------------ 1st 2nd 3rd 4th 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------------------------------------------------------------------------------------------------------ Net sales $356,323 $353,525 $349,717 $389,738 $414,362 $422,602 $407,665 $447,284 Gross profit 60,762 60,625 60,865 68,254 70,731 73,843 70,978 80,138 Income from operations 10,008 10,456 9,225 15,526 12,467 13,938 12,522 21,410 Operating margin 2.8% 3.0% 2.6% 4.0% 3.0% 3.3% 3.1% 4.8% Net income 3,687 3,856 2,201 7,169 2,054 4,714 5,081 10,399 Net income per common share $ 0.20 $ 0.21 $ 0.12 $ 0.38 $ 0.10 $ 0.21 $ 0.23 $ 0.47
Item 7A. Quantitative and Qualitative Disclosure About Market Risk - ------------------------------------------------------------------ Not required for fiscal 1997 because the Company's market capitalization was less than $2.5 billion as of January 28, 1997. Item 8. Financial Statements and Supplementary Data - ---------------------------------------------------- The financial statements and schedules listed in Item 14 are filed as part of this Report and appear on Pages F-1 through F-23. 23 Item 9. Changes in and Disagreements With Accountants on Accounting and - ------------------------------------------------------------------------ Financial Disclosure -------------------- Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant - ------------------------------------------------------------ Information responsive to this Item is incorporated herein by reference to the Company's definitive Proxy Statement for the 1997 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before October 26, 1997. Item 11. Executive Compensation - -------------------------------- Information responsive to this Item is incorporated herein by reference to the Company's definitive Proxy Statement for the 1997 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before October 26, 1997. Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------ Information responsive to this Item is incorporated herein by reference to the Company's definitive Proxy Statement for the 1997 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before October 26, 1997. Item 13. Certain Relationships and Related Transactions - -------------------------------------------------------- Information responsive to this Item is incorporated herein by reference to the Company's definitive Proxy Statement for the 1997 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before October 26, 1997. 24 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - ------------------------------------------------------------------------- (a) The following documents are filed as part of this Report: 1. Financial Statements -------------------- The following financial statements of the Company appear on pages F-1 through F-23 of this Report and are incorporated by reference in Part II, Item 8: Report of Independent Accountants Consolidated Balance Sheets of the Company as of June 29, 1996 and June 28, 1997. Consolidated Statements of Operations of the Company for the fiscal years ended July 1, 1995, June 29, 1996 and June 28, 1997. Consolidated Statements of Stockholders' Equity of the Company for the fiscal years ended July 1, 1995, June 29, 1996 and June 28, 1997. Consolidated Statements of Cash Flows of the Company for the fiscal years ended July 1, 1995, June 29, 1996 and June 28, 1997. Notes to Consolidated Financial Statements. 2. Financial Statement Schedules ----------------------------- I. - Condensed Financial Information of Registrant II. - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. 3. Exhibits -------- 3.1 Restated Certificate of Incorporation of the Company. Filed as Exhibit 3.1 to the Company's Registration Statement on Form S-3 (No. 333-14039) and incorporated herein by reference. 3.2 Amended and Restated By-Laws of the Company. Filed herewith. 25 10.1 Employment Agreement dated as of July 3, 1989, as amended, by and between the Company and James L. Miller. Filed as Exhibit 10.1 to the Company's Registration Statement on Form S-1 (No. 33-82724) and incorporated herein by reference. 10.2 Employment Agreement dated as of August 9, 1991, by and between the Company and Lewis Hay, III. Filed as Exhibit 10.2 to the Company's Registration Statement on Form S-1 (No. 33-82724) and incorporated herein by reference. 10.3 Second Amendment, dated as of June 27, 1995, to Employment Agreement, dated as of July 3, 1989, as amended, by and between the Company and James L. Miller. Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 1995 and incorporated herein by reference. 10.4 First Amendment, dated as of June 27, 1995, to Employment Agreement, dated as of August 9, 1991, as amended, by and between the Company and Lewis Hay, III. Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 1995 and incorporated herein by reference. 10.5 Severance Agreement, dated as of September 27, 1995, by and between the Company and Mark P. Kaiser. Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 1995 and incorporated herein by reference. 10.6 Severance Agreement, dated as of September 27, 1995, by and between the Company and George T. Megas. Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 1995 and incorporated herein by reference. 10.7 Employment Agreement, dated as of January 4, 1996, between the Company and James L. Miller. Filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1996 and incorporated herein by reference. 10.8 Employment Agreement, dated as of January 4, 1996, between the Company and Lewis Hay, III. Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1996 and incorporated herein by reference. 26 10.9 Employment Agreement, dated as of January 4, 1996, between the Company and Mark P. Kaiser. Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1996 and incorporated herein by reference. 10.10 Employment Agreement, dated as of January 4, 1996, between the Company and George T. Megas. Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1996 and incorporated herein by reference. 10.11 Employment Agreement, dated as of June 10, 1996, between the Company and David M. Abramson. Filed as Exhibit 10.29 to the Company's Registration Statement on Form S-3 (No. 333-07321) and incorporated herein by reference. 10.12 JP Foodservice, Inc. 1994 Stock Incentive Plan. Filed as Exhibit 10.3 to the Company's Registration Statement on Form S-1 (No. 33-82724) and incorporated herein by reference. 10.13 JP Foodservice, Inc. Stock Option Plan for Outside Directors, as amended. Filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 28, 1996 and incorporated herein by reference. 10.14 JP Foodservice, Inc. 401(k) Retirement Plan, as amended. Filed herewith. 10.15 JP Foodservice, Inc. 1994 Employee Stock Purchase Plan. Filed as Exhibit 10.6 to the Company's Registration Statement on Form S-1 (No. 33-82724) and incorporated herein by reference. 10.16 Form of Stock Option Agreement used generally in connection with the JP Foodservice, Inc. 1994 Stock Incentive Plan. Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended July 1, 1995 and incorporated herein by reference. 10.17 Form of Stock Option Agreement used generally in connection with the JP Foodservice, Inc. Stock Option Plan for Outside Directors. Filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended July 1, 1995 and incorporated herein by reference. 10.18 Lease dated October 29, 1993 between JP Foodservice Distributors, Inc. and CMANE -- Patuxent Woods II Limited Partnership relating to the lease of the Company's corporate headquarters. Filed as Exhibit 10.7 to the Company's Registration Statement on Form S-1 (No. 33-82724) and incorporated herein by reference. 27 10.19 Description of the Company's annual bonus plan. Filed as Exhibit 10.9 to the Company's Registration Statement on Form S-1 (No. 33-82724) and incorporated herein by reference. 10.20 Note Purchase Agreement, dated as of November 10, 1994, relating to the 8.55% Senior Notes due 2004 of JP Foodservice Distributors, Inc. Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1994 and incorporated herein by reference. 10.21 Amendment No. 2, dated as of May 29, 1996, to Note Purchase Agreement, dated as of November 10, 1994, relating to the 8.55% Senior Notes due 2004 of JP Foodservice Distributors, Inc. Filed as Exhibit 10.20 to the Company's Registration Statement on Form S-3 (No. 333-07321) and incorporated herein by reference. 10.22 Amended and Restated Credit Agreement, dated as of June 9, 1997, among JP Foodservice Distributors, Inc., the lenders party thereto, NationsBank of North Carolina, N.A., as Administrative Agent and Co- Arranger, and The Chase Manhattan Bank, N.A., as Syndication Agent and Co-Arranger. Filed herewith. 10.23 Rights Agreement, dated as of February 19, 1996, between the Company and The Bank of New York, as Rights Agent (the "Rights Agent"). Filed as Exhibit 1 to the Company's Registration Statement on Form 8-A dated February 22, 1996 and incorporated herein by reference. 10.24 Amendment No. 1 to the Rights Agreement, dated as of May 17, 1996. Filed as Exhibit 10.26 to Amendment No. 1 to the Company 's Registration Statement on Form S-3 (No. 333-07321) and incorporated herein by reference. 10.25 Amendment No. 2 to the Rights Agreement, dated as of September 26, 1996. Filed as Exhibit 10.1 to Amendment No. 2 to the Company 's Registration Statement on Form S-3 (No. 333-14039) and incorporated herein by reference. 10.26 Amendment No. 3 to the Rights Agreement, dated as of June 30, 1997. Filed as Exhibit 4.1 to the Company's Current Report on Form 8-K for reportable event dated June 30, 1997 and incorporated herein by reference. 10.27 Receivables Purchase Agreement, dated as of May 30, 1996, among JP Foodservice Distributors, Inc., Illinois Fruit & Produce Corp. and Sky Bros., Inc., JPFD Funding Company and the Company. Filed as Exhibit 10.27 to the Company's Registration Statement on Form S-3 (No. 333- 07321) and incorporated herein by reference. 28 10.28 Transfer and Administration Agreement, dated May 30, 1996, among Enterprise Funding Corporation, JPFD Funding Company, JP Foodservice Distributors, Inc., NationsBank, N.A. and certain other financial institutions from time to time parties thereto. Filed as Exhibit 10.28 to the Company's Registration Statement on Form S-3 (No. 333-07321) and incorporated herein by reference. 10.29 Amendment No. 1, dated as of July 1, 1996, to the Transfer and Administration Agreement, dated as of May 30, 1996, by and among JPFD Funding Company, JP Foodservice Distributors, Inc., Enterprise Funding Corporation, NationsBank, N.A., and the financial institutions from time to time parties thereto. Filed as Exhibit 10.33 to the Company's Registration Statement on Form S-3 (No. 333-07321) and incorporated herein by reference. 10.30 Amendment No. 2, dated as of May 19, 1997, to the Transfer and Administration Agreement, dated as of May 30, 1996, by and among JPFD Funding Company, JP Foodservice Distributors, Inc., Enterprise Funding Corporation, NationsBank, N.A., and the financial institutions from time to time parties thereto. Filed herewith. 10.31 Amended and Restated Registration Rights Agreement, dated as of November 22, 1994, by and among the Company, PYA/Monarch, Inc., Chase Manhattan Investment Holdings, Inc., the Equitable Investors named therein and the management investors named therein. Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1994 and incorporated herein by reference. 10.32 Amendment, dated July 16, 1996, to the Amended and Restated Registration Rights Agreement, dated November 22, 1994, by and among the Company, PYA/Monarch, Inc., Chase Manhattan Investment Holdings, Inc., the Equitable Investors named therein and the management investors named therein. Filed as Exhibit 10.30 to the Company's Registration Statement on Form S-3 (No. 333-07321) and incorporated herein by reference. 10.33 Agreement and Plan of Merger, dated as of May 17, 1996, by and among the Company, JP Foodservice Distributors, Inc., Valley Industries, Inc., E & H Distributing Co., Inc., Lloyd K. Benson, Duane H. Zobrist, E. Mark Zobrist, Gerry R. Zobrist, R. Phillip Zobrist and Richard D. Zobrist. Filed as Exhibit A to the Information Statement/Prospectus filed as a part of the Company's Registration Statement on Form S-4 (No. 333-6645) and incorporated herein by reference. 29 10.34 Purchase and Sale Contract, dated as of May 17, 1996, between "Z" Leasing Co., a Nevada general partnership, and the Company. Filed as Exhibit B to the Information Statement/Prospectus filed as a part of the Company's Registration Statement on Form S-4 (No. 333-6645) and incorporated herein by reference. 10.35 Agreement, dated as of July 17, 1996, for the Purchase and Sale of Assets among the Company, JP Foodservice Distributors, Inc., Shareholders of Arrow Paper and Supply Co., Inc., SGD Associates Limited Liability Company and Members of SGD Associates Limited Liability Company. Filed as Exhibit 10.34 to the Company's Registration Statement on Form S-3 (No. 333-07321) and incorporated herein by reference. 10.36 Agreement and Plan of Merger, dated as of June 30, 1997, among the Company, Hudson Acquisition Corp. ("Hudson") and Rykoff-Sexton, Inc. ("Rykoff-Sexton"). Filed as Exhibit 2.1 to the Company's Registration Statement on Form S-4 (No. 333-32711) and incorporated herein by reference. 10.37 Amendment No. 1, dated as of September 3, 1997, to Agreement and Plan of Merger, dated as of June 30, 1997, among the Company, Hudson and Rykoff-Sexton. Filed as Exhibit 2.2 to the Company's Current Report on Form 8-K for reportable event dated September 3, 1997 and incorporated herein by reference. 10.38 Stock Option Agreement, dated as of June 30, 1997, between the Company and Rykoff-Sexton. Filed as Exhibit 99.1 to the Company's Current Report on Form 8-K for reportable event dated June 30, 1997 and incorporated herein by reference. 10.39 Stock Option Agreement, dated as of June 30, 1997, between Rykoff- Sexton and the Company. Filed as Exhibit 99.2 to the Company's Current Report on Form 8-K for reportable event dated June 30, 1997 and incorporated herein by reference. 10.40 Amended and Restated Support Agreement, dated as of June 30, 1997, by and among the Company and certain stockholders of Rykoff-Sexton. Filed as Exhibit 99.1 to the Company's Current Report on Form 8-K for reportable event dated September 3, 1997 and incorporated herein by reference. 21 Subsidiaries of the Company. Filed herewith. 23.1 Consent of Price Waterhouse LLP, independent accountants. Filed herewith. 23.2 Consent of KPMG Peat Marwick LLP, independent accountants. Filed herewith. 30 27 Financial Data Schedule. Filed herewith. (b) Reports on Form 8-K. Reports on Form 8-K were filed by the Company on the dates, pursuant to the Items and with respect to the subjects indicated:
Date Item Subject ---- ---- ------- April 23, 1997 Item 5 Forward-looking statements April 24, 1997 Item 5 Earnings release May 15, 1997 Item 5 Proposed acquisition
31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JP Foodservice, Inc. (Registrant) By: /s/ JAMES L. MILLER ----------------------------------------- James L. Miller, President and Chief Executive Officer (Duly Authorized Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ JAMES L. MILLER - ------------------------------------------- James L. Miller, Chairman of the Board, September 23, 1997 President and Chief Executive Officer (Principal Executive Officer) /s/ LEWIS HAY, III - ------------------------------------------- Lewis Hay, III, Director, Senior Vice September 23, 1997 President and Chief Financial Officer (Principal Financial Officer) /s/ GEORGE T. MEGAS - ------------------------------------------- George T. Megas, Vice President-Finance September 23, 1997 (Principal Accounting Officer) /s/ DAVID M. ABRAMSON - ------------------------------------------- David M. Abramson, Director September 23, 1997 /s/ MICHAEL J. DRABB - ------------------------------------------- Michael J. Drabb, Director September 23, 1997
32 /s/ ERIC E. GLASS - ------------------------------------------- Eric E. Glass, Director September 23, 1997 /s/ MARK P. KAISER - ------------------------------------------- Mark P. Kaiser, Director September 23, 1997 /s/ PAUL I. LATTA, JR. - ------------------------------------------- Paul I. Latta, Jr., Director September 23, 1997 /s/ JEFFREY D. SERKES - ------------------------------------------- Jeffrey D. Serkes, Director September 23, 1997 /s/ DEAN R. SILVERMAN - ------------------------------------------- Dean R. Silverman, Director September 23, 1997
33 REPORT OF INDEPENDENT AUDITORS OF JP FOODSERVICE, INC. To the Board of Directors and Stockholders of JP Foodservice, Inc. and Subsidiaries: We have audited the consolidated financial statements of JP Foodservice, Inc. and Subsidiaries as of June 28, 1997 and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended. In connection with our audit of the consolidated financial statements, we also have audited the financial statement schedules listed under Item 14(a)(2). These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JP Foodservice, Inc. and Subsidiaries as of June 28, 1997 and the results of their operations and their cash flows for the year ended June 28, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. During the year ended June 28, 1997, the Company adopted Statement of Financial Accounting Standard No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". /s/ KMPG Peat Marwick LLP August 11, 1997 Baltimore, Maryland F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of JP Foodservice, Inc. In our opinion, based upon our audits and the report of other auditors, the accompanying consolidated balance sheet and the related consolidated statements of operations, of stockholders' equity and of cash flows as of and for each of the two fiscal years in the period ended June 29, 1996 (appearing on pages F-4 through F-7 of this Form 10-K Annual Report) present fairly, in all material respects, the financial position, results of operations and cash flows of JP Foodservice, Inc. and its subsidiaries as of and for each of the two fiscal years ended June 29, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management, our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Valley Industries, Inc., which statements reflect total assets of $27,176,000 at January 31, 1996, and total revenues of $105,406,000 and $121,504,000 for the years ended January 1, 1995 and 1996, respectively. These statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Valley Industries, Inc. is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for the opinion expressed above. We have not audited the consolidated financial statements of JP Foodservice, Inc. for any period subsequent to June 29, 1996. /s/ Price Waterhouse LLP Linthicum, Maryland August 2, 1996, except as to Note 16, which is as of September 10, 1996 and except as to the pooling of interests with Valley Industries, Inc. and with Squeri Food Service, Inc. which is as of November 14, 1996 F-2 REPORT OF INDEPENDENT AUDITORS OF VALLEY INDUSTRIES, INC. AND SUBSIDIARIES AND Z LEASING (A GENERAL PARTNERSHIP) The Board of Directors, Stockholders and Partners Valley Industries, Inc. and Subsidiaries and Z Leasing Company (A General Partnership): We have audited the combined balance sheet of Valley Industries, Inc. and Subsidiaries and Z Leasing Company (A General Partnership collectively, the Company) as of January 31, 1996, and the related combined statements of earnings, stockholders' and partners' equity, and cash flows for each of the years in the two-year period ended January 31, 1996. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Company as of January 31, 1996, and the combined results of their operations and their cash flows for each of the years in the two-year period ended January 31, 1996, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP June 17, 1996 Las Vegas, Nevada F-3 JP FOODSERVICE, INC. -------------------- CONSOLIDATED BALANCE SHEETS --------------------------- ($ in thousands) ASSETS
June 29, 1996 June 28, 1997 ------------- ------------- Current assets Cash and cash equivalents $ 12,224 $ 11,139 Receivables 154,405 138,754 Inventories 84,138 110,030 Deferred tax asset 480 2,282 Other current assets 9,076 9,664 -------- -------- Total current assets 260,323 271,869 Property and equipment 104,258 141,724 Goodwill and other noncurrent assets 83,698 110,555 -------- -------- Total assets $448,279 $524,148 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 9,817 $ 4,594 Current obligations under capital leases 5,072 4,817 Accounts payable 110,230 89,923 Accrued expenses 14,338 19,111 -------- -------- Total current liabilities 139,457 118,445 -------- -------- Noncurrent liabilities Long-term debt 150,998 149,055 Obligations under capital leases 17,649 19,460 Deferred income taxes 12,026 8,242 -------- -------- 180,673 176,757 -------- -------- Total liabilities 320,130 295,202 -------- -------- Stockholders' equity Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued Common stock, $.01 par value, 75,000,000 shares authorized, 18,880,962 and 22,589,913 issued and outstanding 189 225 Additional paid-in-capital 190,636 226,709 Retained earnings (accumulated deficit) (17,733) 2,012 Distribution in excess of net book value of continuing stockholder's interest (44,943) -------- -------- Total stockholders' equity 128,149 228,946 -------- -------- Commitments and contingent liabilities (Notes 10, 11 and 15) Total liabilities and stockholders' equity $448,279 $524,148 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-4 JP FOODSERVICE, INC. -------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- ($ in thousands, except per share amounts)
Fiscal Year Ended -------------------------------------------- July 1, 1995 June 29, 1996 June 28, 1997 ------------ ------------- ------------- Net sales $ 1,288,315 $ 1,449,303 $ 1,691,913 Cost of sales 1,069,494 1,198,797 1,396,223 ----------- ----------- ----------- Gross profit 218,821 250,506 295,690 Operating expenses 177,490 202,953 232,435 Amortization of intangible assets 2,263 2,338 2,918 Stock compensation charge 709 ----------- ----------- ----------- Income from operations 38,359 45,215 60,337 ----------- ----------- ----------- Interest expense and other financing costs, net 22,074 15,187 16,522 Nonrecurring charges 1,517 5,400 ----------- ----------- ----------- 22,074 16,704 21,922 ----------- ----------- ----------- Income before income taxes and extraordinary charge 16,285 28,511 38,415 Provision for income taxes 7,358 11,598 16,167 ----------- ----------- ----------- Income before extraordinary charge 8,927 16,913 22,248 Extraordinary charge on early extinguishment of debt (net of $3,059 of income taxes) (4,590) ----------- ----------- ----------- Net income $ 4,337 $ 16,913 $ 22,248 =========== =========== =========== Net income per common share Before extraordinary charge $ 0.68 $ 0.90 $ 1.02 Extraordinary charge (0.35) ----------- ----------- ----------- Net income per common share $ 0.33 $ 0.90 $ 1.02 =========== =========== =========== Weighted average common shares outstanding 13,103,798 18,808,738 21,862,254
The accompanying notes are an integral part of these consolidated financial statements. F-5 JP FOODSERVICE, INC. -------------------- CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ----------------------------------------------- JULY 2, 1994 THROUGH JUNE 28, 1997 ----------------------------------- ($ in thousands)
Retained Distribution in Additional Earnings Excess of Net Book Preferred Common Paid-in (Accumulated Value of Continuing Stock Stock Capital Deficit) Stockholder's Interest Total ----- ----- ------- -------- ---------------------- ----- Balance July 2, 1994 $ 61 $ 58,076 $ (37,449) $ (44,943) $ (24,255) Net income 4,337 4,337 Dividends and distributions to stockholders of acquired companies (779) (779) Preference dividends on preferred stock $ 40 (40) Initial public offering (40) 78 81,094 81,132 Debt conversion 47 47,221 47,268 Stock issued in connection with business acquisition 2 2,098 2,100 Employee stock purchases 302 302 -------- ------ -------- --------- --------- --------- Balance July 1, 1995 188 188,791 (33,931) (44,943) 110,105 Net income 16,913 16,913 Dividends and distributions to stockholders of acquired companies (715) (715) Stock options exercised 247 247 Contributions to 401(k) plan 1 1,260 1,261 Employee stock purchases 338 338 -------- ------ -------- --------- --------- --------- Balance June 29, 1996 189 190,636 (17,733) (44,943) 128,149 Adjustments with respect to acquisitions of Valley and Squeri 2,450 (2,503) (53) Net income 22,248 22,248 Stock issued in connection with business acquisitions 4 9,754 9,758 Public stock offering 31 65,944 65,975 Reclassification in connection with Sara Lee Offering (44,943) 44,943 Stock options exercised 477 477 Contributions to 401(k) plan 1 1,554 1,555 Employee stock purchases 837 837 -------- ------ -------- --------- --------- --------- Balance June 28, 1997 $ $ 225 $226,709 $ 2,012 $ $ 228,946 ======== ====== ======== ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-6 JP FOODSERVICE, INC. -------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- ($ in thousands)
Fiscal Year Ended -------------------------------------------- July 1, 1995 June 29, 1996 June 28, 1997 ------------ ------------- ------------- Cash flows from operating activities Net income $ 4,337 $ 16,913 $ 22,248 Adjustments to reconcile net income to net cash provided by operating activities Depreciation of property and equipment 9,671 10,486 14,007 Amortization of intangible assets 2,902 2,599 3,253 Gain on disposal of property and equipment (558) (185) (64) Increase (decrease) in deferred income taxes 1,695 (292) (2,257) Write-off of loan acquisition costs 3,065 Changes in operating assets and liabilities, net of effects from purchase acquisitions (Increase) decrease in receivables (23,921) (14,570) 31,596 (Increase) decrease in inventories (2,493) (6,561) (13,149) (Increase) decrease in other current assets (1,613) (347) 130 Increase (decrease) in accounts payable 17,296 1,425 (30,946) Increase (decrease) in accrued expenses 957 1,042 3,116 Other 2,175 (2,140) -------- -------- -------- Net cash provided by operating activities 13,513 10,510 25,794 -------- -------- -------- Cash flows from investing activities Additions to property and equipment (4,889) (9,664) (25,063) Costs of businesses acquired, net of cash acquired (434) (2,725) (35,964) (Issuance) collection of note receivable (5,500) 5,500 Proceeds from sales of property and equipment 570 402 397 Other (48) (108) -------- -------- -------- Net cash used in investing activities (4,801) (17,595) (55,130) -------- -------- -------- Cash flows from financing activities Net proceeds from public offerings of common stock 79,927 65,975 Long-term debt (repayments) borrowings (75,533) 7,024 (33,955) Payments of obligations under capital lease (4,989) (4,536) (5,957) Payment of financing costs (3,122) Proceeds from other issuances of common stock 302 1,846 2,869 Redemption of preferred stock (643) Other (779) (715) (681) -------- -------- -------- Net cash provided by (used in) financing activities (4,837) 3,619 28,251 -------- -------- -------- Net increase (decrease) in cash and cash equivalents 3,875 (3,466) (1,085) Cash and cash equivalents Beginning of period 11,815 15,690 12,224 -------- -------- -------- End of period $ 15,690 $ 12,224 $ 11,139 ======== ======== ======== Supplemental disclosure of cash paid during the year for: Interest $ 18,014 $ 13,861 $ 13,654 Income taxes $ 1,592 $ 10,198 $ 17,622
The accompanying notes are an integral part of these consolidated financial statements. F-7 JP FOODSERVICE, INC. -------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (Dollars in thousands except where noted) NOTE 1 - BUSINESS - ----------------- JP Foodservice, Inc. ("JP Foodservice") and its consolidated subsidiaries (the "Company") operate as a broadline distributor of fresh, frozen and packaged foods, paper products, equipment and ancillary products to foodservice businesses, with distribution centers in the Mid-Atlantic, Midwest, Northeast and Western United States. The Company's principal customers are restaurants, hotels, healthcare facilities, cafeterias and schools encompassing both independent and multi-unit businesses. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- A. Principles of Consolidation --------------------------- The consolidated financial statements include the accounts of JP Foodservice and its subsidiaries all of which are wholly-owned. Significant intercompany transactions have been eliminated in consolidation. B. Cash Equivalents ---------------- For purposes of financial statement disclosure, cash equivalents consist of all highly liquid instruments with original maturities of three months or less. The cost of these investments is equivalent to fair market value. C. Fair Value of Financial Instruments ----------------------------------- Information regarding fair value of long-term debt is set forth in Note 10 to the financial statements. Fair values of other instruments, such as receivables and payables, approximate carrying values. D. Revenue and Receivables ----------------------- Revenue is recognized when product is shipped to the customer. Allowances are provided for estimated uncollectible receivables based on historical experience and review of specific accounts. Allowances and credits received from suppliers in connection with the Company's buying and merchandising activities are recognized as earned. E. Inventories ----------- Inventories, consisting principally of fresh, frozen and packaged foods, are valued at the lower of cost or market, with cost (net of applicable purchase rebates) being determined under the first-in, first-out (FIFO) method. F. Property and Equipment ---------------------- Property and equipment are stated at cost less accumulated depreciation. The cost of property and equipment transferred during the original capitalization of the Company was based on fair market value at the date of transfer. Major renewals and betterments are capitalized, and ordinary repairs and maintenance are charged against operations in the period in which the costs are incurred. Related costs and accumulated depreciation are eliminated from the accounts upon disposition of an asset and the resulting gain or loss is reflected in the consolidated statement of operations. F-8 Depreciation is computed using the straight-line method over estimated useful lives from date of acquisition as follows: Buildings and improvements 25-40 years Machinery and equipment 5-15 years Leasehold improvements Life of lease Delivery vehicles 7-10 years G. Goodwill and Other Noncurrent Assets ------------------------------------ Goodwill and other intangible assets are amortized using the straight-line method over the periods expected to be benefited not to exceed 40 years. The Company assesses the recoverability of goodwill by determining whether amortization of the goodwill over its remaining life can be recovered through undiscounted future operating cash flows of the acquired operations. Goodwill impairment, if any, is measured by determining the amount by which the carrying value of the goodwill exceeds its fair value based upon discounting future cash flows. Legal and bank fees associated with the acquisition of loans are capitalized and amortized using the effective interest method over the term of the related debt. Such costs are written off upon refinancing or restructuring of the related debt (see Note 10). H. Impairment of Long-Lived Assets ------------------------------- The recoverability of long-lived assets is assessed whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable through future undiscounted cash flows expected to be generated by the asset. If such assets are deemed to be impaired, the impairment is measured by determining the amount by which the carrying value of the asset exceeds its estimated fair value. I. Income Taxes ------------ Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that included the enactment date. J. Statement of Cash Flows - Noncash Activities -------------------------------------------- During fiscal years 1995, 1996 and 1997, the Company's additions to its transportation fleet of $4,410, $10,179 and $7,513, respectively, were financed through capital lease obligations. K. Net Income Per Common Share --------------------------- Net income per common share is based on the weighted average number of shares outstanding. Common shares issuable upon exercise of stock options are excluded from the computation because their effect is not material. Net income per common share, for the year ended July 1, 1995, has been adjusted for the preference dividends of $40 for computational purposes. L. Derivative Instruments ---------------------- The Company uses interest rate swap and cap contracts to manage exposure to fluctuations in interest rates. The interest rate differential on interest rate swap contracts used to hedge underlying debt obligations is reflected as an adjustment to interest expense over the life of the swap contract. Upon early termination of an interest rate swap or cap contract, the gains or losses on termination are deferred and amortized as an adjustment to the interest expense on the related debt instrument over the remaining period originally covered by the contract. F-9 M. Accounting for Stock-Based Compensation --------------------------------------- The Company has elected to continue to apply the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), with pro forma disclosure of net income and net income per common share as if the fair value based method prescribed by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), had been applied. N. Accounting Estimates -------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. O. Reclassifications ----------------- Certain amounts in the prior years' consolidated financial statements have been reclassified to conform to the current year's presentation. NOTE 3 - ACQUISITIONS - --------------------- Acquisitions Accounted for as Poolings of Interests - --------------------------------------------------- Merger with Valley - ------------------ On August 30, 1996, the Company completed a merger with Valley Industries, Inc. (together with its affiliates "Valley"), a broadline distributor located in Las Vegas, Nevada. Under the terms of the merger, the Company exchanged 1,936,494 common shares with an approximate value of $40.7 million (net of indebtedness assumed or discharged) for all of Valley's common shares and ownership interests. Merger with Squeri - ------------------ On September 30, 1996, the Company completed a merger with Squeri Food Service, Inc. (together with its affiliates "Squeri"), a broadline distributor located in Cincinnati, Ohio. Under the terms of the merger, the Company exchanged 1,079,875 common shares with an approximate value of $24.8 million (net of indebtedness assumed or discharged) for all of Squeri's common shares and ownership interests. The mergers with Valley and Squeri, as discussed above, were accounted for as poolings of interests. The Company's consolidated financial statements for the years ended July 1, 1995 and June 29, 1996 have been restated to include the accounts and operations of Valley and Squeri for all periods prior to each of the respective mergers. Prior to the mergers, Valley used a fiscal year ending on January 31, and Squeri used a fiscal year ending December 31. The fiscal 1995 and 1996 restated financial statements of the Company combine the July 1, 1995 and June 29, 1996 financial statements of the Company with the January 31, 1995 and 1996 financial statements of Valley, respectively, and the December 31, 1994 and 1995 financial statements of Squeri, respectively. The fiscal years of Valley and Squeri have been conformed with the Company's fiscal year as of June 30, 1996. Accordingly, retained earnings activity for the period February 1, 1996 to June 29, 1996, for Valley and the period January 1, 1996 to June 29, 1996, for Squeri has been reflected as adjustments to retained earnings as of June 30, 1996. Combined net sales, loss from operations and net loss for the periods February 1, 1996 to June 29, 1996 for Valley and January 1, 1996 to June 29, 1996 for Squeri were $99,660, $2,028 and $1,848, respectively. F-10 Net sales and net income of Valley and Squeri (the "Combining Companies"), for the periods prior to the acquisition, are summarized below:
Fiscal Year Ended --------------------------- July 1, 1995 June 29, 1996 ------------ ------------- Net sales As previously reported $1,108,253 $1,242,676 Combining Companies 180,062 206,627 ---------- ---------- Combined $1,288,315 $1,449,303 ========== ========== Net income As previously reported $ 1,940 $ 14,057 Combining Companies 2,397 2,856 ---------- ---------- Combined $ 4,337 $ 16,913 ========== ==========
For all periods prior to the respective mergers, to the date of the acquisitions, portions of Valley and Squeri were taxed as S-Corporations and, therefore, Federal and state income taxes were assessed to the shareholders. For purposes of the Company's consolidated financial statements, income taxes have been provided on Valley's and Squeri's earnings, at rates which would have been applicable, had such earnings been taxed at the Company's income tax rate. Distributions to S-Corporation shareholders have been adjusted for the effects of corporate, Federal and state income taxes payable on an annualized basis. Acquisitions Accounted for as Purchases - --------------------------------------- Arrow Acquisition - ----------------- Effective August 31, 1996, the Company completed the acquisition of Arrow Paper and Supply Co., Inc. (together with its affiliate, "Arrow"), a broadline foodservice distributor located in Norwich, Connecticut. Under the terms of the acquisition, which is accounted for as a purchase, the Company purchased certain assets, assumed or discharged certain liabilities and paid consideration of $28.9 million. Approximately $1.7 million of the consideration was paid with 73,977 common shares of the Company and the remainder was paid in cash. The excess of the purchase price over the fair value of net tangible assets of Arrow was approximately $28.2 million and is being amortized using the straight-line method over 40 years. Results of Arrow for the period September 1, 1996 to June 28, 1997 have been included in the Company's 1997 consolidated statement of operations. Mazo-Lerch Acquisition - ---------------------- Effective June 19, 1997, the Company completed the acquisition of Mazo-Lerch Company, Inc. ("Mazo-Lerch"), a broadline foodservice distributor located in Alexandria, Virginia. Under the terms of the acquisition, which is accounted for as a purchase, the Company acquired all of the outstanding common stock of Mazo-Lerch in exchange for 279,268 common shares of the Company valued at approximately $8 million. The purchase price approximated the fair market value of the net tangible assets of Mazo-Lerch. Results of Mazo-Lerch for the period June 20, 1997 to June 28, 1997 have been included in the Company's 1997 consolidated statement of operations. F-11 Pro Forma Information - --------------------- Unaudited pro forma information for the years ended June 29, 1996 and June 28, 1997, as if the Arrow and Mazo-Lerch acquisitions had occurred on the first day of the respective periods, is shown below.
Fiscal Year Ended ----------------------------------- June 29, 1996 June 28, 1997 ------------- ------------- (In thousands, except per share data) Net sales $ 1,602,766 $ 1,782,877 Income from operations 47,386 60,853 Net income 17,601 22,214 Net income per common share $ 0.92 $ 1.00
NOTE 4 - RELATED PARTY TRANSACTIONS - ----------------------------------- In December 1996, Sara Lee Corporation ("Sara Lee") sold its ownership interest of approximately 27% of the Company's outstanding common shares in a public offering. As a result, the Company has reclassified $44,943 of distributions in excess of net book value of continuing stockholder's interest as a reduction to additional paid-in-capital. Total product purchases from Sara Lee and its affiliates, for resale to customers, aggregated $72,590, $64,774 and $35,128 in fiscal 1995, 1996 and 1997 (through the date of sale of Sara Lee's ownership interest), respectively. The Company believes that those purchases were at prices not more favorable than those charged to unrelated distributors of Sara Lee products. NOTE 5 - NONRECURRING CHARGES - ----------------------------- In connection with the mergers of Valley and Squeri, the Company recorded a nonrecurring charge of approximately $5.4 million of merger costs and expenses (consisting primarily of legal and other professional fees) required to complete the transactions. The after-tax impact of the nonrecurring transaction costs to the Company's net income per common share for the year ended June 28, 1997 was $0.21. Excluding these nonrecurring transaction costs, the Company's net income per common share for the year ended June 28, 1997 would have been $1.23. On February 19, 1996, the Company terminated discussions with Sara Lee regarding the proposed combination of Sara Lee's subsidiary, PYA/Monarch, Inc. ("PYA/Monarch"), with the Company. As a result of the termination of these discussions, the Company wrote off the costs incurred related to the transaction (consisting primarily of legal and other professional fees) of approximately $1.5 million. The after-tax impact of this non-recurring charge, for the year ended June 29, 1996, was $0.9 million ($.05 per share). Excluding this charge, net income would have been $17.8 million for the year, and net income per share would have been $0.95 for the year. NOTE 6 - RECEIVABLES - -------------------- Receivables are composed of the following:
June 29, 1996 June 28, 1997 -------------- -------------- Customer accounts and notes $ 109,838 $ 62,820 Residual interest in customer accounts sold 20,098 Less allowance for doubtful accounts (2,447) (3,275) -------- -------- Net customer 107,391 79,643 -------- -------- From suppliers 39,838 51,293 From related parties 1,566 Less allowance for doubtful accounts (100) (255) -------- -------- Net supplier 41,304 51,038 -------- -------- Other 5,710 8,073 -------- -------- $ 154,405 $ 138,754 ======== ========
F-12 During the year ended June 28, 1997, the Company changed its method of accounting for trade receivables sold under its securitization arrangement to comply with the new accounting standard described in Note 10. Under the new standard, sale of the undivided ownership interest in $50 million of trade accounts receivables has been reflected as a reduction of receivables. At June 29, 1996, the Company recorded amounts sold under its securitization arrangement as a secured borrowing. NOTE 7 - PROPERTY AND EQUIPMENT - ------------------------------- The components of property and equipment are as follows:
June 29, 1996 June 28, 1997 ------------- ------------- Land $ 11,251 $ 16,873 Buildings 64,498 87,729 Machinery and equipment 39,800 66,207 Leasehold improvements 6,321 7,016 Vehicles held under capital leases (Note 11) 45,495 50,113 -------- -------- 167,365 227,938 Accumulated depreciation (63,107) (86,214) -------- -------- $ 104,258 $ 141,724 ======== ========
NOTE 8 - GOODWILL AND OTHER NONCURRENT ASSETS - ----------------------------------------------- Goodwill and other noncurrent assets are composed of the following: June 29, 1996 June 28, 1997 ------------- ------------- Goodwill $ 85,916 $ 121,385 Accumulated amortization (14,456) (17,227) ------------- ------------- 71,460 104,158 ------------- ------------- Loan acquisition costs 1,703 1,729 Accumulated amortization (419) (679) ------------- ------------- 1,284 1,050 ------------- ------------- Other intangible assets 5,700 5,601 Accumulated amortization (1,564) (1,785) ------------- ------------- 4,136 3,816 ------------- ------------- Other 527 872 Receivables from related parties 6,291 659 ------------- ------------- $ 83,698 $ 110,555 ============= =============
NOTE 9 - ACCRUED EXPENSES - ------------------------- The components of accrued expenses are as follows: June 29, 1996 June 28, 1997 ------------- ------------- Compensation $ 4,362 $ 6,333 Benefits and payroll taxes 2,781 4,669 Interest 1,887 1,695 Other 5,308 6,414 ------------- ------------- $ 14,338 $ 19,111 ============= =============
F-13 NOTE 10 - DEBT - -------------- Long-term debt is composed of the following:
June 29, 1996 June 28, 1997 ------------- ------------- Revolving line of credit loans $ 1,000 $ 63,700 Trade accounts receivable securitization 49,378 Senior notes 85,000 85,000 Promissory note payable to PYA/Monarch 4,067 4,331 Notes payable to shareholders, officers and related parties 5,513 308 Other 15,857 310 ------------- ------------- 160,815 153,649 Less current maturities (9,817) (4,594) ------------- ------------- $ 150,998 $ 149,055 ============= =============
Revolving Line of Credit - ------------------------ Under its revolving credit loan arrangement, amended in June 1997, the Company is entitled to borrow up to $175 million with interest payable quarterly at the bank's prime rate or, at the option of the Company, the London Interbank Offered Rate ("LIBOR"), plus .275% per annum. The Company is also required to pay an annual facility fee of .125%. While the Company may repay all or a portion of such borrowings at any time, any outstanding principal must be paid in full on or before May 9, 2002. Borrowings outstanding at June 28, 1997 bear interest at 5.9% to 6.1%. Trade Accounts Receivable Securitization - ---------------------------------------- In May 1996, the Company entered into a three-year agreement pursuant to which the Company sells, on an ongoing basis and without recourse, an undivided percentage ownership interest in a designated pool of trade accounts receivable to an independent issuer of receivable-backed paper for proceeds of up to $50 million. In order to maintain the designated balance in the pool of accounts receivables sold, the Company is obligated to sell undivided percentage interests in new receivables as existing receivables are collected. The Company has retained substantially the same credit risk as if the receivables had not been sold. The Company retains collection and administrative responsibilities on the participating interest sold as agent for the purchaser. Prior to January 1, 1997, the net proceeds from the sale of the undivided ownership interest in the pool of receivables was accounted for as a secured borrowing. Effective January 1, 1997, the Company adopted, as required, Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" (SFAS No. 125). SFAS No. 125 is required to be applied to transfers of assets occurring after December 31, 1996. Under the new standard, the sale of the undivided ownership interest has been reflected as a reduction of trade accounts receivable, and the Company is no longer reporting the $50 million proceeds as a secured borrowing. In the 1997 consolidated statement of cash flows, the sale has been reflected as a change in working capital and a decrease in long-term debt. The Company's residual interest, in the undivided ownership interest of the designated pool of trade accounts receivable sold, is included in trade accounts receivable on the balance sheet. There was no material effect on net income as a result of adopting the new standard. Discounts on the sale of the undivided ownership interest in the pool of receivables, since January 1, 1997, amounted to $1,372 and are included in interest expense and other financing costs on the consolidated statement of operations. Notes Payable - ------------- The senior notes are payable in seven annual installments beginning in October 1998. Interest is paid semiannually at an annual rate of 8.55%. In 1989, the Company loaned to PYA/Monarch $110 million in exchange for a promissory note. The note is due in installments through December 31, 1998 and bears interest at rates between 10.35% and 10.8% per annum. The Company assumed a promissory note payable to PYA/Monarch of $112 million which is due in installments through May 31, 1998 and bears interest at 11.0% per annum. Under a Note Offset Agreement F-14 between the parties, maturities of principal and interest payable under the two notes are to be settled by offsetting amounts due, with the net difference being carried until settlement as an obligation or receivable. Interest Rate Swap Agreement - ---------------------------- In May 1997, the Company entered into a three-year interest rate swap contract whereby the Company pays, quarterly, the holder interest at a fixed rate of 5.97% on a notional principal amount of $70 million and receives LIBOR, as defined, on the same notional amount provided LIBOR does not exceed 7% on the quarterly reset dates. If LIBOR is equal to or greater than 7%, no payment is made by either party during the calculation period. At June 28, 1997, the Company estimated it would have paid $213 to terminate the swap contract. Interest expense and other financing costs consist of the following:
Fiscal Year Ended ------------------------------------------ July 1, 1995 June 29, 1996 June 28, 1997 ------------ ------------- ------------- Amounts attributable to third party debt $ 20,833 $ 14,625 $ 13,138 Amounts attributable to PYA/Monarch note 602 68 264 Amortization of loan acquisition costs 639 259 260 Amounts attributable to trade accounts receivable securitization 235 2,860 ------------ ------------- ------------- $ 22,074 $ 15,187 $ 16,522 ============ ============= =============
The revolving line of credit and senior note loan covenants restrict the payment of dividends and require the Company and certain subsidiaries to maintain specified levels of working capital and net worth to meet various financial ratios. Bank and senior note borrowings are unsecured. Aggregate annual principal payments applicable to long-term debt are as follows:
Fiscal Year Ended ----------------- 1998 $ 4,594 1999 12,306 2000 12,202 2001 12,202 2002 75,904 2003 and thereafter 36,441 --------- $ 153,649 =========
Based on the borrowing rates currently available to the Company for indebtedness with similar terms and average maturities, the fair value of the Company's long- term debt is estimated to be $157,159. At June 28, 1997, the Company has approximately $11.71 million of outstanding letters of credit securing the Company's medical and workers' compensation insurance policies. Extraordinary Charge - -------------------- In connection with a recapitalization in fiscal 1995, the Company incurred a $4.6 million extraordinary charge (net of tax benefits of $3.1 million) in the second quarter of fiscal 1995 for the write-off of deferred financing costs relating to existing indebtedness as well as other fees and expenses related to the early extinguishment of debt. F-15 NOTE 11 - LEASES - ---------------- The Company leases its corporate office facilities and certain distribution facilities and equipment under operating leases. The Company leases the majority of its delivery fleet under capital leases. Charges to operations for all operating leases were $6,374, $6,461 and $7,835 in fiscal 1995, 1996 and 1997, respectively. Set forth below are the future minimum lease payments under capital leases and operating leases with noncancelable terms beyond one year.
Operating Capital Fiscal Year Ended Leases Leases ----------------- ------ ------ 1998 $ 5,117 $ 6,072 1999 3,311 5,570 2000 2,684 5,195 2001 2,623 4,732 2002 1,569 2,174 2003 and thereafter 1,555 4,451 ------- ------- $16,859 28,194 Less interest portion ======= 3,917 ------- 24,277 Less current obligations 4,817 ------- Noncurrent obligations $19,460 =======
NOTE 12 - INCOME TAXES - ---------------------- The components of income tax expense (before extraordinary charge) are as follows:
Fiscal Year Ended -------------------------------------------- July 1, 1995 June 29, 1996 June 28, 1997 ------------ ------------- ------------- Current tax expense Federal $ 3,957 $ 10,242 $ 16,414 State and local 1,060 1,208 2,010 ------------ ------------- ------------- Total current 5,017 11,450 18,424 ------------ ------------- ------------- Deferred tax expense (benefit) Federal 2,271 156 (1,941) State and local 70 (8) (316) ------------ ------------- ------------- Total deferred 2,341 148 (2,257) ------------ ------------- ------------- $ 7,358 $ 11,598 $ 16,167 ============ ============= =============
Temporary differences and the resulting deferred income tax assets and liabilities are as follows:
June 29, 1996 June 28, 1997 ------------- ------------- Current Inventory $ (847) $ 167 Allowance for doubtful accounts 1,011 1,366 Accrued expenses and other 316 749 ------------- ------------- Current deferred tax asset 480 2,282 Noncurrent Property and equipment (9,589) (6,914) Intangible assets (1,623) (1,916) Other, net (814) 588 ------------- ------------- Noncurrent deferred tax liability (12,026) (8,242) ------------- ------------- Net deferred income taxes $ (11,546) $ (5,960) ============= =============
F-16 Deferred tax benefits of $879 related to the periods from February 1, 1996 to June 29, 1996 and January 1, 1996 to June 29, 1996 for the Valley and Squeri acquisitions, respectively, are not included above, but have been included in retained earnings activity in the consolidated statement of stockholders' equity as discussed in Note 3. Included in the Company's temporary differences is $2,450 related to an increase in the tax basis of certain assets resulting from the acquisition of Valley. The establishment of the deferred tax asset has been recorded as a credit to additional paid-in-capital. A reconciliation of the statutory Federal income tax rate to the income tax rate on consolidated income, before income taxes and extraordinary charge, for fiscal 1995, 1996 and 1997 is as follows:
Fiscal Year Ended --------------------------------------------------------------------- July 1, 1995 June 29, 1996 June 28, 1997 ------------------- ------------------- ------------------ Computed statutory expense $5,700 35.00% $ 9,979 35.00% $13,445 35.00% State and local income tax, net of Federal tax benefit 720 4.42 858 3.01 1,099 2.86 Permanent differences 1,172 7.20 858 3.01 1,586 4.13 Gas tax credit and other (234) (1.44) (97) (0.34) 37 0.10 ------ ------ ------- ------- ------- ------ $7,358 45.18% $11,598 40.68% $16,167 42.09% ====== ====== ======= ======= ======= ======
All tax years of the Company, since fiscal 1994, are open for examination. The Internal Revenue Service and certain state authorities have examinations in progress. NOTE 13 - STOCKHOLDERS' EQUITY - ------------------------------ Issuance of Common Stock - ------------------------ In August and September 1996, the Company sold 3,075,000 shares of common stock in a public offering for $65.9 million, net. The net proceeds of the offering were used to fund the cash portion of the Arrow purchase price and to repay indebtedness assumed or discharged by the Company in connection with its acquisitions of Valley and Arrow, as discussed above. Employee Stock Purchase Plan - ---------------------------- The Company sponsors an employee stock purchase plan, pursuant to which all full-time employees of the Company and its subsidiaries who have been employed by the Company for 90 days or more are eligible to purchase shares of common stock from the Company. An aggregate of 1,500,000 shares of common stock may be issued and purchased under the plan. Eligible employees may purchase shares of common stock at a price equal to 85% of the market price per share on each quarterly investment date. Purchases under this plan totaled 28,080 shares, 33,940 shares and 38,902 shares during fiscal 1995, 1996 and 1997, respectively. The Company applies APB No. 25 and related interpretations in accounting for the employee stock purchase plan. Accordingly, no compensation cost has been recognized for this plan. Had compensation cost been determined under SFAS No. 123, the Company would have recognized as compensation expense the 15% discount from the market price or $127 and $157 for fiscal 1996 and 1997, respectively. Stock Option Plans - ------------------ The Company has employee and outside director stock option plans. The employee stock option plan authorizes the grants, at the discretion of the Company's Board of Directors, of incentive stock options, non-qualified stock options, restricted stock awards, stock appreciation rights, or any combination thereof, at the fair market value on the date of grant. Options granted under the employee stock option plan generally have a life of ten years and vest over a three-year period. The outside director stock option plan provides for an initial award of 5,000 options and an annual award of 1,000 options, at fair market value, for a ten-year period with one-fourth vesting upon grant and the balance vesting equally over three years. During fiscal year 1997, the Board of Directors agreed to increase the annual award to directors from 1,000 to 2,000 options subject to shareholder approval at the next annual meeting. The aggregate number of shares reserved for the issuance of common stock under stock option plans was 1,472,404 at June 28, 1997. Upon a change of control of the Company, as defined, all outstanding and previously unvested options will become immediately exercisable. The Company applies APB No. 25 and related interpretations when accounting for stock-based employee compensation grants as permitted under SFAS No. 123. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost been determined under the fair value method of SFAS No. 123, the Company's net income and net income per common share would have been reduced to the pro forma amounts indicated below (in thousands, except per share amounts):
Fiscal Year Ended ----------------------------- June 29, 1996 June 28, 1997 ------------- ------------- Net income: As reported $ 16,913 $ 22,248 ------------- ------------- Pro forma $ 16,655 $ 20,879 ------------- ------------- Earnings per share: As reported $ 0.90 $ 1.02 ------------- ------------- Pro forma $ 0.89 $ 0.96 ------------- -------------
The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in fiscal 1996 and 1997: dividend yield of 0%; expected volatility of 41.45% and 45.44% for fiscal 1996 and 1997, respectively; risk-free interest rate of 6.18% and 6.36% for fiscal 1996 and 1997, respectively; and expected lives of 5 years. The weighted average fair value of options granted during fiscal 1996 and 1997 was $6.48 and $11.21, respectively. Pro forma net income reflects only options granted in fiscal 1996 and 1997. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 for fiscal 1996 and 1997 is not reflected in the pro forma net income amounts presented above, because compensation cost is reflected over the options' vested period of three years and compensation cost for options granted prior to July 2, 1995 is not considered. A summary of changes in outstanding stock options follows:
Weighted Average Incentive Exercise Price Stock Options per Share ------------- --------- Options granted in fiscal 1995 400,877 $ 11.06 Options cancelled (32,245) $ 11.00 --------- -------- Balance, July 1, 1995 368,632 $ 11.06 Options granted 158,868 $ 14.46 Options cancelled (57,142) $ 11.77 Options exercised (16,881) $ 11.44 --------- -------- Balance, June 29, 1996 453,477 $ 12.13 Options granted 666,510 $ 21.81 Options cancelled (30,083) $ 13.17 Options exercised (25,826) $ 18.37 --------- -------- Balance, June 28, 1997 1,064,078 $ 17.87 ========= ========
The Compensation Committee has the authority to determine the terms and conditions of any restricted stock awards under the stock option plan. No such awards were made through June 28, 1997. F-17 The following table summarizes information about stock options outstanding at June 28, 1997:
Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise Prices June 28, 1997 Contractual Life Exercise Price June 28, 1997 Exercise Price --------------- ------------- ---------------- -------------- ------------- -------------- $11.00 - $15.75 435,983 7.65 $12.07 245,001 $11.63 $19.25 - $24.50 626,095 9.22 $21.88 51,133 $21.30 $27.75 - $27.75 2,000 9.65 $27.75 500 $27.75 --------- ------- 1,064,078 8.58 $17.87 296,634 $13.33 ========= =======
Shareholder Rights Plan - ----------------------- In 1996, the Board of Directors of the Company adopted a shareholder rights plan. Issuance of rights under the rights plan, subject to specified exceptions, would be triggered by the acquisition (or certain actions that would result in the acquisition) of 10% or more of the Company's common stock by any person or group (or 15% or more by any person eligible to report its ownership of the Company's common stock on Schedule 13G under the Securities Exchange Act of 1934). Pursuant to this plan, the Board of Directors of the Company declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock of the Company. Each share of common stock has attached one Right which entitles the registered holder of common stock to purchase from the Company, upon the occurrence of the specified triggering events, one-hundredth of a share of a newly authorized issue of junior participating preferred stock at a price of $95, subject to adjustment. The Company may redeem the Rights at a price of $.01 per Right prior to a triggering event. The Rights expire on February 19, 2006. NOTE 14 - EMPLOYEE RETIREMENT BENEFITS - -------------------------------------- The majority of the Company's union employees are covered by union-administered pension plans. Since these plans are part of multi-employer pension arrangements, it is not practicable to determine the amount of accumulated plan benefits or plan net assets applicable solely to the Company's employees. Charges to operations for all employer defined benefit pension contributions required by union agreements aggregated $1,848, $2,329 and $2,565 in fiscal 1995, 1996 and 1997, respectively. The Company and certain of its subsidiaries sponsor defined contribution profit sharing plans for which all full-time non-union employees are generally eligible. Terms of the plans provide for employee and Company contributions. The Company's Savings and Retirement 401(k) plan allows Company contributions to be made in common stock of the Company, and provides for vesting by employees in Company contributions on the fifth anniversary of participation in the plan. Charges to operations for employer contributions to the plans were $1,514, $1,775 and $1,811 in fiscal 1995, 1996 and 1997, respectively. The Company has no defined benefit pension plan for non-union employees. The Company does not grant any post-retirement benefits other than those described above. NOTE 15 - CONTINGENCIES - ----------------------- The Company is involved, from time to time, in litigation and proceedings arising out of the ordinary course of business. There are no pending material legal proceedings or environmental investigations to which the Company is a party or to which the property of the Company is subject. F-18 NOTE 16 - ACCOUNTING PRONOUNCEMENTS - ----------------------------------- During 1997, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128); No. 129, "Disclosure of Information About Capital Structure" (SFAS No. 129); No. 130, "Reporting Comprehensive Income" (SFAS No. 130); and No. 131, "Disclosures About Segments of an Enterprise and Related Information" (SFAS No. 131). These pronouncements generally require additional disclosure and are not expected to have any effect on the Company's financial position or results of operations. The Company expects to adopt SFAS No. 128 and No. 129 during the third quarter of fiscal 1998 and SFAS No. 130 and No. 131 during fiscal 1999. The Company is currently evaluating the impact, if any, that the new pronouncements will have on the Company's financial statement disclosures. NOTE 17 - SUBSEQUENT EVENTS - --------------------------- Merger with Rykoff-Sexton, Inc. - ------------------------------- On June 30, 1997, the Company announced it had entered into a definitive agreement to merge with Rykoff-Sexton, Inc. ("Rykoff-Sexton"), a broadline foodservice distributor with corporate headquarters in Wilkes-Barre, Pennsylvania. Under the terms of the merger, to be accounted for as a pooling of interests, the Company will exchange .84 of one share of its common shares for each share of Rykoff-Sexton's 28.6 million outstanding common shares. The transaction is expected to close in the second quarter of fiscal 1998. Upon consummation of the merger, the financial position and results of operations of the Company and Rykoff-Sexton will be restated to give effect to the merger for all periods presented. Presented below are unaudited pro forma condensed combined financial statement information as of and for the year ended June 28, 1997, as if the merger had been consummated at that date:
Unaudited Pro Forma Condensed Combined Balance Sheet Information Company Rykoff-Sexton Combined ---------- ------------- -------- Assets Current assets $ 271,869 $ 441,355 $ 713,224 Property, plant and equipment, net 141,724 296,012 437,736 Other noncurrent assets 110,555 481,655 592,210 ---------- ---------- ---------- $ 524,148 $1,219,022 $1,743,170 ========== ========== ========== Liabilities and stockholders' equity Current liabilities $ 118,445 $ 356,933 $ 475,378 Long-term obligations 168,515 486,731 655,246 Other noncurrent liabilities 8,242 21,185 29,427 ---------- ---------- ---------- 295,202 864,849 1,160,051 Stockholders' equity 228,946 354,173 583,119 ---------- ---------- ---------- $ 524,148 $1,219,022 $1,743,170 ========== ========== ========== Unaudited Pro Forma Condensed Combined Statement of Operations Information (in thousands, except per share amounts) Company Rykoff-Sexton Combined ---------- ------------- ---------- Net sales $1,691,913 $3,477,493 $5,169,406 Income from operations 60,337 85,487 145,824 Net income 22,248 16,038 38,286 Net income per common share $1.02 $0.56 $.83
F-19 JP FOODSERVICE, INC. SCHEDULE I - -------------------- ---------- CONDENSED FINANCIAL INFORMATION OF REGISTRANT Page 1 of 3 (Dollars in thousands) The following are the condensed balance sheets, statements of operations and cash flows for JP Foodservice, Inc. with its subsidiaries at equity:
- --------------------------------------------------------------------------- June 29, June 28, 1996 1997 - --------------------------------------------------------------------------- Condensed Balance Sheets - ------------------------ Assets - ------ Cash and cash equivalents $ 134 $ 126 Other current assets 131 125 Intra-company receivable 3,850 82,384 Investments in subsidiaries 124,034 146,311 ----------------------- $128,149 $228,946 ======================= Liabilities and Stockholders' Equity - ------------------------------------ Stockholders' equity Common stock $ 189 $ 225 Paid-in capital 190,636 226,709 Retained earnings (accumulated deficit) (17,733) 2,012 Distribution in excess of net book value of continuing stockholder's interest (44,943) ----------------------- Total stockholders' equity 128,149 228,946 ----------------------- $128,149 $228,946 =======================
F-20 JP FOODSERVICE, INC. SCHEDULE I - -------------------- ---------- CONDENSED FINANCIAL INFORMATION OF REGISTRANT Page 2 of 3 (Dollars in thousands)
- -------------------------------------------------------------------------------- Year Ended Year Ended Year Ended July 1, June 29, June 28, 1995 1996 1997 - -------------------------------------------------------------------------------- Condensed Statements of Operations - ---------------------------------- Operating expenses $ (6) $ (29) Interest expense $(2,926) Income tax benefit 1,024 ----------------------------------- Loss before equity in undistributed net income of subsidiary (1,902) (6) (29) Equity in net income of unconsolidated subsidiary 6,239 16,919 22,277 ----------------------------------- Net loss applicable to common stock $ 4,337 $16,913 $22,248 ===================================
F-21 JP FOODSERVICE, INC. SCHEDULE I - -------------------- ---------- CONDENSED FINANCIAL INFORMATION OF REGISTRANT Page 3 of 3 - -------------------------------------------------------------------------------- (Dollars in thousands)
Year Ended Year Ended Year Ended July 1, June 29, June 28, 1995 1996 1997 - -------------------------------------------------------------------------------------------------------------- Condensed Statements of Cash Flows - ---------------------------------- Cash flows from operating activities: Net income $ 4,337 $ 16,913 $ 22,248 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Equity in undistributed income of subsidiary (6,239) (16,919) (22,277) (Increase) decrease in other current assets 129 (6) Preferred stock liquidation 182 PIK note interest payable in additional notes 394 Increase (decrease) in other assets 1,981 (1,869) (68,817) Increase (decrease) in other liabilities 12,506 ------------------------------------ Net cash provided by (used in) operating activities 13,161 (1,746) (68,852) ------------------------------------ Cash flows from investing activities: Payment of recapitalization costs (1,432) Investment in unconsolidated subsidiary (64,257) ------------------------------------ Net cash used in investing activities (65,689) ------------------------------------ Cash flows from financing activities: Redemption of preferred stock (643) Long-term debt repayment (27,026) Net proceeds from public offerings of common stock 79,927 65,975 Proceeds from other issuances of common stock 302 1,846 2,869 ------------------------------------ Net cash provided by financing activities 52,560 1,846 68,844 ------------------------------------ Net increase (decrease) in cash and cash equivalents 32 100 (8) Cash and cash equivalents, at beginning of year 2 34 134 ------------------------------------ Cash and cash equivalents, at end of year $ 34 $ 134 $ 126 ====================================
F-22 JP FOODSERVICE, INC. SCHEDULE II - -------------------- ----------- VALUATION AND QUALIFYING ACCOUNTS (Dollars in thousands) YEAR ENDED JULY 1, 1995
Additions -------------------- Amounts Balance at Charged charged Balance beginning to costs Charged to off at of and other less end of Description period expenses accounts recoveries period - -------------------------------------------------------------------------------- Allowance for doubtful accounts $3,037 $1,940 $2,117 $2,860
YEAR ENDED JUNE 29, 1996
Additions -------------------- Amounts Balance at Charged charged Balance beginning to costs Charged to off at of and other less end of Description period expenses accounts recoveries period - -------------------------------------------------------------------------------- Allowance for doubtful accounts $2,860 $2,048 $2,361 $2,547
YEAR ENDED JUNE 28, 1997
Additions -------------------- Amounts Balance at Charged charged Balance beginning to costs Charged to off at of and other less end of Description period expenses accounts/(1)/ recoveries period - ------------------------------------------------------------------------------------ Allowance for doubtful accounts $2,547 $2,253 $1,611 $2,881 $3,530
(1) Other charges consist of $511 in reserves acquired through purchase acquisitions during the year and net increase in reserves of $1,100 during the "stub period" from pooled acquisitions. F-23 EX-3.2 2 EXHIBIT 3.2 EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF JP FOODSERVICE, INC. ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, Delaware 19801, in the County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS MEETINGS Section 1. Places of Meetings. All meetings of stockholders shall be held at such place or places in or outside of the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or waiver of notice thereof, subject to any provisions of the laws of the State of Delaware. Section 2. Annual Meetings. Unless otherwise determined from time to time by the Board of Directors, the annual meeting of stockholders shall be held each year for the election of directors and the transaction of such other business as may properly come before the meeting at such date and time as may be designated by the Board of Directors. Written notice of the time and place of the annual meeting shall be given by mail to each stockholder entitled to vote at such meeting, at the stockholder's address as it appears on the records of the Corporation, not less than ten (10) nor more than sixty (60) days prior to the scheduled date thereof. Section 3. Special Meetings. A special meeting of the stockholders of the Corporation may be called at any time by the Chairman of the Board or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies. Written notice of the date, time, place and specific purpose or purposes for which such meeting is called shall be given by mail to each stockholder entitled to vote thereat at such stockholder's address as it appears on the records of the Corporation not less than (10) nor more than sixty (60) days prior to the scheduled date thereof. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 4. Voting. At all meetings of stockholders, each stockholder entitled to vote on the record date as determined under these By-Laws or, if not so determined, as prescribed under the laws of the State of Delaware, shall be entitled to one vote for each share of stock standing on record in such stockholder's name, subject to any restrictions or qualifications set forth in the Restated Certificate of Incorporation of the Corporation or any amendment thereto (the "Restated Certificate of Incorporation"). Section 5. Quorum; Voting. At any stockholders meeting, a majority of the number of shares of stock outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum, but a smaller interest may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice, subject to such limitations as may be imposed under the laws of the State of Delaware. When a quorum is present at any meeting, the affirmative vote of the holders of a majority of the number of shares of stock entitled to vote thereon, present in person or by proxy, shall decide any question brought before such meeting unless such question is one upon which a different vote is required by express provision of the Restated Certificate of Incorporation, these By-Laws, the rules or regulations of the Nasdaq National Market or any law or other rule or regulation applicable to the Corporation, in which case such express provision shall govern. Section 6. Inspectors of Election; Opening and Closing the Polls. The Board of Directors may, by resolution, appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to act at a meeting of stockholders and make a written report thereof. One or more persons may be designated as alternative inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act, or if all inspectors or alternates who have been appointed are unable to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the General Corporation Law of the State of Delaware. The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting. -2- Section 7. List of Stockholders. At least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address and the number of shares registered in the name of each stockholder, shall be prepared by the secretary or the transfer agent in charge of the stock ledger of the Corporation. Such list shall be open for examination by any stockholder as required by the laws of the State of Delaware. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine such list or the books of the Corporation or to vote in person or by proxy at such meeting. Section 8. Written Consent in Lieu of Meeting. Except as otherwise provided for or fixed pursuant to the provisions of the Restated Certificate of Incorporation relating to the rights of the holders of any series of preferred stock, no action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting of stockholders. ARTICLE III BOARD OF DIRECTORS Section 1. Number and Qualification. The authorized number of directors that shall constitute the full Board of Directors of the Corporation shall be fixed from time to time by resolution of the Board of Directors. The Board of Directors, other than those directors elected by the holders of any series of preferred stock, shall be divided into three classes, as nearly equal in number as the then-authorized number of directors constituting the Board permits, with the term of office of one class expiring each year and with each director serving for a term ending at the third annual meeting of stockholders of the Corporation following the annual meeting at which such director was elected. One class of directors shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 1995, another class shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 1996, and another class shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 1997. Members of each class shall hold office until their successors are elected and qualified. At each succeeding annual meeting of the stockholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast at such meeting to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Directors need not be stockholders of the Corporation. Notwithstanding any other provision of these by-laws, (i) no person who has attained 70 years of age may be elected to the Board, other than pursuant to the Agreement and Plan of Merger dated as of June 30, 1997 among the Corporation, Hudson Acquisition Corp. and Rykoff-Sexton, Inc., and (ii) any director who attains 70 years of age after such director's election to the Board may serve for the entire term of the class of the Board to which such director was elected. The -3- requirements of the preceding sentence shall not apply to any director of the Corporation elected to the Board prior to June 29, 1997. Section 2. Powers. The business and affairs of the Corporation shall be carried on by or under the direction of the Board of Directors, which shall have all the powers authorized by the laws of the State of Delaware, subject to such limitations as may be provided by the Restated Certificate of Incorporation or these By-Laws. Except as otherwise expressly provided herein or in the Restated Certificate of Incorporation, the vote of the majority of directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 3. Compensation. The Board of Directors may from time to time by resolution authorize the payment of fees or other compensation to the directors for services as such to the Corporation, including, but not limited to, fees for attendance at all meetings of the Board or of the executive or other committees, and determine the amount of such fees and compensation. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor in amounts authorized or otherwise approved from time to time by the Board. Section 4. Meetings and Quorum. Meetings of the Board of Directors may be held either in or outside of the State of Delaware. At all meetings of the Board, a majority of the then authorized number of directors shall constitute a quorum. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. The first meeting of the Board of Directors after the election of a new class of directors shall be held immediately after the annual meeting of stockholders and at the same place, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not held at such time and place, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all the directors. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. Notice of special meetings shall be given to each director on one (1) day's notice to each director, either personally, by mail, telegram, facsimile, personal delivery or similar means. Special meetings may be called by the president or the Chairman of the Board of Directors and shall be called by the president or secretary in the manner and on the notice set forth above upon the written request of a -4- majority of the total number of directors which the Corporation would have if there were no vacancies. Notice of any meeting shall state the time and place of such meeting, but need not state the purposes thereof unless otherwise required by the laws of the State of Delaware, the Restated Certificate of Incorporation, these By-Laws or the Board of Directors. Section 5. Executive Committee. The Board of Directors may, by resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies, designate an Executive Committee to exercise, subject to applicable provisions of law, all the powers of the Board in the management of the business and affairs of the Corporation when the Board is not in session, including without limitation the power to declare dividends and to authorize the issuance of the Corporation's capital stock, and may, by resolution similarly adopted, designate one or more other committees, including such committees specified in Section 6 of this Article III. The Executive Committee shall consist of two or more directors of the Corporation. The Board may designate one or more directors as alternate members of the Executive Committee, who may replace any absent member at any meeting of the Executive Committee. The members of the Executive Committee present at any meeting, whether or not constituting a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent member. The Executive Committee shall keep written minutes of its proceedings and shall report such proceedings to the Board when required. A majority of the Executive Committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. Notice of such meetings shall be given to each member of the Executive Committee in the manner provided for in Section 4 of this Article III. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve the Executive Committee. Section 6. Other Committees. (a) The Board shall appoint the following standing committees, the members of which shall serve at the pleasure of the Board: a Nominating Committee, a Compensation Committee and an Audit Committee. The Board may appoint such other committees among the directors of the Corporation as it deems necessary and appropriate for the proper conduct of the Corporation's business and may appoint such officers, agents or employees of the Corporation to assist the committees of the Board as it deems necessary and appropriate. Meetings of committees may be called by the chairman of the committee on one (1) day's notice to each committee member, either personally, by mail, telegram, facsimile or similar means and shall be called by the chairman of the committee in like manner -5- and on like notice on the written request of a committee member. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. (b) One or more directors of the Corporation shall be appointed to act as a Nominating Committee. The Nominating Committee shall be responsible for proposing to the Board nominees for election as directors and shall possess and may exercise such additional powers and authority as may be delegated to it by the Board from time to time. The Nominating Committee shall report its actions to the Board at the next meeting of the Board following such actions. Vacancies in the membership of the Nominating Committee shall be filled by the Board of Directors. (c) One or more directors of the Corporation shall be appointed to act as a Compensation Committee, each of whom shall be directors who are not also officers or employees of the Corporation or its subsidiaries or any other individual having a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director (each such director, an "Unaffiliated Director"). The Compensation Committee shall be responsible for establishing salaries, bonuses and other compensation for the executive officers of the Corporation and for administering the Corporation's benefit plans, and shall possess and may exercise such additional powers and authority as may be delegated to it by the Board from time to time. The Compensation Committee shall report its actions to the Board at the next meeting of the Board following such actions. Vacancies in the membership of the Compensation Committee shall be filled by the Board of Directors. (d) One or more Unaffiliated Directors of the Corporation shall be appointed to act as an Audit Committee. The Audit Committee shall have general oversight responsibility with respect to the Corporation's financial reporting. In performing its oversight responsibility, the Committee shall make recommendations to the Board of Directors as to the selection, retention, or change in the independent accountants of the Corporation, review with the independent accountants the scope of their examination and other matters (relating to both audit and non-audit activities), and review generally the internal auditing procedures of the Corporation. In undertaking the foregoing responsibilities, the Audit Committee shall have unrestricted access, if necessary, to personnel of the Corporation and documents and shall be provided with the resources and assistance necessary to discharge its responsibilities, including periodic reports from management assessing the impact of regulation, accounting, and reporting of other significant matters that may affect the Corporation. The Audit Committee shall review the financial reporting and adequacy of internal controls of the Corporation, consult with the internal auditors and certified public accountants, and from time to time, but not less than annually, report to the Board. Vacancies in the membership of the Audit Committee shall be filled by the Board of Directors. -6- Section 7. Conference Telephone Meetings. Any one or more members of the Board of Directors or any committee thereof may participate in meetings by means of a conference telephone or similar communications equipment and such participation in a meeting shall constitute presence in person at the meeting. Section 8. Action Without Meetings. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting to the extent and in the manner authorized by the laws of the State of Delaware. Section 9. Transactions With Affiliates. No transaction, agreement or understanding between the Corporation (or any of its subsidiaries) and any affiliate of the Corporation that, along with its affiliates and associates, beneficially owns 10% or more of the outstanding common stock of the Corporation shall be valid and effective unless such transaction, agreement or understanding shall have been approved or adopted or authorized, as the case may be, by the Board of Directors or the Executive Committee. ARTICLE IV OFFICERS Section 1. Titles and Election. The officers of the Corporation shall be the president, a secretary and a treasurer, who shall initially be elected as soon as convenient by the Board of Directors and thereafter, in the absence of earlier resignations or removals, shall be elected at the first meeting of the Board following the annual meeting of stockholders. Each officer shall hold office at the pleasure of the Board except as may otherwise be approved by the Board, or until such officer's earlier resignation, removal under these By-Laws or other termination of employment. Any person may hold more than one office if the duties can be consistently performed by the same person, to the extent permitted by the laws of the State of Delaware. The Board of Directors, in its discretion, may also at any time elect or appoint a Chairman of the Board of Directors, who shall be a director, and one or more vice presidents, assistant secretaries and assistant treasurers and such other officers as it may deem advisable, each of whom shall hold office at the pleasure of the Board, except as may otherwise be approved by the Board, or until such officer's earlier resignation, removal or other termination of employment, and shall have such authority and shall perform such duties as shall be prescribed or determined from time to time by the Board or, in case of officers other than the Chairman of the Board, if not so prescribed or determined by the Board, as the president or the then senior executive officer may prescribe or determine. The Board of Directors may require any officer or other employee or agent to give bond for the faithful -7- performance of duties in such form and with such sureties as the Board may require. Section 2. Duties. Subject to such extension, limitations, and other provisions as the Board of Directors or these By-Laws may from time to time prescribe or determine, the following officers shall have the following powers and duties: (a) Chairman of the Board. The Chairman of the Board, when present, shall preside at all meetings of the stockholders and of the Board of Directors and shall be charged with general supervision of the management and policy of the Corporation, and shall have such other powers and perform such other duties as the Board of Directors may prescribe from time to time. (b) President. Subject to the Board of Directors and the provisions of these By-Laws, the president shall be the chief executive officer of the Corporation, shall exercise the powers and authority and perform all of the duties commonly incident to such office, shall in the absence of the Chairman of the Board preside at all meetings of the stockholders and of the Board of Directors if he is a director, and shall perform such other duties as the Board of Directors shall specify from time to time. Unless some other person is thereunto specifically authorized by the Board of Directors, the president or a vice president shall sign all bonds, debentures, promissory notes, deeds and contracts of the Corporation. (c) Vice-President. The vice president or vice presidents shall perform such duties as may be assigned to them from time to time by the Board of Directors or by the president if the Board does not do so. In the absence or disability of the president, the vice presidents in order of seniority may, unless otherwise determined by the Board, exercise the powers and perform the duties pertaining to the office of president, except that if one or more senior vice presidents has been elected or appointed, the person holding such office in order of seniority shall exercise the powers and perform the duties of the office of president. (d) Secretary. The secretary, or in the secretary's absence, an assistant secretary shall keep the minutes of all meetings of stockholders and of the Board of Directors, give and serve all notices, attend to such correspondence as may be assigned to such officer, keep in safe custody the seal of the Corporation, and affix such seal to all such instruments properly executed as may require it, and shall have such other duties and powers as may be prescribed or determined from time to time by the Board of Directors or by the president if the Board does not do so. (e) Treasurer. The treasurer, subject to the order of the Board of Directors, shall have the care and custody of the moneys, funds, valuable papers and documents of the Corporation (other than such officer's own bond, if any, which shall be in the custody of the president), and shall have, under the supervision of -8- the Board of Directors, all the powers and duties commonly incident to such office. The treasurer shall deposit all funds of the Corporation in such bank or banks, trust company or trust companies, or with such firm or firms doing a banking business as may be designated by the Board of Directors or by the president if the Board does not do so. The treasurer may endorse for deposit or collection all checks, notes and similar instruments payable to the Corporation or to its order. The treasurer shall keep accurate books of account of the Corporation's transactions, which shall be the property of the Corporation, and together with all of the property of the Corporation in such officer's possession, shall be subject at all times to the inspection and control of the Board of Directors. The treasurer shall be subject in every way to the order of the Board of Directors, and shall render to the Board of Directors and/or the president of the Corporation, whenever they may require it, an account of all transactions and of the financial condition of the Corporation. In addition to the foregoing, the treasurer shall have such duties as may be prescribed or determined from time to time by the Board of Directors or by the president if the Board does not do so. (f) Delegation of Authority. The Board of Directors may at any time delegate the powers and duties of any officer for the time being to any other officer, director or employee. (g) Compensation. The compensation of the Chairman of the Board, the president, all senior vice presidents, the secretary and the treasurer shall be fixed by the Board of Directors, and the fact that any officer is a director shall not preclude such officer from receiving compensation or from voting upon the resolution providing the same. ARTICLE V RESIGNATIONS AND VACANCIES Section 1. Resignations. Any director or officer may resign at any time by giving written notice thereof to the Board of Directors, the president or the secretary. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, the acceptance of any resignation shall not be necessary to make it effective. Section 2. Vacancies. (a) Directors. Except for the rights of the holders of any series of preferred stock to elect additional directors, newly created directorships resulting from any increase in the authorized number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal, or other cause shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall - 9 - hold office for the remainder of the full term of the class of directors in which the new directorship was created or in which the vacancy occurred and until such director's successor is duly elected and has been qualified. The directors also may reduce the authorized number of directors by the number of vacancies on the Board, provided that such reduction does not reduce the Board to less than the minimum authorized by the laws of the State of Delaware. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. (b) Officers. The Board of Directors may at any time or from time to time fill any vacancy among the officers of the Corporation. ARTICLE VI CAPITAL STOCK Section 1. Certificate of Stock. Every stockholder shall be entitled to a certificate or certificates for shares of the capital stock of the Corporation in such form as may be prescribed or authorized by the Board of Directors, duly numbered and setting forth the number and kind of shares represented thereby. Such certificates shall be signed by the Chairman of the Board, the president or a vice president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary. Any or all of such signatures may be in facsimile if and to the extent authorized under the laws of the State of Delaware. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate has ceased to be such officer, transfer agent or registrar before the certificate has been issued, such certificate may nevertheless be issued and delivered by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 2. Transfer of Stock. Shares of the capital stock of the Corporation shall be transferable only upon the books of the Corporation upon the surrender of the certificate or certificates properly assigned and endorsed for transfer. If the Corporation has a transfer agent or agents or transfer clerk and registrar of transfers acting on its behalf, the signature of any officer or representative thereof may be in facsimile. The Board of Directors may appoint a transfer agent and one or more co-transfer agents and a registrar and one or more co-registrars of transfer and may make or authorize the transfer agents to make all such rules and regulations deemed expedient concerning the issue, transfer and registration of shares of stock. Section 3. Record Dates. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment - 10 - thereof or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix in advance a record date which, in the case of a meeting, shall not be less than ten (10) nor more than sixty (60) days prior to the scheduled date of such meeting and which, in the case of any other action, shall be not more than the maximum number of days prior to any such action permitted by the laws of the State of Delaware. (b) If no such record date is fixed by the Board, the record date shall be that prescribed by the laws of the State of Delaware. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 4. Lost Certificates. In case of loss or mutilation or destruction of a stock certificate, a duplicate certificate may be issued upon such terms as may be determined or authorized by the Board of Directors or by the president if the Board does not do so. ARTICLE VII FISCAL YEAR, BANK DEPOSITS, CHECK, ETC. Section 1. Fiscal Year. The fiscal year of the Corporation shall commence or end at such time as the Board of Directors may designate. Section 2. Bank Deposits, Checks, etc. The funds of the Corporation shall be deposited in the name of the Corporation or of any division thereof in such banks or trust companies in the United States or elsewhere as may be designated from time to time by the Board of Directors, or by such officer or officers as the Board may authorize to make such designations. All checks, drafts or other orders for the withdrawal of funds from any bank account shall be signed by such person or persons as may be designated from time to time by the Board of Directors. The signatures on checks, drafts or other orders for the withdrawal of funds may be in facsimile if authorized in the designation. ARTICLE VIII BOOKS AND RECORDS Section 1. Place of Keeping Books. Unless otherwise expressly required by the laws of the State of Delaware, the books and records of the Corporation may be kept outside of the State of Delaware. - 11 - Section 2. Examination of Books. Except as may otherwise be provided by the laws of the State of Delaware, the Restated Certificate of Incorporation or these By-Laws, the Board of Directors shall have power to determine from time to time whether and to what extent and at what times and places and under what conditions any of the accounts, records and books of the Corporation are to be open to the inspection of any stockholder. No stockholder shall have any right to inspect any account or book or document of the Corporation except as prescribed by statute or authorized by express resolution of the stockholders or of the Board of Directors. ARTICLE IX NOTICES Section 1. Requirements of Notice. Whenever notice is required to be given by statute, the Restated Certificate of Incorporation or these By-Laws, it shall not mean personal notice unless so specified, but such notice may be given in writing by depositing the same in a post office, letter box, or mail chute postpaid and addressed to the person to whom such notice is directed at the address of such person on the records of the Corporation, and such notice shall be deemed given at the time when the same shall be thus mailed. Section 2. Waivers. Any stockholder, director or officer may, in writing or by telegram or cable, at any time waive any notice or other formality required by statute, the Restated Certificate of Incorporation or these By-Laws. Such waiver of notice, whether given before or after any meeting or action, shall be deemed equivalent to notice. Presence of a stockholder either in person or by proxy at any stockholders' meeting and presence of any director at any meeting of the Board of Directors shall constitute a waiver of such notice as may be required by any statute, the Restated Certificate of Incorporation or these By-Laws. ARTICLE X SEAL The corporate seal of the Corporation shall consist of two concentric circles between which shall be the name of the Corporation and the date of its incorporation, and in the center of which shall be inscribed "Corporate Seal, Delaware." ARTICLE XI POWERS OF ATTORNEY The Board of Directors may authorize one or more of the officers of the Corporation to execute powers of attorney delegating to named representatives or agents power to represent or act on behalf of the Corporation, with or without power of substitution. - 12 - In the absence of any action by the Board, the president, any vice president, the secretary or the treasurer of the Corporation may execute for and on behalf of the Corporation waivers of notice of stockholders meetings and proxies for such meetings in any company in which the Corporation may hold voting securities. ARTICLE XII INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 1. Definitions. As used in this article, the term "person" means any past, present or future director or officer of the Corporation or any subsidiary or operating division thereof. Section 2. Indemnification Granted. The Corporation shall indemnify, to the full extent and under the circumstances permitted by the General Corporation Law of the State of Delaware in effect from time to time, any person as defined above, made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the Corporation or a subsidiary or operating division thereof, or is or was an employee or agent of the Corporation, or is or was serving at the specific request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person or on such person's behalf in connection with such action, suit or proceeding and any appeal therefrom, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such conduct was unlawful. Section 3. Requirements for Indemnification. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or a subsidiary thereof or a designated officer of an operating division of the Corporation, or is or was serving at the specific request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint - 13 - venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by such person or on such person's behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if such person acted in good faith and in a manner that such person reasonably believed to be in or not opposed to the best interest of the Corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Section 4. Success on Merits of Any Action. Notwithstanding any other provision of this Article, to the extent that a director, officer, employee or agent of the Corporation or any subsidiary or operating division thereof has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by such person or on such person's behalf in connection therewith. Section 5. Determination of Standard of Conduct. Any indemnification under Sections 2 and 3 of this Article (unless ordered by a court) shall be paid by the Corporation only after a determination has been made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable, or even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders, that indemnification of the director, officer, employee or agent is proper in the circumstances of the specific case because such person has met the applicable standard of conduct set forth in Sections 2 and 3 of this Article. Section 6. Advance Payment; Representation by Corporation. Costs, charges and expenses (including attorneys' fees) incurred by a person referred to in Sections 2 and 3 of this Article in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a director or officer in such capacity as officer or director (and not in any other capacity and which service was or is rendered by such person while a director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on - 14 - behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation as authorized in this Article. Such costs, charges and expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Corporation may, in the manner set forth above, and upon approval of such director, officer, employee or agent, authorize the Corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 7. Procedure for Obtaining Indemnity. Any indemnification under Sections 2, 3 and 4, or advance of costs, charges and expenses under Section 6 of this Article, shall be made promptly, and in any event within sixty (60) days, of the written notice of the director, officer, employee or agent. The right to indemnification or advances as granted by this Article shall be enforceable by the director, officer, employee or agent in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within sixty (60) days. Such person's costs and expenses incurred in connection with successfully establishing a right to indemnification, in whole or in part, in any action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 6 of this Article where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Section 2 or 3 of this Article, but the burden of proving such defense shall be on the Corporation. Neither failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination that indemnification of the claimant is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 2 or 3 of this Article, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 8. Indemnification Not Exclusive. This right of indemnification shall not be deemed exclusive of any other rights to which a person indemnified herein may be entitled by law, agreement, vote of stockholders or disinterested directors or otherwise, and shall continue as to a person who has ceased to be a director, officer, designated officer, employee or agent and shall inure to the benefit of the heirs, executors, administrators and other legal representatives of such person. It is not intended that the provisions of this Article be applicable to, and they are not to be construed as granting indemnity with respect to, matters as to which indemnification would be in contravention of the laws of Delaware or of - 15 - the United States of America, whether as a matter of public policy or pursuant to statutory provision. Section 9. Invalidity of Certain Provisions. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director, officer, employee and agent of the Corporation or any subsidiary or operating division thereof as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including any action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. Section 10. Miscellaneous. The Board of Directors may also on behalf of the Corporation grant indemnification to any individual other than a person defined herein to such extent and in such manner as the Board in its sole discretion may from time to time and at any time determine. ARTICLE XIII AMENDMENTS These By-Laws may be adopted, amended or repealed by the affirmative vote of a majority of the directors then in office. - 16 - EX-10.14 3 EXHIBIT 10.14 EXHIBIT 10.14 JP FOODSERVICE, INC. 401(k) RETIREMENT SAVINGS PLAN IMPORTANT NOTE Neither Connecticut General Life Insurance Company nor any of its employees can provide you with legal advice in connection with the execution of this document. Prior to execution of this document, you should consult your attorney on whether this document is appropriate for you. TABLE OF CONTENTS
Page - ---------------- ARTICLE I DEFINITIONS.......................................... 1 ARTICLE II SERVICE.............................................. 14 ARTICLE III ELIGIBILITY, ENROLLMENT AND PARTICIPATION............ 16 ARTICLE IV CONTRIBUTIONS........................................ 18 ARTICLE V LIMITATIONS ON ALLOCATIONS........................... 27 ARTICLE VI DISTRIBUTION OF BENEFITS............................. 33 ARTICLE VI-A DISTRICT ROLLOVERS................................... 39 ARTICLE VII Retirement BENEFITS.................................. 40 ARTICLE VIII JOINT AND SURVIVOR ANNUITY REQUIREMENTS.............. 40 ARTICLE IX TERMINATION OF EMPLOYMENT............................ 44 ARTICLE X WITHDRAWALS.......................................... 45 ARTICLE XI FIDUCIARY DUTIES AND RESPONSIBILITIES................ 48 ARTICLE XII THE ADMINISTRATOR.................................... 48 ARTICLE XIII PARTICIPANTS' RIGHTS................................. 50 ARTICLE XIII-A INVESTMENTS.......................................... 52 ARTICLE XIV AMENDMENT OR TERMINATION OF THE PLAN................. 53 ARTICLE XV SUBSTITUTION OF PLANS................................ 55 ARTICLE XVI MISCELLANEOUS........................................ 55 ARTICLE XVII TRUST AGREEMENT...................................... 60
ARTICLE I DEFINITIONS 1.1 ACCRUED BENEFIT. The term Accrued Benefit means the value on any applicable date of the Participant's Account. 1.2 ACT. The Securities and Exchange Act of 1934, as amended from time to time. 1.3 ACTIVE PARTICIPANT. The term Active Participant means any Participant who (a) performs duties as an Employee for the Employer, and (b) is not an Inactive Participant. 1.4 ACTUAL CONTRIBUTION PERCENTAGE. The term Actual Contribution Percentage means the average of the Actual Contribution Ratios of a specified group computed to the nearest one-hundredth of one percent. 1.5 ACTUAL CONTRIBUTION PERCENTAGE TEST. (A) For each Plan Year, the Plan shall satisfy the contribution percentage requirement described in section 401(m)(2) of the Code and the regulations thereunder, which are incorporated herein. The Plan satisfies the Actual Contribution Percentage Test if: (1) The Actual Contribution Percentage for the group of eligible Highly Compensated Employees is not more than the Actual Contribution Percentage for the group of all other eligible Employees multiplied by 1.25; or (2) The excess of the Actual Contribution Percentage for the group of eligible Highly Compensated Employees over the Actual Contribution Percentage for the group of all other eligible Employees is not more than two percentage points, and the Actual Contribution Percentage for the group of eligible Highly Compensated Employees is not more than the Actual Contribution Percentage for the group of all other eligible Employees multiplied by two. (B) Special Rules. (1) Matching Contributions and Qualified Nonelective Contributions will be considered for a Plan Year only if allocated to the Employee's Account as of any date within the Plan Year being tested and only if made before the last day of the twelve month period immediately following the Plan Year to which such contributions relate. (2) A Matching Contribution that is forfeited to correct Excess Aggregate Contributions, or because the contribution to which it relates is treated as an Excess Contribution, Excess Deferral, or Excess Aggregate Contribution, shall not be taken into account for purposes of the Actual Contribution Percentage Test. (3) The Employer shall maintain records sufficient to demonstrate satisfaction of the Actual Contribution Percentage Test, including records showing the extent to which Qualified Nonelective Contributions and Elective Deferral Contributions are taken into account. 1 1.6 ACTUAL CONTRIBUTION RATIO. (A) An Employee's Actual Contribution Ratio is the sum of the Contribution Percentage Amounts allocated to the Employee's Account for the Plan Year (including any amounts required to be taken into account under subparagraphs (B) (1) and (B) (2) of this section) divided by the Employee's Compensation for the Plan Year. If no Matching Contributions, Qualified Nonelective Contributions, or Elective Deferral Contributions are taken into account with respect to an eligible Employee, the Actual Contribution Ratio of the Employee is zero. (B) Special Rules. (1) In the event that this Plan is aggregated with one or more plans for purposes of section 410(b) of the Code (other than for purposes of the average benefit percentage test), or if one or more other plans satisfy the requirements of section 410(b) of the Code (other than the average benefit percentage test) only if aggregated with this Plan, then this section shall be applied by determining the Actual Contribution Ratios of Employees as if all such plans were a single plan. Plans may be aggregated only if they have the same Plan Year. (2) The Actual Contribution Ratio of a Highly Compensated Employee who is eligible to participate in more than one plan of the Employer to which employee contributions or Matching Contributions are made shall be calculated by treating all such plans in which the Employee is eligible to participate as one plan. For Plan Years beginning after December 31, 1988, if a Highly Compensated Employee participates in two or more plans that have different plan years, all plans ending with or within the same calendar year shall be treated as a single plan. However, plans that are not permitted to be aggregated under Treasury Regulation section 1.401(m)-I(b)(3)(ii) shall not be aggregated for purposes of this section. (3) For purposes of determining the Actual Contribution Ratio of a Participant who is a 5-percent owner or one of the ten most highly-paid Highly Compensated Employees, the Contribution Percentage Amounts and Compensation of such Participant shall include the Contribution Percentage Amounts (including any amounts required to be taken into account under subparagraphs (B)(1) and (B)(2) of this section) and Compensation for the Plan Year of all Family Members. If the Participant is required to be aggregated as a member of more than one family group under the Plan, all eligible Employees who are members of those family groups that include that Employee are aggregated as one family group. Family Members, with respect to Highly Compensated Employees, shall be disregarded as separate Employees in determining the Actual Contribution Ratio both for Participants who are Nonhighly Compensated Employees and for Participants who are Highly Compensated Employees. (4) The determination and treatment of the Actual Contribution Ratio amounts of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 1.7 ACTUAL DEFERRAL PERCENTAGE. The term Actual Deferral Percentage means the average of the Actual Deferral Ratios of a specified group, computed to the nearest one-hundredth of one percent. 2 [BLANK PAGE] 3 1.8 ACTUAL DEFERRAL PERCENTAGE TEST. (A) For each Plan Year, the Plan shall satisfy the Actual Deferral Percentage Test described in section 401(k)(3) and the regulations thereunder, which are herein incorporated by reference. The Plan satisfies the Actual Deferral Percentage Test for a Plan Year only if: (1) The Actual Deferral Percentage for the group of eligible Highly Compensated Employees is not more than the Actual Deferral Percentage for the group of all other eligible Employees multiplied by 1.25; or (2) The excess of the Actual Deferral Percentage for the group of eligible Highly Compensated Employees over the Actual Deferral Percentage for the group of all other eligible Employees is not more than two percentage points, and the Actual Deferral Percentage for the group of eligible Highly Compensated Employees is not more than the Actual Deferral Percentage for the group of all other eligible Employees multiplied by two. (B) Special Rules. (1) For purposes of determining the Actual Deferral Percentage Test, Elective Deferral Contributions, Qualified Nonelective Contributions, and Qualified Matching Contributions must be allocated to the Employee's Account as of a date within the Plan Year being tested and must be made before the last day of the twelve-month period immediately following the Plan Year to which such contributions relate. (2) The Excess Deferrals of a Highly Compensated Employee shall be taken into account for purposes of the Actual Deferral Percentage Test. Conversely, the Excess Deferrals of an Employee who is a Nonhighly Compensated Employee shall not be taken into account for purposes of the Actual Deferral Percentage Test. (3) The Employer shall maintain records sufficient to demonstrate satisfaction of the Actual Deferral Percentage Test, including the extent to which Qualified Nonelective Contributions and Qualified Matching Contributions are taken into account. 1.9 ACTUAL DEFERRAL RATIO. (A) An Employee's Actual Deferral Ratio for the Plan Year is the sum of the Employee's Deferral Percentage Amounts allocated to the Employee's Account for the Plan Year (including any amounts required to be taken into account under subparagraphs (B)(1) and (B)(2) of this section), divided by the Employee's Compensation taken into account for the Plan Year. If an eligible Employee makes no Elective Deferral Contributions, and no Qualified Matching Contributions or Qualified Nonelective Contributions are taken into account with respect to the Employee, the Actual Deferral Ratio of the Employee is zero. 4 (B) Special Rules. (1) In the event that this Plan is aggregated with one or more plans for purposes of section 410(b) of the Code (other than for purposes of the average benefit percentage test), or if one or more other plans satisfy the requirements of section 410(b) of the Code (other than the average benefit percentage test) only if aggregated with this Plan, then this section shall be applied by determining the Actual Deferral Ratio of Employees as if all such plans were a single plan. Plans may be aggregated only if they have the same Plan Year. (2) The Actual Deferral Ratio of a Highly Compensated Employee who is eligible to participate in more than one cash or deferred arrangement (as described in section 401 (k) of the Code) of the same Employer shall be calculated by treating all the cash or deferred arrangements in which the Employee is eligible to participate as one arrangement. If the cash or deferred arrangements that are treated as a single arrangement under the preceding sentence are parts of plans that have different Plan Years, the cash or deferred arrangements are treated as a single arrangement with respect to the Plan Years ending with or within the same calendar year. However, plans that are not permitted to be aggregated under Treasury Regulation section 1.401(k)- 1(b)(3)(ii)(B) are not aggregated for purposes of this section. (3) For purposes of determining the Actual Deferral Ratio of a Participant who is a 5 percent owner or one of the 10 most Highly Compensated Employees, the Deferral Percentage Amounts and Compensation of such Participant shall include the Deferral Percentage Amounts (including any amounts required to be taken into account under subparagraphs (B) (1) and (B) (2) of this section) and Compensation for the Plan Year of Family Members. If an Employee is required to be aggregated as a member of more than one family group under the Plan, all eligible Employees who are members of those family groups that include that Employee are aggregated as one family group. Family Members, with respect to such Highly Compensated Employees, shall be disregarded as separate Employees in determining the Actual Deferral Percentage both for Participants who are Non- highly Compensated Employees and for Participants who are Highly Compensated Employees. (4) The determination and treatment of the Actual Deferral Ratio amounts of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 1.10 ANNUITY. The term Annuity means a series of payments made over a specified period of time which, for a fixed annuity are, of equal, specified amounts, and for a variable annuity increase or decrease to reflect changes in investment performance of the underlying portfolio. 1.11 ANNUITY STARTING DATE. The term Annuity Starting Date means the first day of the first period for which an amount is payable as an Annuity. In the case of a benefit not payable in the form of an Annuity, the term Annuity Starting Date means the first day on which all events have occurred which entitle the Participant to such benefit. 1.12 BENEFICIARY. The Participant's Spouse is the designated Beneficiary of the Participant's entire Vested Interest. However, each Participant shall have the right to designate another Beneficiary and to specify the 5 form of death benefit the Beneficiary is to receive, subject to the requirements of the "Qualified Election" provisions of Article VIII, Joint and Survivor and/or the form of death benefit Requirements. The Participant may change the Beneficiary and/or the form of death benefit at any time, subject to the requirements of the "Qualified Election" provisions of Article VIII, Joint and Survivor and/or the form of death benefit Requirements. If any distribution hereunder is made to a Beneficiary in the form of an Annuity, and if such Annuity provides for a death benefit, then such Beneficiary shall also have the right to designate a Beneficiary and to change that Beneficiary from time to time. As an alternative to receiving the benefit in the form of an Annuity, the Beneficiary may elect to receive a single cash payment or any other form of payment provided for in the Plan. If a Beneficiary has not been designated, or if a beneficiary designation or change of Beneficiary designation does not meet the requirements of the "Qualified Election" provisions of Article VIII, Joint and Survivor and/or the form of death benefit Requirements, (including any designation made prior to August 23, 1984 by a married Participant who has an Hour of Service on or after August 23, 1984), or if no designated Beneficiary survives the Participant, the Participant's entire Vested Interest shall be distributed to the Participant's Spouse, if living; otherwise in equal shares to any surviving children of the Participant. In the event none of the above named individuals survives the Participant, the Participant's entire Vested Interest shall be paid to the executor or administrator of the Participant's estate. 1.13 BOARD OF DIRECTORS. The term Board of Directors means the Employer's board of directors or other comparable governing body. 1.14 CODE. The term Code means the Internal Revenue Code of 1986, as amended from time to time. 1.15 COMPENSATION (A) Except as otherwise provided in the Plan, the term Compensation means wages, salaries, and fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer maintaining the Plan, to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or other expense allowances under a nonaccountable plan (as described in 1.62-2(c)), and foreign earned income (as defined in section 911 (b) of the Code) whether or not excludable from gross income under section 911 of the Code. The term Compensation does not include: (1) Employer contributions to a plan of deferred compensation which are not includible in the employee's gross income for the taxable year in which contributed, or employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; (2) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to substantial risk of forfeiture; (3) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and 6 (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in section 403(b) of the Code (whether or not the contributions are actually excludable from the gross income of the Employee). (B) Compensation shall include only that Compensation which is actually paid to the Participant during the determination period. Except as provided elsewhere in the Plan, the determination period shall be the Plan Year. (C) Compensation shall include any amount which is contributed by the Employer pursuant to a salary reduction agreement and which is not includible in the gross income of the employee under sections 125, 402(e)(3), 402(h), or 403(b) of the Code; Compensation deferred under an eligible deferred compensation plan within the meaning of section 457(d) of the Code; and employee contributions described in section 414(h)(2) of the Code that are picked up by the employing unit and, thus, are treated as employer contributions. (D) For Plan Years beginning prior to January 1, 1994, the annual Compensation of each Participant taken into account for determining all benefits provided under the Plan for any determination period shall not exceed $200,000. This limitation shall be adjusted by the Secretary of the Treasury at the time and in the same manner as under section 415(d) of the Code, except that the dollar increase in effect on January 1 of any calendar year is effective for determination periods beginning in such calendar year and the first adjustment to the $200,000 limitation is effected on January 1, 1990. For Plan Years beginning on or after January 1, 1994, the annual Compensation of each Participant taken into account for determining all benefits provided under the Plan shall not exceed $150,000. This limitation shall be adjusted by the Secretary of the Treasury at the time and in the manner provided under Section 401(a)(17) of the Code. If the period for determining Compensation used in calculating an Employee's allocation for a determination period is a short Plan Year (i.e., shorter than 12 months), the annual Compensation limit is an amount equal to the otherwise applicable annual Compensation limit multiplied by a fraction, the numerator of which is the number of months in the short Plan Year, and the denominator of which is 12. For Plan Years beginning prior to January 1, 1997, in determining the Compensation of a Participant for purposes of this limitation, the rules of section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules, the adjusted $200,000 (or $150,000) limitation is exceeded, then either the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this section prior to the application of this limitation, or the limitation shall be allocated among the affected individuals in an objective and nondiscriminatory manner based on a reasonable, good faith interpretation of section 401(a)(17) of the Code. The method chosen in the preceding sentence shall be uniformly applied to all affected individuals in a Plan Year and shall be applied consistently from year to year. If Compensation for any prior determination period is taken into account in determining an Employee's allocations or benefits for the current determination period, the Compensation for such prior determination period is subject to the applicable annual Compensation limit in effect for that prior year. 1.16 CONSIDERED NET PROFITS. The term Considered Net Profits means the entire amount of the accumulated or current operating profits (excluding capital gains from the sale or involuntary conversion of capital or business assets) of the Employer after all expenses and charges other than (i) the contributions 7 made by the Employer to the Plan, and (ii) federal or state or local taxes based upon or measured by income, as determined by the Employer, either on an estimated basis or a final basis, in accordance with the generally accepted accounting principles used by the Employer. When the amount of Considered Net Profits has been determined by the Employer, and the contributions are made by the Employer on the basis of such determination, for any Plan Year, such determination and contribution shall be final and conclusive and shall not be subject to change because of any adjustments in income or expense which may be required by the Internal Revenue Service or otherwise. Such determination and contribution shall not be open to question by any Participant either before or after the contributions by the Employer have been made. 1.17 CONTRIBUTION PERCENTAGE AMOUNTS. The term Contribution Percentage Amounts means the sum of the Matching Contributions and Qualified Matching Contributions (to the extent not taken into account for purposes of the Actual Deferral Percentage Test) made under the Plan on behalf of the Employee for the Plan Year. The term Contribution Percentage Amounts also includes Qualified Nonelective Contributions and Elective Deferral Contributions treated as Matching Contributions and taken into account in determining the Employee's Actual Contribution Ratio for the Plan Year. 1.18 CONTRIBUTION PERIOD. The term Contribution Period means that regular period specified by the Employer in Article IV for which contributions shall be made. 1.19 DEFERRAL PERCENTAGE AMOUNTS. The term Deferral Percentage Amounts means an Employee's Elective Deferral Contributions for the Plan Year. The term Deferral Percentage Amounts also includes Qualified Nonelective Contributions and Qualified Matching Contributions treated as Elective Deferral Contributions and taken into account in determining the Employee's Actual Deferral Ratio for the Plan Year. 1.20 DISABILITY. The term Disability means a Participant's incapacity to engage in any substantial gainful activity because of a medically determinable physical or mental impairment which can be expected to result in death, or to be of long, continued and indefinite duration. Such determination of Disability shall be made by the Administrator with the advice of competent medical authority. All Participants in similar circumstances will be treated alike. 1.21 DISABILITY RETIREMENT DATE. The term Disability Retirement Date means the first day of the month after the Plan Administrator has determined that a Participant's incapacity is a Disability. 1.22 EFFECTIVE DATE. The term Effective Date means January 1, 1993. 1.23 ELECTIVE DEFERRAL CONTRIBUTION. The term Elective Deferral Contribution means any Employer Contribution made to the Plan at the election of the Participant, in lieu of cash compensation, and includes contributions made pursuant to a Salary Deferral Agreement or other deferral mechanism. Solely for purposes of the dollar limitation specified in section 402(g) of the Code, with respect to any taxable year, a Participant's Elective Deferral Contributions are the sum of all employer contributions made on behalf of such Participant pursuant to an election to defer under any qualified cash or deferred arrangement as described in section 401(k) of the Code, any simplified employee pension cash or deferred arrangement described in section 402(h)(1)(B) of the Code, any plan as described under section 501 (c)(18) of the Code, and any employer contributions made on behalf of a Participant for the purchase of a tax sheltered annuity contract under section 403(b) of the Code pursuant to a salary reduction agreement. The term Elective Deferral Contribution shall not include any deferrals properly distributed as excess annual additions. 1.24 EMPLOYEE. The term Employee means an individual who performs services for the Employer and who is either a common law employee on the active payroll of the Employer or a self-employed individual/owner 8 employee treated as an Employee pursuant to Code section 401 (c)(1). The term Employee also includes a Leased Employee who is treated as an Employee of the Employer-recipient pursuant to the provisions of Code section 414(n) or 414(o). For purposes of determining the Highly Compensated Employees, the Employer may elect, on a reasonable and consistent basis, to treat such Leased Employees covered by a plan described in Code section 414(n)(5) as Employees. 1.25 EMPLOYEE CONTRIBUTIONS. The term Employee Contributions means any contributions to the Plan or any other plan that are designated or treated at the time of contribution as after-tax Employee Contributions and are allocated to a separate account to which the attributable earnings and losses are allocated. Such term includes Employee Contributions applied to the purchase of life insurance policies. Such term does not include buy-back of benefits described in code section (411)(a)(7)(c) or employee contributions transferred to this Plan. 1.26 EMPLOYER. The term Employer means JP Foodservice, Distributors, Inc. and any successor organization to such Employer which elects to continue the Plan. In the case of a group of employers which constitutes a controlled group of corporations (as defined in Code section 414(b)), or which constitutes trades or businesses (whether or not incorporated) which are under common control (as defined in Code section 414(c)), or which constitutes an affiliated service group (as defined in Code section 414(m)), all such employers shall be considered a single employer for purposes of participation, vesting, Top-Heavy provisions and determination of Highly Compensated Employees. 1.27 EMPLOYER CONTRIBUTION. The term Employer Contribution means any contribution made to the Plan by the Employer on behalf of a Participant, other than a Rollover Contribution or a mandatory or voluntary contribution made to the Plan by the Employee that is treated at the time of contribution as an after-tax employee contribution. 1.28 EMPLOYER STOCK. The term Employer Stock means the common stock, $0.01 par value, of JP Foodservice, Inc., a Delaware corporation, or any successor thereto. 1.29 ENTRY DATE. The term Entry Date means either the Effective Date or the thirtieth day after the date of hire thereafter when an Employee who has fulfilled the eligibility requirements commences participation in the Plan. If the Employee does not desire to become a Participant at that time, the Employee may have as an Entry Date the first day of any calendar quarter thereafter, provided he still meets the eligibility requirements. Any Employee who has satisfied the maximum eligibility requirements permissible under ERISA, shall be eligible to commence participation in this Plan no later than the earlier of (A) or (B) below, as applicable; provided that the Employee has not separated from the Service of the Employer: (A) The first day of the first Plan Year beginning after the date on which the Employee satisfied such requirements; or (B) The date six months after the date on which the Employee satisfied such requirements. If an Employee is not in the active Service of the Employer as of his initial Entry Date, his subsequent Entry Date shall be the date he returns to the active Service of the Employer, provided he still meets the eligibility requirements. If an Employee does not enroll as a Participant as of his initial Entry Date, his subsequent Entry Date shall be the applicable Entry Date as specified above when the Employee actually enrolls as a Participant. 9 1.30 ERISA. The term ERISA means the Employee Retirement Income Security Act of 1974 (PL 93-406) as it may be amended from time to time, and any regulations issued pursuant thereto as such Act and such regulations affect this Plan and Trust. 1.31 EXCESS AGGREGATE CONTRIBUTIONS. (A) The term Excess Aggregate Contributions means, with respect to any Plan Year, the excess of the aggregate amount of the Contribution Percentage Amounts actually made on behalf of Highly Compensated Employees for the Plan Year (including any amounts required to be taken into account under subparagraphs (B)(1) and (B)(2) of Section 1.5 of the Plan), over the maximum amount of contributions permitted under the Actual Contribution Percentage Test. The amount of Excess Aggregate Contributions for each Highly Compensated Employee is determined by using the method described in paragraph (B) of this section. (B) The amount of Excess Aggregate Contributions for a Highly Compensated Employee for a Plan Year is the amount (if any) by which the Employee's Matching Contributions must be reduced for the Employee's Actual Contribution Ratio to equal the highest permitted Actual Contribution Ratio under the Plan. To calculate the highest permitted Actual Contribution Ratio under the Plan, the Actual Contribution Ratio of the Highly Compensated Employee with the highest Actual Contribution Ratio is reduced by the amount required to cause the Employee's Actual Contribution Ratio to equal the ratio of the Highly Compensated Employee with the next highest Actual Contribution Ratio. If a lesser reduction would enable the Plan to satisfy the Actual Contribution Percentage Test, only this lesser reduction may be made. This process shall be repeated until the Plan satisfies the Actual Contribution Percentage Test. The highest Actual Contribution Percentage Ratio remaining under the Plan after leveling is the highest permitted Actual Contribution Ratio. For each Highly Compensated Employee, the amount of Excess Aggregate Contributions for a Plan Year is equal to the total Contribution Percentage Amounts (including any amounts required to be taken into account under subparagraphs (B) (1) and (B) (2) of Section 1.5 of the Plan), minus the amount determined by multiplying the Employee's highest permitted Actual Contribution Ratio (determined after application of this section) by the compensation used in determining the ratio. 10 1.32 EXCESS CONTRIBUTION. (A) The term Excess Contribution means, with respect to a Plan Year, the excess of Deferral Percentage Amounts made on behalf of eligible Highly Compensated Employees for the Plan Year (including any amounts required to be taken into account under subparagraphs (B) (1) and (B) (2) of Section 1.8 of the Plan) over the maximum amount of such contributions permitted under the Actual Deferral Percentage Test for the Plan Year. The amount of Excess Contributions for each Highly Compensated Employee is determined by using the method described in paragraph (B) of this section. (B) The amount of Excess Contributions for a Highly Compensated Employee for a Plan Year is the amount (if any) by which the Employee's Elective Deferral Contributions must be reduced for the Employee's Actual Deferral Ratio to equal the highest permitted Actual Deferral Ratio under the Plan. To calculate the highest permitted Actual Deferral Ratio under the Plan, the Actual Deferral Ratio of the Highly Compensated Employee with the highest Actual Deferral Ratio is reduced by the amount required to cause the Employee's Actual Deferral Ratio to equal the ratio of the Highly Compensated Employee with the next highest Actual Deferral Ratio. If a lesser reduction would enable the arrangement to satisfy the Actual Deferral Percentage Test, only this lesser reduction shall be made. This process shall be repeated until the cash or deferred arrangement satisfies the Actual Deferral Percentage Test. The highest Actual Deferral Ratio remaining under the Plan after leveling is the highest permitted Actual Deferral Ratio. 1.33 EXCESS DEFERRALS. The term Excess Deferrals means those Elective Deferral Contributions that are includible in a Participant's gross income under section 402(g) of the Code to the extent such Participant's Elective Deferral Contributions for a taxable year exceed the dollar limitation under such Code section. 1.34 FAIL-SAFE CONTRIBUTION. The term Fail-Safe Contribution means a Nonelective Contribution, designated by the Employer at the time of contribution as a Qualified Nonelective Contribution, which is contributed to the Plan solely for the purposes of satisfying either the Actual Deferral Percentage Test or the Actual Contribution Percentage Test and is made in accordance with the provisions of Article IV of this Plan. 1.35 FAIR MARKET VALUE. The term Fair Market Value means the closing price of Employer Stock as reported by the National Association of Securities Dealers Automated Quotation System (NASDAQ) in the national market or the date as of which the Employer Stock is to be valued, provided that if there should be no sales of Employer Stock on such date, the Fair Market Value shall be deemed equal to the closing price as reported by NASDAQ on the last preceding date on which sales of Employer Stock were reported. In the event Employer Stock is listed upon an established stock exchange or exchanges, Fair Market Value means the closing price of Employer Stock on the exchange that trades the largest volume of Employer Stock on the date as of which Employer Stock is to be valued. 1.36 FAMILY MEMBER. The term Family Member means, with respect to any Employee, such Employee's Spouse and lineal ascendants and descendants and the spouses of such lineal ascendants and descendants. 11 1.37 FIDUCIARY. The term Fiduciary means any, or all, of the following, as applicable: (A) Any Person who exercises any discretionary authority or control respecting the management of the Plan or its assets; or (B) Any Person who renders investment advice for a fee or other compensation, direct or indirect, respecting any monies or other property of the Plan or has authority or responsibility to do so; or (C) Any Person who has discretionary authority or responsibility in the administration of the Plan; or (D) Any Person who has been designated by a Named Fiduciary pursuant to authority granted by the Plan, who acts to carry out a fiduciary responsibility, subject to any exceptions granted directly or indirectly by ERISA. 1.38 FORFEITURE. The term Forfeiture means the amount, if any, by which the value of a Participant's Account exceeds his Vested Interest following such Participant's Termination of Employment, and at the time specified in Section 9.1. 1.39 HIGHLY COMPENSATED EMPLOYEE. The term Highly Compensated Employee means any Highly Compensated Active Employee or Highly Compensated Former Employee as further defined herein. For purposes of the determination of Highly Compensated Employees, the term Compensation means Compensation as defined in Article V of the Plan, but includes the amount of any elective contributions made by the Employer on the Employee's behalf to a cafeteria plan established in accordance with the provisions of Code section 125, a qualified cash or deferred arrangement in accordance with the provisions of Code section 402(e)(3), a simplified employee pension plan in accordance with the provisions of Code section 402(h), or a tax sheltered annuity plan maintained in accordance with the provisions of Code section 403(b). A "Highly Compensated Active Employee" is any Employee who performs services for the Employer during the current Plan Year and who, during the current Plan Year or the 12-month period immediately preceding such Plan Year: (A) Owns (or is considered to own within the meaning of section 318 of the Code, as modified by section 416(i)(1)(B)(iii) of the Code), more than 5% of the outstanding stock of the Employer or stock possessing more than 5% of the total combined voting power of all stock of the Employer, or, if the Employer is other than a corporation, owns more than 5% of the capital or profits interest in the Employer. The determination of 5% ownership shall be made separately for each member of a controlled group of corporations (as defined in Code section 414(b)), or of a group of trades or businesses (whether or not incorporated) that are under common control (as defined in Code section 414(c)), or of an affiliated service group (as defined in Code section 414(m)); or (B) Receives Compensation in excess of $75,000 multiplied by the applicable cost-of-living adjustment factor prescribed under Code section 415(d) and then prorated in the case of a short Plan Year, or (C) Receives Compensation in excess of $50,000, as adjusted for cost- of-living increases in accordance with Code section 415(d) and then prorated in the case of a short Plan Year, and is in the top 20% of Employees ranked by Compensation; or (D) Is, at any time, an officer of the Employer and receives Compensation in excess of 50% of the amount in effect under Code section 415(bj(l)(A) for the applicable period. 12 If no officer receives Compensation in excess of the amount specified above, the highest paid officer for the applicable period shall be a Highly Compensated Employee. In no event if there are more than 500 Employees, shall more than 50 Employees or, if there are less than 500 Employees, shall the greater of firm Employees or 10% of all Employees, be taken into account as officers. In determining both the top 20% of Employees ranked by Compensation for purposes of paragraph (C) above, and officers of the Employer for purposes of paragraph (D) above, Employees who have not completed six months of Service by the end of the applicable period, Employees who normally work less than 17-1/2 hours per week, Employees who normally work less than six months during a year, Employees who have not attained 21, and nonresident aliens who receive no earned income from U.S. sources shall be excluded. Also excluded under the above paragraph are Employees who are covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement. Such Employees will be excluded only if retirement benefits were the subject of good faith bargaining, 90% of the Employees of the Employer are covered by the agreement, and the Plan covers only Employees who are not covered by the agreement. Notwithstanding the above provisions, an Employee, other than a 5% owner as described in paragraph (A) above who was not highly compensated during the 12-month period immediately preceding the current Plan Year will not be considered to be a Highly Compensated Employee in the current Plan Year unless such Employee is one of the top 100 Employees ranked by Compensation for the current Plan Year. A "Highly Compensated Former Employee" is any former Employee who separated from Service with the Employer in a Plan Year preceding the current Plan Year and was a Highly Compensated Active Employee in either: (A) The Plan Year in which his separation from Service occurred; or (B) any Plan Year ending on or after such former Employee's 55th birthday. A former Employee is an Employee who performs no services for the Employer during a Plan Year (for example, by reason of a leave of absence). 1.40 INACTIVE PARTICIPANT. The term Inactive Participant means any Participant who does not currently meet the requirements to be an Active Participant due to a suspension of the performance of duties for the Employer. In addition, a Participant who ceases to meet the eligibility requirements in accordance with Section 3.1 shall be considered an Inactive Participant. 1.41 INSTALLMENT REFUND ANNUITY. The term Installment Refund Annuity means an annuity which provides fixed monthly payments for a period certain of not less than three nor more than 15 years. If the Participant dies before the period certain expires, the annuity will be paid to the Participant's Beneficiary for the remainder of the period certain. The period certain shall be chosen by the Participant at the time the annuity is purchased, and the Installment Refund Annuity will be the amount of benefit which can be purchased with the Participant's Vested Interest. The Installment Refund Annuity is not a life annuity and in no event shall the period certain extend to a period which equals or exceeds the life expectancy of the Participant. 13 1.42 JOINT AND SURVIVOR ANNUITY. The term Joint and Survivor Annuity means an Annuity for the life of the Participant with a survivor Annuity for the life of the Participant's Spouse which is not less than one-half, nor greater than, the amount of the Annuity payable during the joint lives of the Participant and the Participant's Spouse. The Joint and Survivor Annuity will be the amount of benefit which can be purchased with the Participant's vested account balance. In the case of an unmarried Participant, Joint and Survivor Annuity means an Annuity payable over the Participant's life. 1.43 LATE RETIREMENT DATE. The term Late Retirement Date means the first day of the month coinciding with or next following the date a Participant is separated from Service with the Employer after his Normal Retirement Age, for any reason other than death. 1.44 LEASED EMPLOYEE. The term Leased Employee means any person (other than an Employee of the recipient) who, pursuant to an agreement between the recipient and any other person ("leasing organization"), has performed services for the recipient (or for the Employer and related persons determined in accordance with Code section 414(n)(6)) on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the recipient Employer. 1.45 MATCHING CONTRIBUTIONS. The term Matching Contributions means contributions made by the Employer to the Plan on behalf of a Participant on account of either Elective Deferral Contributions, if any, Employee Contributions, if any, or required contributions, if any. 1.46 NAMED FIDUCIARY. The term Named Fiduciary means the Plan Administrator, the Trustee and any other Fiduciary designated in writing by the Employer, and any successor thereto. 1.47 NONELECTIVE CONTRIBUTIONS. The term Nonelective Contributions means contributions made by the Employer (other than Matching Contributions) that the Participant may not elect to have paid in cash or other benefits instead of being contributed to the Plan. 1.48 NONHIGHLY COMPENSATED EMPLOYEE. The term Nonhighly Compensated Employee means an Employee who is not a Highly Compensated Employee. 1.49 NORMAL RETIREMENT AGE. The term Normal Retirement Age means the date the Participant attains age 65. 1.50 NORMAL RETIREMENT DATE. The term Normal Retirement Date means the first day of the month coinciding with or next following the date a Participant attains his Normal Retirement Age. 1.51 PARTICIPANT. The term Participant means any Employee of the Employer, who is or becomes eligible to participate under this Plan in accordance with its provisions and shall include an Active Participant and an Inactive Participant. 1.52 PARTICIPANT'S ACCOUNT. The term Participant's Account means the sum of the following sub-accounts held on behalf of each Participant: . Elective Deferral Contributions, if any, and earnings thereon. . Matching Contributions made prior to January 1, 1995, if any, and earnings thereon. . Matching Contributions made on or after January 1, 1995, if any, and earnings thereon. . Qualified Matching Contributions, if any, and earnings thereon. 14 . Nonelective Contributions made prior to January 1, 1995, if any, and earnings thereon. . Nonelective Contributions made on or after January 1, 1995, if any, and earnings thereon. . Qualified Nonelective Contributions, if any, and earnings thereon. . Rollover Contributions, if any, and earnings thereon. Participant's Account shall be invested in accordance with the rules established by the Plan Administrator, which shall be applied in a consistent and nondiscriminatory manner. 1.53 PERSON. The term Person means any natural person, partnership, corporation, trust or estate. 1.54 PLAN. The term Plan means JP Foodservice, Inc. 401(k) Retirement Savings Plan, the terms of which are set forth herein as it may be amended from time to time. 1.55 PLAN ADMINISTRATOR. The terms Plan Administrator and Administrator are used interchangeably throughout the Plan and Trust and shall mean the Employer. 1.56 PLAN YEAR. The term Play Year means the 9-month period commencing on April 1, 1995 and ending on December 31, 1995. Thereafter, the term Plan Year means the 12-month period commencing on January 1 and ending on the following December 31. 1.57 QUALIFIED MATCHING CONTRIBUTIONS. The term Qualified Matching Contributions shall mean Matching Contributions which are subject to the distribution and nonforfeitability requirements under section 401(k) of the Code when made. 1.58 QUALIFIED NONELECTIVE CONTRIBUTIONS. The term Qualified Nonelective Contributions shall mean Nonelective Contributions which are subject to the distribution and nonforfeitability requirements under section 401 (k) of the Code when made. 1.59 ROLLOVER CONTRIBUTION. The term Rollover Contribution means an amount representing all or part of a distribution from a pension or profit- sharing plan meeting the requirements of Code section 401 (a) that is eligible for rollover to this Plan in accordance with the requirements set forth in Code section 402 or Code section 408(d)(3), whichever is applicable. 1.60 SALARY DEFERRAL AGREEMENT. The term Salary Deferral Agreement means an agreement between a Participant and the Employer to defer the Participant's Compensation for the purpose of making Elective Deferral Contributions to the Plan. 1.61 TERMINATION OF EMPLOYMENT. The term Termination of Employment means a severance of the Employer-Employee relationship which occurs prior to a Participant's Normal Retirement Age for any reason other than Disability or death. 1.62 TRUST. The term Trust means the trust agreement entered into by the Employer, the Administrator and the Trustee, which trust agreement forms a part of, and implements the provisions of this Plan. 1.63 TRUSTEE. The term Trustee means one or more individuals collectively appointed and acting under the trust agreement, and any successor thereto. 1.64 VESTED INTEREST. The term Vested Interest on any date means the nonforfeitable right to an immediate or deferred benefit in the amount which is equal to the following: 15 (A) the value on that date of that portion of the Participant's Account that is attributable to the following contributions: . Elective Deferral Contributions, if any . Rollover Contributions, if any . Qualified Matching Contributions, if any . Qualified Nonelective Contributions, if any (B) plus the value on that date of that portion of the Participant's Account that is attributable to and derived from: . Matching Contributions, if any . Nonelective Contributions, if any Such contributions pursuant to Subsection (B), plus the earnings thereon, shall be, at any relevant time, a part of the Participant's Vested Interest equal to an amount ("X") determined by the following formula: X = P(AB + D)-D For the purposes of applying this formula: P = The Participant's Vesting Percentage at the relevant time. AB = The account balance attributable to such contributions, plus the earnings thereon, at the relevant time. D = The amount of the distribution. 16 1.65 VESTING PERCENTAGE. The term Vesting Percentage means the percentage used to determine a Participant's Vested Interest in contributions made by the Employer, plus the earnings thereon, credited to his Participant's Account that are not 100% immediately vested. The Vesting Percentage for each Participant shall be determined in accordance with the following schedule based on Years of Service with the Employer
Years of Service Vesting Percentage ---------------- ------------------ Less than five 0% Five or more 100%
However, if an Active Participant dies prior to attaining his Normal Retirement Age, his Vesting Percentage shall be 100%. 1.66 VOTING COMMITTEE. The term Voting Committee means a committee of at least three Employees appointed by the Employer to vote the Employer Stock held by the Plan, provided that none of the Employees appointed to the Voting Committee may be an officer, director, or ten-percent shareholder of JP Foodservice, Inc. who is subject to Section 16(b) of the Act. ARTICLE II SERVICE 2.1 SERVICE. The term Service means active employment with the Employer as an Employee. For purposes of determining Service, employment with any company which is under common control with the Employer as specified in section 414 of the Internal Revenue Code shall be treated as employment with the Employer. 2.2 ABSENCE FROM EMPLOYMENT. Absence from employment on account of a leave of absence authorized by the Employer pursuant to the Employer's established leave policy will be counted as employment with the Employer provided that such leave of absence is of not more than two years' duration. Absence from employment on account of active duty with the Armed Forces of the United States will be counted as employment with the Employer. If the Employee does not return to active employment with the Employer, his Service will be deemed to have ceased on the date the Administrator receives notice that such Employee will not return to the active Service of the Employer. The Employer's leave policy shall be applied in a uniform and nondiscriminatory manner to all Participants under similar circumstances. FOR PURPOSES OF VESTING, THE FOLLOWING PROVISIONS SHALL APPLY: 2.3 HOUR OF SERVICE. The term Hour of Service means a period of Service during which an Employee shall be credited with one Hour of Service as described in (A), (B), (C), and (D) below: (A) Each hour for which an Employee is directly or indirectly paid, or entitled to payment, by the Employer for the performance of duties. These hours shall be credited to the Employee for the computation period or periods in which the duties are performed; and (B) Each hour for which an Employee is directly or indirectly paid, or entitled to payment, by the Employer for reasons (such as vacation, sickness or Disability) other than for the performance of duties. Hours under this Subsection shall be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference; and 17 (C) Each hour for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer. These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made; and (D) Each hour for which an Employee is on an authorized unpaid leave (such as service with the Armed Forces, jury duty, educational leave). These hours shall be credited to the Employee for the computation period or periods in which such authorized leave takes place. However, no more than 501 hours shall be credited under this subparagraph (D). Hours of Service will be credited for employment with other members of an affiliated service group (under Internal Revenue Code section 414(m)), a controlled group of corporations (under Internal Revenue Code section 414(b)), or a group of trades or businesses under common control (under Internal Revenue Code section 414(c)), of which the adopting employer is a member. Hours of Service will also be credited for any individual considered an Employee under Internal Revenue Code section 414(n). Solely for purposes of determining whether a One-Year Break in Service, as defined in Section 2.4, for participation and vesting purposes has occurred in a computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such individual but for such absence, or in any case in which such hours cannot be determined, eight Hours of Service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the individual (2) by reason of a birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be credited (1) in the computation period in which the absence begins if the crediting is necessary to prevent a Break in Service in that period, or (2) in all other cases, in the following computation period. 2.4 ONE-YEAR BREAK IN SERVICE. The term One-Year Break in Service means any Plan Year during which an Employee fails to complete more than 500 Hours of Service. 2.5 DETERMINING VESTING PERCENTAGE. Vesting credit shall be given for each Year of Service except those periods specified in Section 2.7. If a Participant completes less than 1,000 Hours of Service during a Plan Year while remaining in the Service of the Employer, his Vesting Percentage shall not be increased for such Plan Year. However, at such time as the Participant again completes at least 1,000 Hours of Service in any subsequent Plan Year, his Vesting Percentage shall then take into account all Year(s) of Service with the Employer except those specified in Section 2.7. If an individual who ceases to be an Employee and is subsequently rehired as an Employee enrolls (or re-enrolls) in the Plan, upon his participation (or subsequent participation) his Vesting Percentage shall then take into account all Year(s) of Service except those specified in Section 2.7. 2.6 YEAR(S) OF SERVICE. The term Year(s) of Service means a 12-consecutive- month period during which an Employee has completed at least 1,000 Hours of Service. In computing Years of Service and Breaks in Service for vesting, the 12- consecutive-month period shall be the Plan Year. However, active participation as of the last day of the Plan Year is not required in order for a Participant to be credited with a Year of Service for vesting purposes. 18 For purposes of the Vesting Computation Period, if any Plan Year is less than 12-consecutive months, and if a Participant would have been credited with a Year of Service during the 12-consecutive-month period beginning on the first day of the short Plan Year, then the Participant will receive a Year of Service for the short Plan Year. The Participant receives credit for an additional Year of Service if the Participant would have been credited with a Year of Service for the Plan Year immediately following the short Plan Year. For each Participant who was employed by PYA/Monarch on July 1, 1989, his Years of Service with PYA/Monarch will be counted as Years of Service for purposes of this Plan. For each Participant who was employed by Cooks Foodservice on August 3, 1991, his Years of Service with Cooks Foodservice will be counted as Years of Service for purposes of this Plan. For each Participant who was employed by Tri River Foods, Inc. on July 1, 1995, his Years of Service with Tri River Foods, Inc. will be counted as Years of Service for purposes of this Plan. For each Participant who was employed by The Doyen Company on November 24, 1995, his Years of Service with The Doyen Company will be counted as Years of Service for purposes of this Plan. For each Participant who was employed by Rotelle, Inc. on November 27, 1995, his Years of Service with Rotelle, Inc. will be counted as Years of Service for purposes of this Plan. 2.7 EXCLUDED YEARS OF SERVICE. In determining the Vesting Percentage of an Employee, all Years of Service with the Employer shall be taken into account except: . Plan Years during which a Participant did not complete at least 1,000 Hours of Service. 2.8 PREDECESSOR ORGANIZATION SERVICE. For purposes of this Article, Service with a predecessor organization of the Employer shall be treated as Service with the Employer in any case in which the Employer maintains the Plan of such predecessor organization. ARTICLE III ELIGIBILITY, ENROLLMENT AND PARTICIPATION 3.1 ELIGIBILITY. Each Employee who was a Participant prior to the Effective Date and who is in the Service of the Employer on the Effective Date shall continue as a Participant in the Plan Each other Employee, including a Leased Employee, shall be eligible to become a Participant as of the Entry Date when he first meets the following requirement(s): . Not in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between Employee representatives and the Employer, if there is evidence that retirement benefits were the subject of good faith bargaining between such Employee representatives and the Employer, unless the collective bargaining agreement provides for coverage under this Plan. 3.2 ENROLLMENT AND PARTICIPATION. Each eligible Employee may enroll as of his Entry Date by completing and delivering to the Administrator an enrollment form and, if applicable, a Salary Deferral Agreement. He will then become a Participant as of his Entry Date. 3.3 RE-EMPLOYED EMPLOYEE. In the case of an individual who ceases to be an Employee and is subsequently rehired as an Employee, the following provisions shall apply in determining his eligibility to again participate in the Plan: 19 (A) If the Employee had met the eligibility requirement(s) specified in Section 3.1 prior to his separation from employment, he shall become an Active Participant in the Plan as of the date he is re-employed, after completing the applicable form(s), in accordance with Section 3.2. (B) If the Employee had not met the eligibility requirement(s) specified in Section 3.1 prior to his separation from employment, he shall be eligible to participate in the Plan on the first Entry Date following his fulfillment of such eligibility requirement(s). For purposes of this Subsection, all Years of Service with the Employer, including any Years of Service prior to any Breaks in Service, shall be taken into account. 3.4 ELIGIBLE CLASS. In the event a Participant becomes ineligible to participate because he is no longer a member of an eligible class of Employees, such Employee shall participate immediately upon his return to an eligible class of Employees. In the event an Employee who is not a member of the eligible class of Employees becomes a member of the eligible class, such Employee shall participate immediately. 3.5 WAIVER OF PARTICIPATION. Notwithstanding any provision of the Plan to the contrary, any Employee in accordance with the rules of the Plan may decline to become a Participant or cease to be an Active Participant by filing a written waiver of participation with the Administration in the manner he prescribes. Such waiver must be filed prior to the date such Employee is eligible to become a Participant, or in the case of an Active Participant, in the last month of the Plan Year immediately preceding the Plan Year for which he wishes to cease being and Active Participant. Any Employee who files such a waiver shall not become a Participant, or if an Active Participant, shall elect to cease to be such as of the first day of the succeeding Plan Year; and such Employee shall not receive any additional compensation or other sums by reason of his waiver of participation. Any such waiver may be rescinded by an Employee effective on the first day of the first Plan Year following one or more Plan Years commencing after the filing of such waiver in which he was not an Active Participant, in which event he shall become a Participant, or again become an Active Participant, as the case may be, effective as of such date. ARTICLE IV CONTRIBUTIONS 4.1 ELECTIVE DEFERRAL CONTRIBUTIONS. Each Active Participant may enter into a written Salary Deferral Agreement with the Employer in an amount equal to not less than 1% nor more than 15% of his Compensation for the Contribution Period. In consideration of such agreement, the Employer will make a contribution for each Contribution Period on behalf of the Participant in an amount equal to the total amount by which the Participant's Compensation from the Employer was deferred during the Contribution Period pursuant to the Salary Deferral Agreement then in effect. Elective Deferral Contributions shall be paid by the Employer to the Trust not less frequently than four-weekly, but in no event later than 90 days following the date the amounts were deferred. Salary Deferral Agreements shall be governed by the following provisions (A) Amounts contributed pursuant to a Salary Deferral Agreement shall be 100% vested and non-forfeitable at all times. 20 (B) No Participant shall be permitted to have Elective Deferral Contributions made under this Plan, or any other qualified plan maintained by the Employer, during any taxable year, in excess of the dollar limitation contained in section 402(g) of the Code in effect at the beginning of the taxable year. (C) Amounts contributed pursuant to a Salary Deferral Agreement which are not in excess of the limit described in Subsection (B) above, shall be subject to the Limitations on Allocations in accordance with Article V. Elective Deferral Contributions that are in excess of the limit described in Subsection (B) shall also be subject to the Limitations on Allocations in accordance with Article (D) A Salary Deferral Agreement may be changed by a Participant four times during the Plan Year, on any January 1, April 1, July I and October 1, by filing written notice thereof with the Administrator. Such notice shall be effective, and the Salary Deferral Agreement shall be changed on the date specified in such notice or as soon as administratively possible, which date must be at least 15 days after such notice is filed. (E) Elective Deferral Contributions shall be subject to the Actual Deferral Percentage Test limitations. (F) Correction of Excess Contributions. (1) If the Employer determines prior to the end of the Plan Year that the Actual Deferral Percentage Test may not be satisfied, the Employer may take the corrective action specified in Section 4.12 of the Plan. (2) If, after the end of the Plan Year, the Employer determines that the Plan will fail the Actual Deferral Percentage Test, the Employer shall take the corrective action specified in Section 4.14 or Section 4.17 of the Plan, or a combination of such corrective actions, in order to ensure that the Plan does not fail the Actual Deferral Percentage Test for the Plan Year being tested. 4.2 MATCHING CONTRIBUTIONS. The Employer shall make a Matching Contribution in an amount equal to $1.00 for each $1.00 by which a Participant defers his Compensation pursuant to a Salary Deferral Agreement up to a maximum of 2% of his Compensation, subject to the Limitations on Allocations specified in Article V. Matching Contributions may be paid to the Trust either in cash or in the form of Employer Stock valued at Fair Market Value on the date on which such Employer Stock is contributed to the Trust. Such contributions shall be paid to the Trust not less frequently than annually, but in any event not later than the date which is prescribed by law for filing the Employer's income tax return, including any extension thereof. Matching Contributions shall be subject to the Actual Contribution Percentage Test. The Employer may designate at the time of contribution that all or a portion of such Matching Contributions be treated as Qualified Matching Contributions. If the Employer determines prior to the end of the Plan Year that the Actual Contribution Percentage Test may not be satisfied, the Employer may take the corrective action specified in Section 4.13 of the Plan. If, after the end of the Plan Year, the Employer determines that the Plan will fail the Actual Contribution Percentage Test the Employer shall take the corrective action specified in Section 4.15 or Section 4.17 of the Plan, or a combination of such corrective actions, in order to ensure that the Plan does not fail the Actual Contribution Percentage Test for the Plan Year being tested. Such Matching Contribution shall be allocated as of the last day of the Plan Year for which such contribution is made to each Participant who: 21 . is an Active Participant as of the last day of the Plan Year. Notwithstanding the above provision, an allocation will be made on behalf of a Participant who dies, retires, or becomes disabled during the Plan Year. 4.3 NONELECTIVE CONTRIBUTIONS. The Employer may make a contribution under the Plan for each Plan Year of an amount equal to 1% of the Compensation of each Participant entitled to an allocation. However, if the Employer's Board of Directors shall so determine by resolution, the Employer may entirely omit, increase or decrease its Nonelective Contribution for such Plan Year and may provide for different amounts of Nonelective Contributions for Participants employed at different geographical locations. In such event, such resolution shall either specify a fixed amount or specify a definite formula by which a fixed amount can be determined. Nonelective Contributions may be paid to the Trust either in cash or in Employer Stock valued at Fair Market Value on the date on which such Employer Stock is contributed to the Trust. The contribution as described above, for any Plan Year, shall be paid to the Trust at the end of the Plan Year, or as soon as possible on or after the last day of such Plan Year, but in any event not later than the date which is prescribed by law for filing the Employer's income tax return, including any extension thereof. The Nonelective Contribution made pursuant to this Section shall be allocated to each Participant who is an Active Participant as of the last day of the Plan Year. Notwithstanding the preceding sentence, an allocation will be made on behalf of a Participant who dies, retires, or becomes disabled during the Plan Year. The Employer may designate at the time of contribution that all or a portion of such Nonelective Contribution be treated as a Qualified Nonelective Contribution. 4.4 FAIL-SAFE CONTRIBUTION. The Employer reserves the right to make a discretionary Nonelective Contribution to the Plan for any Plan Year, if the Employer determines that such a contribution is necessary to ensure that either the Actual Deferral Percentage Test or the Actual Contribution Percentage Test will be satisfied for that Plan Year. Such amount shall be designated by the Employer at the time of contribution as a Qualified Nonelective Contribution and shall be known as a Fail-Safe Contribution. The Fail-Safe Contribution shall be made on behalf of all eligible non- Highly Compensated Employees who are Participants and who are considered under the Actual Deferral Percentage Test or the Actual Contribution Percentage Test. This contribution shall be allocated to the Participant's Account of each such Participant in an amount equal to a fixed percentage of such Participant's Compensation. The fixed percentage shall be equal to the minimum fixed percentage necessary to be contributed by the Employer on behalf of each eligible non-Highly Compensated Employee who is a Participant so that the Actual Deferral Percentage Test or the Actual Contribution Percentage Test is satisfied. The Fail-Safe Contribution for any Plan Year as determined above shall be paid to the Trust at the end of the Plan Year, or as soon as possible on or after the last day of such Plan Year, but in no event later than the date which is prescribed by law for filing the Employer's income tax return, including any extensions thereof. 4.5 PROFITS NOT REQUIRED. Contributions to this Plan shall not be precluded because the Employer does not have Considered Net Profits. Notwithstanding the existence of Considered Net Profits, the Employer may determine in its sole discretion that it will make no contributions for such Plan Year. 4.6 PAYMENT OF EXPENSES. The Employer may contribute to the Plan the amount necessary, to pay any applicable expense charges and administration charges. In lieu of the Employer's contributing the amount necessary to pay such charges, these expenses may be paid from the Trust fund. 4.7 ALLOCATION OF FORFEITURES. The contributions made by the Employer shall be reduced by any Forfeitures available as an Employer credit in accordance with Section 9.3. 22 4.8 CREDITING OF ELECTIVE DEFERRAL AND OTHER CONTRIBUTIONS. Elective Deferral Contributions and other contributions made by the Employer shall be credited to the Participant Account of each Participant for whom such contributions are made, in accordance with the provisions of Article 4.9 ROLLOVER CONTRIBUTIONS. The Plan may receive Rollover Contributions on behalf of an Employee. Receipt of a Rollover Contribution shall be subject to the approval of the Plan Administrator. Before approving the receipt of a Rollover Contribution, the Plan Administrator may request any documents or other information from an Employee or opinions of counsel which the Plan Administrator deems necessary to establish that such amount is a Rollover Contribution. A Participant's Account shall be maintained on behalf of each Employee from whom Rollover Contributions are received, regardless of such Employee's eligibility to participate in the Plan in accordance with the requirements of Article HI, and Rollover Contributions may be invested in any manner authorized under the provisions of this Plan. Rollover Contributions received from an Employee who is not otherwise eligible to participate in the Plan may not be withdrawn in accordance with the provisions of Article X until such Employee becomes a Participant, except that such Employee may receive a distribution of his Participant's Account if his Termination of Employment occurs. Rollover Contributions shall be credited to the Participant's Account and may be invested in any manner authorized under the provisions of this Plan. 4.10 TRANSFERS. Without regard to the Limitations on Allocations imposed under Article V, the Trustee may receive, directly from another qualified pension or profit-sharing plan meeting the requirements of Internal Revenue Code section 401(a), all or part of the entire amount distributable on behalf of a Participant from such plan. Likewise, the Trustee may receive Transfers representing the assets of any predecessor plan. Transfers may be invested in any manner authorized under the provisions of this Plan. 4.11 SUSPENSION OF ELECTIVE DEFERRAL CONTRIBUTIONS. The following provisions shall apply with respect to suspension of Elective Deferral Contributions. (A) Elective Suspension. An Active Participant may elect to suspend his Salary Deferral Agreement for Elective Deferral Contributions by filing a written notice thereof with the Administrator at any time. The Salary Deferral Agreement shall be suspended on the date specified in such notice, which date must be at least 15 days after such notice is filed. The notice shall specify the period for which such suspension shall be effective. Such period may extend indefinitely. (B) Suspension for Leave. A Participant who is absent from employment on account of an authorized leave of absence or military leave shall have his Salary Deferral Agreement suspended during such leave. Such suspension of contributions shall be effective on the date payment of Compensation by the Employer to him ceases, and shall remain in effect until payment of Compensation is resumed. (C) Withdrawal Suspension. An Active Participant who elects a withdrawal in accordance with Article X may have his Salary Deferral Agreement suspended on the date such election becomes effective. Such suspension shall remain in effect for the number of months specified therein. (D) Non-Elective Suspension. An Active Participant who ceases to meet the eligibility requirements as specified in Section 3.1 but who remains in the employ of the Employer, shall have his Salary Deferral Agreement suspended, effective as of the date he ceases to meet the eligibility 23 requirements. Such suspension shall remain in effect until he again meets such eligibility requirements. The Participant may elect to reactivate his Salary Deferral Agreement for Elective Deferral Contributions by filing a written notice thereof with the Plan Administrator. The Salary Deferral Agreement shall be reactivated on the January I or July I following the expiration of the suspension period described above. 4.12 LIMITATION OF ELECTIVE DEFERRAL CONTRIBUTIONS. If the Employer determines prior to the end of the Plan Year that the Plan may not satisfy the Actual Deferral Percentage Test for the Plan Year, the Employer may require that the amount of Elective Deferral Contributions being allocated to the accounts of Highly Compensated Employees be reduced to the extent necessary to prevent Excess Contributions from being made to the Plan. Although the Employer may reduce the amount of Elective Deferral Contributions that may be allocated to the Participant's Account of Highly Compensated Employees, the affected Employees shall continue to participate in the Plan. When the situation that resulted in the reduction of Elective Deferral Contributions ceases to exist, the Employer shall reinstate the amount of Elective Deferral Contributions elected by the Participant in the Salary Deferral Agreement to the fullest extent possible for all affected Participants in a nondiscriminatory manner. 4.13 LIMITATION OF MATCHING CONTRIBUTIONS. If the Employer determines prior to the end of the Plan Year that the Plan may not satisfy the Actual Contribution Percentage Test for the Plan Year, the Employer may require that the amount of Matching Contributions being allocated to the Accounts of Highly Compensated Employees be reduced to the extent necessary to prevent Excess Aggregate Contributions from being made to the Plan. 4.14 CORRECTIVE DISTRIBUTION OF EXCESS CONTRIBUTIONS. (A) The Employer may distribute Excess Contributions (and income allocable thereto) to the appropriate Highly Compensated Employee after the close of the Plan Year in which the Excess Contribution arose and within 12 months after the close of that Plan Year. (B) The income allocable to Excess Contributions is equal to the sum of the allocable gain or loss for the Plan Year and shall be determined as follows: (1) The income allocable to Excess Contributions is determined by multiplying the income for the Plan Year allocable to Deferral Percentage Amounts by a fraction. The numerator of the fraction is the Excess Contributions attributable to the Employee for the Plan Year. The denominator of the fraction is equal to the sum of (A) the total account balance of the Employee attributable to Deferral Percentage Amounts as of the beginning of the Plan Year, plus (B) the Employee's Deferral Percentage Amounts for the Plan Year. (2) The allocable gain or loss for the period between the end of the Plan Year and the date of distribution shall not be taken into consideration when determining the income allocable to Excess Contributions. (C) The amount of Excess Contributions to be distributed with respect to an Employee for a Plan Year shall be reduced by Excess Deferrals previously distributed to the Employee for the Employee's taxable year ending with or within the Plan Year. (D) The distribution of Excess Contributions made to the Family Members of a family group that was combined for purposes of determining a Highly Compensated Employee's Actual Deferral Ratio 24 shall be allocated among the Family Members in proportion to the Elective Deferral Contribution (including any amounts required to be taken into account under subparagraphs (B)(1) and (B)(2) of Section 1.8 of the Plan) of each Family Member that is combined to determine the Actual Deferral Ratio. (E) A corrective distribution of Excess Contributions (and income) shall be made without regard to any Participant or spousal consent or any notice otherwise required under sections 411(a)(1 1) and 417 of the Code. (F) Any Matching Contributions or Qualified Matching Contributions that relate to the Excess Contribution being distributed shall be forfeited. The Matching Contribution so forfeited shall be in proportion to the applicable Employee's vested and nonvested interest in Matching Contributions under the Plan for the Plan Year in which the Excess Contribution arose. Forfeitures of Matching Contributions or Qualified Matching Contributions that relate to Excess Contributions shall be applied to reduce Employer contributions or pay Plan expenses. (G) In no case may the amount of Excess Contributions to be distributed for a Plan Year with respect to any Highly Compensated Employee exceed the amount of Elective Deferral Contributions made on behalf of the Highly Compensated Employee for the Plan Year. (H) In the event of a complete termination of the Plan during the Plan Year in which an Excess Contribution arose, the corrective distribution must be made as soon as administratively feasible after the date of the termination of the Plan, but in no event later than 12 months after the date of termination. (I) Any distribution of less than the entire amount of Excess Contributions with respect to any Highly Compensated Employee shall be treated as a pro-rata distribution of Excess Contributions and allocable income or loss. 4.15 CORRECTION OF EXCESS AGGREGATE CONTRIBUTIONS. (A) Excess Aggregate Contributions may be corrected using one of the methods described in subparagraphs (1) and (2) below. The Employer shall elect the method of correction to be used and shall apply such method to the correction of the Excess Annual Contribution for the Plan Year. (1) Method 1: (a) The Excess Aggregate Contribution (and income) shall be forfeited, if forfeitable, or distributed on a pro-rata basis from the Employee's Account attributable to Contribution Percentage Amounts. The distribution or forfeiture shall be made after the close of the Plan Year in which the Excess Aggregate Contribution arose and within 12 months after the close of that Plan Year. Whether an amount is distributed or forfeited under this subparagraph (a) shall be determined based on the rules set forth in paragraph (B) of this section. (2) Method 2: (a) Any Matching Contributions (and Qualified Matching Contributions, to the extent not taken into account for purposes of the Actual Deferral Percentage Test), and income allocable thereto, shall be forfeited, if forfeitable, or distributed to the appropriate Highly Compensated Employee. The distribution or forfeiture shall be made after the close of 25 the Plan Year in which the Excess Aggregate Contribution arose and within 12 months after the close of that Plan Year. Whether an amount is forfeited or distributed shall be determined under the rules set forth in paragraph (B) of this section. (B) Determination of Distributable and Forfeitable Amounts. For purposes of paragraph (A) of this section: (1) An Excess Aggregate Contribution attributable to vested Matching Contributions, Qualified Matching Contributions (and, if applicable, Qualified Nonelective Contributions and Elective Deferral Contributions) shall be distributed to the appropriate Highly Compensated Employee in accordance with the terms of this section. (2) An Excess Aggregate Contribution attributable to an Employee's nonvested Matching Contributions shall be forfeited in accordance with the terms of this section. (3) A Highly Compensated Employee's vested and nonvested interest in Matching Contributions (and income allocable thereto) attributable to Excess Aggregate Contributions shall be based on the proportion that represents the Employee's Vested Interest in Matching Contributions under the Plan for the Plan Year in which the Excess Aggregate Contribution arose. (C) Forfeited Excess Aggregate Contributions. In accordance with paragraph (B) of this section, the amount that represents the Employee's nonvested interest in Matching Contributions (and income), and is attributable to Excess Aggregate Contributions, shall be forfeited and, as such, shall be applied to reduce Employer contributions or pay expenses. (D) Income Allocable to Excess Aggregate Contributions. For purposes of this section, the income allocable to Excess Aggregate Contributions is equal to the sum of the allocable gain or loss for the Plan Year, and shall be determined as follows: (1) The income allocable to Excess Aggregate Contributions is determined by multiplying the income for the Plan Year allocable to Contribution Percentage Amounts by a fraction. The numerator of the fraction is the Excess Aggregate Contributions for the Employee for the Plan Year. The denominator of the fraction is equal to the sum of (A) the total account balance of the Employee attributable to Contribution Percentage Amounts as of the beginning of the Plan Year, plus (ii) the Contribution Percentage Amounts for the Plan Year. (2) The allocable gain or loss for the period between the end of the Plan Year and the date of correction shall not be taken into consideration when determining the income allocable to Excess Aggregate Contributions. (E) The distribution of Excess Aggregate Contributions (and income) made to Family Members of a family group that was combined for purposes of determining a Highly Compensated Employee's Actual Contribution Ratio shall be allocated among Family Members in proportion to the Contribution Percentage Amounts (including any amounts required to be taken into account under subparagraphs (B) (1) and (B) (2) of Section 1.5 of the Plan) of each Family Member that are combined to determine the Actual Contribution Ratio. (F) In the event of a complete termination of the Plan during the Plan Year in which an Excess Aggregate Contribution arose, the corrective distribution or forfeiture shall be made as soon as administratively feasible after the date of termination of the Plan, but in no event later than 12 months after the date of termination. 26 (G) If the entire account balance of a Highly Compensated Employee is distributed during the Plan Year in which the Excess Aggregate Contribution arose, the distribution shall be deemed to have been a corrective distribution of Excess Aggregate Contributions (and income) to the extent that a corrective distribution would otherwise have been required. (H) Any distribution of less than the entire amount of Excess Aggregate Contributions (and income) shall be treated as a pro-rata distribution of Excess Aggregate Contributions and allocable income or loss. (I) In no case may the amount of Excess Aggregate Contributions distributed to a Highly Compensated Employee exceed the amount of Matching Contributions made on behalf of the Highly Compensated Employee for the Plan Year. (J) A distribution of Excess Aggregate Contributions (and income) shall be made under this section without regard to any notice or consent otherwise required under sections 41 1 (a)(1 1) and 417 of the Code. 4.16 CORRECTIVE DISTRIBUTION OF EXCESS DEFERRALS. Notwithstanding any other provision of the Plan, Excess Deferrals, plus any income and minus any loss allocable thereto, may be distributed to any Participant to whose account Excess Deferrals were allocated for the individual's taxable year. Such a corrective distribution shall be made in accordance with this section. (A) Correction of Excess Deferrals After Taxable Year. (1) Not later than the March 15 following the close of a Participant's taxable year, the Participant may notify the Plan of the amount of Excess Deferrals received by the Plan during that taxable year. The notification shall be in writing, shall specify the Participant's Excess Deferrals, and shall be accompanied by the Participant's written statement that if such amounts are not distributed, these amounts, when added to all other Elective Deferral Contributions made on behalf of the Participant during the taxable year, shall exceed the dollar limitation specified in section 402(g) of the Code. (2) The Participant is deemed to have notified the Plan of Excess Deferrals if, not later than the March 1 following the close of a Participant's taxable year, the Employer notifies the Plan on behalf of the Participant of the Excess Deferrals. Such Excess Deferrals shall be calculated by taking into account only Elective Deferral Contributions under the Plan and any other plans of the Employer. (3) Not later than the April 15 following the close of the taxable year, the Plan shall distribute to the Participant the amount of Excess Deferrals designated under subparagraphs (1) or (2) above. (B) Correction of Excess Deferrals During the Taxable Year. A Participant who has an Excess Deferral during a taxable year may receive a corrective distribution during the same year. Such a corrective distribution shall be made if: (1) The Participant designates the distribution as an Excess Deferral. The designation shall be made in the same manner as the notification described in subparagraph (A)(1) of this section. The Participant will be deemed to have designated the distribution as an Excess Deferral if the Employer makes the designation on behalf of the Participant to the extent that the Participant has Excess Deferrals for the taxable year calculated by taking into account only Elective Deferral Contributions to the Plan and other plans of the Employer. 27 (2) The corrective distribution is made after the date on which the Plan received the Excess Deferral. (3) The Plan designates the distribution as a distribution of Excess Deferrals. (C) If the Participant provides the Employer with satisfactory evidence and written notice to demonstrate that all Elective Deferral Contributions by the participant in this Plan and any other qualified plan exceed the applicable limit under section 402(g) of the Code for such individual's taxable year, then the Plan Administrator may (but is not required to) distribute sufficient Elective Deferral Contributions (not to exceed the amount of Elective Deferral Contributions actually contributed on behalf of the Participant to this Plan during the Participant's taxable year) from this Plan to allow the Participant to comply with the applicable limit. The evidence provided by the Participant must establish clearly the amount of Excess Deferrals. The Participant must present this evidence to the Plan Administrator by the March I following the end of the calendar year in which the Excess Deferrals occurred. (D) Income Allocable to Excess Deferrals. The income allocable to Excess Deferrals is equal to the sum of allocable gain or loss for the taxable year of the individual and shall be determined as follows: (1) The gain or loss allocable to Excess Deferrals is determined by multiplying the income for the taxable year allocable to Elective Deferral Contributions by a fraction. The numerator of the fraction is the Excess Deferrals by the Employee for the taxable year. The denominator of the fraction is equal to the sum of: (a) The total account balance of the Employee attributable to Elective Deferral Contributions as of the beginning of the Plan Year, plus (b) The Employee's Elective Deferral Contributions for the taxable year. (2) The income allocable to Excess Deferrals shall not include the allocable gain or loss for the period between the end of the taxable year and the date of distribution. (E) No Employee or Spousal Consent Required. A corrective distribution of Excess Deferrals (and income) shall be made without regard to any notice or consent otherwise required under sections 411(a)(11) and 417 of the Code. (F) Any Matching Contributions or Qualified Matching Contributions that relate to the Excess Deferral being distributed shall be forfeited. The Matching Contribution so forfeited shall be in proportion to the applicable Employee's vested and nonvested interest in Matching Contributions under the Plan for the Plan Year in which the Excess Deferral arose. Forfeitures of Matching Contributions or Qualified Matching Contributions that relate to Excess Deferrals shall be applied to reduce Employer contributions or pay Plan expenses. 4.17 QUALIFIED CONTRIBUTIONS. In lieu of distributing Excess Contributions as provided in Section 4.14 of the Plan, or Excess Aggregate Contributions as provided in Section 4.15 of the Plan, the Employer may take the actions specified below in order to satisfy the Actual Deferral Percentage Test or the Actual Contribution Percentage Test, or both, pursuant to the regulations under the Code. (A) At the election of the Employer, Qualified Nonelective Contributions or Qualified Matching Contributions, or both, may be taken into account as Elective Deferral Contributions for purposes of calculating the Actual Deferral Ratio of a Participant. 28 The amount of Qualified Nonelective Contributions or Qualified Matching Contributions made under the terms of this Plan and taken into account as Elective Deferral Contributions for purposes of calculating the Actual Deferral Ratio, subject to such other requirements as may be prescribed by the Secretary of the Treasury, shall be such Qualified Nonelective Contributions or Qualified Matching Contributions, or both, that are needed to meet the Actual Deferral Percentage Test. (B) At the election of the Employer, Qualified Nonelective Contributions or Elective Deferral Contributions, or both, may be taken into account as Matching Contributions for purposes of calculation- the Actual Contribution Ratio of a Participant. The amount of Qualified Nonelective Contributions or Elective Deferral Contributions made under the terms of this Plan and taken into account for purposes of calculating the Actual Contribution Ratio, subject to such other requirements as may be prescribed by the Secretary of the Treasury, shall be such Qualified Nonelective Contributions or Elective Deferral Contributions, or both, that are needed to meet the Actual Contribution Percentage Test. (C) Any Qualified Nonelective Contribution, Qualified Matching Contribution, and Elective Deferral Contribution taken into account under paragraphs (A) or (B) must be allocated to the Employee's Account as of a date within the Plan Year in which the Excess Contribution or Excess Aggregate Contribution arose and must be paid to the Plan no later than the 12-month period immediately following the Plan Year to which the contribution relates. 4.18 MULTIPLE USE OF ALTERNATIVE LIMITATION. (A) Multiple use of the alternative limitation occurs if all of the conditions of this paragraph (A) are satisfied: (1) One or more Highly Compensated Employee of the Employer are eligible employees in both a cash or deferred arrangement subject to section 401(k) and a plan maintained by the Employer subject to section 401(m). (2) The sum of the Actual Deferral Percentage of the entire group of eligible Highly Compensated Employees under the arrangement subject to section 401(k) and the Actual Contribution Percentage of the entire group of eligible Highly Compensated Employees under the Plan subject to section 401(m) exceeds the aggregate limit of paragraph (C) of this section. (3) Actual Deferral Percentage of the entire group of eligible Highly Compensated Employees under the arrangement subject to section 401(k) exceeds the amount described in section 401(k)(3)(A)(ii)(1). (4) The Actual Contribution Percentage of the entire group of eligible Highly Compensated Employees under the arrangement subject to section 401 (m) exceeds the amount described in section 401(m)(2)(A)(i). (B) For purposes of this section, the aggregate limit is the greater of: (1) The sum of- (a) 1.25 times the greater of the relevant Actual Deferral Percentage or the relevant Actual Contribution Percentage, and 29 (b) Two percentage points plus the lesser of the relevant Actual Deferral Percentage or the relevant Actual Contribution Percentage. In no event however, may this amount exceed twice the lesser of the relevant Actual Deferral Percentage or the Actual Contribution Percentage; or (2) The sum of- (a) 1.25 times the lesser of the relevant Actual Deferral Percentage or the relevant Actual Contribution Percentage, and (b) Two percentage points plus the greater of the relevant Actual Deferral Percentage or the relevant Actual Contribution Percentage. In no event, however, may this amount exceed twice the greater of the relevant Actual Deferral Percentage or the relevant Actual Contribution Percentage. (C) For purposes of paragraph (B) of this section, the term "relevant Actual Deferral Percentage" means the Actual Deferral Percentage of the group of Nonhighly Compensated Employees under the arrangement subject to section 401(k) for the Plan Year, and the term "relevant Actual Contribution Percentage" means the Actual Contribution Percentage of the group of Nonhighly Compensated Employees eligible under the Plan subject to section 401(m) for the Plan Year beginning with or within the Plan Year of the arrangement subject to section 401(k). (D) The Actual Deferral Percentage and Actual Contribution Percentage of the group of eligible Highly Compensated Employees are determined after use of Qualified Nonelective Contributions and Qualified Matching Contributions to meet the requirements of the Actual Deferral Percentage Test and after use of Qualified Nonelective Contributions and Elective Deferral Contributions to meet the requirements of the Actual Contribution Percentage Test. The Actual Deferral Percentage and Actual Contribution Percentage of the group of Highly Compensated Employees are determined after any corrective distribution or forfeiture of Excess Deferrals, Excess Contributions, or Excess Aggregate Contributions and after recharacterization of Excess Contributions required without regard to this section. Only plans and arrangements maintained by the Employer are taken into account under paragraph (B). If the Employer maintains two or more cash or deferred arrangements subject to section 401(k) that must be mandatorily disaggregated pursuant to section 40 1 (k)- I (g)(I 1)(iii) multiple use is tested separately with respect to each plan. (E) If multiple use of the alternative limit occurs with respect to two or more plans or arrangements maintained by the Employer, it shall be connected by reducing the Actual Contribution Percentage of Highly Compensated Employees in the manner described in paragraph (F) of this section. Instead of making this reduction, the Employer may eliminate the multiple use of the alternative limitation by making Qualified Nonelective Contributions to the Plan. (F) The amount of the reduction by which each Highly Compensated Employee's Actual Contribution Ratio is reduced shall be treated as an Excess Aggregate Contribution. The Actual Contribution Percentage of all Highly Compensated Employees under the plan subject to reduction shall be reduced so that there is no multiple use of the alternative limitation. ARTICLE V LIMITATIONS ON ALLOCATIONS 5.1 LIMITATIONS ON ALLOCATIONS. Definitions - The following definitions are atypical terms which refer only to terms used in the Limitations on Allocations Sections of this Article V. 30 (A) Annual Additions. The term Annual Additions shall mean the sum of the following amounts allocated on behalf of a Participant for a Limitation Year: (1) all contributions made by the Employer which shall include: . Elective Deferral Contributions, if any; . Matching Contributions, if any; . Qualified Matching Contributions, if any; . Nonelective Contributions, if any; . Qualified Nonelective Contributions, if any; (2) all contributions made by the Employer which shall include: all Forfeitures, if any; (3) all Employee Contributions, if any. For the purposes of this Article, Excess Amounts reapplied under Section 5.2 (D) shall also be included as Annual Additions. Also, for the purposes of this Article, Employee Contributions are determined without regard to deductible employee contributions within the meaning of section 72(o)(5) of the Code. Amounts allocated after March 31, 1984, to an individual medical account, as defined in Internal Revenue Code section 415(l)(1), which is part of a defined benefit plan maintained by the Employer, are treated as Annual Additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued attributable to post-retirement medical benefits allocated to the separate account of a key employee, as defined in Internal Revenue Code section 419A(d)(3), under a welfare benefit fund, as defined in Internal Revenue Code section 419(e), maintained by the Employer, are treated as Annual Additions to a defined contribution plan. Contributions do not fail to be Annual Additions merely because they are Excess Deferrals, Excess Contributions or Excess Aggregate Contributions or merely because Excess Contributions or Excess Aggregate Contributions are corrected through distribution or recharacterization-Excess Deferrals that are distributed in accordance with Section 4.16 of the Plan are not Annual Additions. Forfeited Matching Contributions that are forfeited because the contributions to which they relate are treated as Excess Aggregate Contributions, Excess Contributions, or Excess Deferrals and that are reallocated to the Participant Accounts of other Participants for the Plan Year in which the forfeiture occurs, are treated as Annual Additions for the Participants to whose accounts they are reallocated and for the Participants from whose accounts they are forfeited. (B) Compensation. The term Compensation means wages, salaries, and fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer maintaining the Plan to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or other expense allowances under a nonaccountable plan (as described in 1.62-2(c)), and foreign earned 31 income (as defined in section 911(b) of the Code) whether or not excludable from gross income under section 911 of the Code. The term Compensation does not include: (1) Employer Contributions to a plan of deferred compensation which are not includible in the employee's gross income for the taxable year in which contributed, or Employer Contributions under a simplified employee pension plan to the extent such contributions are deductible by the employee, or any distributions from a plan of deferred compensation; (2) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to substantial risk of forfeiture; (3) Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in section 403(b) of the Code (whether or not the contributions are actually excludable from the gross income of the Employee). For Limitation Years beginning after December 31, 1991, for purposes of applying the limitations of this article, Compensation for a Limitation Year is the Compensation actually paid or made available during such Limitation Year. (C) Defined Contribution Dollar Limitation. The term Defined Contribution Dollar Limitation shall mean $30,000 or, if greater, one-fourth of the defined benefit dollar limitation set forth in Internal Revenue Code section 415(b)(1) as in effect for the Limitation Year. (D) Employer. The term Employer shall mean the Employer that adopts this Plan. In the case of a group of employers which constitutes a controlled group of corporations (as defined in Internal Revenue Code section 414(b) as modified by section 415(h)), or which constitutes trades or business (whether or not incorporated) which are under common control (as defined in section 414(c) as modified by section 415(h)), or affiliated service groups (as defined in section 414(m)) of which the adopting Employer is a part, all such employers shall be considered a single Employer for purposes of applying the limitations of this Article. (E) Excess Amount. The term Excess Amount shall mean the excess of the Participant's Annual Additions for the Limitation Year over the Maximum Permissible Amount. (F) Limitation Year. The term Limitation Year shall mean the calendar year. (G) Maximum Permissible Amount. The term Maximum Permissible Amount shall mean the lesser of (1) the Defined Contribution Dollar Limitation, or (2) 25% of the Participant's Compensation for the Limitation Year. If a short Limitation Year is created because of an amendment changing the Limitation Year to a different period of 12 consecutive months, the Maximum Permissible Amount for the short Limitation Year will be the lesser of (1) the Defined Contribution Dollar Limitation multiplied by a fraction, the numerator of which is the number of months in the short Limitation Year, and the denominator of which is 12, or (2) 25% of the Participant's Compensation for the short Limitation Year. 32 5.2 LIMITATIONS ON ALLOCATIONS. If the Employer does not maintain any qualified plan in addition to this Plan: (A) The amount of Annual Additions which may be allocated under this Plan on a Participant's behalf for a Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or any other limitation contained in this Plan. (B) Prior to the determination of the Participant's actual Compensation for a Limitation Year, the Maximum Permissible Amount may be determined on the basis of the Participant's estimated annual Compensation. Such Compensation shall be determined on a reasonable basis and shall be uniformly determined for all Participants similarly situated. Any employer contributions based on estimated annual Compensation shall be reduced by any Excess Amounts carried over from prior years. (C) As soon as is administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for such Limitation Year shall be determined on the basis of the Participant's actual Compensation for such Limitation Year. In the event a Participant separates from the Service of the Employer prior to the end of the Limitation Year, the Maximum Permissible Amount for such Participant shall be determined prior to any distribution of his Participant's Account on the basis of his actual Compensation. Any Excess Amounts shall be disposed of in accordance with Section 5.2(D). (D) If there is an Excess Amount with respect to a Participant for a Limitation Year as a result of a reasonable error in estimating the Participant's annual compensation, an allocation of forfeitures, a reasonable error in determining the amount of elective deferrals (within the meaning of section 402(g)(3) of the Code) that may be made with respect to any individual under the limits of section 415 of the Code, or under other limited facts and circumstances which the commissioner finds justified, such Excess Amount shall be disposed of as follows: (1) If an Excess Amount exists, the Excess Amount in the Participant's Account (excluding Elective Deferral Contributions) shall be held unallocated in a suspense account for the Limitation Year and allocated and reallocated in the next Limitation Year to all Participants in the Plan. The excess amount must be used to reduce Employer Contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for all of the Participants in the Plan. For purposes of this subparagraph, the Excess Amount may not be distributed to Participants or former Participants. (2) If, after the application of subparagraph (1) an Excess Amount still exists, then the Participant's Elective Deferral Contributions (including earnings and losses thereon) allocated for the Limitation Year shall be returned to the Participant to the extent that an Excess Amount exists. This distribution shall be made as soon as administratively feasible after the Excess Amount is determined. Any Elective Deferral Contributions returned under this paragraph shall be disregarded for purposes of the Actual Deferral Percentage Test. (3) Alternatively, the Plan Administrator may elect to dispose of the Excess Amount by applying the procedure in subparagraph (2) before applying the procedure in subparagraph (1). If the Plan Administrator makes this election, the Plan Administrator must apply it uniformly to all Participants in a Limitation Year. (4) If a suspense account is in existence at any time during a Limitation Year pursuant to this section, it will not participate in the allocation of investment gains or losses. If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the 33 suspense account must be allocated and reallocated to Participants' Accounts before any Employer Contributions which would constitute Annual Additions may be made to the Plan for that Limitation Year. 5.3 LIMITATIONS ON ALLOCATIONS. If the Employer maintains one or more defined contribution plans in addition to this Plan: (A) The amount of Annual Additions which may be allocated under this Plan on a Participant's behalf for a Limitation Year, shall not exceed the lesser of: (1) The Maximum Permissible Amount, reduced by the sum of any Annual Additions allocated to the Participant's Account for the same Limitation Year under this Plan and such other defined contribution plan; or (2) Any other limitation contained in this Plan. Prior to the determination of the Participant's actual Compensation for the Limitation Year, the amounts referred to in Subsection (1) above may be determined on the basis of the Participant's estimated annual Compensation for such Limitation Year. Such estimated annual Compensation shall be determined for all Participants similarly situated. Any contribution made by the Employer based on estimated annual Compensation shall be reduced by any Excess Amounts carried over from prior years, if applicable. (B) As soon as is administratively feasible after the end of the Limitation Year, the amounts referred to in Section 5.3 (A) shall be determined on the basis of the Participant's actual Compensation for such Limitation Year. (C) If amounts are contributed to a Participant's Account under this Plan on an allocation date which does not coincide with the allocation date(s) for all such other plans, and if a Participant's Annual Additions under this Plan and all such other plans result in an Excess Amount, such Excess Amount shall be deemed to have derived from those contributions last allocated. (D) If an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Amount attributable to this Plan will be the product of (1) and (2) below: (1) The total Excess Amount allocated as of such date (including any amount which would have been allocated but for the limitations of Internal Revenue Code section 415). (2) The ratio of (1) the amount allocated to the Participant as of such date under this Plan, divided by (2) the total amount allocated as of such date under all qualified defined contribution plans (determined without regard to the limitations of Internal Revenue Code section 415). (E) Any Excess Amounts attributed to this Plan shall be disposed of as provided in Section 5.2 (D). 5.4 LIMITATIONS ON ALLOCATIONS. If the Employer maintains a defined benefit plan in addition to this Plan: (A) If an individual is a Participant at any time in both this Plan and a defined benefit plan maintained by the Employer, the sum of the Defined Benefit Plan Fraction and the Defined Contribution Plan 34 Fraction for any year may not exceed 1.0. In the event that the sum of the Defined Contribution Plan Fraction and the Defined Benefit Plan Fraction exceeds 1.0, the Defined Contribution Plan Fraction will be reduced until the sum of the Defined Contribution Plan Fraction and the Defined Benefit Plan Fraction does not exceed 1.0. If an individual was a Participant in this Plan or in any other defined contribution plan maintained by the Employer which was in existence on July 1, 1982, the numerator of the Defined Contribution Plan Fraction will be adjusted if the sum of the Defined Contribution Plan Fraction and the Defined Benefit Plan Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of (1) the excess of the sum of the Fractions over 1.0 times (2) the denominator of the Defined Contribution Plan Fraction, will be permanently subtracted from the numerator of the Defined Contribution Plan Fraction. The adjustment is calculated using the Fractions as they would be computed as of the later of the end of the last Limitation Year beginning before January 1, 1983, or June 30, 1983. This adjustment also will be made if at the end of the last Limitation Year beginning before January 1, 1984, the sum of the Fractions exceeds 1.0 because of accruals or additions that were made before the limitations of this Article became effective to any plans of the Employer in existence on July 1, 1982. In addition, if an individual was a Participant in this Plan or in any other defined contribution plan maintained by the Employer which was in existence on May 6, 1986, the numerator of the Defined Contribution Plan Fraction will be adjusted if the Employer's defined benefit plan was also in existence on May 6, 1986, and the sum of the Defined Contribution Plan Fraction and the Defined Benefit Plan Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of (1) the excess of the sum of the Fractions over 1.0 times (2) the denominator of the Defined Contribution Plan Fraction, will be permanently subtracted from the numerator of the Defined Contribution Plan Fraction. This adjustment is calculated using the Fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987. In the event that a Participant's accrued benefit as of December 31, 1986, under the defined benefit plan exceeds the defined benefit dollar limitation set forth in Internal Revenue Code section 415(b)(1), the amount of that accrued benefit shall be used in both the numerator and the denominator of the Defined Benefit Plan Fraction in making this adjustment. For purposes of this Section 5.4, all defined benefit plans of the Employer, whether or not terminated, will be treated as one defined benefit plan and all defined contribution plans of the Employer, whether or not terminated, will be treated as one defined contribution plan. (B) The Defined Benefit Plan Fraction for any year is a fraction, the numerator of which is the Participant's Projected Annual Benefit under the defined benefit plan (determined as of the close of the Limitation Year), and the denominator of which is the lesser of (1) or (2) below: (1) 1.25 times the dollar limitation in effect under Internal Revenue Code section 415(b)(1)(A) on the last day of the Limitation Year, or (2) 1.4 times the amount which may be taken into account under Internal Revenue Code section 415(b)(1)(B) with respect to such Participant for the Limitation Year. Notwithstanding the above, if the Participant was a participant in one or more defined benefit plans maintained by the Employer which were in existence on July 1, 1982, the denominator of the Defined Benefit Plan Fraction will not be less than 125% of the sum of the annual benefits under such plans which the Participant had accrued as of the later of the end of the last Limitation Year beginning before January 1, 1983 or June 30, 1983. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Internal Revenue Code section 415 as in effect at the end of the 1982 Limitation Year. 35 (C) A Participant's Projected Annual Benefit is equal to the annual benefit to which the Participant would be entitled under the terms of the defined benefit plan based upon the following assumptions: (1) The Participant will continue employment until reaching Normal Retirement Age as determined under the terms of the plan (or current age, if that is later); (2) The Participant's Compensation for the Limitation Year under consideration will remain the same until the date the Participant attains the age described in sub-division (1) of this subparagraph; and (3) All other relevant factors used to determine benefits under the plan for the Limitation Year under consideration will remain constant for all future Limitation Years. (D) The Defined Contribution Plan Fraction for any Limitation Year is a fraction, the numerator of which is the sum of the Annual Additions to the Participant's Accounts in such Limitation Year and for all prior Limitation Years, and the denominator of which is the lesser of (1) or (2) below for such Limitation Year and for all prior Limitation Years of such Participant's employment (assuming for this purpose, that Internal Revenue Code section 415(c) had been in effect during such prior Limitation Years): (1) 1.25 times the dollar limitation in effect under Internal Revenue Code section 415(c)(1)(A) on the last day of the Limitation Year, or (2) 1.4 times the amount which may be taken into account under Internal Revenue Code section 415(c)(1)(B) with respect to such Participant for the Limitation Year. For the purposes of determining these Limitations on Allocations, any non-deductible employee contributions made under a defined benefit plan will be considered to be a separate defined contribution plan and will be considered to be part of the Annual Additions for the appropriate Limitation Year. Annual Additions for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat all Employee Contributions as Annual Additions. (E) Notwithstanding the foregoing, at the election of the Plan Administrator, in computing the Defined Contribution Plan Fraction with respect to any Plan Year ending after December 31, 1982, the denominator shall be an amount equal to the product of: (1) The denominator of the Defined Contribution Plan Fraction, computed in accordance with the rules in effect for the Plan Year, ending in 1982; and (2) the transition fraction, which is a fraction (a) the numerator of which is the lesser of: (i) $51,875, or (ii) 1.4 times 25% of the Compensation of the Participant for the Plan Year ending in 1981, and (b) the denominator of which is the lesser of: 36 (i) $41,500, or (ii) 25% of the Compensation of the Participant for the Plan Year ending in 1981. ARTICLE VI DISTRIBUTION OF BENEFITS 6.1 DISTRIBUTIONS IN GENERAL. Each Participant may elect, with his Spouse's consent, if required, a distribution in the form of cash or a combination of cash and annuity, or, as to that portion of the Participant's Vested Interest attributable to Employer Stock, in the form of whole shares of Employer Stock. Fractional shares of Employer Stock shall be valued at Fair Market Value and distributed in cash. If the Participant elects a distribution in the form of cash or an annuity, or a combination of cash and an annuity, any portion of the Participant's Vested Interest attributable to Employer Stock shall be sold at Fair Market Value and the proceeds, net of any expenses attributable to such sale, shall be distributed to the Participant in the form elected. All distributions are subject to the provisions of Article VIII, Joint and Survivor Annuity Requirements. 6.2 TIMING OF DISTRIBUTIONS. If the value of a Participant's Vested Interest exceeds (or at the time of any prior distribution exceeded) $3,500 and is immediately distributable (as defined in Section 8.5), the Participant and his Spouse, if required, must consent to the distribution before it is made. Instead of consenting to a distribution, the Participant may make a written election to defer the distribution for a specified period of time ending no later than the Participant's Normal Retirement Age. Such election to defer shall be revocable. If the Participant and Spouse, if applicable, do not consent to a distribution or if no election to defer is made within 90 days after receiving a written explanation of the optional forms of benefit available pursuant to Income Tax Regulation 1.41 1 (a)(1 1), all benefits shall be deferred to, and distribution shall be made as of the Participant's Normal Retirement Age. The distribution will be made in the form of a single sum cash payment (in the case of a Participant's meeting the requirements of Section 8.1 (A)) or in accordance with Section 8.2 (in the case of a Participant's not meeting the requirements of Section 8.1 (A)), unless the Participant elects another form of benefit within the 90-day period prior to the date the distribution is made. A Participant whose actual retirement date is on or after his Normal Retirement Age may not elect to defer distribution of his benefit beyond the date of his actual retirement. If the value of a Participant's Vested Interest is $3,500 or less at the time it becomes payable, the distribution shall be made in the form of a single sum cash payment and shall be made upon such Participant's Termination of Employment. Such a distribution may not be deferred. Unless the Participant elects otherwise, the payment of benefits under this Plan to the Participant shall begin not later than the 60th day after the close of the Plan Year in which the later of (A) or (B), below, occurs: (A) the date on which the Participant attains his Normal Retirement Age or age 62, if later; or (B) the date on which the Participant terminates his Service (including Termination of Employment, death or Disability) with the Employer. Notwithstanding the foregoing, the failure of a Participant and Spouse, if required, to consent to a distribution while a benefit is immediately distributable shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy the above paragraph. 37 6.3 DISTRIBUTION LIMITATION. Elective Deferral Contributions, Qualified Nonelective Contributions and Qualified Matching Contributions, and income allocable to each, are not distributable to a Participant or a Beneficiary, in accordance with such Participant's or Beneficiary's election, earlier than upon the Participant's Termination of Employment, death, or disability. Such amounts may also be distributed upon: (A) Termination of the Plan without the establishment or maintenance of a successor plan. For purposes of this paragraph, a successor plan is any other defined contribution plan maintained by the same employer. However, if fewer than two percent of the Employees who are eligible under the Plan at the time of its termination are or were eligible under another defined contribution plan at any time during the 24 month period beginning 12 months before the time of the termination, the other plan is not a successor plan. The term "defined contribution plan" means a plan that is a defined contribution plan as defined in section 414(i) of the Code, but does not include an employee stock ownership plan as defined in section 4975(e) or 409 of the Code or a simplified employee pension as defined in section 408(k) of the Code. A plan is a successor plan only if it exists at the time the Plan is terminated or within the period ending 12 months after distribution of all assets from the Plan. A distribution may be made under this paragraph only if it is a lump sum distribution. The term "lump sum distribution" has the same meaning provided in section 402(e)(4) of the Code, without regard to subparagraphs (A)(i) through (iv), (B), and (H) of that section. (B) The disposition by the Employer to an unrelated corporation of substantially all the assets (with the meaning of section 409(b)(2) of the Code) used in the trade or business of the Employer if the Employer continues to maintain this Plan after the disposition. However, a distribution may be made under this paragraph only to an Employee who continues employment with the corporation acquiring such assets. In addition, this requirement is satisfied only if the purchaser does not maintain the Plan after the disposition. A purchaser maintains the plan of the seller if it adopts the plan or otherwise becomes an employer whose employees accrue benefits under the Plan. A purchaser also maintains the Plan if the Plan is merged or consolidated with, or any assets or liabilities are transferred from the Plan to a plan maintained by the purchaser in a transaction subject to section 414(l)(1) of the Code. A purchaser is not treated as maintaining the Plan merely because the Plan that it maintains accepts rollover contributions of amounts distributed by the Plan. For purposes of this paragraph, the sale of "substantially all" the assets used in a trade or business means the sale of at least 85 percent of the assets. A distribution may be made under this paragraph only if it is a lump sum distribution. The term "lump sum distribution" has the same meaning provided in section 402(e)(4) of the Code, without regard to subparagraphs (A)(i) through (iv), (B), and (H) of that section. (C) The disposition by the Employer to an unrelated entity or individual of the Employer's interest in a subsidiary (with the meaning of section 409(d)(3) of the Code) if the Employer continues to maintain this Plan. However, a distribution may be made under this paragraph only to an Employee who continues employment with such subsidiary. In addition, this requirement is satisfied only if the purchaser does not maintain the Plan after the disposition A purchaser maintains the plan of the seller if it adopts the plan or otherwise becomes 38 an employer whose employees accrue benefits under the Plan. A purchaser also maintains the Plan if the Plan is merged or consolidated with, or any assets or liabilities are transferred from the Plan to a plan maintained by the purchaser in a transaction subject to section 414(l)(1) of the Code. A purchaser is not treated as maintaining the Plan merely because the Plan that it maintains accepts rollover contributions of amounts distributed by the Plan. A distribution may be made under this paragraph only if it is a lump sum distribution. The term "lump sum distribution" has the same meaning provided in section 402(e)(4) of the Code, without regard to subparagraphs (A)(i) through (iv), (B), and (H) of that section. (D) In the case of Elective Deferral Contributions only, the attainment of age 59-1/2, as described in Section 10.1 of the Plan. (E) In the case of Elective Deferral Contributions only, the hardship of the Participant, as described in Section 10.2 of the Plan. 6.4 COMMENCEMENT OF DISTRIBUTIONS. Notwithstanding the provisions of the preceding Timing of Distributions Section, distributions to a Participant will commence no later than the date determined in accordance with the provisions of this Section. Distribution to a Participant must commence no later than the required beginning date. The first required beginning date of a Participant is the first day of April of the calendar year following the calendar year in which the Participant attains age 70-1/2. The required beginning date of a Participant who attains age 70-1/2 before January 1, 1988, shall be the first day of April of the calendar year following the calendar year in which the later of retirement or attainment of age 70-1/2 occurs, provided the Participant was not a 5% owner in the Plan Year ending in the year in which the Participant attained age 66-1/2 or any later Plan Year. A Participant is treated as a 5% owner for purposes of this section if such Participant is a 5% owner as defined in section 416(i) of the Code (determined in accordance with section 416 but without regard to whether the Plan is Top-Heavy). The required beginning date of a Participant who is a 5% owner during any year beginning after December 31, 1979, is the first day of April following the later of: (A) the calendar year in which the Participant attained age 70-1/2, or (B) the earlier of the calendar year with or within which ends the Plan Year in which the Participant becomes a 5% owner, or the calendar year in which the Participant retires. Once distributions have begun to a 5% owner under this section, they must continue to be distributed, even if the Participant ceases to be a 5% owner in a subsequent year. Distribution to such Participant must commence no later than the first day of April following the calendar year in which the Participant's Termination of Employment occurs. If distribution to any Participant is made in other than a single sum payment, the second payment shall be distributed no later than the December 31 following the April 1 by which the first payment was required to be distributed. Each succeeding payment shall be distributed no later than each December 31 thereafter. 6.5 DISTRIBUTION REQUIREMENTS. (A) Except as otherwise provided in Article VIII, the requirements of this Section shall apply to any distribution of a Participant's Accrued Benefit. 39 (B) All distributions required under this Article shall be determined and made in accordance with the Income Tax Regulations under section 401(a)(9), including the minimum distribution incidental benefit requirement of section 1.401(a)(9)-2 of the regulations. (C) Limits on Settlement Options. Distributions, if not made in a lump sum, may only be made over one of the following periods (or a combination thereof): (1) the life of the Participant, (2) the life of the Participant and a designated Beneficiary, (3) a period certain not extending beyond the life expectancy of the Participant, or (4) a period certain not extending beyond the joint and last survivor expectancy of the Participant and a designated Beneficiary. (D) Minimum Amounts to be Distributed. If the Participant's entire Vested Interest is to be distributed in other than a lump sum, then the amount to be distributed each year must be at least an amount equal to the quotient obtained by dividing the Participant's entire Vested Interest by the life expectancy of the Participant or the joint and last survivor expectancy of the Participant and designated Beneficiary. Life expectancy and joint and last survivor expectancy are computed by the use of the return multiples contained in section 1.72-9 of the Income Tax Regulations. For purposes of this computation, a Participant's life expectancy may be recalculated no more frequently than annually; however, the life expectancy of a Beneficiary other than the Participant's Spouse may not be recalculated. (1) If the Participant's Spouse is not the designated Beneficiary, the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the life expectancy of the Participant. (2) For calendar years beginning after December 31, 1988, the amount to be distributed each year, beginning with distributions for the first distribution calendar year, shall not be less than the quotient obtained by dividing the Participant's benefit by the lesser of (1) the applicable life expectancy or (2) if the Participant's Spouse is not the designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of section 1.401(a)(9)-2 of the Income Tax Regulations. Distributions after the death of the Participant shall be distributed using the applicable life expectancy in subsection (d)(1) above as the relevant divisor without regard to regulations section 1.401(a)(9)-2. (3) The minimum distribution required for the Participant's first distribution calendar year must be made on or before the Participant's required beginning date. The minimum distribution for other calendar years, including the minimum distribution for the distribution calendar year in which the Employee's required beginning date occurs, must be made on or before December 31 of that distribution calendar year. 6.6 NON-TRANSFERABLE. The Participant's right to any Annuity payments, benefits, and refunds is not transferable and shall be free from the claims of all creditors to the fullest extent permitted by law. 6.7 DEATH DISTRIBUTION PROVISIONS. If the Participant dies before distribution of his Vested Interest commences, the following provisions shall apply: (A) If a distribution is to be made to a Beneficiary other than the Surviving Spouse: 40 (1) If the present value of the Participant's Vested Interest exceeds (or at the time of any prior distribution exceeded) $3,500, unless the Beneficiary elects another form of distribution, that portion of the Participant's Vested Interest payable to the Beneficiary will be distributed in the form of a single sum cash payment within a reasonable period of time after the Plan Administrator is notified of the Participant's detail (2) If the present value of the Participant's Vested Interest is $3,500 or less at the time it becomes payable, the distribution shall always be made in the form of a single sum cash payment and shall be paid within a reasonable period of time after the Plan Administrator is notified of the Participant's death. (B) If the distribution is to be made to a Beneficiary who is the Surviving Spouse, such distribution will be made in accordance with the following: (1) If the Participant had never elected a life Annuity form of distribution under the Plan: (a) If the present value of the Participant's Vested Interest exceeds (or at the time of any prior distribution exceeded) $3,500, unless the surviving spouse elects another form of distribution, that portion of the Participant's Vested Interest payable to the Surviving Spouse will be distributed in the form of a single sum cash payment within a reasonable period of time after the Plan Administrator is notified of the Participant's death. (b) If the present value of the Participant's Vested Interest payable to the Surviving Spouse is $3,500 or less at the time it becomes payable, the distribution shall always be made in the form of a single sum cash payment and shall be made within a reasonable period of time after the Plan Administrator is notified of the Participant's death. (2) If the Participant had previously elected a life Annuity form of distribution under the Plan: (a) If the present value of the Participant's Vested Interest exceeds (or at the time of any prior distribution exceeded) $3,500 and is immediately distributable (as defined in Section 8.5), the Surviving Spouse must consent to the distribution before it is made. If the Surviving Spouse does not consent to a distribution, all benefits shall be deferred to a date that complies with the terms of Section 6.8 (B). The distribution shall be made in accordance with the provisions of Section 8.3. (b) If the present value of the Participant's Vested Interest is $3,500 or less at the time it becomes payable, the distribution shall always be made in the form of a single sum cash payment and shall be paid within a reasonable period of time after the Plan Administrator is notified of the Participant's death . 6.8 DEATH DISTRIBUTION COMMENCEMENT DATE. Upon the death of the Participant, the following distribution provisions shall take effect: (A) If the Participant dies after distribution of his entire Vested Interest has commenced, the remaining portion of such Vested Interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. In no event shall distribution of the Participant's remaining Vested Interest be made in a lump sum after the Participant's death unless such distribution is consented to, in writing, by the Participant's Surviving Spouse, if any. 41 (B) If the Participant dies before distribution of his Vested Interest commences, the Participant's entire Vested Interest will be distributed no later than five years after the Participant's death except to the extent that an election is made to receive distributions in accordance with (1) or (2) below: (1) If any portion of the Participant's Vested Interest is payable to a designated Beneficiary, distributions may be made in substantially equal installments over the life or life expectancy of the designated Beneficiary (or over a period not extending beyond the life expectancy of such Beneficiary), commencing no later than one year after the Participant's death; (2) If the designated Beneficiary is the Participant's Surviving Spouse, the date distributions are required to begin in accordance with (1) above shall not be earlier than the date on which the Participant would have attained age 70-1/2. However, the Surviving Spouse may elect, at any time following the Participant's death, to defer the date on which distributions will begin until no later than the date on which the Participant would have attained age 70-1/2 and, if the Spouse dies before payments begin, subsequent distributions shall be made as if the Spouse had been the Participant. (C) For purposes of (B) above, payments will be calculated by use of the return multiples specified in section 1.72-9 of the Income Tax Regulations. Life expectancy of a Surviving Spouse may be recalculated annually; however, in the case of any other designated Beneficiary, such life expectancy will be calculated at the time payment first commences without further recalculation. (D) For purposes of this Section (Death Distribution Commencement Date) any amount paid to a child of the Participant will be treated as if it had been paid to the Surviving Spouse if the amount becomes payable to the Surviving Spouse when the child reaches the age of majority. 6.9 ALTERNATE PAYEE SPECIAL DISTRIBUTION. Distributions pursuant to Section 16.8 may be made (A) without regard to the age or employment status of the Participant. ARTICLE VI-A DIRECT ROLLOVERS 6A.1. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover, except as otherwise provided by the Employer's administrative procedures as permitted by regulations. In addition, a Distributee's election of a Direct Rollover shall be subject to the following requirements: (B) If the Distributee elects to have only a portion of an Eligible Rollover Distribution paid to an Eligible Retirement Plan in a Direct Rollover, that portion must be equal to at least $500. (C) If the entire amount of a Distributee's Eligible Rollover Distribution is $500 or less, the distribution may not be divided. Instead, the entire amount must either be paid to the Distributee or to an Eligible Retirement Plan in a Direct Rollover. (D) A Distributee may not elect a Direct Rollover if the Distributee's Eligible Rollover Distributions during a year are reasonably expected by the Plan Administrator to total less than $200 (or any lower minimum amount specified by the Plan Administrator). 42 (E) A Distributee's election to make or not make a Direct Rollover with respect to one payment in a series of periodic payments shall apply to all subsequent payments in the series, except that a Distributee shall be permitted at any time to change, with respect to subsequent payments in the series of periodic payments, a previous election to make or not make a Direct Rollover. A change of election shall be accomplished by the Distributee notifying the Plan Administrator of the change. Such notice must be in the form and manner prescribed by the Plan Administrator. 43 6A.2 Definitions. (A) Direct Rollover: A Direct Rollover is a payment by the plan to the Eligible Retirement Plan specified by the Distributee. (B) Distributee: A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's Surviving Spouse and the Employee's or former Employee's Spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are Distributees with regard to the interest of the Spouse or former Spouse. (C) Eligible Retirement Plan: An Eligible Retirement Plan is an individual retirement account described in section 408(a) of the code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the Surviving Spouse, an Eligible Retirement Plan is an individual retirement account or an individual retirement annuity. (D) Eligible Rollover Distribution: An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 40 1 (a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). ARTICLE VII RETIREMENT BENEFITS 7.1 NORMAL RETIREMENT. A Participant who attains his Normal Retirement Age shall have a Vesting Percentage of 100%. If a Participant retires from the active Service of the Employer on his Normal Retirement Date, he shall be entitled to receive a distribution of the entire value of his Participant's Account as of his Normal Retirement Date. 7.2 LATE RETIREMENT. A Participant may continue in the Service of the Employer after his Normal Retirement Age, and in such event he shall retire on his Late Retirement Date. Such Participant shall continue as a Participant under this Plan until such Late Retirement Date. The Participant shall have a Vesting Percentage of 100% and shall be entitled to receive a distribution of the entire value of his Participant's Account as of his Late Retirement Date. 7.3 DISABILITY RETIREMENT. A Participant who retires from the Service of the Employer on account of Disability shall have a Vesting Percentage of 100% and shall be entitled to receive a distribution of the entire value of his Participant's Account as of his Disability Retirement Date. ARTICLE VIII JOINT AND SURVIVOR ANNUITY REQUIREMENTS 8.1 GENERAL. The provisions of this Article shall take precedence over any conflicting provision in this Plan. 44 The provisions of this Article shall apply to any Participant who is credited with at least one Hour of Service with the Employer on or after August 23, 1984, and such other Participants as provided in Section 8.7, unless: (A) upon the death of the Participant the Participant's entire Vested Interest will be paid to the Participant's Surviving Spouse, but if there is no Surviving Spouse, or, if the Surviving Spouse has already consented in a manner conforming to a Qualified Election, then to the Participant's designated Beneficiary; (B) the Participant does not elect payments in the form of a Life Annuity and has not previously elected payments in the form of a Life Annuity under the Plan, and (C) as to the Participant, the Plan is not a direct or indirect transferee of a defined benefit plan, money purchase pension plan (including a target benefit plan), stock bonus, or profit-sharing plan which would otherwise provide for a Life Annuity form of payment to the Participant. 8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an optional form of benefit is selected pursuant to a Qualified Election within the ninety-day period ending on the first day on which all events have occurred which entitle the Participant to a benefit, a married Participant's Vested Interest will be paid in the form of a Qualified Joint and Survivor Annuity. An unmarried Participant will be provided a single Life Annuity unless the Participant elects another form of benefit during the applicable Election Period. 8.3 PAYMENT OF QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Unless an optional form of benefit has been selected within the Election Period pursuant to a Qualified Election, if a married Participant dies before his Annuity Starting Date, then the Participant's entire Vested Interest shall be applied toward the purchase of an immediate Annuity for the life of the Surviving Spouse. As an alternative to receiving the benefit in this form of an Annuity, the Surviving Spouse may elect to receive a single cash payment or any other form of payment provided for in the Plan within a reasonable time after the Participant's death. 8.4 DEFINITIONS. (A) Election Period: The period which begins on the first day of the Plan Year in which the Participant attains age 35 and ends on the date of the Participant's death. If a Participant separates from Service prior to the first day of the Plan Year in which age 35 is attained, with respect to the account balance as of the date of separation, the Election Period shall begin on the date of separation. A Participant who has not attained age 35 as of the end of a Plan Year, may make a special Qualified Election to waive the Qualified Preretirement Survivor Annuity for the period beginning on the date of such election and ending on the first day of the Plan Year in which the Participant will attain age 35. Such election shall not be valid unless the Participant receives 'a written explanation of the Qualified Preretirement Survivor Annuity in such terms as are comparable to the explanation required under Section 8.6 (A). Qualified Preretirement Survivor Annuity coverage will be automatically reinstated as of the first day of the Plan Year in which the Participant attains age 35. Any new waiver on or after such date shall be subject to the full requirements of this Article. (B) Qualified Election: A waiver of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity. Any waiver of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity shall not be effective unless: (a) the Participant's Spouse 45 consents in writing to the election; (b) the election designates a specific Beneficiary, including any class of Beneficiaries or any contingent Beneficiaries, which may not be changed without spousal consent (or the Spouse expressly permits designations by the Participant without any further spousal consent); (c) the Spouse's consent acknowledges the effect of the election; and (d) the Spouse's consent is witnessed by a Plan representative or notary public. Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity shall not be effective unless the election designates a form of benefit payment which may not be changed without spousal consent (or the Spouse expressly permits designations by the Participant without any further spousal consent). If it is established to the satisfaction of a Plan representative that such written consent cannot be obtained because: (1) there is no Spouse; (2) the Spouse cannot be located; (3) the Participant is legally separated or has been abandoned within the meaning of local law, and the Participant has a court order to such effect; (4) of other circumstances as the Secretary of the Treasury may by regulations prescribe, the Participant's election to waive coverage will be considered a Qualified Election. Any consent by a Spouse obtained under this provision (or establishment that the consent of a Spouse may not be obtained) shall be effective only with respect to such Spouse. A consent that permits designations by the Participant without any requirement of further consent by such Spouse must acknowledge that the Spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the Spouse voluntarily elects to relinquish either or both of such rights. A revocation of a prior waiver may be made by a Participant without the consent of the Spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Participant has received notice as provided in Section 8.6 below. (C) Qualified Joint and Survivor Annuity: An immediate Annuity for the life of the Participant with a survivor Annuity for the life of the Spouse which is not less than 50% and not more than 100% of the amount of the Annuity which is payable during the joint lives of the Participant and the Spouse and which is the amount of benefit which can be purchased with the Participant's entire Vested Interest. If no survivor Annuity percentage has been specified in an election, the percentage payable to the Spouse will be 50%. Notwithstanding the above paragraph, a Qualified Joint and Survivor Annuity for an unmarried Participant shall mean an Annuity for the life of the Participant. (D) Qualified Preretirement Survivor Annuity: A survivor Annuity for the life of the Spouse in the amount which can be purchased with the Participant's entire Vested Interest. (E) Spouse (Surviving Spouse): The Spouse or Surviving Spouse of the Participant. A former Spouse may be treated as the Spouse or Surviving Spouse to the extent provided under a Qualified Domestic Relations Order as described in Internal Revenue Code section 414(p). 8.5 CONSENT REQUIREMENTS. Only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the account balance is immediately distributable. Neither the consent of the Participant nor the Participant's Spouse shall be required to the extent that a 46 distribution is required to satisfy section 401(a)(9) or section 415 of the Code. An account balance is immediately distributable if any part of the account balance could be distributed to the Participant (or Surviving Spouse) before the Participant attains (or would have attained if not deceased) the later of Normal Retirement Age or age 62. 8.6 NOTICE REQUIREMENTS. (A) In the case of a Qualified Joint and Survivor Annuity as described in Section 8.4 (C), the Plan Administrator shall provide each Participant within a reasonable period prior to the commencement of benefits a written explanation of (i) the terms and conditions of a Qualified Joint and Survivor Annuity; (ii) the Participant's right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit; (iii) the rights of a Participant's Spouse; (iv) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity; (v) a general description of the eligibility conditions and other material features of the optional forms of benefit; and (vi) sufficient additional information to explain the relative values of the optional forms of benefit available to them under this Plan. (B) In the case of a Qualified Preretirement Survivor Annuity as described in Section 8.4 (D), the Plan Administrator shall provide each Participant within the period beginning on the first day of the Plan Year in which the Participant age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35, a written explanation of the Qualified Preretirement Survivor Annuity in such terms and in such manner as would be comparable to the explanation provided for meeting the requirements of Section 8.6 (A) to a Qualified Joint and Survivor Annuity. If a Participant enters the Plan after the first day of the Plan Year in which the Participant attained age 32, the Plan Administrator shall provide notice no later than the close of the second Plan Year succeeding the entry of the Participant in the Plan. If a Participant enters the Plan after he has attained age 35, the Plan Administrator shall provide notice within a reasonable period of time following the entry of the Participant in the Plan. If a Participant's Termination of Employment occurs before the Participant attains age 35, the Plan Administrator shall provide notice within one year of such Termination of Employment. 8.7 TRANSITIONAL RULES. (A) Any living Participant not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the previous Sections of this Article must be given the opportunity to elect to have the prior Sections of this Article relating to the Qualified Preretirement Survivor Annuity apply if such Participant is credited with at least one Hour of Service under this Plan or a predecessor plan in a Plan Year beginning on or after January 1, 1976, and such Participant had at least 10 Years of Service for vesting purposes when he separated from Service. (B) Any living Participant not receiving benefits on August 23, 1984, who was credited with at least one Hour of Service under this Plan or a predecessor plan on or after September 2, 1974, and who is not otherwise credited with any Service in a Plan Year beginning on or after January 1, 1976, must be given the opportunity to have his or her benefits paid in accordance with Section 8.7 (D). 47 (C) The respective opportunities to elect (as described in Sections 8.7 (A) and 8.7 (B) above) must be afforded to the appropriate Participants during the period commencing on August 23, 1984, and ending on the date benefits would otherwise commence to said Participants. (D) Any Participant who has elected pursuant to Section 8.7 (B) of this Article and any Participant who does not elect under Section 8.7 (A) or who meets the requirements of Section 8.7 (A) except that such Participant does not have at least 10 Years of Service for vesting purposes when he separates from Service, shall have his benefits distributed in accordance with all of the following requirements if benefits would have been payable in the form of a life annuity: (1) Automatic Joint and Survivor Annuity. If benefits in the form of a life annuity become payable to a married Participant who: (a) begins to receive payments under the Plan on or after Normal Retirement Age; or (b) dies on or after Normal Retirement Age while still working for the Employer, or (c) begins to receive payments on or after the Qualified Early Retirement Age; or (d) separates from Service on or after attaining Normal Retirement Age (or the Qualified Early Retirement Age) and after satisfying the eligibility requirements for the payment of benefits under the Plan and thereafter dies before beginning to receive such benefits; then such benefits will be received under this Plan in the form of a Qualified Joint and Survivor Annuity, unless the Participant has elected otherwise during the election period. The election period must begin at least six months before the Participant attains Qualified Early Retirement Age and end not more than 90 days before the commencement of benefits. Any election hereunder will be in writing and may be changed by the Participant at any time. (2) Election of Early Survivor Annuity: A Participant who is employed after attaining the Qualified Early Retirement Age will be given the opportunity to elect, during the election period, to have a survivor annuity payable on death. If the Participant elects the survivor annuity, payments under such Annuity must not be less than the payments which would have been made to the Spouse under the Qualified Joint and Survivor Annuity if the Participant had retired on the day before his or her death. Any election under this provision will be in writing and may be changed by the Participant at any time. The election period begins on the later of (1) the 90th day before the Participant attains the Qualified Early Retirement Age, or (2) the date on which participation begins, and ends on the date the Participant terminates employment. (3) For purposes of this Section 8.7 (D): (a) Qualified Early Retirement Age is the latest of: (i) the earliest date, under the Plan, on which the Participant may elect to receive retirement benefits; or (ii) the first day of the 120th month beginning before the Participant reaches Normal Retirement Age; or (iii) the date the Participant begins participation. 48 (b) Qualified Joint and Survivor Annuity is an Annuity for the life of the Participant with a survivor annuity for the life of the Spouse as described in Section 8.4 (C). ARTICLE IX TERMINATION OF EMPLOYMENT 9.1 DISTRIBUTION. As of a Participant's Termination of Employment, he shall be entitled to receive a distribution of his entire Vested Interest. Such distribution shall be further subject to the terms and conditions of Article VI. If at the time of his Termination of Employment the Participant's Vesting Percentage is not 100% and the Participant does not take a distribution from the portion of his Vested Interest subject to the Vesting Percentage, the non-vested portion of his Participant's Account will become a Forfeiture upon the date the Participant incurs five consecutive One-Year Breaks in Service. If at the time of his Termination of Employment the Participant's Vesting Percentage is not 100% and such Participant does take a distribution from the portion of his Vested Interest subject to the Vesting Percentage, or if the Participant's Vesting Percentage is 0%, the non-vested portion of his Participant's Account will become a Forfeiture upon the date such terminated Participant incurs a One-Year Break in Service. If the Participant is later rehired by the Employer and re-enrolls in the Plan, Subsection (A), (B) or (C) below, as applicable, will apply: (A) If the Participant was 0% vested at his Termination of Employment and did not incur five consecutive One-Year Breaks in Service after such date, the amount of the separate account which became a Forfeiture, if any, shall be restored by the Employer at the time such Participant re-enrolls in the Plan. (B) If the Participant was vested but not 100% vested at his Termination of Employment and did not incur five consecutive One-Year Breaks in Service after such date, the Participant shall be entitled to repay the full amount of the distribution attributable to employer contributions, if any, made at his Termination of Employment Such repayment of employer contributions, however, must be made before the Participant has incurred five consecutive One-Year Breaks in Service following the date he received the distribution or five years after the Participant is rehired by the Employer, whichever is earlier. If the Participant elects to make such payment, the amount of the separate account which became a Forfeiture, if any, shall be restored by the Employer at the same time such repayment is made. However, if the Participant does not elect to repay the distribution made in accordance with this Article within the period of time specified above, that Forfeiture shall remain a Forfeiture. (C) If the Participant had incurred five consecutive One-Year Breaks in Service after his Termination of Employment, the amount of the separate account that became a Forfeiture shall remain a Forfeiture and such Participant shall be prohibited from repaying a distribution made at his Termination of Employment. 9.2 NO FURTHER RIGHTS OR INTEREST. A Participant shall have no further interest in or any rights to any portion of his Participant's Account that becomes a Forfeiture due to his Termination of Employment once the Participant incurs five consecutive One-Year Breaks in Service in accordance with Article II. 49 9.3 APPLICATION OF FORFEITURES. Any Forfeiture arising in accordance with the provisions of Section 9.1 shall be used by the Employer to reduce and in lieu of the contributions made by the Employer next due under Article IV, or to pay Plan expenses, at the earliest opportunity after such Forfeiture becomes available. The provisions of the preceding sentence notwithstanding, in the event that a former Participant is rehired by the Employer and the Employer is required by the provisions of Section 9.1 of this Plan to restore the amount of a separate account that had been created upon such Participant's prior Termination of Employment and later forfeited, Forfeitures, if any; will first be used to restore such separate account to its value as of such Participant's prior Termination of Employment date. In the event that the available Forfeitures are not sufficient to make such restoration, the Employer will make an additional contribution sufficient to make such restoration. ARTICLE X WITHDRAWALS AND LOANS 10.1 WITHDRAWAL AFTER AGE 59-1/2. A Participant who has attained age 59-1/2, may elect to withdraw from his Participant's Account, at any time, an amount which is equal to any whole percentage (not exceeding 100%) of his Vested Interest in his Participant's Account attributable to: . Elective Deferral Contributions, including earnings. 10.2 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF ELECTIVE DEFERRAL CONTRIBUTIONS. Distributions of Elective Deferral Contributions may be made to a Participant in the event of a hardship. For purposes of this section, a distribution is made on account of hardship only if the distribution is made both on account of an immediate and heavy financial need of the Employee and is necessary to satisfy the financial need. In addition, any distribution on account of hardship shall be limited to the distributable amount described in paragraph (C) of this section. (A) The following are the only financial needs considered immediate and heavy for purposes of this section: (1) Expenses for medical care described in section 213(d) of the Code previously incurred by the Employee, the Employee's Spouse, or any dependents of the Employee (as defined in section 152 of the Code) or necessary for these persons to obtain medical care described in section 213(d) of the Code; (2) Payment of tuition and related educational fees for the next 12 months of post-secondary education for the Employee, his Spouse, children, or dependents (as defined in section 152 of the Code); (3) Costs directly related to the purchase of a principal residence for the Employee (excluding mortgage payments); or (4) Payments necessary to prevent the eviction of the Employee from the Employee's principal residence or foreclosure on the mortgage on that residence. (B) The Participant shall specify on the application for a hardship withdrawal whether the Participant elects the provision of (1) or (2) below to be used in determining the necessity of the hardship. (1) A distribution will be considered as necessary to satisfy an immediate and heavy financial need of the Employee only if all of the following requirements are satisfied: 50 (a) The hardship distribution is not in excess of the amount of the immediate and heavy financial need of the Employee. The amount of an immediate and heavy financial need may include the amounts necessary to apply any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution. (b) The Employee had obtained all distributions, other than hardship distributions, and all nontaxable (at the time of the loan) loans currently available under all plans maintained by the Employer. (c) The Employee is suspended from making Elective Deferral Contributions to the Plan for at least 12 months after receipt of the hardship distribution In addition, the Employee must be prohibited under the terms of the plan or an otherwise enforceable agreement from making Elective Deferral Contributions and Employee Contributions to all other plans maintained by the Employer for at least 12 months after receipt of the hardship distribution. For this purpose, the phrase "all other plans of the Employer" means all qualified and nonqualified plans of , deferred compensation maintained by the Employer. The phrase includes a stock option, stock purchase, or similar plan, or a cash or deferred arrangement that is part of a cafeteria plan within the meaning of section 125 of the Code. However, it does not include the mandatory employee contribution part of a defined benefit plan. It also does not include a health or welfare benefit plan, including one that is part of a cafeteria plan within the meaning of section 125 of the Code. (d) The Employee may not make Elective Deferral Contributions to the Plan for the Employee's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under section 402(g) of the Code for such taxable year less the amount of such Employee's Elective Deferral Contributions for the taxable year of the hardship distribution. In addition, all other plans maintained by the Employer must limit the Employee's Elective Deferral Contributions for the next taxable year to the applicable limit under section 402(g) of the Code for that year minus the Employee's Elective Deferral Contributions for the year of the hardship distribution. (2) A distribution will be treated as necessary to satisfy a financial need if the Employer relies upon the Employee's written representation, unless the Employer has actual knowledge to the contrary, that the need cannot reasonably be relieved: (a) Through reimbursement or compensation by insurance or otherwise; (b) By liquidation of the Employee's assets; (c) By cessation of Elective Deferral Contributions under the Plan; or (d) By other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Employer or by any other employer, or by borrowing from commercial sources on reasonable commercial terms in an amount sufficient to satisfy the need. A need cannot reasonably be relieved by one of the actions listed above if the effect would be to increase the amount of the need. 51 The amount of an immediate and heavy financial need may include any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution. (C) The distributable amount is equal to the Employee's total Elective Deferral Contribution as of the date of distribution, reduced by the amount of previous distributions of Elective Deferral Contributions on account of hardship. The Employee's total Elective Deferral Contributions shall not include income allocable to such Elective Deferral Contributions. 10.3 WITHDRAWAL OF ROLLOVER CONTRIBUTIONS. At any time a Participant may elect to withdraw from his Participant's Account an amount up to 100% of the value of that portion of his account attributable to his Rollover Contributions as defined in Article IV. Such an election shall become effective in accordance with the Notification Section below. 10.4 NOTIFICATION. The Participant shall notify the Administrator in writing of his election to make a withdrawal under the preceding provisions of this Article X. Any such election shall be effective as of the date specified in such notice, which date must in at least 15 days after such notice is filed. Payment of the withdrawal shall be subject to the terms and conditions of Article VI. 10.5 NON-REPAYMENT. Withdrawals made in accordance with this Article X may not be repaid. 10.6 SPOUSAL CONSENT TO WITHDRAWAL OR LOAN. Prior to obtaining a withdrawal or loan in accordance with this Article X, a married Participant must obtain spousal consent in accordance with the provisions of Article VIII unless such Participant meets the requirements set forth in Sections 8.1 (A), (B) and (C) 10.7 LOANS. Effective as of July 1, 1996, a Participant may borrow from the Plan an amount which, when aggregated with any other loans from this Plan does not exceed the lesser of (i) $50,000, reduced by the excess, if any, of (A) the highest outstanding balance of loans from the Plan during the one-year period ending on the day before the day on which such loan was made, over (B) the oustanding balance of loans from the Plan on the date on which such loan was made, or (ii) one-half (1/2) of the aggregate of the Participant's Vested Interest. A loan may be requested by a Participant only for one of the reasons set forth in Section 10.2 and the Participant shall provide documentation of the reason for such loan. The loan shall be funded first from the Participant's Elective Deferrals, then the Employer's Nonelective Contributions, and then from Employer Matching Contributions, with funds withdrawn pro rata from all investment options other than Employer Stock. Loans from Employer Stock are not permitted. Participants shall be required to authorize repayment of the loan by payroll deduction, unless the Participant is on an approved leave of absence or on layoff. Participants who are on an approved leave of absence or on layoff must remit payments to the Company on a monthly basis. The term of each such loan shall be five years, unless the Participant certifies that the proceeds of the loan are to be used to acquire a principal residence of the Participant in which case the term of the loan shall be ten years. A loan may be prepaid in full at any time. Upon termination of a Participant's employment with the Company, the remaining balance of the loan is payable in full. No more than one loan may be outstanding at any one time. The minimum loan amount shall be $1,000. Interest on the loan shall be charged based upon the prime rate charged by the Company's primary commercial lender on the first business day of the month during which the loan is made. A one-time loan fee of $50.00 shall be charged to the Participant for each loan. ARTICLE XI FIDUCIARY DUTIES AND RESPONSIBILITIES 11.1 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary of the Plan shall discharge his duties hereunder solely in the interest of the Participants and their Beneficiaries and for the exclusive purpose of 52 providing benefits to Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan. Each Fiduciary shall act with the care, skill, prudence, and diligence under the circumstances that a prudent man acting in a like capacity and familiar with such matters would use in conducting an enterprise of like character and with like aims, in accordance with the documents and instruments governing this Plan, insofar as such documents and instruments are consistent with this standard. 11.2 SERVICE IN MULTIPLE CAPACITIES. Any Person or group of persons may serve in more than one fiduciary capacity with respect to this Plan. 11.3 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this Plan shall be construed to prevent any Fiduciary from receiving any benefit to which he may be entitled as a Participant or Beneficiary in this Plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of this Plan as applied to all other Participants and Beneficiaries. Nor shall this Plan be interpreted to prevent any Fiduciary from receiving any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred in the performance of his duties with the Plan; except that no Person so serving who already receives full-time pay from an Employer shall receive compensation from this Plan, except for reimbursement of expenses properly and actually incurred. 11.4 INVESTMENT MANAGER. When an Investment Manager has been appointed he, is required to acknowledge in writing that he has undertaken a Fiduciary responsibility with respect to the Plan. ARTICLE XII THE ADMINISTRATOR 12.1 DESIGNATION AND ACCEPTANCE. The Employer shall designate a person or persons to serve as Administrator under the Plan and such person, by joining in the execution of this Plan and Trust Agreement accepts such appointment and agrees to act in accordance with the terms of the Plan. 12.2 DUTIES AND AUTHORITY. The Administrator shall administer the Plan in a nondiscriminatory manner for the exclusive benefit of Participants and their Beneficiaries. The Administrator shall perform all such duties as are necessary to operate, administer, and manage the Plan in accordance with the terms thereof, including but not limited to the following: (A) To determine all questions relating to a Participant's coverage under the Plan; (B) To maintain all necessary records for the administration of the Plan; (C) To compute and authorize the payment of retirement income and other benefit payments to eligible Participants and Beneficiaries; (D) To interpret and construe the provisions of the Plan and to make regulations which are not inconsistent with the terms thereof, and (E) To advise or assist Participants regarding any rights, benefits, or elections available under the Plan. The Administrator shall take all such actions as are necessary to operate, administer, and manage the Plan as a retirement program which is at all times in full compliance with any law or regulation affecting this Plan. 53 The Administrator may allocate certain specified duties of plan administration to an individual or group of individuals who, with respect to such duties, shall have all reasonable powers necessary or appropriate to accomplish them. 12.3 EXPENSES AND COMPENSATION. All expenses of administration may be paid out of the Trust fund unless paid by the Employer. Such expenses shall include any expenses incident to the functioning of the Administrator, including, but not limited to, fees of accountants, counsel, and other specialists and their agents, and other costs of administering the Plan. Until paid, the expenses shall constitute a liability of the Trust fund. However, the Employer may reimburse the Trust fund for any administration expense incurred. Any administration expense paid to the Trust fund as a reimbursement shall not be considered an Employer Contribution. Nothing shall prevent the Administrator from receiving reasonable compensation for services rendered in administering this Plan, unless the Administrator already receives full-time pay from any Employer adopting the Plan. 12.4 INFORMATION FROM EMPLOYER. To enable the Administrator to perform his functions, the Employer shall supply full and timely information to the Administrator on all matters relating to this Plan as the Administrator may require. 12.5 ADMINISTRATIVE COMMITTEE; MULTIPLE SIGNATURES. In the event that more than one person has been duly nominated to serve on the Administrative Committee and has signified in writing the acceptance of such designation, the signature(s) of one or mom persons may be accepted by an interested party as conclusive evidence that the Administrative Committee has duly authorized the action therein set forth and as representing the will of and binding upon the whole Administrative Committee. No person receiving such documents or written instructions and acting in good faith and in reliance thereon shall be obliged to ascertain the validity of such action under the terms of this Plan and Trust. The Administrative Committee shall act by a majority of its members at the time in office and such action may be taken either by a vote at a meeting or in writing without a meeting. 12.6 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. The Administrator, or any member of the Administrative Committee, may resign at any time by delivering to the Employer a written notice of resignation, to take effect at a date specified therein, which shall not be less than 30 days after the delivery thereof, unless such notice shall be waived. The Administrator may be removed with or without cause by the Employer by delivery of written notice of removal, to take effect at a date specified therein, which shall be not less than 30 days after delivery thereof, unless such notice shall be waived. The Employer, upon receipt of or giving notice of the resignation or removal of the Administrator, shall promptly designate a successor Administrator who must signify acceptance of this position in writing. In the event no successor is appointed, the Board of Directors of the Employer will function as the Administrative Committee until a new Administrator has been appointed and has accepted such appointment. 12.7 INVESTMENT MANAGER. The Administrator may appoint, in writing, an Investment Manager or Managers to whom is delegated the authority to manage, acquire, invest, or dispose of all or any part of the Trust assets. With regard to the assets entrusted to his care, the Investment Manager shall provide written instructions and directions to the Trustee, who shall in turn be entitled to rely upon such written direction. This appointment and delegation shall be evidenced by a signed written agreement. 12.8 DELEGATION OF DUTIES. The Administrator shall have the power, to the extent permitted by law, to delegate the performance of such Fiduciary and non-Fiduciary duties, responsibilities, and functions as the Administrator shall deem advisable for the proper management and administration of the Plan in the best interests of the Participants and their Beneficiaries. 54 ARTICLE XIII PARTICIPANTS' RIGHTS 13.1 GENERAL RIGHTS OF PARTICIPANTS AND BENEFICIARIES. The Plan is established and the Trust assets are held for the exclusive purpose of providing benefits for such Employees and their Beneficiaries as have qualified to participate under the terms of the Plan. 13.2 FILING A CLAIM FOR BENEFITS. A Participant or Beneficiary or the Employer acting in his behalf, shall notify the Administrator of a claim of beneficial under the Plan. Such request shall be in writing to the Administrator and shall set forth the basis of such claim and shall authorize the Administrator to conduct such examinations as may be necessary to determine the validity of the claim and to take such steps as may be necessary to facilitate the payment of any benefits to which the Participant or Beneficiary may be entitled under the terms of the Plan. A decision by the Administrator shall be made promptly and not later than 90 days after the Administrator's receipt of the claim of benefits under the Plan, unless special circumstances require an extension of the time for processing, in which case a decision shall be rendered as soon as possible, but not later than 180 days after the initial receipt of the claim of benefits. 13.3 DENIAL OF CLAIM. Whenever a claim for benefits by any Participant or Beneficiary has been denied by a Plan Administrator, a written notice, prepared in a manner calculated to be understood by the Participant, must be provided, setting forth (1) the specific reasons for the denial; (2) the specific reference to pertinent Plan provisions on which the denial is based; (3) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (4) an explanation of the Plan's claim review procedure. 13.4 REMEDIES AVAILABLE TO PARTICIPANTS. A Participant or Beneficiary may (1) request a review by a Named Fiduciary, other than the Administrator, upon written application to the Plan; (2) review pertinent Plan documents; and (3) submit issues and comments in writing to a Named Fiduciary. A Participant or Beneficiary shall have 60 days after receipt by the claimant of written notification of a denial of a claim to request a review of a denied claim. A decision by a Named Fiduciary shall be made promptly and not later than 60 days after the Named Fiduciary's receipt of a request for review, unless special circumstances require an extension of the time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of a request for review. The decision on review by a Named Fiduciary shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. A Participant or Beneficiary shall be entitled, either in his own name or in conjunction with any other interested parties, to bring such actions in law or equity or to undertake such administrative actions or to seek such relief as may be necessary or appropriate to compel the disclosure of any required information, to enforce or protect his rights, to recover present benefits due to him, or to clarify his rights to future benefits under the Plan. 13.5 REINSTATEMENT OF BENEFIT. In the event any portion of a distribution which is payable to a Participant or a Beneficiary shall remain unpaid on account of the inability of the Plan Administrator, after diligent effort, to locate such Participant or Beneficiary, the amount so distributable shall be treated as a Forfeiture under the Plan. If a claim is made by the Participant or Beneficiary for any benefit forfeited under this section, such benefit shall be reinstated. 55 13.6 LIMITATION OF RIGHTS. Participation hereunder shall not grant any Participant the right to be retained in the Service of the Employer or any other rights or interest in the Plan or Trust fund other than those specifically herein set forth. 13.7 PARTICIPANT CONTRIBUTIONS. Each Participant, regardless of his length of Service with the Employer, shall be fully vested (100%) at all times in any portion of his Participant's Account attributable to the following: . Rollover Contributions. 13.8 MERGERS OR TRANSFERS. In the case of any merger or consolidation with or transfer of assets or liabilities to any other qualified plan after September 2, 1974, the following conditions must be met: (A) The sum of the account balances in each plan shall equal the fair market value (determined as of the date of the merger or transfer as if the plans had then terminated) of the entire plan assets. (B) The assets of each plan shall be combined to form the assets of the plan as merged (or transferred). (C) Immediately after the merger (or transfer), each Participant in the plan merged (or transferred) shall have an account balance equal to the sum of the account balances the Participant had in the plans immediately prior to the merger (or transfer). (D) Immediately after the merger (or transfer) each Participant in the plan merged (or transferred) shall be entitled to the same optional benefit forms as he was entitled to immediately prior to the merger (or transfer). In the case of any merger or consolidation with or transfer of assets or liabilities to any defined benefit plan after September 2, 1974, one of the plans before such merger, consolidation, or transfer shall be converted into the other type of plan and either the rules described above, applicable to the merger of two defined contribution plans, or the rules applicable to the merger of two defined benefit plans, as appropriate, shall be applied. 13.9 PARTICIPANT'S ACCOUNT AND VALUATION. A Participant's Account shall be maintained on behalf of each Participant until such account is distributed in accordance with the terms of this Plan. At least once per year, as of the last day of the Plan Year, each Participant's Account shall be adjusted for any earnings, gains, losses, contributions, withdrawals, and expenses, attributable to such Plan Year, in order to obtain a new valuation of the Participant's Account ARTICLE XIII-A INVESTMENTS 13A.1 INVESTMENT ALTERNATIVES. The Investment Committee shall determine the investment alternatives to be made available to Participants and Terminated Participants, but one of the investment alternatives offered shall be Employer Stock, and up to 100% of Plan assets may be invested in Employer Stock. Each Participant shall elect, by written notice to the Plan Administrator, how, among such investment alternatives, such Participant's Accounts (other than the subaccounts attributable to Matching Contributions and Non-Elective Contributions, if any, made on or after January 1, 1995 and earnings thereon) are to be invested. The investment directions of a Participant or Terminated Participant shall remain in effect until amended. Investment directions may be amended at any time by telephonic instruction by the Participant or Terminated Participant. The Plan Administrator shall adopt such rules and procedures as it deems advisable with respect to all matters relating to the selection among such investment alternatives by Participants and 56 Terminated Participants. The Plan Administrator may adopt rules to impose holding period requirements and to limit trading by Participants of Employee Stock to designated "window periods." Unless Employer Stock is purchased in open market transactions, the Employer shall register the Common Stock issued to the Plan and interests under the Plan with the Securities and Exchange Commission. No commission shall be charged to the Plan in connection with any issuance of Employer Stock to the Plan by the Company. 13A.2 EXPENSES. Expenses attributable to the investment of Accounts in any of the investment alternatives, including commissions, "loads," early withdrawal penalties, and similar charges, shall be charged to the Account of the Participant who has directed such investment pursuant to Section 13A.01. Any other expenses attributable to the creation, administration or operation of the Plan and Trust which are not paid by the Employer shall be allocated to the Accounts of each Participant and Terminated Participant pro rata on the basis of Account balances. --- ---- 13A.3 VOTING OF EMPLOYER STOCK. The Trustee shall vote the shares allocated to Participants' Accounts as instructed by the Voting Committee. 13A.4 SALE OF EMPLOYER STOCK. Subject to the rights of Participants in a tender offer as described in Section 13A.5, the Trustee shall sell shares of Employer Stock only pursuant to the investment instructions of the Participant. To effectuate such instructions, Employer Stock may be sold to any person, including the Employer, provided that any sale to the Employer or other "disqualified person" within the meaning of Code section 4975 or "party in interest" within the meaning of Section 3(14) of ERISA is made at a price which is not less than adequate consideration as defined in Section 3(18) of ERISA and no commission is charged with respect to the sale. 13A.5 TENDER OFFER FOR EMPLOYER STOCK. In the event of a tender offer for shares of Employer Stock subject to Section 14(d)(1) of the Act or subject to Rule 13e-4 promulgated under that Act (as those provisions may from time to time be amended or replaced by successor provisions of Federal securities laws), the Voting Committee will advise each Participant who has shares of Employer Stock credited to the Participant's Accounts in writing of the terms of the tender offer as soon as practicable after its commencement and will furnish each Participant with a form by which he may instruct the Trustee confidentially to tender shares credited to the Participant's Accounts. The Trustee will tender those shares it has been properly instructed to tender, and will not tender those shares which it has been properly instructed not to tender or for which no instructions are properly received. The Voting Committee's advice to Participants will include notice that allocated shares for which no instructions are received will not be tendered and such related documents as are prepared by any person and provided to the shareholders of the Employer pursuant to the Act. The Voting Committee may also provide Participants with such other material concerning the tender offer as the Voting Committee in its discretion determines to be appropriate. A Participant's instructions to the Trustee to tender shares will not be deemed a withdrawal or suspension from the Plan or a forfeiture of any portion of the Participant's interest in the Plan. The number of shares to which a Participant's instructions apply will be the total number of shares credited to the Participant's Accounts, as of the close of business on the day preceding the date on which the tender offer commences. The Voting Committee will advise the Trustee of the commencement date of any tender offer and, until receipt of that advice, the Trustee will not be obligated to take any action under this Section. Funds received in exchange for tendered stock will be credited to the Accounts of the Participant whose stock was tendered. Pending receipt of instructions from the Participant as to investment of such amounts, the Trustee will invest such funds in short term investments permitted under the Trust Agreement. 13A.6 INSIDER TRADING RULES. With respect to Employees or Participants subject to Section 16 of the Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Act. To the extent any provision of the Plan or action by the Employer, the Voting 57 Committee, the Trustee, or an Employee or Participant fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the party taking such action. (a) It is intended that the Plan will comply with Sections 401(a)(4) and 410(b) of the Code to meet the requirement of broad based employee participation under Rule 16b-3. (b) No Employee or Participant who is an insider may elect to purchase or to sell Employer Stock held in such Participant's Accounts except pursuant to an irrevocable election by the insider at least six months in advance of the effective date of the transaction. ARTICLE XIV AMENDMENT OR TERMINATION OF THE PLAN 14.1 AMENDMENT OF PLAN. The Employer shall have the right from time to time to modify or amend, in whole or in part, any or all provisions of the Plan, provided that a Board of Directors' resolution pursuant to such modification or amendment shall first be adopted and provided further that the modification or amendment is signed by the Employer, the Administrator and the Trustee. Upon any such modification or amendment the Administrator and the Trustee shall be furnished a copy thereof. No amendment shall deprive any Participant or Beneficiary of any Vested Interest hereunder. Any Participant having not less than three Years of Service shall be permitted to elect, in writing, to have his Vesting Percentage computed under the Plan without regard to such amendment. The period during which the election must be made by the Participant shall begin no later than the date the Plan Amendment is adopted and end no later than after the latest of the following dates: (A) The date which is 60 days after the day the amendment is adopted; or (B) The date which is 60 days after the day the amendment becomes effective; or (C) The date which is 60 days after the day the Participant is issued written notice of the amendment by the Employer or Administrator. Such written election by a Participant shall be made to the Administrator. No amendment to the Plan shall decrease a Participant's Account balance or eliminate an optional form of distribution. Notwithstanding the preceding sentence, a Participant's Account balance may be reduced to the extent permitted under Internal Revenue Code section 412(c)(8). Furthermore, no amendment to the Plan shall have the effect of decreasing a Participant's Vested Interest determined without regard to such amendment as of the later of the date such amendment is adopted or the date it becomes effective. 14.2 CONDITIONS OF AMENDMENT. The Employer shall not make any amendment which would cause the Plan to lose its status as a qualified plan within the meaning of section 401(a) of the Code. 14.3 TERMINATION OF THE PLAN. The Employer intends to continue the Plan indefinitely for the benefit of its Employees, but reserves the right to terminate the Plan at any time by resolution of its Board of Directors. Upon such termination, the liability of the Employer to make contributions hereunder shall terminate. 14.4 FULL VESTING. Upon the termination or partial termination of the Plan, or upon complete discontinuance of Employer contributions, the rights of all affected Participants in and to the amounts credited to each such Participant's Account shall be 100% vested and nonforfeitable. 58 14.5 DISTRIBUTIONS UPON PLAN TERMINATION. If this Plan is terminated and the Employer does not maintain or establish another defined contribution plan, pursuant to Code section 401(k)(10)(A)(i), each Participant shall receive a total distribution, in the form of a lump-sum distribution as defined in Code section 401(k)(10)(B)(ii), of his Participant's Account in accordance with the terms and conditions of Article VI. However, if this Plan is terminated and the Employer does maintain or establish another defined contribution plan as discussed in the above paragraph, or if the Plan is only partially terminated, each Participant shall receive a total distribution of his Participant's Account, excluding any amounts attributable to Elective Deferral Contributions and contributions made by the Employer designated as 401(k) contributions in accordance with the terms and conditions of Article VI. In such a situation, any amounts in a Participant's Account attributable to Elective Deferral Contributions and contributions made by the Employer designated as 401(k) contributions may be distributed only upon the occurrence of an event described in Article VI. No Participant and/or spousal consent will be required for a distribution where no successor plan exists. However, if the Employer does maintain a successor plan, Participant and/or spousal consent is required for a distribution exceeding $3,500. The Participant's Account will be transferred to such successor plan if the required consents are not received. 14.6 APPLICATION OF FORFEITURES. Upon the termination of the Plan, any Forfeitures which have not been applied as of such termination to reduce the contribution made by the Employer shall be credited on a pro rata basis to the Participant's Account of the then Active Participants in the same manner as the last contribution made by the Employer under the Plan. 14.7 APPROVAL BY THE INTERNAL REVENUE SERVICE. Notwithstanding any other provisions of this Plan, the Employer's adoption of this Plan is subject to the condition precedent that the Employer's Plan shall be approved and qualified by the Internal Revenue Service as meeting the requirements of section 401(a) of the Internal Revenue Code and that the Trust established hereunder shall be entitled to exemption under the provisions of section 501(a). In the event the Plan initially fails to qualify and the Internal Revenue Service issues a final ruling that the Employer's Plan or Trust fails to so qualify as of the Effective Date, all liability of the Employer to make further contributions hereunder shall cease. The Plan Administrator, Trustee and any other Named Fiduciary shall be notified immediately by the Employer, in writing, of such failure to qualify. Upon such notification, the value of the Participants' Accounts shall be distributed in cash to the Employer, subject to the terms and conditions of Article VI. That portion of such distribution which is attributable to Participant Contributions as specified in Section 13.7, if any, shall be paid to the Participant and the balance of such distribution shall be paid to the Employer. 14.8 SUBSEQUENT UNFAVORABLE DETERMINATION. If the Employer is notified subsequent to initial favorable qualification that the Plan is no longer qualified within the meaning of section 401(a) of the Internal Revenue Code, or that the Trust is no longer entitled to exemption under the provisions of section 501 (a), and if the Employer shall fail within a reasonable time to make any necessary changes in order that the Plan and/or Trust shall so qualify, the Participants' Accounts shall be fully vested and nonforfeitable and shall be disposed of as if the Plan had terminated, in the manner set forth in this Article XIV. ARTICLE XV SUBSTITUTION OF PLANS 15.1 SUBSTITUTION OF PLANS. Subject to the provisions of Section 13.8 the Employer may substitute an individually designed plan or a master or prototype plan for this Plan without terminating this Plan as 59 embodied herein and this shall be deemed to constitute an amendment and restatement in its entirety of this Plan as heretofore adopted by the Employer; provided, however, that the Employer shall have certified to the Trustee that this Plan is being continued on a restated basis which meets the requirements of section 401 (a) of the Internal Revenue Code and ERISA. 15.2 TRANSFER OF ASSETS. Upon 90 days' written notification from he the Employer and the Trustee that a different plan meeting the requirements set forth in Section 15.1 above has been executed and entered into by the Administrator and the Employer, and after the Trustee has been furnished the Employer's certification in writing that the Employer intends to continue the Plan as a qualified Plan under section 401(a) of the Internal Revenue Code and ERISA, assets which represent the value of all Participant's Accounts may be transferred in accordance with the instructions received from or on behalf of the Employer. The Trustee may rely fully on the representations or directions of the Employer with respect to any such transfer and shall be fully protected and discharged with respect to any such transfer made in accordance with such representations, instructions, or directions. ARTICLE XVI MISCELLANEOUS 16.1 NON-REVERSION. This Plan has been established by the Employer for the exclusive benefit of the Participants and their Beneficiaries. Except as otherwise provided in Sections 14.7, 16.7, and 16.8, under no circumstances shall any funds contributed hereunder, at any time, revert to or be used by the Employer, nor shall any such funds or assets of any kind be used other than for the benefit of the Participants or their Beneficiaries. 16.2 GENDER AND NUMBER. When necessary to the meaning hereof, and except when otherwise indicated by the context, either the masculine or the neuter pronoun shall be deemed to include the masculine, the feminine, and the neuter, and the singular shall be deemed to include the plural. 16.3 REFERENCE TO THE CODE AND ERISA. Any reference to any section of the Internal Revenue Code, ERISA, or to any other statute or law shall be deemed to include any successor law of similar import. 16.4 GOVERNING LAW. The Plan and Trust shall be governed and construed in accordance with the laws of the state where the Trustee has its principal office if the Trustee is a corporation or an association, otherwise under the laws of the state where the Employer has its principal office. 16.5 COMPLIANCE WITH THE CODE AND ERISA. This Plan is intended to comply with all requirements for qualification under the Internal Revenue Code and ERISA, and if any provision hereof is subject to more than one interpretation or any term used herein is subject to more than one construction, such ambiguity shall be resolved in favor of that interpretation or construction which is consistent with the Plan being so qualified. If any provision of the Plan is held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions, and this Plan shall be construed and enforced as if such provision had not been included. 16.6 NON-ALIENATION. It is a condition of the Plan, and all rights of each Participant shall be subject thereto, that no right or interest of any Participant in the Plan shall be assignable or transferable in whole or in part, either directly or by operation of law or otherwise, including, but without limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no right or interest of any Participant in the Plan shall be liable for or subject to any obligation or liability of such Participant. The preceding sentence shall not preclude the enforcement of a federal tax levy made pursuant to section 6331 of the Code or the collection by the United States on a judgment resulting from an unpaid tax assessment. 60 16.7 CONTRIBUTION RECAPTURE. Notwithstanding any other provisions of this Plan, (1) in the case of a contribution which is made by an Employer by a mistake of fact, Section 16.1 shall not prohibit the return of such contribution to the Employer within one year after the payment of the contribution, and (2) if a contribution is conditioned upon the deductibility of the contribution under section 404 of the Code, then, to the extent the deduction is disallowed, Section 16.1 shall not prohibit the return to the Employer of such contribution (to the extent disallowed) within one year after the disallowance of the deduction. The amount which may be returned to the Employer is the excess of (1) the amount contributed over (2) the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Earnings attributable to the excess contribution may not be returned to the Employer, but losses attributable thereto must reduce the amount to be so returned. Furthermore, if the withdrawal of the amount attributable to the mistaken contribution would cause the balance of the individual account of any Participant to be reduced to less than the balance which would have been in the account had the mistaken amount not been contributed, then the amount to be returned to the Employer would have to be limited so as to avoid such reduction. 16.8 QUALIFIED DOMESTIC RELATIONS ORDERS. Notwithstanding any other provisions of this Plan, the Participant's Account may be segregated and distributed pursuant to a Qualified Domestic Relations Order within the meaning of Internal Revenue Code section 414(p). The distribution may occur prior to the time at which the Participant would be entitled to a distribution under the terms of the Plan. The Plan Administrator shall establish procedures for determining if a Domestic Relations Order is qualified within the meaning of section 414(p). ARTICLE XVI-A TOP-HEAVY PROVISIONS 16A.1 DEFINITIONS. The following definitions are atypical terms used only in this Article XVI-A. (A) Compensation. The term Compensation, whenever used in this Article XVI-A, means Compensation as defined in Article V of the Plan, but includes the amount of any elective contributions made by the Employer on the Employee's behalf to a cafeteria plan established in accordance with the provisions of Code section 125, a qualified cash or deferred arrangement in accordance with the provisions of Code section 402(e)(3), a simplified employee pension plan in accordance with the provisions of Code section 402(h), or a tax sheltered annuity plan maintained in accordance with the provisions of Code section 403(b). (B) Key Employee. The term Key Employee means any Employee or former Employee (including deceased Employees) of the Employer who at any time during the Plan Year or the four preceding Plan Years was: (1) An officer of the Employer, but in no event if there are more than 500 Employees, shall more than 50 Employees be considered Key Employees. If there are less than 500 Employees, in no event shall the greater of three Employees or 10% of all Employees, be taken into account under this Subsection as Key Employees. If the number of officers is limited by the terms of the preceding sentence, the Employees with the highest Compensation will be considered to be officers. In no event shall an officer whose annual Compensation is less than 50% of the dollar limitation in effect under Code section 415(b)(1)(A) as adjusted from time to time, be a Key Employee for any such Plan Year. In making a determination under this Subsection, Employees who have not completed six months of Service by the end of the applicable Plan Year, Employees who normally work 61 less than 17-1/2 hours per week, Employees who normally work less than six months during a year, Employees who have not attained 21, and nonresident aliens who receive no earned income from U.S. sources, shall be excluded. Also excluded under the above paragraph are Employees who are covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement. Such Employees will be excluded only if retirement benefits were the subject of good faith bargaining, 90% of the Employees of the Employer are covered by the agreement, and the Plan covers only Employees who are not covered by the agreement. (2) One of the 10 Employees who has annual Compensation greater than the amount in effect under Internal Revenue Code section 415(c)(1)(A) and who owns (or is considered to own within the meaning of Internal Revenue Code section 318, as modified by section 416(i)(1)(B)(iii)) both more than 1/2% interest and the largest interest in the Employer. If two or more Employees own equal interests in the Employer, the ranking of ownership share will be in descending order of such Employees' Compensation. If the Employer is other than a corporation, the term "interest" as used herein shall refer to capital or profits interest. (3) An Employee who owns (or is considered to own within the meaning of Internal Revenue Code section 318, as modified by section 416(i)(1)(B)(iii)) more than 5% of the outstanding stock of the Employer or stock possessing more than 5% of the total combined voting power of all stock of the Employer. If the Employer is other than a corporation, an Employee who owns, or is considered to own, more than 5% of the capital or profits interest in the Employer. The determination of 5% ownership shall be made separately for each member of a controlled group of corporations (as defined in Code section 414(b)), or of a group of trades or businesses (whether or not incorporated) that are under common control (as defined in Code section 414(c)), or of an affiliated service group (as defined in Code section 414(m)). (4) An Employee who owns (or is considered to own within the meaning of Internal Revenue Code section 318, as modified by section 416(i)(1)(B)(iii)) more than 1% of the outstanding stock of the Employer or stock possessing more than I % of the total combined voting power of all stock of the Employer, and whose annual Compensation is more than $150,000. If the Employer is other than a corporation, an Employee who owns, or is considered to own, more than 1% of the capital or profits interest in the Employer, and whose annual Compensation is more than $150,000. For the purposes of paragraphs (2), (3) and (4) above, if an Employee's ownership interest changes during a given Plan Year, his ownership interest for that Plan Year is the largest interest owned at any time during the Plan Year. The Beneficiary of any deceased Employee who was a Key Employee shall be considered a Key Employee for the same period as the deceased Employee would have been so considered. (C) Non-Key Employee. The term Non-Key Employee means any Employee or former Employee of the Employer who is not a Key Employee. The Beneficiary of any deceased Employee who is a Non-Key Employee shall be considered a Non-Key Employee for the same period as the deceased Employee would have been so considered. (D) Determination Date. The term Determination Date means, with respect to a Plan Year, the last day of the preceding Plan Year, or, in the case of the first Plan Year of a plan, the last day of the first Plan Year. 62 (E) Valuation Date. The term Valuation Date means, with respect to a Plan Year, the last day of the preceding Plan Year and is the date on which Account Balances are valued for the purpose of determining the Plan's Top-Heavy status. (F) Account Balance. The term Account Balance means the value of the Participant's Account standing to the credit of a Participant, a former Participant, or the Beneficiary of a former Participant, as the case may be, as of the Valuation Date. Such Account Balance shall include any contributions due as of the Determination Date and all distributions made to the Participant (or former Participant or Beneficiary, as the case may be) during the Plan Year or the preceding four Plan Years, except for distributions of Related Rollovers. However, the Account Balance shall not include any deductible Employee Contributions made pursuant to Internal Revenue Code section 219 or Unrelated Rollovers made to the Plan after December 31, 1983. A Related Rollover is a Rollover Contribution or Transfer that either was not initiated by the Employee or was made to a plan maintained by the same Employer. An Unrelated Rollover is a Rollover Contribution or Transfer that was initiated by the Employee and was made from a plan maintained by one employer to a plan maintained by another employer. For purposes of this Subsection (F), the term Employer shall include all employers that are required to be aggregated in accordance with Internal Revenue Code sections 414(b), (c) or (m). (G) Required Aggregation Group. The term Required Aggregation Group means all of the plans of the Employer which cover a Key Employee, including any such plan maintained by the Employer pursuant to the terms of a collective bargaining agreement, and each other plan of the Employer which enables any plan in which a Key employee participates to satisfy the requirements of Internal Revenue Code sections 401(a)(4) or 410. (H) Permissive Aggregation Group. The term Permissive Aggregation Group means all of the plans of the Employer which are included in the Required Aggregation Group plus any plans of the Employer which provide comparable benefits to the benefits provided by the plans in the Required Aggregation Group and are not included in the Required Aggregation Group, but which satisfy the requirements of Internal Revenue Code sections 401(a)(4) and 410 when considered together with the Required Aggregation Group, including any plan maintained by the Employer pursuant to a collective bargaining agreement which does not include a Key Employee. (I) Top-Heavy Plan. The Plan is Top-Heavy if it meets the requirements of Section 16A.2. (J) Super Top-Heavy Plan. The Plan is Super Top-Heavy if it meets the requirements of Section 16A.3. (K) Terminated Plan. A plan shall be considered to be a Terminated Plan if it: (1) has been formally terminated; (2) has ceased crediting service for benefit accruals and vesting; or (3) has been or is distributing all plan assets to Participants (or Beneficiaries) as soon as administratively possible. With the exception of the Minimum Employer Contribution Requirements and the Minimum Vesting Requirements, the Top-Heavy provisions of this Article XVI-A will apply to any 63 Terminated Plan which was maintained at any time during the five years ending on the Determination Date. (L) Frozen Plan. A plan shall be considered to be a Frozen Plan if all benefit accruals have ceased but all assets have not been distributed to Participants or Beneficiaries. The Top-Heavy provisions of this Article XVI-A will apply to any such Frozen Plan. 16A.2 TOP-HEAVY PLAN STATUS. This Plan shall be determined to be Top-Heavy if, as of the Determination Date, the aggregate of the Account Balances of Key Employees exceeds 60% of the aggregate of the Account Balances of all Employees covered by the Plan. The determination of whether the Plan is Top-Heavy shall be made after aggregating all plans in the Required Aggregation Group, and after aggregating any other plans which are in the Permissive Aggregation Group, if such permissive aggregation thereby eliminates the Top-Heavy status of any plan within such Required Aggregation Group. In determining whether this Plan is Top-Heavy, the Account Balance of a former Key Employee who is now a Non-Key Employee will be disregarded. Likewise, for Plan Years beginning after December 31, 1984, the Account Balance of any Employee who has not performed an Hour of Service during the five-year period ending on the Determination Date will be excluded. 16A.3 SUPER TOP-HEAVY PLAN STATUS. This Plan shall be determined to be Super Top-Heavy if, as of the Determination Date, the Plan would meet the test specified in Section 16A.2 above, if 90% were substituted for 60% in each place where it appears. The Plan may be permissively aggregated in order to avoid being Super Top-Heavy. 16A.4 TOP-HEAVY REQUIREMENTS. Notwithstanding anything in the Plan to the contrary, if the Plan is Top-Heavy with respect to any Plan Year beginning after December 31, 1983, then the Plan shall meet the following requirements for such Plan Year: (A) Compensation Limit. The annual Compensation of each Participant taken into account under the Plan shall not exceed $200,000; however, such dollar limitation shall be adjusted to take into account any adjustments made by the Secretary of the Treasury or his delegate pursuant to Internal Revenue Code section 416(d)(2). (B) Minimum Employer Contribution Requirements. A Minimum Employer Contribution of 3% of each Eligible Employee's Compensation will be made on behalf of each Eligible Employee in the Plan. If the actual Employer Contribution made or required to be made for Key Employees is less than 3%, the Minimum Employer Contribution required hereunder shall not exceed the percentage contribution made for the Key Employee for whom the percentage of Employer Contributions and Forfeitures relative to the first $200,000 of Compensation is the highest for the Plan Year after taking into account contributions or benefits under other qualified plans in the Plan's Required Aggregation Group. However, if a Participant in this Plan is also a participant in a defined benefit plan maintained by the Employer, such Participant shall receive the Top-Heavy minimum benefit under the defined benefit plan in lieu of the Minimum Employer Contribution described herein. Such minimum benefit will be equal to the Participant's average yearly Compensation during his five highest-paid consecutive years, multiplied by the lesser of 2% per Year of Service or 20%. Compensation periods and Years of Service to be taken into account in the calculation of this benefit shall be subject to any limitations set forth in the defined benefit plan. 64 For any Limitation Year in which this Plan is Top-Heavy but not Super Top-Heavy, the Minimum Employer Contribution shall be increased to 4% of each Eligible Employee's Compensation in order to preserve the use of the factor 1.25 in the denominators of the fractions described in Section 5.4 (B)(1) and Section 5.4 (D)(1). A Participant who receives the Top-Heavy minimum benefit in lieu of the Minimum Employer Contribution shall receive an increased minimum benefit equal to the Participant's average yearly Compensation during his five highest-paid consecutive years, multiplied by the lesser of 3% per Year of Service or 20% plus one percentage point (to a maximum of 10 percentage points) for each year that this Plan is maintained. Compensation periods and Years of Service to be taken into account in the calculation of this increased minimum benefit shall be subject to any limitations set forth in the defined benefit plan. For any Limitation Year in which this Plan is Super Top-Heavy, the factor of 1.25 in the denominators of the fractions described in Sections 5.4 (B)(1) and 5.4(D)(1) shall be reduced to 1.0. The Maximum Employer Contribution payable in such years shall be 3% of each Eligible Employee's Compensation and the defined benefit Top- Heavy minimum benefit shall be average Compensation multiplied by the lesser of 2% per Year of Service or 20%. Eligible Employees are all Non-Key Employees who are Participants in the Plan as of the last day of the Plan Year regardless of whether they had completed 1,000 Hours of Service during the Plan Year. Also included are Non-Key Employees who would have been Participants as of the last day of the Plan Year except: . The Employee's Compensation was below a required minimum level; or . The Employee chose not to make Elective Deferral Contributions when he was eligible to do so. Elective Deferral Contributions and Matching Contributions made to Key Employees shall be taken into account as Employer Contributions allocated to such Key Employees when deter-mining whether a lower Minimum Employer Contribution is permissible for purposes of this section. However, Elective Deferral Contributions made by Non-Key Employees shall not be used towards satisfying the Minimum Employer Contribution required to be allocated to Non-Key Employees pursuant to this section. Matching Contributions made on behalf of Non-Key Employees may, at the option of the Employer, be used to satisfy the Minimum Employer Contribution requirement. However, for Plan Years beginning after December 31, 1988, to the extent that Matching Contributions are used for this purpose, they shall not be used to satisfy the Actual Contribution Percentage Test. (C) Minimum Vesting Requirements. Vesting shall be determined in accordance with the following schedule: Years of Service Vesting Percentage ---------------- ------------------ Less than 3 0% 3 or more 100% In the event the Plan ceases to be Top-Heavy, the vesting schedule in this Section 16A.4 16A.5 shall continue to apply until the Plan is amended to provide otherwise and any such amendment shall comply with the provisions of Section 14.1. 65 ARTICLE XVII TRUST AGREEMENT 17.1 CREATION AND ACCEPTANCE OF TRUST. The Trustee, by joining in the execution of the Plan and trust agreement, accepts the Trust hereby created and agrees to act in accordance with the express terms and conditions herein stated. 17.2 TRUSTEE CAPACITY; CO-TRUSTEES. The Trustee may be a bank, trust company or other corporation possessing trust powers under applicable state or federal law or one or more individuals or any combination thereof. When two or more persons serve as Trustee, they are specifically authorized, by a written agreement between themselves, to allocate specific responsibilities, obligations or duties wrong themselves. An original copy of such written agreement is to be delivered to the Administrator. 17.3 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE. Any Trustee may resign at any time by delivering to the Administrator a written notice of resignation, to take effect at a date specified therein, which shall not be less than 30 days after the delivery thereof, unless such notice shall be waived. The Trustee may be removed with or without cause by the Board of Directors by delivery of a written notice of removal, to take effect at a date specified therein, which shall not be less than 30 days after delivery thereof, unless such notice shall be waived. In the case of the resignation or removal of a Trustee, the Trustee shall have the right to a settlement of its account, which may be made, at the option of the Trustee, either (1) by judicial settlement in an action instituted by the Trustee in a court of competent jurisdiction, or (2) by written agreement of settlement between the Trustee and the Administrator. Upon such settlement, all right, title and interest of such Trustee in the assets of the Trust and all rights and privileges under this Agreement theretofore vested in such Trustee shall vest in the successor Trustee, and thereupon all future liability of such Trustee shall terminate; provided, however, that the Trustee shall execute, acknowledge and deliver all documents and written instruments which are necessary to transfer and convey the right, title and interest in the Trust assets, and all rights and privileges to the successor Trustee. The Board of Directors, upon receipt of notice of the resignation or removal of the Trustee, shall promptly designate a successor Trustee, whose appointment is subject to acceptance of this Trust in writing and shall notify in writing the insurance company of such successor Trustee. 17.4 TAXES, EXPENSES AND COMPENSATION OF TRUSTEE. The Trustee shall deduct from and charge against the Trust fund any taxes paid by it which may be imposed upon the Trust fund or the income thereof or which the Trustee is required to pay with respect to the interest of any person therein. The Trustee shall be paid such reasonable compensation as shall from time to time be agreed upon in writing by the Employer and the Trustee. An individual serving as Trustee who already receives full-time pay from the Employer shall not receive compensation from the Plan. In addition, the Trustee shall be reimbursed for any reasonable expenses, including reasonable counsel fees incurred by it as Trustee. Such compensation and expenses shall be paid from the Trust fund unless paid or advanced by the Employer. 66 17.5 TRUSTEE ENTITLED TO CONSULTATION. The Trustee shall be entitled to advice of counsel, which may be counsel for the Plan or the Employer, in any case in which the Trustee shall deem such advice necessary. With the exception of those powers and duties specifically allocated to the Trustee by the express terms of this Plan, it shall not be the responsibility of the Trustee to interpret the terms of the Plan or Trust and the Trustee may request and is entitled to receive guidance and written direction from the Administrator on any point requiring construction or interpretation of the Plan documents. 17.6 RIGHTS, POWERS AND DUTIES OF TRUSTEE. The Trustee shall have the following rights, powers, and duties: (A) The Trustee shall be responsible for the safekeeping and administering of the assets of this Plan and Trust in accordance with the provisions of this Agreement and any amendments thereto. The duties of the Trustee under this Agreement shall be determined solely by the express provisions of this Agreement and no further duties or responsibility shall be implied. Subject to the terms of this Plan and Trust, the Trustee shall be fully protected and shall incur no liability in acting in reliance upon the written instructions or directions of the Administrator or a duly designated Investment Manager or any other Named Fiduciary. (B) The Trustee shall have all powers necessary or convenient for the orderly and efficient performance of its duties hereunder, including but not limited to those specified in this section. The Trustee may appoint one or more administrative agents or contract for the performance of such administrative and service functions as it may deem necessary for the effective installation and operation of the Plan and Trust. (C) The Trustee shall have the power to collect and receive any and all monies and other property due hereunder and to give full discharge and acquittance therefor, to settle, compromise or submit to arbitration any claims, debits or damages due or owing to or from the Trust; to commence or defend suits or legal proceedings wherever, in its judgment, any interest of the Trust requires it; and to represent the Trust in all suits or legal proceedings in any court of law or equity or before any other body or tribunal. It shall have the power generally to do all acts, whether or not expressly authorized, which the Trustee in the exercise of its Fiduciary responsibility may deem necessary or desirable for the protection of the Trust and the assets thereof. (D) The Trustee may temporarily hold cash balances and shall be entitled to deposit any such funds received in a bank account or bank accounts in the name of the Trust in any bank or banks selected by the Trustee, including the banking department of the Trustee, pending disposition of such funds in accordance with the Trust. Any such deposit may be made with or without interest. (E) The Trustee shall deal with any assets of this Trust held or received under this Plan only in accordance with the written directions from the Administrator. The Trustee shall be under no duty to determine any facts or the propriety of any action taken or omitted by it in good faith pursuant to instructions from the Administrator. (F) If the whole or any part of the Trust shall become liable for the payment of any estate, inheritance, income or other tax which the Trustee shall be required to pay, the Trustee shall have full power and authority to pay such tax out of any monies or other property in its hands for the account of the person whose interest hereunder is so liable. Prior to making any payment, the Trustee may require such releases or other documents from any lawful taxing authority as it shall deem necessary. The Trustee shall not be liable for any nonpayment of tax when it distributes an interest hereunder on instructions from the Administrator. 67 (G) The Trustee shall keep a full, accurate and detailed record of all transactions of the Trust which the Administrator shall have the right to examine at any time during the Trustee's regular business hours. Following the close of the fiscal year of the Trust, or as soon as practical thereafter, the Trustee shall furnish the Administrator with a statement of account. This account shall set forth all receipts, disbursements and other transactions effected by the Trustee during said year. The Administrator shall promptly notify the Trustee in writing of its approval or disapproval of the account. The Administrator's failure to disapprove the account within 60 days after receipt shall be considered an approval. The approval by the Administrator shall be binding as to all matters embraced in any statement to the same extent as if the account of the Trustee had been settled by judgment or decree of a court of competent jurisdiction under which the Trustee, Administrator, Employer and all persons having or claiming any interest in the Trust were parties; provided, however, that the Trustee may have its account judicially settled if it so desires. (H) If, at any time, there shall be a dispute as to the person to whom payment or delivery of monies or property should be made by the Trustee, or regarding any action to be taken by the Trustee, the Trustee may postpone such payment, delivery or action, retaining the funds or property involved, until such dispute shall have been resolved in a court of competent jurisdiction or the Trustee shall have been indemnified to its satisfaction or until it has received written direction from the Administrator. (I) Anything in this instrument to the contrary notwithstanding, it shall be understood that the Trustee shall have no duty or responsibility with respect to the determination of matters pertaining to the eligibility of any Employee to become or remain a Participant hereunder, the amount of benefit to which any Participant or Beneficiary shall be entitled hereunder, all such responsibilities being vested in the Administrator. The Trustee shall have no duty to collect any contribution from the Employer and shall not be concerned with the amount of any contribution nor the application of the contribution formula. 17.7 EVIDENCE OF TRUSTEE ACTION. In the event that the Trustee is comprised of two or more Trustees, then those Trustees may designate one such Trustee to transmit all decisions of the Trustee and to sign all necessary notices and other reports on behalf of the Trustee. All notices and other reports bearing the signature of the individual Trustee so designated shall be deemed to bear the signatures of all the individual Trustees and all parties dealing with the Trustee are entitled to rely on any such notices and other reports as authentic and as representing the action of the Trustee. 17.8 INVESTMENT POLICY. This Plan has been established for the sole purpose of providing benefits to the Participants and their Beneficiaries. In determining its investments hereunder, the Trustee shall take account of the advice provided by the Administrator as to funding policy and the short and long range needs of the Plan based on the evident and probable requirements of the Plan as to the time benefits shall be payable and the requirements therefore. 68 17.9 PERIOD OF TRUST. If it shall be determined that the applicable state law requires a limitation on the period during which the Employer's Trust shall continue, then such Trust shall not continue for a period longer than 21 years following the death of the last of those Participants including future Participants who are living at the effective date hereof. At least 180 days prior to the end of the twenty-first year as described in the first sentence of this Section, the Employer, the Administrator and the Trustee shall provide for the establishment of a successor trust and transfer of Plan assets to the successor trustee. If the applicable state law requires no such limitation, then this Section shall not be operative. JP Foodservice Distributors, Inc. ----------------------------------- By: -------------------------------- 69 EX-10.22 4 EXHIBIT 10.22 EXHIBIT 10.22 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of June 9, 1997 among JP FOODSERVICE DISTRIBUTORS, INC. THE LENDERS PARTY HERETO, NATIONSBANK, N.A., as Administrative Agent, THE CHASE MANHATTAN BANK, as Syndication Agent and Co-Arranger, and THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent TABLE OF CONTENTS
ARTICLE I DEFINITIONS...............................................................................1 SECTION 1.01. Defined Terms................................................................1 SECTION 1.02. Accounting Terms, Etc.......................................................32 SECTION 1.03. Terms Generally.............................................................32 SECTION 1.04. Directly or Indirectly......................................................32 ARTICLE II. THE LOANS..............................................................................33 SECTION 2.01. Revolving Loans.............................................................33 SECTION 2.02. Swingline Loan Subfacility..................................................35 SECTION 2.03. Letter of Credit Subfacility................................................38 SECTION 2.04 Competitive Loan Subfacility................................................42 SECTION 2.05. Termination and Reduction of Commitments....................................45 SECTION 2.06. Fees........................................................................45 ARTICLE III. ADDITIONAL PROVISIONS REGARDING LOANS.................................................47 SECTION 3.01. Default Rate................................................................47 SECTION 3.02. Prepayments.................................................................47 SECTION 3.03. Extension and Conversion....................................................49 SECTION 3.04. Alternate Rate of Interest..................................................50 SECTION 3.05. Reserve Requirements; Change in Circumstances...............................50 SECTION 3.06. Change in Legality..........................................................52 SECTION 3.07. Indemnity...................................................................52 SECTION 3.08. Mandatory Assignment; Commitment Termination................................53 ARTICLE IV. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; U.S. TAXES; EVIDENCE OF LOANS..............54 SECTION 4.01. Payments and Computations...................................................54 SECTION 4.02. Pro Rata Treatment..........................................................54 SECTION 4.03. Sharing of Payments.........................................................55 SECTION 4.04. Net Payments................................................................56 SECTION 4.05. U.S. Taxes..................................................................56 SECTION 4.06. Evidence of Loans...........................................................58 ARTICLE V. CONDITIONS PRECEDENT....................................................................59 SECTION 5.01. [INTENTIONALLY OMITTED].....................................................59 SECTION 5.02. [INTENTIONALLY OMITTED].....................................................59 SECTION 5.03. Each Extension of Credit....................................................59 SECTION 5.04. Conditions to Restatement Date..............................................60 ARTICLE VI. FINANCIAL STATEMENTS; INFORMATION......................................................61 SECTION 6.01. Reporting Requirements......................................................61 ARTICLE VII. INSPECTION OF PROPERTIES AND BOOKS....................................................66 SECTION 7.01. Inspection Rights of Administrative Agent and Lenders.......................66
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ARTICLE VIII. COVENANTS............................................................................67 SECTION 8.01. Maintenance of Certain Financial Conditions.................................67 SECTION 8.02. Debt Incurrence; Restricted Subsidiary Debt.................................67 SECTION 8.03. Liens.......................................................................69 SECTION 8.04. Sale Leasebacks.............................................................72 SECTION 8.05. Restricted Payments; Restricted Investments.................................72 SECTION 8.06. Subsidiary Stock and Debt...................................................74 SECTION 8.07. Consolidation, Merger, Sale of Assets, etc..................................75 SECTION 8.08. Transactions with Affiliates; Tax Consolidation.............................78 SECTION 8.09. Nature of Business..........................................................79 SECTION 8.10. Books and Records; Fiscal Year..............................................79 SECTION 8.11. Corporate Existence; Licenses...............................................79 SECTION 8.12. Payment of Taxes, Claims for Labor and Materials, etc.......................80 SECTION 8.13. Maintenance of Properties...................................................80 SECTION 8.14. Insurance...................................................................80 SECTION 8.15. Compliance with Laws........................................................81 SECTION 8.16. Environmental Matters.......................................................81 SECTION 8.17. Maintenance of Office.......................................................82 SECTION 8.18. Future Restricted Subsidiaries..............................................82 ARTICLE IX. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.........................................83 SECTION 9.01. Organization and Authority of the Borrower, etc.............................83 SECTION 9.02. Subsidiaries................................................................83 SECTION 9.03. Qualification...............................................................84 SECTION 9.04. Financial Statement.........................................................84 SECTION 9.05. Changes, etc................................................................84 SECTION 9.06. Compliance with Laws, Other Instruments, etc................................84 SECTION 9.07. Consents and Approvals......................................................85 SECTION 9.08. Debt, etc...................................................................85 SECTION 9.09. Title to Property; Leases; Investments; Existing Affiliate Agreements.......86 SECTION 9.10. Litigation..................................................................87 SECTION 9.11. Taxes.......................................................................87 SECTION 9.12. Compliance with ERISA.......................................................87 SECTION 9.13. Use of Loan Proceeds; Margin Regulations....................................88 SECTION 9.14. Licenses, Patents, Trademarks, Authorizations, etc..........................89 SECTION 9.15. Status Under Certain Statutes; Other Regulations............................89 SECTION 9.16. Labor Matters...............................................................90 SECTION 9.17. Full Disclosure.............................................................90 SECTION 9.18. Environmental Matters.......................................................90 SECTION 9.19. Solvency....................................................................91 ARTICLE X. EVENTS OF DEFAULT.......................................................................91 SECTION 10.01. Events of Default..........................................................91 SECTION 10.02. Acceleration; Remedies.....................................................95 ARTICLE XI. ADMINISTRATIVE AGENT...................................................................96
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SECTION 11.01. Appointment and Authorization..............................................96 SECTION 11.02. General Immunity...........................................................96 SECTION 11.03. Consultation with Professionals............................................96 SECTION 11.04. Documents..................................................................96 SECTION 11.05. Rights as a Lender.........................................................97 SECTION 11.06. Responsibility of Administrative Agent.....................................97 SECTION 11.07. Action by Administrative Agent.............................................97 SECTION 11.08. Notices of Event of Default, Etc...........................................98 SECTION 11.09. Indemnification of Administrative Agent....................................98 SECTION 11.10. No Representations.........................................................98 SECTION 11.11. Resignation; Removal.......................................................99 SECTION 11.12. Syndication Agent, Documentation Agent, Co-Arranger and Co-Agent..........100 ARTICLE XII. MISCELLANEOUS........................................................................100 SECTION 12.01. Notices...................................................................100 SECTION 12.02. Survival of Agreement.....................................................101 SECTION 12.03. Binding Effect............................................................101 SECTION 12.04. Benefit of Agreement......................................................101 SECTION 12.05. No Waiver; Remedies Cumulative............................................103 SECTION 12.06. Payment of Expenses, Etc..................................................103 SECTION 12.07. Amendments, Waivers and Consents..........................................104 SECTION 12.08. Counterparts..............................................................104 SECTION 12.09. Headings..................................................................105 SECTION 12.10. Survival of Indemnification...............................................105 SECTION 12.11. Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial....105 SECTION 12.12. Severability..............................................................106 SECTION 12.13. Term......................................................................106 SECTION 12.14. Entirety..................................................................106
iii SCHEDULES --------- Schedule I Lenders, Lender Addresses and Commitment Percentages Schedule II Existing Letters of Credit Schedule III Form of Guarantor Joinder Agreement Schedule IV Form of Guaranty Agreement Schedule V Form of Notice of Borrowing Schedule VA-1 Form of Competitive Bid Request Schedule VA-2 Form of Notice of Receipt of Competitive Bid Request Schedule VA-3 Form of Competitive Bid Request Schedule VA-4 Form of Competitive Bid Accept/Reject Letter Schedule VI Form of Notice of Extension/Conversion Schedule VII Existing Investments of the Borrower and Subsidiaries Schedule VIII Information Concerning Subsidiaries and Qualification Schedule IX Existing Debt of the Borrower and Subsidiaries Schedule X Existing Affiliate Agreements Schedule XI Environmental Matters Schedule XII Approvals Schedule XIII Existing Leases of the Borrower and Subsidiaries Schedule XIV Form of Lender Assignment Agreement iv THIS AMENDED AND RESTATED CREDIT AGREEMENT (as amended from time to time, the "Agreement"), dated as of June 9, 1997, is made by and among JP FOODSERVICE DISTRIBUTORS, INC., a Delaware corporation formerly known as JP Foodservice, Inc. (the "Borrower"); the lenders listed in Schedule I (the "Lenders"); ---------- NATIONSBANK, N.A., a national banking association, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"); THE CHASE MANHATTAN BANK, a New York state banking association, as Syndication Agent and Co-Arranger; THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and PNC BANK, NATIONAL ASSOCIATION, as Co-Agent. WHEREAS, a $110 million credit facility has been established in favor of the Borrower pursuant to the terms of that Credit Agreement dated as of November 10, 1994 (as amended and modified, the "Existing Credit Agreement") among the Borrower, the lenders identified therein, NationsBank of North Carolina, N.A., as Administrative Agent, and The Chase Manhattan Bank, N.A., as Syndication Agent and Co-Arranger; WHEREAS, the Borrower has requested that such credit facility be increased and otherwise modified; WHEREAS, the Lenders have agreed to the requested increase and modification of the credit facility pursuant to the terms of this Amended and Restated Credit Agreement; and WHEREAS, this Agreement is given in amendment to, restatement of and substitution for the Existing Credit Agreement and, subject to the terms of this Agreement, on the Restatement Date all loans, letters of credit and other obligations of the Borrower outstanding as of such date under the Existing Credit Agreement shall be deemed to be loans and obligations outstanding under this Agreement; NOW, THEREFORE, upon the terms and subject to the conditions and relying on the representations and warranties contained in this Agreement, the parties hereto hereby (i) agree that the Existing Credit Agreement is hereby amended, restated in its entirety to read as provided for in this Agreement, and reaffirmed as of the Restatement Date, (ii) further agree that all terms and provisions of the Existing Credit Agreement are of no further force and effect except as specifically restated herein, (iii) agree that on the Restatement Date all loans, Existing Letters of Credit and other obligations of the Borrower to the Lenders outstanding as of the Restatement Date under the Existing Credit Agreement shall be renewed and deemed to be Loans, Letters of Credit, and other obligations outstanding hereunder, and (iv) further agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. ------------- As used in this Agreement, the following terms shall have the meanings specified below: "Additional Portion" shall have the meaning assigned to such term in Section 8.07(f)(ii). "Administrative Agent" shall have the meaning assigned to such term in the heading hereof. "Administrative Agent's Fee Letter" means that letter agreement dated as of March 7, 1997 between the Borrower and the Administrative Agent, as amended and modified. "Affiliate" shall mean, with respect to any designated Person, any other Person (a) directly or indirectly, through one or more intermediaries, controlling or controlled by or under direct or indirect common control with such designated Person, (b) which beneficially owns or holds 5% or more of the shares of any class of Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of such designated Person, or (c) 5% or more of any class of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by such designated Person; provided, however, that -------- ------- none of the Lenders shall be deemed to be an Affiliate of the Borrower or any of its Subsidiaries solely by reason of ownership of any obligations of the Borrower to such Lender hereunder and under the other Credit Documents or by reason of having the benefits of any agreements or covenants of the Borrower contained in this Agreement. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock (or other equity interest) or by contract or otherwise. "Agents' Fees" shall have the meaning assigned to such term in Section 2.06(c). "Agreement" shall have the meaning assigned to such term in the heading hereof. "Alternative Assets" shall mean, in connection with any proposed sale of assets constituting an Excluded Sale, fixed assets (whether new, additional or replacement assets but exclusive of assets acquired in the course of regular upkeep and maintenance) which (a) are similar in nature or purpose to other assets owned or leased by the Borrower and/or its Restricted Subsidiaries prior to or at the time of the acquisition of such fixed assets and useful in the conduct of the business of the Borrower and its Restricted Subsidiaries as permitted to be conducted pursuant to Section 8.09 and (b) have a fair market value at least equal to the amount required pursuant to subdivision (f)(ii) of Section 8.07 to be applied to the purchase or acquisition or construction thereof. "Applicable Margin" shall mean, for purposes of calculating (i) the applicable interest rate for any day for any Eurodollar Loan, (ii) the applicable rate for the Facility Fee for any day for purposes of Section 2.06(a) or (iii) the Standby Letter of Credit Fee for any standby Letter of Credit for purposes of Section 2.06(b)(i), the applicable margin corresponding to the Total Debt Ratio described below in effect as of the most recent Determination Date: 2
Applicable Applicable Margin Margin Applicable for for Margin Standby Pricing Total Debt Eurodollar for Letters of Level Ratio Loans Facility Fee Credit - ------------------------------------------------------------------------------------------------------------- V Greater than 3.5 to 1.0 42.5 bps 17.5 bps 42.5 bps IV Equal to or less than 3.5 to 1.0 32.5 bps 15.0 bps 32.5 bps but greater than 3.25 to 1.0 III Equal to or less than 3.25 to 1.0 27.5 bps 12.5 bps 27.5 bps but greater than 2.75 to 1.0 II Equal to or less than 2.75 to 1.0 22.5 bps 10.0 bps 22.5 bps but greater than 2.25 to 1.0 I Equal to or less than 2.25 to 1.0 17.5 bps 7.5 bps 17.5 bps
Determination of the appropriate Applicable Margins based on the Total Debt Ratio shall be made as of each Determination Date. The Total Debt Ratio to in effect as of a Determination Date shall establish the Applicable Margins that shall be effective as of the date designated by the Administrative Agent as the Applicable Margin Change Date. The Administrative Agent shall determine the Applicable Margins as of each Determination Date occurring after the Closing Date and shall promptly notify the Borrower and the Lenders of the Applicable Margins so determined and of the related Applicable Margin Change Date. Such determinations by the Administrative Agent of the Applicable Margin shall be rebuttably presumptive evidence thereof absent manifest error. As of the Restatement Date and until the first Applicable Margin Change Date, (a) the Applicable Margin for purposes of calculating the applicable interest rate for any Eurodollar Loan shall be 27.5 bps, (b) the Applicable Margin for purposes of calculating the Facility Fee shall be 12.5 bps and (c) the Applicable Margin for purposes of calculating the Standby Letter of Credit Fee shall be 27.5 bps. "Applicable Margin Change Date" shall mean, with respect to any Determination Date, a date designated by the Administrative Agent that is not more than five (5) Business Days after receipt by the Administrative Agent of the Required Financial Information for such Determination Date. "Application Period" shall have the meaning assigned to such term in Section 8.07(f)(ii). "Approvals" shall have the meaning assigned to such term in Section 5.01(f). "Arranger" shall mean NationsBanc Capital Markets, Inc. "Attributable Debt" shall mean, with respect to any Sale Leaseback (other than a Sale Leaseback which shall have been entered into in compliance with subdivision (b) of Section 3 8.04), as of any date of determination, the lesser of (a) the fair market value of the property subject to such Sale Leaseback (as determined by the Board of Directors) at the time of sale thereof and (b) the present value (discounted in accordance with GAAP at the debt rate implicit in the lease of such property) as of such date of determination of all amounts (whether designated as rentals or additional or supplemental rentals or otherwise) payable by the lessee during the remaining term of such Sale Leaseback (including any period for which such Sale Leaseback has been extended and any renewal periods as to which the lessor has the option), excluding, however, amounts so payable on account of maintenance, ordinary repairs, insurance, taxes, assessments and other similar charges. "Available Fund" shall having the meaning assigned to such term in Section 3.02(b)(ii). "Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/16 of 1%) equal to the greater of (a) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. For purposes hereof, (i) "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by NationsBank as its prime rate in effect at its principal office in Charlotte, North Carolina; each change in the Prime Rate shall be effective on the date such change is publicly announced as effective and (ii) "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System, or, if such rate is not so released for any day which is a Business Day, the arithmetic average (rounded upwards to the next 1/100th of 1%), as determined by the Administrative Agent, of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be rebuttably presumptive evidence thereof absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Base Rate Loan" shall mean any Loan bearing interest at a rate determined by reference to the Base Rate in accordance with the provisions of Article II. "Board of Directors" shall mean, the Board of Directors of the Borrower or a duly authorized committee of directors lawfully exercising the relevant powers of such Board of Directors. "Borrower Group Member" shall mean the Borrower, each Subsidiary, and each of their respective predecessors and (a) each corporation that is or was at any time a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as the Borrower or any Subsidiary, or any of their respective predecessors, (b) each trade or business, whether or not incorporated, that is or was at any time under common control (within the 4 meaning of Section 414(c) of the Code) with the Borrower or any Subsidiary, or any of their respective predecessors, and (c) each trade or business, whether or not incorporated, that is or was at any time a member of the same affiliated service group (within the meaning of Sections 414(m) and (o) of the Code) as the Borrower or any Subsidiary, or any of their respective predecessors. "Borrower Premises" shall mean real property in which the Borrower, any Subsidiary, or any Person which has been a Subsidiary at any time has or ever had any direct or indirect interest, including, without limitation, ownership thereof, or any arrangement for the lease, rental or other use thereof, or the retention or claim of any mortgage or security interest therein or thereon. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of North Carolina) on which banks are open for business in Charlotte, North Carolina; provided, however, that, -------- ------- when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Business or Condition", of any Person, shall mean the business, operations, assets, properties, earnings or condition (financial or other) of such Person, provided that, such term, when used without reference to any -------- particular Person, shall mean the Business or Condition of the Borrower and of the Borrower and its Restricted Subsidiaries taken as a whole. "Capital Contribution" shall have the meaning assigned to such term in Section 5.02(l). "Capital Lease" shall mean, as applied to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person or in the notes thereto, other than, in the case of any Restricted Subsidiary, any such lease under which the Borrower or a Predominantly Owned Restricted Subsidiary is the lessor. "Capital Lease Obligation" shall mean, as at any date, with respect to any Capital Lease, the amount of the obligation of the lessee thereunder which would, in accordance with GAAP, appear on a balance sheet of such lessee or in the notes thereto in respect of such Capital Lease. "Change of Control" shall mean any acquisition subsequent to the Closing Date by any Person or group of Persons (within the meaning of Section 13 or 14 of the Exchange Act), other than one or more of (x) the Management Group, or (y) any persons comprising a group controlled (as defined in Rule 12b-2 under the Exchange Act) by the Management Group, of (a) beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of a majority of the Voting Stock of the Borrower or (so long as the Borrower shall be a Subsidiary of JPF) of JPF or (b) all or substantially all of the properties and assets of the Borrower. For purposes of this definition, "acquisition" by any Person or Persons of the Voting Stock or properties and assets referred to in the preceding sentence shall mean the earlier of (i) the actual possession 5 thereof and (ii) the consummation of any transaction or series of transactions which, with the passage of time, will give such Person or Persons the actual possession thereof. "Chase" shall mean The Chase Manhattan Bank, a New York state banking association. "Closing Date" shall mean the date of the original Credit Agreement, being November 10, 1994. "Co-Agent" shall mean PNC Bank, National Association, as identified in the heading hereto. "Co-Arranger" shall mean The Chase Manhattan Bank, a New York state banking association. "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. "Commission" shall mean the Securities and Exchange Commission and any other similar or successor agency of the Federal government administering the Securities Act and the Exchange Act. "Commitment" shall mean, (i) with respect to each Lender, the commitment of such Lender (A) to make Revolving Loans in an aggregate principal amount at any time outstanding of up to such Lender's Commitment Percentage multiplied by the Revolving Committed Amount (as such Revolving Committed Amount may be reduced from time to time pursuant to Section 2.05), and (B) to purchase Participation Interests in the Swingline Loans in accordance with the provisions of Section 2.02(b)(iii) and in the Letters of Credit in accordance with the provision of Section 2.03(c), (ii) with respect to the Swingline Lender, the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding of up to the Swingline Committed Amount and (iii) with respect to the Issuing Lender, the commitment of the Issuing Lender to issue Letters of Credit in an aggregate face amount at any time outstanding (together with the amounts of any unreimbursed drawings thereon) of up to the LOC Committed Amount. "Commitment Percentage" shall mean, for each Lender, the percentage identified as its Commitment Percentage opposite such Lender's name on Schedule -------- I, as such percentage may be modified in connection with any assignment made in - - accordance with the terms of Section 12.04(b). "Competitive Bid" means an offer by a Lender to make a Competitive Loan pursuant to the terms of Section 2.04. 6 "Competitive Bid Rate" means, as to any Competitive Bid made by a Lender in accordance with the provisions of Section 2.04, the fixed rate of interest offered by the Lender making the Competitive Bid. "Competitive Bid Request" means a request by the Borrower for Competitive Bids in accordance with the provisions of Section 2.04(b). "Competitive Bid Request Fee" shall have the meaning assigned to such term in Section 2.06(d). "Competitive Loan" means a loan made by a Lender in its discretion pursuant to the provisions of Section 2.04. "Competitive Loan Lenders" means, at any time, those Lenders which have Competitive Loans outstanding. "Competitive Loan Maximum Amount" shall have the meaning assigned to such term in Section 2.04(a). "Computation Period" have the meaning assigned to such term in Section 8.05. "Consolidated Net Income" shall mean, for any period, the net income (or deficit) of the Borrower and its Restricted Subsidiaries for such period (taken as a cumulative whole) after deducting, without duplication, operating expenses, provisions for all taxes and reserves (including reserves for deferred income taxes) and all other proper deductions (excluding amortization of Effective Date Intangibles), all determined in accordance with GAAP on a consolidated basis, after eliminating all inter-company items and after deducting portions of income properly attributable to outside minority interests, if any, in the stock and surplus of any Restricted Subsidiary; provided, however, that there shall in any event be excluded from Consolidated - -------- ------- Net Income (without duplication): (a) the income (or deficit) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Borrower or a Restricted Subsidiary; (b) any amount representing the interest of the Borrower or any Restricted Subsidiary in the earnings of any Person other than a Restricted Subsidiary, except to the extent that any such earnings have been actually received by the Borrower or such Restricted Subsidiary in the form of cash dividends or similar distributions; (c) any portion of the net income of a Restricted Subsidiary which for any reason is unavailable for the payment of dividends to the Borrower or another Restricted Subsidiary; 7 (d) any deferred credit (or amortization of a deferred credit) representing the excess of the equity in any Person at the date of acquisition thereof over the cost of the Investment in such Person; (e) any gain during such period arising from (i) the sale, exchange or other disposition of capital assets (such term to include all fixed assets, whether tangible or intangible (other than trucks, forklifts, trailers, scrubbers, sweepers, refrigerators or like equipment disposed of by the Borrower or a Restricted Subsidiary in the ordinary course of business), and all securities) to the extent the aggregate gains from such transactions exceed losses during such period from such transactions, (ii) any reappraisal, revaluation or write-up of assets after the date of the most recent audited financial statements referred to in Section 9.04, (iii) the acquisition of any securities of the Borrower or a Restricted Subsidiary or (iv) the termination of any Plan; (f) the proceeds of any life insurance policy; and (g) any item properly classified as extraordinary in accordance with GAAP; and provided further, however, that (x) in determining Consolidated Net Income -------- ------- ------- for any period during which the Borrower shall have sold the Everett Facility, losses from such sale or other disposition shall be disregarded to the extent the aggregate amount of all such losses (computed without regard to Effective Date Intangibles allocable to such facility) does not exceed $3,300,000 on an after tax basis and (y) gains in excess of losses during any period from the sale or other disposition by the Borrower or a Restricted Subsidiary in the ordinary course of business of trucks, forklifts, trailers, scrubbers, sweepers, refrigerators or like equipment shall not be excluded from Consolidated Net Income for such period. "Consolidated Net Tangible Assets" shall mean, as of any date, the consolidated assets of the Borrower and its Restricted Subsidiaries appearing on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries prepared in accordance with GAAP as of such date less the sum (without duplication) of all amounts which would appear on such balance sheet in respect of (a) reserves for depreciation, depletion, obsolescence and/or amortization of properties and all other reserves properly attributable to assets set aside in connection with the business conducted by the Borrower and its Restricted Subsidiaries, (b) goodwill, trademarks, tradenames, copyrights, patents, licenses, permits, franchises, unamortized debt discount and expense, experimental and organization expense and all other assets which under GAAP are deemed intangible, (c) any write-up in the book value of any assets subsequent to the date of the most recent audited financial statements referred to in Section 9.04, (d) Restricted Investments (valued at the book value thereof) and (e) all liabilities other than deferred taxes. "Consolidated Net Worth" shall mean, as of any date, the excess of (a) the sum of capital stock (but excluding capital stock subscribed for but unissued) and surplus (including retained earnings, additional paid-in capital and the balance of the current profit and loss account not transferred to surplus) accounts of the Borrower and its Restricted Subsidiaries appearing on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries prepared in 8 accordance with GAAP as of such date, after eliminating all intercompany transactions and all amounts properly attributable to outside minority interests in Restricted Subsidiaries over (b) the amount obtained by subtracting (i) the aggregate amortization of Effective Date Intangibles in accordance with GAAP subsequent to the Effective Date to and including such date of determination to the extent such amortization has reduced the surplus accounts of the Borrower and its Restricted Subsidiaries appearing on a balance sheet of the Borrower and its Restricted Subsidiaries prepared in accordance with GAAP as of the Effective Date (after giving effect to the consummation of the Recapitalization) from (ii) ---- the aggregate amount appearing in respect of Effective Date Intangibles on such balance sheet as of the Effective Date (after giving effect to the consummation of the Recapitalization). "Credit Documents" shall mean this Agreement, the LOC Documents, the Guaranty Agreement (including any Guarantor Joinder Agreement) and all other related agreements and documents issued or delivered under this Agreement or under the Guaranty Agreement (including any Guarantor Joinder Agreement) or pursuant hereto or thereto. "Debt" shall mean, as applied to any Person, as of any date of determination (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, debentures, notes, drafts or similar instruments, or upon which interest payments are customarily made; (b) all obligations of such Person for all or any part of the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business which are not overdue by more than 30 days or which are being contested in good faith by appropriate proceedings) or for the cost of property constructed or of improvements; (c) all obligations secured by any Lien ((other than a Lien deemed to exist in connection with any Permitted Receivables Financing (including any related filings of financing statements) provided that (i) for purposes of Section 8.01(c), all Permitted Receivables Financing Amounts shall be considered Debt, (ii) the Borrower or any of its Restricted Subsidiaries may consummate a Permitted Receivables Financing otherwise permitted by the terms of this Agreement notwithstanding the provisions of Section 8.02, provided that the Permitted Receivables Financing Amount in respect of such Permitted Receivables Financing shall be considered Debt in any computation otherwise required by (or by reference to) Section 8.02 and (iii) for no purpose other than determination of "Total Debt Ratio" as used herein (including as used in the definition of "Applicable Margin" and in section 8.01(c) hereof) shall any obligation incurred by the Borrower or any of its Restricted Subsidiaries pursuant to any Permitted Receivables Financing be considered Debt, and it being understood and agreed that the Permitted Receivables Financing Amount in respect of any Permitted Receivables Financing shall be deemed to be an obligation secured by Liens in connection with a Permitted Receivables Financing)) on or payable out of the proceeds of production from property owned or held by such 9 Person even though such Person has not assumed or become liable for the payment of such obligations; (d) all Capital Lease Obligations of such Person; (e) all preferred stock issued by such Person or required by the terms thereof to be redeemed, or for which mandatory sinking fund payments are due, by a fixed date; (f) all obligations of such Person, contingent or otherwise, in respect of any letter of credit facility, bankers' acceptance facility or other similar credit facility, exclusive, however, of obligations in respect of any letter of credit issued solely for the benefit of a state agency or insurance carrier in connection with the maintenance by such Person of casualty, medical or workers' compensation insurance through such agency or insurance carrier; (g) the aggregate amount of the net liability exposure of such Person under all Hedging Agreements (which net liability exposure in respect of any such Hedging Agreement shall, for purposes hereof, be deemed to be an amount equal to (i) the actual net liability exposure of such Person under such Hedging Agreement to the extent realized (upon culmination or termination of such Hedging Agreement or otherwise) and no longer contingent or (ii) to the extent the net liability exposure of such Person under such Hedging Agreement has not been actually realized and is contingent, the product of (A) the then current notional principal amount of such Hedging Agreement multiplied ---------- by (B) the number of years (or portions thereof) then remaining to the -- date of maturity of such Hedging Agreement multiplied by (C) 0.75%); ------------- and (h) all Guaranties by such Person of or with respect to obligations of the character referred to in the foregoing clauses (a) through (g) of another Person; provided, however, that in determining the Debt of the Borrower, so long as the - -------- ------- Sara Lee Offset Agreement shall remain in full force and effect and shall be effective to permit the offset of principal and interest due under the Sara Lee Note against principal and interest due under PYA's Note (or to establish the Borrower's obligation in respect of the indebtedness evidenced by the Sara Lee Note from and after a prepayment in full of PYA's Note as the remaining principal balance of the Sara Lee Note after offset against amounts owing thereon of the principal of and accrued and unpaid interest to the date of prepayment on the PYA Note), the Debt evidenced by the Sara Lee Note shall be deemed equal to the net amounts for which the Borrower is obligated under the Sara Lee Offset Agreement. "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "Determination Date" shall mean each date which shall be the last day of a fiscal quarter of the Borrower. 10 "Documentation Agent" means The First National Bank of Chicago, as identified in the heading hereto. "Dollars", "dollars" or "$" shall mean lawful money of the United States of America. "Effective Date" shall mean the date (being on or about November 15, 1994) on which the conditions set forth in Section 5.02 to the making of the initial Extension of Credit hereunder (other than the issuance of the Existing Letters of Credit) shall have been fulfilled and on which the initial Extension of Credit (other than the issuance of the Existing Letters of Credit) shall have been made. "Effective Date Intangibles" shall mean all goodwill and other intangible assets that appear on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries prepared in accordance with GAAP as of the Effective Date immediately after giving effect to the consummation of the Recapitalization. "Eligible Assignee" shall mean (i) any Lender or any Affiliate or Subsidiary of a Lender, and (ii) any other commercial bank acceptable to the Administrative Agent and the Borrower. "Environmental Claims" shall have the meaning assigned to such term in Section 9.18. "Environmental Law" shall mean any past, present or future Federal, state, local or foreign statutory or common law, or any regulation, ordinance, code, plan, Order, permit, grant, franchise, concession, restriction or agreement issued, entered, promulgated or approved thereunder, relating to (a) the environment, human health or safety, including, without limitation, emissions, discharges, releases or threatened releases of Hazardous Substances into the environment, or (b) the manufacture, generation, refining, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport, arranging for transport, or handling of Hazardous Substances. "Environmental Permits" shall mean, collectively, any and all permits, consents, licenses, approvals and registrations of any nature at any time required pursuant to or in order to comply with any Environmental Law. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "Eurocurrency Liabilities" shall have the meaning assigned to such term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Eurodollar Rate in accordance with the provisions of Article II. 11 "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate equal to the per annum rate determined by the Administrative Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), which appear on the Reuters Screen LIBO Page as of 11:00 a.m. (London time) two (2) Business Days before the first day of such Interest Period (provided that, if at least two -------- such offered rates appear on the Reuters Screen LIBO Page, the rate in respect of such Interest Period will be the arithmetic mean of such offered rates). As used herein, "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks). "Eurodollar Rate Reserve Percentage" shall mean, in respect of any Lender and any Interest Period relating to any Eurodollar Loan of such Lender, the reserve percentage applicable to such Lender during such Interest Period under Regulation D of the Board of Governors of the Federal Reserve System (or, if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) for determining the reserve requirement (including, without limitation, any marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (such Eurocurrency Liabilities having a term equal to such Interest Period). "Event of Default" shall have the meaning assigned to such term in Section 10.01. "Everett Facility" shall mean the facility owned by the Borrower on the date hereof in Everett, Massachusetts. "Excess Sale Event" shall having the meaning assigned to such term in Section 3.02(b)(ii). "Excess Sale Notice" shall having the meaning assigned to such term in Section 3.02(b)(ii). "Exchange Act" shall mean the Securities Exchange Act of 1934, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same may be in effect from time to time. "Excluded Sale" shall mean any sale of assets permitted pursuant to subdivision (f)(ii) of Section 8.07 the net proceeds of which to the Borrower and its Restricted Subsidiaries the Borrower shall be required to apply (or cause to be applied) as provided in said subdivision. "Existing Affiliate Agreements" shall have the meaning assigned to such term in Section 8.08. 12 "Existing Letters of Credit" shall mean each Letter of Credit issued by NationsBank and outstanding as of the Restatement Date and more fully described on Schedule II. ----------- "Extension of Credit" shall mean the making of any Loan (including any Swingline Loan) hereunder or the issuance, or the extension of the maturity date, of any Letter of Credit hereunder. "Facility Fee" shall have the meaning assigned to such term in Section 2.06(a). "Federal Funds Effective Rate" shall have the meaning assigned to such term within the definition of "Base Rate". "Fees" shall mean all fees payable pursuant to Section 2.06. "Fixed Charge Coverage Ratio" shall mean, as of any Determination Date, the number obtained by dividing (a) Net Income Available for Fixed Charges for the period ("Coverage Period") of four consecutive fiscal quarters ended on such Determination Date by (b) Fixed Charges for such Coverage Period. "Fixed Charges" shall mean, for any period, the sum of the following amounts: (a) Interest Expense for such period, plus (b) the aggregate amount of ---- Operating Lease Rentals accrued (whether or not actually paid) during such period. "Funded Debt" shall mean, as applied to any Person, as of any date of determination thereof, all Debt of such Person, whether secured or unsecured, having a final maturity (or which, pursuant to the terms of a revolving credit agreement or otherwise, is renewable or extendable at the option of such Person for a period ending) more than one year after such date of determination, notwithstanding the fact that (a) payments in respect thereof (whether installment, serial maturity or sinking fund payments or otherwise) are required to be made by such Person on demand or within one year after such date or (b) all or any part of the amount thereof is at the time also included in current liabilities of such Person. "Further Period" shall have the meaning assigned to such term in Section 8.07(f)(ii). "GAAP" shall mean generally accepted accounting principles as from time to time set forth in the opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and in statements by the Financial Accounting Standards Board or in such opinions and statements of such other entities as shall be approved by a significant segment of the accounting profession in the United States of America, but subject to Section 1.02. "Governmental Body" shall mean any Federal, state, municipal, local or other governmental department, commission, board, bureau, agency, instrumentality, political subdivision or taxing authority, of any country. 13 "Guarantor" shall mean each of the Restricted Subsidiaries of the Borrower which is a party to the Guaranty Agreement, including each Subsidiary of the Borrower which becomes a party to the Guaranty Agreement pursuant to a Guarantor Joinder Agreement. "Guarantor Joinder Agreement" shall mean a Guarantor Joinder Agreement substantially in the form of Schedule III. ------------ "Guaranty" shall mean, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any indebtedness, lease, dividend or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business) or discounted or sold with recourse by such Person, or in respect of which such Person is otherwise in any manner directly or indirectly liable, including, without limitation, any such obligation in effect guaranteed by such Person through any agreement (contingent or otherwise) to (a) purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or (b) maintain the solvency or any balance sheet or other financial condition of the obligor of such obligation, or (c) make payment for any products, materials or supplies or for any transportation or services regardless of the non-delivery or non-furnishing thereof, in any such case if the purpose or intent of such agreement is to provide assurance that such obligation will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected against loss in respect thereof. For purposes of all computations made under this Agreement the amount of any Guaranty shall be equal to the amount of the obligation guaranteed or, if not stated or determined, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Guaranty Agreement" shall mean the Guaranty Agreement in the form attached as Schedule IV. ----------- "Hazardous Substances" shall mean and include those substances included within the definitions of "hazardous substances," "hazardous materials," "toxic substances" or "solid waste" in the Comprehensive Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. (S)9601 et seq.) , as amended -- --- by Superfund Amendments and Reauthorization Act of 1986 (Pub. L. (S)99-499 100 Stat. 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. (S) 6901 et seq.) and the Hazardous Materials Transportation Act, (49 U.S.C. (S) -- --- 1801 et seq.), and in the regulations promulgated pursuant to said laws, all as -- --- amended; and in any event shall include medical wastes, infectious wastes, asbestos, paint containing lead, and urea formaldehyde. "Hedging Agreement" shall mean any agreement entered into by a Person for protection against future fluctuations in interest rates, foreign exchange rates, commodities prices, or the like (including, but not limited to, interest rate and/or currency swap arrangements, interest rate, currency and/or commodities future or option contracts, and other similar agreements) and which 14 creates a contingent obligation of such Person to make any payments (other than payments in respect of any fee or charge for contracting to provide the protection provided by such agreement) to the holder(s) thereof or counterparty(ies) thereunder upon the culmination or termination of such agreement or otherwise. "IDB Debt" shall mean Debt incurred to finance the construction or acquisition of industrial or pollution control facilities pursuant to state or local law, the interest borne by which is not, at the time of incurrence thereof, subject to federal income tax and recourse to the Borrower and its Restricted Subsidiaries in respect of which is limited solely to the property subject to such Liens. "Interest Expense" shall mean, as applied to any Person, for any period, the sum of the following amounts for such Person: (a) the aggregate amount of all interest accrued (whether or not actually paid) during such period on Debt (including, without limitation, (i) imputed interest on Capital Lease Obligations and (ii) all imputed interest, whether in the form of "yield", "discount" or other similar item, that accrues in respect of the Permitted Receivables Financing Amount of any Permitted Receivables Financing entered into by such Person (or by any Subsidiary of such Person or any other Person "controlled" (as such term is defined in the Securities Act of 1933 and the rules and regulations thereunder)), together with any fees payable thereunder, plus (b) amortization of debt discount and expense during such period, plus (c) - ---- all fees and commissions payable in connection with any letters of credit during such period. Unless otherwise specified, any reference to Interest Expense for any period is intended as a reference to the sum for such period of said amounts for the Borrower and its Restricted Subsidiaries on a consolidated basis after eliminating all intercompany transactions. "Interest Payment Date" shall mean (i) as to any Base Rate Loan, the last day of each March, June, September and December, the date of repayment of the principal of such Loan and the Maturity Date, (ii) as to any Eurodollar Loan or Competitive Loan, the last day of each Interest Period for such Loan and the Maturity Date, and in addition where the applicable Interest Period is more than 3 months, then also on the date 3 months from the beginning of the Interest Period, and each 3 months thereafter and (iii) as to any Quoted Rate Swingline Loan, the last day of the Interest Period for such Loan and the Maturity Date. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day. "Interest Period" shall mean (i) as to any Eurodollar Loan, a period of one, two, three or six months' duration, as the Borrower may elect, commencing in each case on the date of the borrowing (including conversions, extensions and renewals), (ii) as to any Quoted Rate Swingline Loan, a period commencing in each case on the date of the borrowing and ending on the date agreed to by the Borrower and the Swingline Lender in accordance with the provisions of Section 2.02(b)(i) (such ending date in any event to be not more than 7 Business Days from the date of borrowing) , and (iii) as to any Competitive Loan, a period commencing in each case on the date of borrowing and ending on the date specified in the applicable Competitive Bid whereby 15 the offer to make such Competitive Loan was extended (such ending date in any event to be not less than 7 nor more than 180 days from the date of borrowing); provided, however, (A) if any Interest Period would end on a day which is not a - -------- ------- Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that, with respect to any Eurodollar Loan, where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (B) no Interest Period shall extend beyond the Maturity Date and (C) in the case of Eurodollar Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall, subject to clause (A) above, end on the last Business Day of such calendar month. "Investment" shall mean, as applied to any designated Person, any direct or indirect purchase or other acquisition by such designated Person for cash or other property of (a) stock, debt or other securities of any other Person, or any direct or indirect loan, advance, extension of credit or capital contribution by such designated Person to any other Person or any Guaranty by such designated Person with respect to the Debt of such other Person, including all Debt of and accounts receivable from any such other Person which are not current assets or did not arise from sales to such other Person in the ordinary course of business, or (b) any interest in any kind of property or assets, whether real, personal or mixed, tangible or intangible. In computing the amount involved in any Investment, (i) undistributed earnings of, and interest accrued in respect of Debt owing by, any such other Person accrued after the date of such Investment shall not be included, (ii) there shall not be deducted from the amounts invested in any such other Person any amounts received as earnings (in the form of dividends, interest or otherwise) on such Investment or as loans or advances from such other Person, and (iii) unrealized increases or decreases in value, or write-ups, write-downs or write-offs, of Investments in any such other Person shall be disregarded. "Issuing Lender" shall mean NationsBank, or, if NationsBank shall no longer be the Administrative Agent, such Lender with shall become the Administrative Agent hereunder in accordance with the provisions of Section 11.11. "Issuing Lender Fees" shall have the meaning assigned to such term in Section 2.06(b)(iii). "JPF" shall mean JP Foodservice, Inc., a Delaware corporation and the owner of all of the outstanding stock of the Borrower. "Lenders" shall have the meaning assigned to such term in the heading hereof. The term "Lenders" shall also include within the meaning thereof any Person which becomes a Lender in accordance with the terms of Section 12.04(b). "Letter of Credit" shall mean (i) any standby letter of credit or any trade, documentary or merchandise letter of credit issued by the Issuing Lender for the account of the Borrower in accordance with the terms of Section 2.03 and (ii) each Existing Letter of Credit. 16 "Licenses" shall have the meaning assigned to such term in Section 9.14. "Lien" shall mean, as to any Person, any mortgage, lien (statutory or other), pledge, assignment, hypothecation, adverse claim, charge, security interest or other encumbrance in or on, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale, trust receipt or other title retention agreement or Capital Lease with respect to, any property or asset of such Person, or the signing or filing of a financing statement which names such Person as debtor, or the signing of any security agreement authorizing any other party as the secured party thereunder to file any financing statement which names such Person as debtor. For purposes of this Agreement, a Person shall be deemed to be the owner of any property which it has placed in trust for the benefit of holders of Debt of such Person which Debt is deemed to be extinguished under GAAP but for which such Person remains legally liable, and such trust shall be deemed to be a Lien. "Loan" or "Loans" shall mean the Revolving Loans (or any Revolving Loan bearing interest at the Base Rate or the Eurodollar Rate and referred to as a Base Rate Loan or a Eurodollar Loan), the Swingline Loans and/or the Competitive Loans, individually or collectively, as appropriate. "LOC Committed Amount" shall have the meaning assigned to such term in Section 2.03. "LOC Documents" shall mean, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (i) the rights and obligations of the parties concerned or at risk or (ii) any collateral security for such obligations. "LOC Obligations" means, at any time, the sum of (i) the maximum amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit (including without limitation Existing Letters of Credit) then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit plus (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed. For purposes of clause (i) hereof, each trade Letter of Credit shall be deemed to be outstanding from the date of issuance thereof until and including the earlier of (A) the date which is thirty (30) days after the stated expiration date of such trade Letter of Credit or (B) the date on which such trade Letter of Credit is fully drawn. "Management Group" shall mean the individuals who on the date hereof hold the offices of (i) Chairman of the Board and Chief Executive Officer and (ii) Senior Vice President and Chief Financial Officer, respectively, of JPF. "Mandate Letter" shall mean the letter agreement dated March 7, 1997, among the Borrower, NationsBank and NationsBanc Capital Markets, Inc. 17 "Mandatory Borrowing" shall have the meaning assigned to such term in Section 2.02(b)(iii). "Material Adverse Change; Material Adverse Effect; Materially Adverse" in, on or to, as appropriate, any Person, shall mean a material adverse change in such Person's Business or Condition, a material adverse effect on such Person's Business or Condition or an event which is materially adverse to such Person's Business or Condition; provided that, (a) any such term, when used -------- without reference to any particular Person, shall mean such change in or effect on or event adverse to, as the case may be, the Borrower and its Restricted Subsidiaries taken as a whole, and (b) any impairment in any material respect of the ability of the Borrower and its Restricted Subsidiaries taken as a whole to pay any principal, interest or Fees in accordance with the terms hereof and of the other Credit Documents, any material impairment of the ability of the Borrower and its Restricted Subsidiaries taken as a whole to perform the other obligations of such Persons under this Agreement and the other Credit Documents, or any circumstance or occurrence which would impair the enforceability as against the Borrower or any Restricted Subsidiary of any material term of this Agreement or any of the other Credit Documents, shall in any case be deemed to have resulted in a material adverse change in, to have a material adverse effect on, and to be materially adverse to, the Borrower's Business or Condition. "Maturity Date" shall mean June 9, 2002. "Memorandum" shall have the meaning assigned to such term in Section 9.04. "Multiemployer Plan" shall mean a plan defined as such in Section 3 (37) of ERISA to which any Borrower Group Member is making or incurring an obligation to make, or has made or incurred an obligation to make, contributions. "Multiple Employer Plan" shall mean a Plan to which any Borrower Group Member, and at least one employer other than a Borrower Group Member, is making or incurring an obligation to make contributions or has made or incurred an obligation to make contributions. "NationsBank" shall mean NationsBank, N.A., a national banking association. "Net Income Available for Fixed Charges" shall mean, for any period, (a) the net income (or deficit) of the Borrower and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP after eliminating all nonrecurring items (whether cash or non-cash and whether or not deemed extraordinary in accordance with GAAP) for such period, plus (b) the sum of the following amounts, in each case to the extent deducted in arriving at the amount determined in accordance with the foregoing subdivision (a): (i) Interest Expense, (ii) provisions for taxes imposed on or measured by income or excess profits, (iii) Operating Lease Rentals accrued (whether or not actually paid), and (iv) provisions for amortization of Effective Date Intangibles; provided, -------- however, that in determining the net income (or deficit) of the Borrower and its - ------- Restricted Subsidiaries pursuant to the foregoing subdivision (a) for any period during which the Borrower shall have sold or otherwise disposed of the Everett Facility, losses from 18 such sale or other disposition shall be disregarded to the extent the aggregate amount of all such losses (computed without regard to Effective Date Intangibles attributable to such facility) does not exceed $3,300,000 on an after tax basis. "Net Receivables" shall mean, on any day, in respect of any Permitted Receivables Financing, the outstanding balance of accounts receivable sold, transferred, pledged or otherwise subject to Liens, in each case, to or in favor of a Receivables Financier (as hereinafter defined) in connection with such Permitted Receivables Financing, excluding any accounts receivables not included in the calculation of the Receivables Financier's percentage interest in the Transferred Assets (as hereinafter defined) (it being understood that only the percentage interest shall be included in this calculation) or borrowing base (such excluded accounts receivables may include, without limiting the foregoing in any manner, any such accounts receivables (x) not meeting the eligibility criteria under such Permitted Receivables Financing, (y) exceeding the applicable concentration limits set forth for such Permitted Receivables Financing, or (z) which are or become defaulted, delinquent, charged-off or otherwise cease to be creditworthy as set forth in, and as determined in accordance with, such Permitted Receivables Financing). "Net Sale Proceeds" shall mean, with respect to any sale of assets, an amount equal to the excess of (i) the greater of (x) the aggregate gross sale price of the assets sold in such sale and (y) the fair market value of such assets (as determined by the Board of Directors at the time of such sale) over (ii) the reasonable and customary costs and expenses incurred by the Borrower or a Restricted Subsidiary in effecting such sale. "Net Worth Minimum" shall mean, as of any date, the sum of $75,000,000 plus on the last day of each fiscal quarter to occur after the Restatement Date an amount (but not less than zero) equal to 50% of the net income of the Borrower and its Restricted Subsidiaries for such fiscal quarter, such increases to be cumulative, determined on a consolidated basis in accordance with GAAP after eliminating all inter-company items and deducting portions of income properly attributable to outside minority interests, if any, in Restricted Subsidiaries and after adding, to the extent deducted in determining such net income, the amount of any provision for the amortization of Effective Date Intangibles. "Note" shall mean any one of the 8.55% Senior Notes due 2004 issued by the Borrower pursuant to the Note Purchase Agreements, as the same may be restated, extended, renewed, amended, or otherwise modified and in effect from time to time. "Note Guaranties" shall mean those certain Guaranty Agreements, dated as of the Effective Date, from each Subsidiary of the Borrower which as of the Closing Date shall be a Restricted Subsidiary, substantially in the form of Exhibit B-1 to each of the Note Purchase Agreements as originally executed and delivered, providing among other things for the guaranty by each Restricted Subsidiary party thereto of all amounts from time to time owing by the 19 Borrower under the respective Note Purchase Agreements, as such Guaranty Agreements may be amended or otherwise modified from time to time (including by any joinder agreement in the form of Exhibit B-2 to each of said Note Purchase Agreements effective to constitute as a Guarantor under and within the meaning thereof any Subsidiary which on or following the Closing Date shall be designated or redesignated a Restricted Subsidiary and which shall be or concurrently become a Guarantor under and within the meaning of the Guaranty Agreement in compliance with Section 8.18). "Note Purchase Agreement" shall mean any one of the Note Purchase Agreements by and between the Borrower and the holder of the Note to be issued by the Borrower and sold to such holder pursuant to the terms of such Note Purchase Agreement, as the same may be restated, extended, renewed, amended, or otherwise modified and in effect from time to time. "Notice of Borrowing" shall mean a written notice of borrowing in substantially the form of Schedule V, as required by Section 2.01(b). ---------- "Notice of Extension/Conversion" shall mean a written notice of continuance or conversion of one or more Loans in substantially the form of Schedule VI, as required by Section 3.03. - ----------- "Officers' Certificate" shall mean a certificate executed on behalf of the Borrower by two of its executive officers, one of whom shall be its Chairman of the Board of Directors (if an officer) or its Chief Executive Officer, or President or one of its Senior Vice Presidents, and one of whom shall be its Chief Financial Officer or Treasurer. "Operating Cash Flow" shall mean, for any period, (a) the net income (or deficit) of the Borrower and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP after eliminating all nonrecurring items (whether cash or non-cash and whether or not deemed extraordinary in accordance with GAAP) for such period; plus (b) the sum of the following ---- amounts, in each case to the extent deducted in arriving at such the amount determined in accordance with the foregoing subdivision (a): (i) Interest Expense, (ii) provisions for taxes imposed on or measured by income or excess profits, and (iii) provisions for depreciation and amortization (including, without limitation, amortization of Effective Date Intangibles); plus (c) the sum (without duplication) of the following items to the extent not - ---- included in the amounts determined pursuant to subdivisions (a) and (b) above (such sum being herein called the "Acquired Unit Adjustment"): 20 (i) the net income (or net deficit) for such period of each Person which shall have become a Restricted Subsidiary during such period (an "Acquired Subsidiary") after eliminating all nonrecurring items (whether cash or non-cash and whether or not deemed extraordinary in accordance with GAAP), (ii) the net income (or net deficit) derived during such period from any operating assets acquired by the Borrower or a Restricted Subsidiary during such period ("Acquired Assets"), and (iii) the sum (without duplication) of the following items to the extent deducted in determining net income of any Acquired Subsidiary or derived from any Acquired Assets for such period: (A) Interest Expense of such Acquired Subsidiary or associated with such Acquired Assets, (B) provisions for taxes imposed on or measured by income or excess profits of such Acquired Subsidiary or associated with such Acquired Assets, and (C) provisions for depreciation and amortization of such Acquired Subsidiary or associated with such Acquired Assets; minus (d) the sum of the following items to the extent included in the amounts - ----- determined pursuant to subdivisions (a), (b) and (c) above (such sum being herein called the "Disposed Unit Adjustment"): (i) the net income (or net deficit) for such period of each Person which shall have ceased to be a Restricted Subsidiary during such period (a "Disposed Subsidiary") after eliminating all nonrecurring items (whether cash or non-cash and whether or not deemed extraordinary in accordance with GAAP), (ii) the net income (or net deficit) derived during such period from any assets which were sold or otherwise disposed of by the Borrower or a Restricted Subsidiary during such period ("Disposed Assets"), and (iii) the sum (without duplication) of the following items to the extent deducted in determining net income of any Disposed Subsidiary or derived from any Disposed Assets for such period: (A) Interest Expense of such Disposed Subsidiary or associated with such Disposed Assets, (B) provisions for taxes imposed on or measured by income or excess profits of such Disposed Subsidiary or associated with such Disposed Assets for such period, and (C) provisions for depreciation and amortization of such Disposed Subsidiary or associated with such Disposed Assets; provided, however, that (1) for purposes of determining Operating Cash Flow for - -------- ------- any period, the Acquired Unit Adjustment and the Disposed Unit Adjustment shall be determined by the Borrower in accordance with sound financial practice (and on the basis, to the extent available, of appropriate financial statements and tax returns for such period) and shall be set forth in a certificate of the principal financial officer of the Borrower accompanied by calculations in reasonable detail showing the manner of determination thereof, which certificate shall be furnished to the Administrative Agent and each of the Lenders not later than the certificate 21 required to be furnished by the Borrower in respect of such period pursuant to Section 6.01(c), and (2) no amount shall in any event be includable in Operating Cash Flow pursuant to subdivision (c) of this definition for any period in respect of any Acquired Unit Adjustment unless the amount and calculation thereof, as set forth in the certificate for such period required by the foregoing clause (1), shall be reasonably acceptable to the Required Lenders; and provided further, however, that in determining the net income (or deficit) -------- ------- ------- of the Borrower and its Restricted Subsidiaries pursuant to the foregoing subdivision (a) for any period during which the Borrower shall have sold or otherwise disposed of the Everett Facility, losses from such sale or other disposition shall be disregarded to the extent the aggregate amount of all such losses (computed without regard to Effective Date Intangibles attributable to such facility) does not exceed $3,300,000 on an after tax basis. "Operating Lease" shall mean any lease of property (real, personal or mixed) having an original term (including terms of renewal or extension at the option of the lessor or the lessee, whether or not any such option has been exercised) of more than one year, other than (a) a Capital Lease and (b) in the case of any Subsidiary, any such lease under which the Borrower or a Predominantly Owned Restricted Subsidiary is the lessor. "Operating Lease Rentals" shall mean, as applied to the Borrower and its Restricted Subsidiaries for any period, the total amount (whether designated as rentals or additional or supplemental rentals or otherwise) payable as lessee under all Operating Leases during such period, including amounts so payable during such period by reason of a lease termination or a surrender of property but excluding amounts so payable on account of maintenance, ordinary repairs, insurance, taxes, assessments and other similar charges. "Order" shall mean any order, writ, injunction, decree, judgment, award, determination, direction or demand. "Participation Interest" shall mean the extension of credit by a Lender by way of a purchase of a participation in any Swingline Loans as provided in Section 2.02(b)(iii), in Letters of Credit or LOC Obligations as provided in Section 2.03(c) or in any Loans as provided in Section 4.03. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereof. "Permitted Receivables Financing" shall mean any transaction involving one or more sales, contributions or other conveyances by the Borrower and/or any Restricted Subsidiary of any accounts receivable (together with certain related property relating thereto and the right to collections thereon, being the "Transferred Assets") to a Subsidiary (including a Subsidiary which is a Restricted Subsidiary) or Affiliate of the Borrower (with respect to any such transaction, the "Receivables Financing SPC"), which Receivables Financing SPC then either (x) sells (as determined in accordance with GAAP) such Transferred Assets (or percentage interests therein) to any Person that is not a Subsidiary or Affiliate of the Borrower (with respect to any such transaction, the "Receivables Financier"), (y) borrows from such Receivables Financier and 22 secures such borrowings by a pledge of such Transferred Assets and/or (z) otherwise finances its acquisition of such Transferred Assets and, in connection therewith, conveys an interest in such Transferred Assets to the Receivables Financier, provided that (i) such receivables financing shall not involve any -------- recourse to the Borrower or any Restricted Subsidiary (other than the Receivables Financing SPC) for any reason other than (A) repurchases of non-eligible receivables, (B) indemnifications for losses (including any adjustments for dilutions), other than credit losses related to the receivables sold in such financing, and (C) payment of all costs, fees, expenses and indemnities relating to such receivables financing, (ii) such receivables financing shall not include any Guaranty by the Borrower or any Restricted Subsidiary, it being understood that payment by the Borrower or any Restricted Subsidiary of any amount of the type described in the immediately preceding clause (i) which is owing by it to the Receivables Financing SPC shall not be deemed to be a Guaranty notwithstanding that an identical amount may be owing by the Receivables Financing SPC to the Receivables Financier, (iii) in the case of any such transaction other than the transaction contemplated by the Transfer and Administration Agreement among Enterprise Funding Corporation, JPFD Funding Company, JP Foodservice Distributors, Inc., NationsBank, N.A. and certain investors party thereto (which transaction is hereby specifically approved and consented to by each of the Required Lenders), the Administrative Agent shall be reasonably satisfied with the structure of and documentation for any such transaction and that the terms of such transaction, including the discount at which receivables are sold to the Receivables Financier and any termination events, shall be (in the good faith understanding of the Administrative Agent) consistent with those prevailing in the market for similar transactions involving receivables and originators of similar credit quality and a receivables pool of similar characteristics or which are otherwise reasonably acceptable to the Administrative Agent, (iv) the documentation for such transaction shall not be amended or modified to modify the calculation of the Net Receivables thereunder, to permit the acquisition of interests in the Transferred Assets by the Receivables Financier in excess of the Permitted Receivables Financing Over-Collateralization Amount, to change or modify any provision of the Subordinated Intercompany Revolving Note or any provision of any agreement relating to the calculation of any amount due or to become due in respect thereof, or in any other manner which is materially inconsistent with the terms and provisions hereof (and/or any other amendment which deals with the requirements for a Permitted Receivables Financing) (other than, in each case, for the requirement that any such amendment or modification (or any of the relevant documents affected thereby) satisfy the requirements set forth in the immediately preceding clause (iii)) without the prior written approval of the Administrative Agent (which approval shall not be unreasonably withheld), (v) at no time in connection with any particular receivables financing shall the applicable Receivables Financier's interest in the outstanding face amount of Net Receivables sold, transferred or pledged pursuant thereto (it being understood that if such interest is a percentage interest, only that percentage thereof shall be included in this calculation) exceed 130% of the aggregate outstanding balance of all fundings, financings or purchases made by such Receivables Financier to the Receivables Financing SPC and (vi) the maximum principal amount of all fundings, financings and purchases of accounts receivables by the Receivables Financier to the Receivables Financing SPC under all such receivables financings shall not at any time exceed $50,000,000 in the aggregate. 23 "Permitted Receivables Financing Amount" shall mean at any time with respect to any Permitted Receivables Financing, the aggregate balance of all cash received by the Receivables Financing SPC from the Receivables Financier in respect of purchase proceeds or principal under such financing minus the aggregate amount of all payments received by the Receivables Financier and applied to the repayments of such amounts; it being understood and agreed that any amounts previously applied as aforesaid which are subsequently required to be repaid, disgorged or otherwise returned by the Receivables Financier shall be deemed to have never been received and applied by the Receivables Financier. "Permitted Receivables Financing Over-Collateralization Amount" shall mean, with respect to any Permitted Receivables Financing, the excess from time to time of (x) the outstanding face amount of the Net Receivables subject to the Receivables Financier's interest in connection with such financing (it being understood that if such interest is a percentage interest only that percentage of such Net Receivables shall be included in this calculation) over (y) the Permitted Receivables Financing Amount of such Permitted Receivables Financing. "Person" shall mean any individual, corporation, association, partnership, joint venture, trust or estate, organization, business, government or agency or political subdivision thereof, or any other entity. "Plan" shall mean any employee pension benefit plan (as defined in Section 3(2) of ERISA), other than a Multiemployer Plan, subject to Title IV of ERISA or the minimum funding standards under Section 412 of the Code or Section 302 of ERISA and established, maintained or contributed to at any time by any Borrower Group Member. "Predominantly Owned Restricted Subsidiary" shall mean any Restricted Subsidiary at least 80% of all of the equity interests of each class of which and at least 80% of the voting interests of which shall at the time be owned by the Borrower either directly or through one or more other Predominantly Owned Restricted Subsidiaries. "Prime Rate" shall have the meaning assigned to such term within the definition of "Base Rate". "Priority Debt Amount" shall mean, as of any date, an amount equal to the sum (without duplication) of (a) all Attributable Debt of the Borrower and its Restricted Subsidiaries as of such date, plus (b) the aggregate principal ---- amount outstanding on such date of all Debt of the Borrower and its Restricted Subsidiaries secured by Liens (other than Liens permitted by subdivisions (a) through (j) of Section 8.03), plus the aggregate amount of all Permitted Receivables Financing Over-Collateralization Amounts, plus (c) the aggregate principal amount outstanding on such date of all Debt of Restricted Subsidiaries (exclusive of (x) Debt of any Restricted Subsidiary owing to the Borrower or a Predominantly Owned Restricted Subsidiary, (y) Debt of any Restricted Subsidiary pursuant to the Guaranty Agreement and (z) to the extent not exceeding in aggregate principal amount for all Restricted Subsidiaries the aggregate original principal amount of the Notes, Debt of any Restricted Subsidiary pursuant to the Note Guaranties). 24 "Pro Forma Financial Statements" shall have the meaning assigned to such term in Section 9.04. "Pro Rata Prepayment Share" shall have the meaning assigned to such term in Section 3.02(b)(ii). "PYA" shall mean PYA/Monarch, Inc., a Delaware corporation. "PYA's Note" shall mean that certain promissory note of PYA, dated March 10, 1989, in the original principal amount of $110,000,000, and payable to the Borrower, which bears interest at rates between 10.35% and 10.8% per annum, as such note shall be in effect on the Closing Date. "Quoted Rate" shall mean, with respect to any Quoted Rate Swingline Loan, the fixed percentage rate per annum offered by the Swingline Lender and accepted by the Borrower with respect to such Swingline Loan as provided in accordance with the provisions of Section 2.02. "Quoted Rate Swingline Loan" shall mean a Swingline Loan bearing interest at a Quoted Rate. "Recapitalization" shall have the meaning assigned to such term in Section 5.02(m). "Receivables Financier" shall have the meaning assigned to such term in the definition of "Permitted Receivables Financing" set forth in this Section 1.01. "Receivables Financing SPC" shall have the meaning assigned to such term in the definition of "Permitted Receivables Financing" set forth in this Section 1.01. "Registration Statement" shall have the meaning assigned to such term in Section 5.02(k). "Related Entity" shall mean any partnership, corporation, trust, unincorporated association or organization, joint venture or any other entity other than the Borrower or any of its Subsidiaries in which any current officer or director of any member of the Borrower or any of its Subsidiaries has a financial interest or the ability to control its management or affairs; provided, however, that the ownership by any such officer or director of not more than five percent (5%) of the voting shares (or share equivalents) of a public company listed or traded on NASDAQ or a national exchange shall not be deemed to make such company a "Related Entity" within the meaning of this definition. "Replaced Warehouse Sale" shall mean a sale by the Borrower or a Restricted Subsidiary of assets consisting solely of a warehouse facility and related assets, including, without limitation, fixtures, equipment and other property required to operate such warehouse as theretofore operated ("Replaced Warehouse") which shall occur within two years following the 25 construction or acquisition (other than from the Borrower or a Restricted Subsidiary) by the Borrower or a Restricted Subsidiary of another warehouse facility and related assets, including, without limitation, fixtures, equipment and other property required to operate such warehouse ("Replacement Warehouse"); provided that, no such sale of a Replaced Warehouse following the construction - -------- or acquisition of a Replacement Warehouse shall constitute a Replaced Warehouse Sale unless (a) the net book value of such Replaced Warehouse (determined as of the date of sale thereof), when taken together with the aggregate net book value of each other warehouse facility (so determined) the sale of which has been or is concurrently determined to constitute a Replaced Warehouse Sale on the basis of the construction or acquisition of such Replacement Warehouse, shall not exceed the net book value of such Replacement Warehouse less the aggregate principal amount of all Debt, if any, secured by any Lien on such Replacement Warehouse, and (b) such Replacement Warehouse shall not at any time have been deemed Alternative Assets on the basis of the purchase, acquisition or construction of which any other sale of assets shall have been determined to constitute an Excluded Sale. "Reportable Event" shall mean any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. "Required Financial Information" shall mean, with respect to the applicable Determination Date, (i) the financial statements of the Borrower required to be delivered pursuant to Section 6.01 for the fiscal period or quarter ending as of such Determination Date, and (ii) the Officers' Certificate required by Section 6.01 to be delivered with the financial statements described in clause (i) above. "Required Lenders" shall mean, at any time, Lenders which are then in compliance with their obligations hereunder (as determined by the Administrative Agent) and holding in the aggregate at least 51% of (i) the Commitments to make Revolving Loans or (ii) if the Commitments have been terminated, the outstanding Loans and Participation Interests. "Responsible Officer" shall mean any officer of the Borrower who shall be permitted to sign an Officers' Certificate (as provided in the definition of that term set forth in this Section) and any other officer of the Borrower who shall at any time hereafter perform substantially the same duties as are performed on the date hereof by any such officer permitted to sign an Officers' Certificate. "Restatement Date" means the date of this Amended and Restated Credit Agreement. "Restricted Investments" shall mean all Investments other than: (a) Investments in (i) readily marketable direct obligations of the United States of America or of any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America or readily marketable obligations unconditionally guaranteed by the United States of America or by any such agency or instrumentality, in each case maturing within three years from the date of acquisition thereof, (ii) U.S. dollar denominated certificates of deposit, time deposits or 26 bankers' acceptances maturing within 270 days from the date of acquisition thereof of any commercial bank (x) which is organized under the laws of and located in the United States of America or a State thereof ("U.S. Bank") or Canada, Japan or a member country of the European Economic Community ("Foreign Bank"), (y) which has combined capital, surplus and undivided profits of at least, in the case of a U.S. Bank, $100,000,000 and, in the case of a Foreign Bank, $500,000,000, and (z) the long-term debt obligations of which are rated at least A3 by Moody's Investors Service Inc. ("Moody's") or A- by Standard & Poor's Corporation ("S&P"), (iii) money-market preferred stock or auction rate preferred stock, in each case maturing or redeemable at the option of the holder thereof no more than one year after the date of acquisition thereof and having a rating of at least A-2 by Moody's or A by S&P; (iv) obligations of any state of the United States or any political subdivision thereof, the interest with respect to which is exempt from federal income taxation under Section 103 of the Code, having a long term rating of at least Aa-3 or AA- by Moody's or S&P, respectively, and maturing within three years from the date of acquisition thereof; (v) open market commercial paper of United States corporations maturing not later than 270 days after the issuance thereof and having a rating of at least P-2 by Moody's or A-2 by S&P, and (vi) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $100,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a)(i) through (a)(v); (b) Investments in Subsidiaries of the Borrower existing on the date hereof, and other Investments existing on the date hereof and described in Schedule VII; ------------ (c) Investments in any Restricted Subsidiary or in any Person which simultaneously therewith becomes a Restricted Subsidiary; (d) Investments consisting of stock, obligations, securities or other property received by the Borrower or a Restricted Subsidiary in settlement of accounts receivable (created in the ordinary course of business) from bankrupt obligors; (e) Investments consisting of Guaranties by the Borrower and its Restricted Subsidiaries of the obligations of other Persons so long as at the time of and immediately after giving effect to each such Investment, the Borrower is in compliance with Section 8.01(c) and Section 8.02; (f) Investments by the Borrower and its Restricted Subsidiaries in property to be used in the ordinary course of their business as permitted to be conducted pursuant to Section 8.09; and (g) Investments in addition to those described in the foregoing subdivisions (a) through (f) of this definition, provided -------- that, the amount of all such additional Investments shall not exceed $10,000,000 in the aggregate. 27 "Restricted Payment" shall mean any payment or distribution or the incurrence of any liability to make any payment or distribution, in cash, property or other assets (other than shares of common stock of the Borrower) upon or in respect of any share of any class of capital stock of the Borrower or any warrants, rights or options evidencing a right to purchase or acquire any securities of the Borrower, including, without limiting the generality of the foregoing, payments or distributions as dividends and payments or distributions for the purpose of purchasing, acquiring, retiring or redeeming any such shares of stock (or any warrants, rights or options to purchase or acquire any such securities) or the making of any other distribution in respect of any such shares of stock (or any warrants, rights or options evidencing a right to purchase or acquire any such securities). "Restricted Subsidiary" shall mean each Subsidiary existing on the date hereof which is not designated as an Unrestricted Subsidiary in Schedule VIII, ------------- each other Subsidiary which is not hereafter designated by the Board of Directors as an Unrestricted Subsidiary, and each Unrestricted Subsidiary which is hereafter designated by the Board of Directors as a Restricted Subsidiary; provided, however, that (a) any Restricted Subsidiary may be redesignated an - -------- ------- Unrestricted Subsidiary as and to the extent provided in the definition of "Unrestricted Subsidiary" set forth in this Section 1.01; (b) any Subsidiary which shall be an Unrestricted Subsidiary at the commencement of any period of 30 consecutive months and which shall have been redesignated a Restricted Subsidiary during such period may, following such redesignation, be further redesignated an Unrestricted Subsidiary during such period but may not, following such further redesignation, again be redesignated a Restricted Subsidiary during such period; and (c) notwithstanding any provision hereof to the contrary, no Person which hereafter becomes a Subsidiary may be designated a Restricted Subsidiary and no Subsidiary which is designated an Unrestricted Subsidiary may be redesignated a Restricted Subsidiary unless: (i) immediately after giving effect to such designation or redesignation, no Default or Event of Default shall have occurred and be continuing, (ii) in the case of any such redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, no property or assets of such Subsidiary shall at the time of such redesignation be subject to any Liens which would not have been permitted to be created by such Subsidiary pursuant to Section 8.03, and (iii) such Subsidiary shall have become, in compliance with Section 8.18, a Guarantor under and within the meaning of the Guaranty Agreement. "Revolving Committed Amount" shall have the meaning assigned to such term in Section 2.01(a). "Revolving Loans" shall have the meaning assigned to such term in Section 2.01(a). "Sale Leaseback" shall mean any transaction or arrangement or series of transactions or arrangements pursuant to which the Borrower or any Restricted Subsidiary shall become 28 obligated as lessee under any lease of property, whether real, personal or mixed (except for (i) leases for a term of not more than three years, (ii) any lease by a Restricted Subsidiary under which the Borrower or a Predominantly Owned Restricted Subsidiary is lessor and (iii) leases of property executed prior to, at the time of or within 180 days after the later to occur of the acquisition or the commencement of commercial operation of such property) which property (a) is now owned or hereafter acquired by the Borrower or a Restricted Subsidiary (or which the Borrower or any Restricted Subsidiary intends to use for substantially the same purpose as any other property now owned or hereafter acquired by the Borrower or a Restricted Subsidiary) and (b) has been or is to be sold or transferred to any other Person. "Sara Lee" shall mean Sara Lee Corporation, a Maryland corporation. "Sara Lee Note" shall mean that certain promissory note of the Borrower, dated August 19, 1989, issued in the original principal amount of $112,000,000 and payable to PYA, which bears interest at the rate of 11% per annum, as such note shall be in effect on the Closing Date. "Sara Lee Offset Agreement" shall mean the Amended and Restated Note Offset Agreement, dated as of July 3, 1989, by and between PYA and the Borrower, providing, among other things, for the settlement of maturities of principal and accrued interest under the Sara Lee Note, on the one hand, and under PYA's Note, on the other hand, by offsetting the respective amounts due thereunder. "Securities Act" shall mean the Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Standby Letter of Credit Fee" shall have the meaning assigned to such term in Section 2.06(b)(i). "Subordinated Debt" shall mean any Debt of the Borrower or any Restricted Subsidiary which is subordinated in right of payment to any other Debt of such Person. "Subordinated Intercompany Revolving Note" shall mean, with respect to any Permitted Receivables Financing, any note issued by a Receivables Financing SPC in favor of the Borrower or any Restricted Subsidiary in connection therewith. "Subsidiary" shall mean, with respect to any Person, any corporation more than 50% of the Voting Stock of which is at the time owned by such Person and/or one or more of its other Subsidiaries. Unless otherwise specified, any reference to a Subsidiary is intended as a reference to a Subsidiary of the Borrower. "Substantial Sale" shall have the meaning assigned to such term in Section 8.07(f)(ii). "Swingline Committed Amount" shall have the meaning assigned to such term in Section 2.02. 29 "Swingline Lender" shall mean NationsBank, or, if NationsBank shall no longer be the Administrative Agent, such Lender which shall become the Administrative Agent hereunder in accordance with the provisions of Section 11.11. "Swingline Loan" shall have the meaning assigned to such term in Section 2.02. "Syndication Agent" means The Chase Manhattan Bank, as identified in the heading hereto. "Termination Event" shall mean (a) with respect to any Plan, the occurrence of a Reportable Event or an event described in Section 4062(e) of ERISA, or (b) the withdrawal of any Borrower Group Member from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, or (c) the distribution of a notice of intent to terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A of ERISA or the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or (d) the institution of proceedings to terminate a Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan or (f) the complete or partial withdrawal of any Borrower Group Member from a Multiemployer Plan. "Total Debt" shall mean, as of any date, the aggregate amount of all Debt of the Borrower and its Restricted Subsidiaries outstanding on such date (including, without limitation, Debt evidenced by the Notes), determined on a consolidated basis. "Total Debt Ratio" shall mean, as of any date, the number obtained by dividing (a) Total Debt as of such date by (b) Operating Cash Flow for the period ("Cash Flow Period") of four consecutive fiscal quarters ended on such date or (if such date shall not be a Determination Date) most recently prior to such date; provided that for purposes for determining the Total Debt Ratio as of -------- any date, in computing Operating Cash Flow for any Cash Flow Period occurring in whole or in part prior to the Effective Date, it shall be assumed that all Debt of the Borrower (including, without limitation, Debt arising hereunder or under the other Credit Documents) incurred by the Borrower on the Effective Date had been incurred on, and all Debt of the Borrower retired through the application on the Effective Date of the proceeds of the initial borrowings hereunder, the Notes or the Capital Contribution had been retired immediately prior to, the first day of such Cash Flow Period and not on the Effective Date, and that all such incurred Debt, and no such retired Debt, remained outstanding during the portion of such Cash Flow Period which occurred prior to the Effective Date. "Trade Letter of Credit Fee" shall have the meaning assigned to such term in Section 2.06(b)(ii). 30 "Transferred Assets" shall have the meaning assigned to such term in the definition of "Permitted Receivables Financing" set forth in this Section 1.01. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the present value of the accrued benefits under such Plan (based on those assumptions used to fund such Plan) as of the close of its most recent plan year exceeds the then current value of the assets of such Plan allocable to such benefits. "Unrestricted Subsidiary" shall mean each Subsidiary designated as an Unrestricted Subsidiary in Schedule VIII and each other Subsidiary which is ------------- hereafter designated by the Board of Directors as an Unrestricted Subsidiary; provided, however, that (a) any Unrestricted Subsidiary may be redesignated a - -------- ------- Restricted Subsidiary as and to the extent provided in the definition of "Restricted Subsidiary" set forth in this Section 1.01; (b) any Subsidiary which shall be a Restricted Subsidiary at the commencement of any period of 30 consecutive months and which shall have been redesignated an Unrestricted Subsidiary during such period may, following such redesignation, be further redesignated a Restricted Subsidiary during such period but may not, following such further redesignation, again be redesignated an Unrestricted Subsidiary during such period; and (c) notwithstanding any provision hereof to the contrary, no Subsidiary which is a Restricted Subsidiary may be redesignated an Unrestricted Subsidiary unless (i) immediately after giving effect to such redesignation, no Default or Event of Default shall have occurred and be continuing, and (ii) such Subsidiary does not own (directly or through its Subsidiaries) any shares of stock or other securities of (or warrants, rights or options to acquire stock or other securities of) any Restricted Subsidiary or hold any Debt of the Borrower or any Restricted Subsidiary and, at the time of such redesignation, all Debt and shares of stock of such Subsidiary which are owned by the Borrower and its Restricted Subsidiaries could be sold in compliance with Section 8.06 (in which case, such redesignation shall be deemed a disposition of assets for purposes of Section 8.07). Any Subsidiary of any Person which shall at any time be an Unrestricted Subsidiary shall itself be an Unrestricted Subsidiary for so long as such Person shall remain an Unrestricted Subsidiary (and thereafter for so long as such Subsidiary shall not have been redesignated as a Restricted Subsidiary in compliance with the definition herein of that term). "Voting Stock" shall mean capital stock of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or persons performing similar functions) of such corporation. "Weighted Average Life to Maturity" shall mean, as applied to any indebtedness at any date, the number of years (or portions of years) obtained by dividing (a) the then outstanding principal amount of such indebtedness into (b) the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required 31 payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the date on which such payment is to be made. "Wholly Owned Restricted Subsidiary" shall mean any Restricted Subsidiary 100% of all of the equity interests (except directors' qualifying shares) and voting interests of which shall at the time be owned by the Borrower either directly or through one or more other Wholly Owned Subsidiaries. SECTION 1.02. Accounting Terms, Etc. --------------------- Except as specifically provided herein, all accounting terms used herein which are not expressly defined in this Agreement have the meanings given to them in accordance with GAAP and all computations made pursuant to this Agreement shall be made in accordance with GAAP. All balance sheets and other financial statements delivered pursuant to Section 6.01 shall be prepared in accordance with GAAP. If any changes in accounting principles from those used in the preparation of the most recent financial statements referred to in Section 6.01 are hereafter required or permitted by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto) and are adopted by the Borrower with the agreement of its independent certified public accountants and such changes result or could result (for any present or future period) in a change in the method of calculation of any of the financial covenants, standards or terms in or relating to Article VIII, the parties hereto agree to enter into discussions with a view to amending such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating the financial condition of the Borrower and its Restricted Subsidiaries shall be the same after such changes as if such changes had not been made, provided that, no change in GAAP that would affect or could affect (for any present or future period) the method of calculation of any of said financial covenants, standards or terms shall be given effect in such calculations until such provisions are amended, in a manner satisfactory to the Borrower and the Required Lenders, to so reflect such change in GAAP. SECTION 1.03. Terms Generally. --------------- The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." All references herein to Articles, Sections and Schedules shall be deemed references to Articles and Sections of, and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP. SECTION 1.04. Directly or Indirectly. ---------------------- 32 Where any provision of this Agreement refers to actions to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. ARTICLE II. THE LOANS SECTION 2.01. Revolving Loans. --------------- (a) Revolving Commitment. Subject to and upon the terms and conditions -------------------- and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, at any time and from time to time from the Restatement Date until the Maturity Date, to make revolving credit loans (each a "Revolving Loan" and, collectively, "Revolving Loans") to the Borrower for the purposes set forth in Section 9.13; provided, however, (i) with regard -------- ------- to each Lender individually, such Lender's pro rata share of outstanding Revolving Loans shall not exceed such Lender's Commitment Percentage of the Revolving Committed Amount, (ii) with regard to the Lenders collectively, the aggregate amount of Revolving Loans outstanding shall not exceed ONE HUNDRED SEVENTY-FIVE MILLION DOLLARS ($175,000,000), as such maximum amount may be reduced from time to time as provided in Section 2.05 or as otherwise provided herein (such amount, as so reduced from time to time, the "Revolving Committed Amount"), and (iii) in addition to the limitations set forth in the preceding subparagraphs (i) and (ii), in no event shall the sum of Revolving Loans outstanding plus Swingline Loans outstanding plus the LOC Obligations ---- ---- outstanding plus Competitive Loans outstanding exceed the Revolving Committed ---- Amount. Revolving Loans hereunder may consist of Base Rate Loans or Eurodollar Loans (or a combination thereof) as the Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof. (b) Advances. -------- (i) Notices. Whenever the Borrower desires a Revolving Loan advance ------- hereunder, it shall give an appropriate Notice of Borrowing to the Administrative Agent by hand delivery, telex or telecopy not later than 1:00 P.M. (Charlotte, North Carolina time) on the Business Day of the requested advance in the case of Base Rate Loans, and on the third Business Day prior to the requested advance in the case of Eurodollar Loans. Each such Notice of Borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested advance (which shall be a Business Day), (C) the aggregate principal amount of the Revolving Loan requested, and (D) whether the Revolving Loan requested shall consist of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Periods with respect thereto. If the Borrower shall fail to specify in any such Notice of Borrowing (i) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (ii) the type of Revolving Loan requested, then such notice shall be deemed to be a request for a Base Rate Loan 33 hereunder. The Administrative Agent shall as promptly as practicable give each Lender notice of each requested Revolving Loan advance, of such Lender's pro rata share thereof and of the other matters covered in the applicable Notice of Borrowing. (ii) Minimum Amounts. Each Revolving Loan shall be in an aggregate --------------- principal amount that is not less than the lesser of $1,000,000 or the remaining amount available to be borrowed with respect to the Revolving Loans in accordance with the terms of Section 2.01(a). Any Revolving Loan requested in excess of $1,000,000 shall be in an integral multiple of $1,000,000. (iii) Funding of Advances. Each Lender will make its pro rata share ------------------- of each Revolving Loan available to the Administrative Agent by 3:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing by deposit in dollars of immediately available funds at the offices of the Administrative Agent in Charlotte, North Carolina, or at such other address as the Administrative Agent may designate in writing, and the Administrative Agent shall, by 4:00 P.M. (Charlotte, North Carolina time) on the same day, credit the amount so received to the general deposit account of the Borrower with the Administrative Agent. All Revolving Loans shall be made by the Lenders pro rata on the basis of each Lender's Commitment Percentage. No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make Revolving Loans hereunder; provided, however, that the failure of any Lender to fulfill -------- ------- its Commitment hereunder shall not relieve any other Lender of its Commitment hereunder. Unless the Administrative Agent shall have been notified by any Lender prior to the date of any Revolving Loan advance that such Lender does not intend to make available to the Administrative Agent its portion of the Revolving Loan advance to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on the date of such Revolving Loan advance, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent, the Administrative Agent shall be entitled to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent will promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a per annum rate equal to, with respect to the Borrower, the then applicable rate calculated in accordance with Section 2.01(d) and, with respect to such Lender, the Federal Funds Effective Rate. (c) Repayment. The Borrower hereby promises to pay to the Lenders the --------- principal amount of all Revolving Loans outstanding hereunder on the Maturity Date. 34 (d) Interest. (i) Interest Rates. Subject to the provisions of Section -------- -------------- 3.01, Revolving Loans shall bear interest as follows: (A) Base Rate Loans. During such periods as Revolving Loans --------------- shall consist of Base Rate Loans, at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days for each applicable day on which the Base Rate shall be determined on the basis of the Federal Funds Effective Rate and over a year of 365/66 days for each applicable day on which the Base Rate shall be determined on the basis of the Prime Rate) equal to the Base Rate in effect from time to time. (B) Eurodollar Loans. During such periods as Revolving Loans ---------------- shall consist of Eurodollar Loans, at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the sum of the Eurodollar Rate for the Interest Period in effect for such Eurodollar Loan plus the Applicable Margin in effect from time to time. (ii) Payment of Interest. (A) The Borrower hereby promises to ------------------- pay to the Lenders on each applicable Interest Payment Date (or at such other times as may be specified herein) accrued interest on the Revolving Loans. (B) In addition to amounts payable with respect to accrued interest on Eurodollar Loans pursuant to subsection (d)(i)(B) above, the Borrower hereby promises to pay to each Lender which is subject to a reserve requirement in respect of Eurocurrency Liabilities and which has notified the Administrative Agent and the Borrower as provided below, on each date on which interest is payable on any Eurodollar Loan pursuant to such subsection (d)(i)(B), additional interest on the Eurodollar Loans of such Lender at a rate per annum equal at all times during each Interest Period of such Eurodollar Loan to the remainder obtained by subtracting (1) the Eurodollar Rate for the Interest Period for such Eurodollar Loan from (2) the rate obtained by dividing the Eurodollar Rate for the Interest Period for such Eurodollar Loan by a percentage equal to 1.00 minus the Eurodollar Rate Reserve Percentage (expressed as a decimal) actually incurred by such Lender for the Interest Period for such Eurodollar Loan as specified in a certificate signed by a duly authorized officer of such Lender delivered to the Administrative Agent and the Borrower setting forth reasonable details of such Lender's computation. Each determination by a Lender under this Section 2.01(d)(ii)(B) shall be rebuttably presumptive evidence thereof absent manifest error. SECTION 2.02. Swingline Loan Subfacility. -------------------------- (a) Swingline Commitment. Subject to and upon the terms and conditions -------------------- and relying upon the representations and warranties herein set forth, the Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans to the Borrower (each a "Swingline Loan" and, collectively, the "Swingline Loans") from time to time from the Restatement Date until the Maturity Date for the purposes hereinafter set forth; provided, -------- 35 however, (i) the aggregate amount of Swingline Loans outstanding at any time - ------- shall not exceed FIFTEEN MILLION DOLLARS ($15,000,000) (the "Swingline Committed Amount"), and (ii) in no event shall the sum of Revolving Loans outstanding plus ---- Swingline Loans outstanding plus LOC Obligations outstanding plus Competitive ---- ---- Loans outstanding exceed the Revolving Committed Amount. Swingline Loans hereunder shall be made as Base Rate Loans or Quoted Rate Swingline Loans as the Borrower may request in accordance with the provisions of this Section 2.02, and may be repaid and reborrowed in accordance with the provisions hereof. (b) Swingline Loan Advances. ----------------------- (i) Notices; Disbursement. Whenever the Borrower desires a --------------------- Swingline Loan advance hereunder it shall give written notice (or telephone notice promptly confirmed in writing) to the Swingline Lender not later than 1:00 P.M. (Charlotte, North Carolina time) on the Business Day of the requested Swingline Loan advance. Each such notice shall be irrevocable and shall specify (A) that a Swingline Loan advance is requested, (B) the date of the requested Swingline Loan advance (which shall be a Business Day) and (C) the principal amount of the Swingline Loan advance requested. Each Swingline Loan shall be made as a Base Rate Loan or a Quoted Rate Swingline Loan and shall have such maturity date as the Swingline Lender and the Borrower shall agree by telephone, promptly confirmed in writing, upon receipt by the Swingline Lender of any such notice from the Borrower. The Swingline Lender shall credit the amount representing the Swingline Loan advance to the general deposit account of the Borrower by 3:00 P.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing. (ii) Minimum Amounts. Each Swingline Loan advance shall be in a --------------- minimum principal amount of $500,000 and in integral multiples of $100,000 in excess thereof. (iii) Repayment of Swingline Loans. The Borrower hereby promises ---------------------------- to pay to the Swingline Lender the principal amount of each Swingline Loan on the earlier of (A) the maturity date agreed to by the Swingline Lender and the Borrower with respect to such Loan (which maturity date shall not be a date more than 7 Business Days from the date of advance thereof) or (B) the Maturity Date. The Swingline Lender may, at any time, in its sole discretion, by written notice to the Borrower and the Lenders, demand repayment of its Swingline Loans by way of a Revolving Loan advance (each such Revolving Loan advance made for the purpose of repaying any Swingline Loans as provided herein being hereinafter referred to as a "Mandatory Borrowing"), in which case the Borrower shall be deemed to have requested a Revolving Loan advance comprised solely of Base Rate Loans in the amount of such Swingline Loans; provided, however, that any such demand shall be deemed to have been -------- ------- given one Business Day prior to the Maturity Date and on the date of the occurrence of any Event of Default described in Section 10.01(g) or (h) and upon acceleration of the indebtedness hereunder and the exercise of remedies in accordance with the provisions of Section 10.02. Each Lender hereby irrevocably agrees to make its pro rata share of each Revolving Loan constituting 36 a Mandatory Borrowing in the amount, in the manner and on the date specified in the preceding sentence notwithstanding (I) the amount of --------------- Mandatory Borrowing may not comply with the minimum amount for advances of Revolving Loans otherwise required hereunder, (II) whether any conditions specified in Section 5.03 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (V) whether the date of such Mandatory Borrowing is a date on which Revolving Loans are otherwise permitted to be made hereunder or (VI) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such Mandatory Borrowing. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the U.S. Bankruptcy Code with respect to the Borrower), then each Lender hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause each such Lender to share in such Swingline Loans ratably based upon its Commitment Percentage of the Revolving Committed Amount (determined before giving effect to any termination of the Commitments pursuant to Section 10.02), provided that (A) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is purchased and (B) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender interest on the principal amount of participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the Federal Funds Effective Rate. (c) Interest on Swingline Loans. (i) Subject to the provisions of --------------------------- Section 3.01, each Swingline Loan shall bear interest as follows: (A) Base Rate Loans. If such Swingline Loan is a Base Rate --------------- Loan, at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days for each applicable day on which the Base Rate shall be determined on the basis of the Federal Funds Effective Rate and over a year of 365/66 days for each applicable day on which the Base Rate shall be determined on the basis of the Prime Rate) equal to the Base Rate. (B) Quoted Rate Swingline Loans. If such Swingline Loan is a --------------------------- Quoted Rate Swingline Loan, at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the Quoted Rate applicable thereto. Notwithstanding any other provision to the contrary set forth in this Agreement, in the event that the principal amount of any Quoted Rate Swingline Loan is not repaid on the last day of the 37 Interest Period for such Loan, then such Loan shall be automatically converted into a Base Rate Loan at the end of such Interest Period. (ii) Payment of Interest. The Borrower hereby promises to pay to the ------------------- Swingline Lender on each applicable Interest Payment Date (or at such other times as may be specified herein) accrued interest on the Swingline Loans. SECTION 2.03. Letter of Credit Subfacility. ---------------------------- (a) Issuance. Subject to the terms and conditions hereof, the Lenders -------- will participate (i) in the Existing Letters of Credit and (ii) in the issuance by the Issuing Lender from time to time of such standby and trade Letters of Credit from the Restatement Date until the Maturity Date as the Borrower may request in a form acceptable to the Issuing Lender; provided, however, that (i) -------- ------- the LOC Obligations outstanding shall not at any time exceed TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the "LOC Committed Amount") and (ii) in no event shall -------------------- the sum of Revolving Loans outstanding plus Swingline Loans outstanding plus LOC ---- Obligations outstanding plus Competitive Loans outstanding exceed the Revolving ---- Committed Amount. Except as otherwise expressly agreed upon by all the Lenders, no standby Letter of Credit shall have an original expiry date more than one year from the date of issuance and no trade Letter of Credit shall have an original expiry date more than 90 days following the date of issuance thereof; provided, further, that no Letter of Credit, as originally issued or as - -------- ------- extended, shall have an expiry date extending beyond the Maturity Date except ------ that prior to the Maturity Date a Letter of Credit may be issued or extended - ---- with an expiry date extending beyond the Maturity Date if, and to the extent that, the Borrower shall provide cash collateral to the Issuing Lender on the date of issuance or extension in an amount equal to the maximum amount available to be drawn under such Letter of Credit. The obligation of the Issuing Lender to issue any Letter of Credit shall be conditioned upon delivery to the Issuing Lender of the Issuing Lender's customary application for a letter of credit, containing information necessary to issue the Letter of Credit. If such application form contains any terms or conditions, such terms or conditions (other than any terms or conditions contained in any application for a trade Letter of Credit regarding any lien or security interest of the Issuing Lender in goods to be purchased with the use of such Letter of Credit) shall have no force and effect, it being understood by the parties hereto that the issuance and payment of Letters of Credit, and all other matters between the Issuing Lender and the Lenders and the Borrower with respect to Letters of Credit and the credit relationship of the Issuing Lender and the Lenders and the Borrower shall be governed exclusively by this Agreement and applicable law. The issuance and expiry date of each Letter of Credit shall be a Business Day. (b) Notice and Reports. The request for the issuance of a Letter of ------------------ Credit shall be submitted to the Issuing Lender at least three (3) Business Days in the case of standby Letters of Credit and one (1) Business Day in the case of trade Letters of Credit, prior to the requested date of issuance. The Issuing Lender will, at least quarterly and more frequently upon request, disseminate to the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of the prior report, and including therein, among other things, the account party, the 38 beneficiary, the face amount, expiry date as well as any payment or expirations which may have occurred. (c) Participations. (i) Each Lender, upon issuance of a Letter of -------------- Credit shall be deemed to have purchased without recourse a risk participation from the Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its pro rata share of the obligations under such Letter of Credit (based on the respective Commitment Percentages of the Lenders) and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the Issuing Lender therefor and discharge when due, its pro rata share of the obligations arising under such Letter of Credit. (ii) On the Restatement Date, (A) each Lender shall be deemed to have purchased without recourse a risk participation from the Issuing Lender in each Existing Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its pro rata share of the obligations under such Existing Letter of Credit (based on the respective Commitment Percentages of the Lenders) and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the Issuing Lender therefor and discharge when due, its pro rata share of the obligations arising under such Existing Letter of Credit and (B) each Existing Letter of Credit shall be deemed for all purposes of this Agreement and the other Credit Documents to be a Letter of Credit. (iii)Without limiting the scope and nature of each Lender's participation in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any such Letter of Credit, each such Lender shall pay to the Issuing Lender its pro rata share of such unreimbursed drawing in same day funds on the day of notification by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of subsection (d) hereof. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) Reimbursement. In the event of any drawing under any Letter of ------------- Credit, the Issuing Lender will promptly notify the Borrower. Unless the Borrower shall immediately notify the Issuing Lender of its intent to otherwise reimburse the Issuing Lender, the Borrower shall be deemed to have requested a Revolving Loan in the amount of the drawing as provided in subsection (e) hereof, the proceeds of which will be used to satisfy the reimbursement obligations. The Borrower shall reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Revolving Loan obtained hereunder or otherwise) in same day funds. If the Borrower shall fail to reimburse the Issuing Lender as provided hereinabove, the unreimbursed amount of such drawing shall bear interest at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days for each applicable day on which the Base Rate shall be determined on the basis of the Federal Funds Effective Rate and over a year of 365/66 days for each applicable day on which the Base Rate 39 shall be determined on the basis of the Prime Rate) equal to the Base Rate plus two percent (2%). The Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of any rights of set-off, counterclaim or defense to payment the Borrower may claim or have against the Issuing Lender, the Administrative Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation any defense based on any failure of the Borrower or any Restricted Subsidiary to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit. The Issuing Lender will promptly notify the other Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Administrative Agent for the account of the Issuing Lender in Dollars and in immediately available funds, the amount of such Lender's pro rata share of such unreimbursed drawing. Such payment shall be made on the day such notice is received by such Lender from the Issuing Lender if such notice is received at or before 2:00 p.m., Charlotte, North Carolina time, otherwise such payment shall be made at or before 12:00 noon, Charlotte, North Carolina time, on the Business Day next succeeding the day such notice is received. If such Lender does not pay such amount to the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Administrative Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date of such drawing until such Lender pays such amount to the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business Days of the date of drawing, the Federal Funds Effective Rate (computed on the basis of the actual number of days elapsed over a year of 360 days) and thereafter at a rate equal to the Base Rate (computed on the basis of the actual number of days elapsed over a year of 360 days for each applicable day on which the Base Rate shall be determined on the basis of the Federal Funds Effective Rate and over a year of 365/66 days for each applicable day on which the Base Rate shall be determined on the basis of the Prime Rate). Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the obligations of the Borrower hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. Simultaneously with the making of each such payment by a Lender to the Issuing Lender, such Lender shall, automatically and without any further action on the part of the Issuing Lender or such Lender, acquire a participation in an amount equal to such payment (excluding the portion of such payment constituting interest owing to the Issuing Lender) in the related unreimbursed drawing portion of the LOC Obligation and in the interest thereon and in the related LOC Documents, and shall have a claim against the Borrower with respect thereto. (e) Modification, Extension. The issuance of any supplement, modification, ----------------------- amendment, renewal, or extension to any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (f) Uniform Customs and Practices. Except as otherwise expressly stated ----------------------------- herein, any Letter of Credit shall be subject to The Uniform Customs and Practice for Documentary Credits, as published as of the date of issue by the International Chamber of Commerce (the "UCP"), and to such extent the UCP shall be incorporated therein and deemed in all respects to be a part 40 thereof as to matters governed by this Agreement or by the UCP, each Letter of Credit shall be construed in accordance with and governed by the laws of the State of New York. (g) Provisions Relating to Trade Letters of Credit. ---------------------------------------------- (i) The Borrower agrees to procure or to cause the beneficiaries of each trade Letter of Credit to procure promptly any necessary import and export or other licenses for the import or export or shipping of any goods referred to in or pursuant to a trade Letter of Credit and to comply and to cause the beneficiaries to comply with all foreign and domestic governmental regulations with respect to the shipment and warehousing of such goods or otherwise relating to or affecting such trade Letter of Credit, including governmental regulations pertaining to transactions involving designated foreign countries or their nationals, and to furnish such certificates in that respect as the Issuing Lender thereof may at any time reasonably require, and to keep such goods adequately covered by insurance in amounts, with carriers and for such risks as shall be customary in the industry and to cause the Issuing Lender's interest to be endorsed on such insurance and to furnish the Issuing Lender at its request with reasonable evidence thereof. Should such insurance (or lack thereof) upon said goods for any reason not be reasonably satisfactory to such Issuing Lender, the Issuing Lender may (but is not obligated to) obtain, at the Borrower's expense, insurance satisfactory to the Issuing Lender. (ii) In connection with each trade Letter of Credit, neither any Issuing Lender nor any of their correspondents shall be responsible for: (A) the existence, character, quality, quantity, condition, packing, value or delivery of the property purporting to be represented by documents; (B) any difference in character, quality, quantity, condition or value of the property from that expressed in documents; (C) the time, place, manner or order in which shipment of the property is made; (D) partial or incomplete shipment referred to in such credit; (E) the character, adequacy or responsibility of any insurer, or any other risk connected with insurance; (F) any deviation from instructions, delay, default or fraud by the beneficiary or any one else in connection with the property or the shipping thereof; (G) the solvency, responsibility or relationship to the property of any party issuing any documents in connection with the property; (H) delay in arrival or failure to arrive of either the property or any of the documents relating thereto; (I) delay in giving or failure to give notice of arrival or any other notice; (J) any breach of contract between the shippers or vendors and the Borrower or any applicable Restricted Subsidiary; (K) any laws, customs, and regulations which may be effective in any jurisdiction where any negotiation and/or payment of such trade Letter of Credit occurs; (L) failure of documents (other than documents required by the terms of the trade Letter of Credit) to accompany any draft at negotiation; or (M) failure of any person to note the amount of any document or drafts on the reverse of such trade Letter of Credit or to surrender or to take up such trade Letter of Credit or to forward documents other than documents required by the terms of the trade Letter of Credit. In connection with each trade Letter of Credit, the Lender shall not be responsible for any error, neglect or default of any of their correspondents. Nothing set forth in the above shall affect, impair or prevent the vesting of any of the Issuing Lender's rights or powers hereunder. If a trade Letter of Credit provides that payment is to be made by the Issuing Lender's correspondent, neither the Issuing Lender nor such correspondent shall be responsible for the failure of any of the documents specified in such trade Letter of Credit to come into the Issuing Lender's hands, or for any delay in connection 41 therewith, and the Borrower's obligation to make reimbursements shall not be affected by such failure or delay in the receipt of any such documents. (iii) Notwithstanding anything to the contrary set forth in this Agreement, a trade Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of any Subsidiary of the Borrower, provided that notwithstanding such statement, the -------- Borrower shall be the actual account party for all purposes of this Agreement for such Letter of Credit and such statement shall not affect the Borrower's obligations hereunder with respect to such Letter of Credit. (h) Nature of Issuing Lender's Duties. --------------------------------- (i) As between the Borrower and the Issuing Lender, the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuing Lender shall not be responsible: (A) for the validity, accuracy, genuineness or legal effect of drafts, required statements or documents, even if such drafts, statements or documents should in fact prove to be in any or all respects invalid, inaccurate, fraudulent or forged; (B) for any defect in a draft, payment request or other document unless such defect is readily apparent upon the face of the draft, payment request or other document; (C) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; or (D) for any consequences arising from causes beyond the control of the Issuing Lender, including, without limitation, any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (ii) If the Borrower consents to any overdrafts under any Letter of Credit or authorizes in writing payment under any Letter of Credit with irregular accompanying documents or authorizes or consents to any departure from the terms of such Letter of Credit, this Agreement shall be fully binding upon the Borrower with respect to such overdrafts, irregularities or both and Lenders' rights shall be, in every respect, the same as if this Agreement and such Letter of Credit expressly provided for such overdraft or irregularity or both. If at the request of the Borrower there is any extension of time for presentation of any payment request or any document under a Letter of Credit, this Agreement shall be fully binding upon the Borrower with regard to any payment request and documents presented within such extended time. (iii) Nothing in this subsection (i) is intended to limit the reimbursement obligation of the Borrower contained in subsection (d) above. No act or omissions of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Issuing Lender to enforce any right, power or benefit under this Agreement. SECTION 2.04 Competitive Loan Subfacility. ---------------------------- (a) Competitive Loans. Subject to and upon the terms and conditions and ----------------- relying upon the representations and warranties herein set forth, the Borrower may, from time to time until the 42 Termination Date, request and each Lender may, in its sole discretion, agree to make, Competitive Loans in Dollars to the Borrower; provided, however, that (i) ----------------- the aggregate principal amount of outstanding Competitive Loans shall not at any time exceed the lesser of (a) ONE HUNDRED SEVENTY-FIVE MILLION DOLLARS ------ ($175,000,000) or (b) the Revolving Committed Amount (the "Competitive Loan ---------------- Maximum Amount"), and (ii) the sum of Revolving Loans outstanding plus Swingline - -------------- ---- Loans outstanding plus the LOC Obligations outstanding plus Competitive Loans ---- ---- outstanding shall not at any time exceed the Revolving Committed Amount. Each Competitive Loan shall be not less than $5,000,000 in the aggregate and integral multiples of $1,000,000 in excess thereof (or the remaining portion of the Competitive Loan Maximum Amount, if less). (b) Competitive Bid Requests. The Borrower may solicit Competitive Bids ------------------------ by delivery of a Competitive Bid Request substantially in the form of Schedule -------- VA-1 to the Administrative Agent by 12:00 Noon (Charlotte, North Carolina time) - ---- on a Business Day not less than one (1) nor more than four (4) Business Days prior to the date of a requested Competitive Loan borrowing. A Competitive Bid Request shall specify (i) the date of the requested Competitive Loan borrowing (which shall be a Business Day), (ii) the amount of the requested Competitive Loan borrowing and (iii) the applicable Interest Periods requested and shall be accompanied by payment of the Competitive Bid Request Fee. The Administrative Agent shall, promptly following its receipt of a Competitive Bid Request under this subsection (b), notify the Lenders of its receipt and the contents thereof and invite the Lenders to submit Competitive Bids in response thereto. A form of such notice is provided in Schedule VA-2. No more than two (2) Competitive Bid ------------- Requests (e.g., the Borrower may request Competitive Bids for no more than two (2) different Interest Periods at a time) shall be submitted at any one time and Competitive Bid Requests may be made no more frequently than once every five (5) Business Days. (c) Competitive Bid Procedure. Each Lender may, in its sole discretion, ------------------------- make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid must be received by the Administrative Agent not later than 10:00 A.M. (Charlotte, North Carolina time) on the Business Day next succeeding the date of receipt by the Administrative Agent of the related Competitive Bid Request. A Lender may offer to make all or part of the requested Competitive Loan borrowing and may submit multiple Competitive Bids in response to a Competitive Bid Request. The Competitive Bid shall specify (i) the particular Competitive Bid Request as to which the Competitive Bid is submitted, (ii) the minimum (which shall be not less than $1,000,000 and integral multiples of $1,000,000 in excess thereof) and maximum principal amounts of the requested Competitive Loan or Loans as to which the Lender is willing to make, and (iii) the applicable interest rate or rates and Interest Period or Periods therefor. A form of such Competitive Bid is provided in Schedule VA-3. A Competitive Bid ------------- submitted by a Lender in accordance with the provisions hereof shall be irrevocable. The Administrative Agent shall promptly notify the Borrower by no later than 10:30 A.M. (Charlotte, North Carolina time) on the Business Day succeeding the date of receipt by the Administrative Agent of the related Competitive Bid Request of all Competitive Bids made and the terms thereof. The Administrative Agent shall send a copy of each of the Competitive Bids to the Borrower for its records as soon as practicable. 43 (d) Submission of Competitive Bids by Administrative Agent. If the ------------------------------------------------------ Administrative Agent, in its capacity as a Lender, elects to submit a Competitive Bid in response to any Competitive Bid Request, it shall submit such Competitive Bid directly to the Borrower one-half of an hour earlier than the latest time at which the other Lenders are required to submit their Competitive Bids to the Administrative Agent in response to such Competitive Bid Request pursuant to subsection (c) above. (e) Acceptance of Competitive Bids. The Borrower may, in its sole and ------------------------------ absolute discretion, subject only to the provisions of this subsection (e), accept or refuse any Competitive Bid offered to it. To accept a Competitive Bid, the Borrower shall give written notification (or telephonic notice promptly confirmed in writing) substantially in the form of Schedule VA-4 of its ------------- acceptance of any or all such Competitive Bids to the Administrative Agent by 11:00 A.M. (Charlotte, North Carolina time) on the date on which notice of election to make a Competitive Bid is to be given to the Administrative Agent by the Lenders; provided, however, (i) the failure by the Borrower to give timely -------- ------- notice of its acceptance of a Competitive Bid shall be deemed to be a refusal thereof, (ii) the Borrower may accept Competitive Bids only in ascending order of rates, (iii) the aggregate amount of Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) the Borrower may accept a portion of a Competitive Bid in the event, and to the extent, acceptance of the entire amount thereof would cause the Borrower to exceed the principal amount specified in the Competitive Bid Request, subject however to the minimum amounts provided herein (and provided that where two or more Lenders submit such a Competitive Bid at the same Competitive Bid Rate, then pro rata between or among such Lenders) and (v) no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $1,000,000 and integral multiples of $1,000,000 in excess thereof, except that where a portion of a Competitive Bid is accepted in accordance with the provisions of subsection (iv) hereof, then in a minimum principal amount of $1,000,000 and integral multiples of $1,000,000 in excess thereof (but not in any event less than the minimum amount specified in the Competitive Bid), and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to subsection (iv) hereof, the amounts shall be rounded to integral multiples of $1,000,000 in a manner which shall be in the discretion of the Borrower. A notice of acceptance of a Competitive Bid given by the Borrower in accordance with the provisions hereof shall be irrevocable. The Administrative Agent shall, not later than 12:00 Noon (Charlotte, North Carolina time) on the date of receipt by the Administrative Agent of a notification from the Borrower of its acceptance and/or refusal of Competitive Bids, notify each affected Lender of its receipt and the contents thereof. Upon its receipt from the Administrative Agent of notification of the Borrower's acceptance of its Competitive Bid in accordance with the terms of this subsection (e), each successful bidding Lender will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted. (f) Funding of Competitive Loans. Each Lender which is to make a ---------------------------- Competitive Loan shall make its Competitive Loan borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified herein by 1:30 P.M. (Charlotte, North Carolina time) on the date specified in the Competitive Bid Request in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to 44 the Borrower by crediting the account of the Borrower on the books of such office with the aggregate of the amount made available to the Administrative Agent by the applicable Competitive Loan Lenders and in like funds as received by the Administrative Agent. (g) Maturity of Competitive Loans. Each Competitive Loan shall mature ----------------------------- and be due and payable in full on the last day of the Interest Period applicable thereto. Unless the Borrower shall give notice to the Administrative Agent otherwise, the Borrower shall be deemed to have requested a Revolving Loan borrowing in the amount of the maturing Competitive Loan, the proceeds of which will be used to repay such Competitive Loan. (h) Interest on Competitive Loans. Subject to the provisions of Section ----------------------------- 3.1, Competitive Loans shall bear interest in each case at the Competitive Bid Rate applicable thereto. Interest on Competitive Loans shall be payable in arrears on each Interest Payment Date. SECTION 2.05. Termination and Reduction of Commitments. ---------------------------------------- (a) Voluntary. The Borrower may from time to time permanently reduce or --------- terminate the aggregate Revolving Committed Amount in whole or in part (in minimum aggregate amounts of the lesser of $1,000,000 or the full remaining amount of the Revolving Committed Amount) upon three Business Days' prior written notice to the Administrative Agent; provided, however, no such termination or reduction shall be made which would reduce the Revolving Committed Amount to an amount less than the sum of Revolving Loans outstanding plus Swingline Loans outstanding plus LOC Obligations outstanding. The commitments of the Lenders to make, extend or convert Revolving Loans shall automatically terminate on the Maturity Date. The Administrative Agent shall promptly notify each of the Lenders of receipt by the Administrative Agent of any notice from the Borrower pursuant to this Section 2.05. (b) Mandatory. At the option of the Required Lenders (evidenced by --------- prompt written notice thereof from the Administrative Agent, on behalf of the Required Lenders, to the Borrower), the aggregate Revolving Committed Amount shall be permanently reduced by the amount of any mandatory payment, prepayment or other reduction of the Loans and LOC Obligations made in accordance with the terms of Section 3.02(b)(ii)(A). SECTION 2.06. Fees. ---- (a) Facility Fee. In consideration of the Commitments hereunder, the ------------ Borrower agrees to pay to the Administrative Agent for the account of the Lenders a facility fee (the "Facility Fee") on the aggregate Revolving Committed Amount computed from the Restatement Date at a per annum rate equal to the Applicable Margin for each day during the applicable period. The Facility Fee shall be payable quarterly in arrears on the fifteenth (15th) day of each January, April, July and October and on the Maturity Date for the immediately preceding fiscal quarter (or portion thereof). (b) Letter of Credit Fees. --------------------- 45 (i) Standby Letter of Credit Fee. In consideration of the issuance of ---------------------------- standby Letters of Credit hereunder, the Borrower agrees to pay to the Issuing Lender a fee (the "Standby Letter of Credit Fee") equal to the Applicable Margin for Letters of Credit plus one-eighth of one percent (1/8%) per annum on the average daily maximum amount available to be drawn under each such Letter of Credit from the date of issuance to the date of expiration. Of such Standby Letter of Credit Fee, the Issuing Lender shall retain for its own account without sharing by the other Lenders one-eighth of one percent (1/8%) per annum thereon and shall promptly pay over to the Administrative Agent for the ratable benefit of the Lenders (including the Issuing Lender) the remainder of amounts paid on the Standby Letter of Credit Fee; provided, however, that the Lenders -------- ------- shall not be entitled to any such fee in respect of a standby Letter of Credit which is an Existing Letter of Credit if such fee has been deemed to be earned during the period prior to the Closing Date (it being understood and agreed by each of the Lenders that any such fee in respect of a standby Letter of Credit which is an Existing Letter of Credit shall be deemed to be earned evenly throughout the period for which it is paid regardless of when it was paid). The Standby Letter of Credit Fee will be payable quarterly in arrears on the 15th day of each January, April, July and October. (ii) Trade Letter of Credit Fee. In consideration of the issuance of -------------------------- trade Letters of Credit hereunder, the Borrower agrees to pay to the Issuing Lender a fee (the "Trade Letter of Credit Fee") equal to one-quarter of one percent (1/4%) of the amount of each drawing under any such Letter of Credit or such lesser amount as may be agreed upon by the Issuing Lender and the Borrower. Of such Trade Letter of Credit Fee, the Issuing Lender shall pay over to the Administrative Agent for the ratable benefit of the Lenders (including the Issuing Lender) one-eighth of one percent (1/8%) thereof and the Issuing Lender may retain for its own account without sharing by the other Lenders the amount in excess thereof, if any. The Trade Letter of Credit Fee will be collected by the Issuing Lender on the date of each drawing, the Lenders' portion of which will be paid over to the Administrative Agent quarterly on the 15th day of each January, April, July and October for distribution to the Lenders (including the Issuing Lender). (iii) Issuing Lender Fees. In addition to the Standby Letter of Credit ------------------- Fees and Trade Letter of Credit Fees payable pursuant to clauses (i) and (ii) above, the Borrower shall pay to the Issuing Lender for its own account without sharing by the other Lenders the customary charges from time to time of the Issuing Lender with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit (collectively, the "Issuing Lender Fees"). (c) Agents' Fees. The Borrower agrees to pay to the Administrative ------------ Agent and Arranger, for their own account, such structuring, syndication, administrative and other fees (collectively, the "Agents' Fees") as provided in the Mandate Letter, the Administrative Agent's Fee Letter. (d) Competitive Bid Request Fee. The Borrower shall pay to the --------------------------- Administrative Agent concurrently with each Competitive Bid Request such administrative fee as provided in the Administrative Agent's Fee Letter (the "Competitive Bid Request Fee"). 46 ARTICLE III. ADDITIONAL PROVISIONS REGARDING LOANS SECTION 3.01. Default Rate. ------------ Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the rate which would otherwise be applicable. SECTION 3.02. Prepayments. ----------- (a) Voluntary. --------- (i) Revolving Loans and Competitive Loans. The Borrower shall have ------------------------------------- the right to prepay Revolving Loans and Competitive Loans in whole or in part from time to time without premium or penalty; provided, however, that (A) each -------- ------- such partial prepayment shall be a minimum principal amount of $1,000,000 or an integral multiple of $500,000 in excess thereof and (B) no Eurodollar Loan or Competitive Loan may be prepaid prior to the last day of the Interest Period applicable thereto unless accompanied by payment of amounts specified in Section 3.07. Amounts prepaid on the Revolving Loans may be reborrowed in accordance with the provisions hereof. (ii) Swingline Loans. The Borrower shall have the right to prepay --------------- Swingline Loans which are Base Rate Loans in whole or in part from time to time without premium or penalty; provided, however, that each such partial prepayment -------- ------- shall be a minimum principal amount of $100,000 or an integral multiple of $100,000 in excess thereof. Swingline Loans which are Quoted Rate Swingline Loans may not be prepaid unless accompanied by payments of amounts specified in Section 3.07. Amounts prepaid on the Swingline Loans may be reborrowed in accordance with the provisions hereof. (iii) Application. Amounts prepaid hereunder shall be applied to the ----------- Revolving Loans and the Swingline Loans as the Borrower may elect, provided that -------- if the Borrower shall fail to specify its application, prepayments shall be applied, first, to the Swingline Loans (and with respect to Base Rate Loans and Quoted Rate Swingline Loans comprising such Loans, first to Base Rate Loans and then to Quoted Rate Swingline Loans in direct order of Interest Period maturities), second, to Revolving Loans (and with respect to Base Rate Loans and Eurodollar Loans comprising such Loans, first to Base Rate Loans and then to Eurodollar Loans in direct order of Interest Period maturities) and, third, to Competitive Loans in direct order of Interest Period maturities. (b) Mandatory. --------- 47 (i) Revolving Committed Amount Limitation. If at any time (A) the sum ------------------------------------- of Revolving Loans outstanding plus Swingline Loans outstanding plus LOC ---- ---- Obligations outstanding plus Competitive Loans outstanding shall exceed (B) the ---- Revolving Committed Amount, then in any such instance the Borrower shall pay, prepay or otherwise reduce so much of the outstanding Loans and LOC Obligations as shall be necessary to eliminate such excess. (ii) Excess Sale Events. In the event that there shall occur any Excess ------------------ Sale Event, the Borrower will give the Administrative Agent and each of the Lenders, not later than the date of such Excess Sale Event (which, in the case of an Excess Sale Event consisting of a Sale Leaseback, shall be deemed to be the date of the sale of the assets subject thereto), written notice thereof ("Excess Sale Notice"). Each Excess Sale Notice shall set forth (i) the date of such Excess Sale Event and a description of the facts or circumstances giving rise thereto and (ii) the amount of the Available Fund resulting from such Excess Sale Event and the Pro Rata Prepayment Share thereof (together with computations showing the calculation of such amount and such Pro Rata Prepayment Share). On the thirty-fifth day following the giving of any Excess Sale Notice, the Borrower shall pay, prepay or otherwise reduce the outstanding Loans and LOC Obligations by an amount equal to the Pro Rata Prepayment Share of the Available Fund resulting from the Excess Sale Event to which such Excess Sale Notice relates. For purposes hereof: (A) "Excess Sale Event" shall mean (1) any Sale Leaseback to the extent such Sale Leaseback is not consummated in compliance with subdivision (a) of Section 8.04 or (2) the expiration of the Application Period for any Substantial Sale as to which the sum of (I) the amount applied (or caused to be applied) by the Borrower during such Application Period by reason of such Substantial Sale to the purchase, acquisition or construction of Additional Assets plus (II) ---- the Additional Portion, if any, of such Net Sale Proceeds to be so applied during the Further Period immediately following such Application Period, as specified in the Officers' Certificate furnished pursuant to subdivision (ii)(B) of Section 8.07 in connection with such Substantial Sale, shall not be at least equal to the amount of such Net Sale Proceeds during which an amount equal to the Net Sale Proceeds of such Substantial Sale shall not have been applied (or caused to be applied) by the Borrower, by reason of such Substantial Sale, to the purchase, acquisition or (in the case of real estate) construction of Alternative Assets; (B) "Available Fund" resulting from any Excess Sale Event shall mean (1) if such Excess Sale Event shall consist of a Sale Leaseback, an amount equal to the Net Sale Proceeds of the assets sold by the Borrower or a Restricted Subsidiary, as the case may be, in connection with such Sale Leaseback or (2) if such Excess Sale Event shall consist of the expiration of the Application Period for a Substantial Sale, an amount equal to the excess of (I) the Net Sale Proceeds of such Substantial Sale over (II) the sum of (x) the aggregate amount applied (or caused to be applied) by the Borrower during such Application Period, by reason of such Substantial Sale, to the purchase, acquisition or (in the case of real estate) construction of Alternative Assets plus (y) the Additional Portion, if any, of such ---- Net Sale Proceeds to be so applied during the Further Period immediately 48 following such Application Period, as specified in the Officers' Certificate furnished pursuant to subdivision (ii)(B) of Section 8.07 in connection with such Substantial Sale; and (C) "Pro Rata Prepayment Share" of any Available Fund resulting from any Excess Sale Event shall mean a percentage of such Available Fund (rounded to the nearest one-hundredth of one percent) determined as of the date that the Excess Sale Notice with respect to the related Excess Sale Event is required to be given under this Section 3.02(b)(ii) obtained by dividing (1) the sum (without duplication) of Revolving Loans then outstanding plus Swingline Loans ---- then outstanding plus LOC Obligations then outstanding plus Competitive ---- ---- Loans then outstanding by (2) the sum of (x) the aggregate then outstanding principal amount of all Revolving Loans then outstanding plus Swingline Loans then outstanding plus LOC Obligations then ---- ---- outstanding plus Competitive Loans then outstanding plus (y) the amount ---- ---- determined pursuant to clause (1) above in respect of such Available Fund. (iii) Payments and prepayments pursuant to this Section 3.02(b) shall be applied, first, to Swingline Loans (and with respect to Base Rate Loans ----- and Quoted Rate Swingline Loans comprising such Loans, first to Base Rate Loans and then to Quoted Rate Swingline Loans in direct order of Interest Period maturities), until all Swingline Loans have been repaid or prepaid in full; second, to Revolving Loans (and with respect to Base Rate Loans and Eurodollar - ------ Loans comprising such Loans, first to Base Rate Loans and then to Eurodollar Loans in direct order of Interest Period maturities), until all Revolving Loans have been repaid or prepaid in full; third, to Competitive Loans in direct order ----- of Interest Period maturities; and fourth, to the extent necessary, to the ------ payment to the Administrative Agent of additional amounts of cash, to be held by the Administrative Agent, for the benefit of the Issuing Lender and the other Lenders, in a cash collateral account as additional security for the Borrower's LOC Obligations for subsequent drawings under then outstanding Letters of Credit. (c) General. All prepayments of Loans shall be subject to Section 3.07 ------- but otherwise without premium or penalty and shall be accompanied by accrued interest on the principal amount being prepaid to the date of prepayment and all other amounts due and payable hereunder with respect to such Loans. SECTION 3.03. Extension and Conversion. The Borrower shall have the option, on any Business Day, to extend existing Loans into a subsequent Interest Period or to convert Loans into Loans of another type; provided, however, that (i) except as provided in Section 3.06, -------- ------- Eurodollar Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no Default or Event of Default is in existence on the date of extension or conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall be in such minimum amounts as provided in Section 2.01(b), (iv) any request for extension or conversion of a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month and 49 (v) Swingline Loans may not be converted or extended pursuant to this Section 3.03. Each such extension or conversion shall be effected by the Borrower by giving a Notice of Extension/Conversion (or telephone notice promptly confirmed in writing) to the Administrative Agent prior to 1:00 P.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan and on the third Business Day prior to, in the case of the extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Loans to be so extended or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Each request for extension or conversion shall constitute a representation and warranty by the Borrower of the matters specified in Section 5.03(b), (c), (d) and (e). In the event the Borrower fails to request extension or conversion of any Eurodollar Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then such Loans shall be automatically converted into Base Rate Loans at the end of their Interest Period. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. SECTION 3.04. Alternate Rate of Interest. -------------------------- In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Loan the Administrative Agent shall have determined in good faith (i) that dollar deposits in the principal amounts of such Eurodollar Loan are not generally available in the London interbank market or (ii) that reasonable means do not exist for ascertaining the Eurodollar Rate as practicable thereafter, give telex or telecopy notice of such determination to the Borrower and the Lenders. In the event of any such determination under clause (i) or (ii) above, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (A) any request by the Borrower for a Eurodollar Loan pursuant to Section 2.01(b) shall be deemed to be a request for a Base Rate Loan and (B) any request by the Borrower for conversion into or extension of a Eurodollar Loan pursuant to Section 3.03 shall be deemed to be a request for conversion into or extension of a Base Rate Loan. Each determination by the Administrative Agent hereunder shall be in good faith and shall be rebuttably presumptive evidence thereof absent manifest error. SECTION 3.05. Reserve Requirements; Change in Circumstances. --------------------------------------------- (a) Notwithstanding any other provision herein, if after the Relevant Date (as defined in paragraph (c) below) any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Body charged with the interpretation or administration thereof (whether or not having the force of law) shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by such Lender (including without limitation the Swingline Lender and the Issuing Lender), or shall impose on such Lender or the London interbank market any other condition affecting this Agreement, such Lender's Commitment, any Loan made by such Lender, any Letter of Credit issued by such Lender or any Participation Interest held by such Lender (other than the imposition of or change in the rate of any Taxes as defined in Section 50 4.04 or the imposition of or change in the rate of any item specifically excluded from such definition of Taxes pursuant to the terms of such Section), and the result of any of the foregoing shall be to increase the cost to such Lender of making, issuing or maintaining such Loan, Letter of Credit or Participation Interest, as the case may be, or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then the Borrower will pay to such Lender in accordance with paragraph (d) below upon demand such additional amount or amounts as will compensate such Lender for any such additional costs incurred or reduction suffered after delivery to the Borrower of a certificate relating to such additional costs or such reduction as contemplated by such paragraph (d). (b) If any Lender (including without limitation the Swingline Lender, the Issuing Lender and any Competitive Lender) shall have determined that after the Relevant Date the applicability of any law, rule, regulation or guideline adopted pursuant to or arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards," or the adoption after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Body, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or any Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement, such Lender's Commitment or any Loan made by such Lender pursuant hereto, any Letter of Credit issued by such Lender pursuant hereto or any Participation Interest held by such Lender pursuant hereto to a level below that which such Lender or such Lender's holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time after delivery to the Borrower of a certificate relating to such additional cost or costs as contemplated by paragraph (d) below, the Borrower shall pay to such Lender in accordance with such paragraph (d) such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) For purposes of this Section 3.05, "Relevant Date" shall mean, in the case of a Lender that is a Lender on the date hereof and, in the case of a Lender that becomes a Lender after the date hereof as provided in Section 12.04(b), the date on which such Lender becomes a Lender under such Section. (d) A certificate signed by a duly authorized officer of a Lender setting forth such amount or amounts (including computation of such amount or amounts) as shall be necessary to compensate such Lender or its holding company as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Borrower and the Administrative Agent, and the Borrower 51 shall pay to such Lender, within 30 Business Days after receipt by the Borrower of such certificate delivered by the Lender, the amount shown as due on any such certificate. (e) The protection of this Section shall be available to each Lender (including without limitation the Swingline Lender and the Issuing Lender) regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. Each determination by a Lender (including without limitation the Swingline Lender and the Issuing Lender) under this Section 3.05 shall be in good faith and shall be rebuttably presumptive evidence thereof absent manifest error. SECTION 3.06. Change in Legality. ------------------ (a) Notwithstanding any other provision herein, if any change in any law or regulation or in the interpretation thereof by any Governmental Body charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by 30 days' (or such shorter period as shall be required in order to comply with applicable law) written notice to the Borrower and to the Administrative Agent, such Lender may: (i) declare that Eurodollar Loans, and conversions into or extensions of Eurodollar Loans, will not thereafter be made by such Lender hereunder, whereupon any request by the Borrower for, or for conversion into or extension of, a Eurodollar Loan shall, as to such Lender only, be deemed a request for, or for conversion into or extension of, a Base Rate Loan, unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to Base Rate Loans, in which event all such Eurodollar Loans shall be automatically converted to Base Rate Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the Base Rate Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 3.06, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower. Each determination by a Lender under this Section 3.06 shall be in good faith and shall be rebuttably presumptive evidence thereof absent manifest error. SECTION 3.07. Indemnity. --------- 52 The Borrower shall indemnify each Lender (including without limitation the Swingline Lender) against any loss, cost or expense which such Lender may sustain or incur as a consequence of (a) any failure by the Borrower to borrow or to refinance, convert or extend any Loan hereunder after notice of such borrowing, refinancing, conversion or extension has been given pursuant to Section 2.01, 2.02 or 3.03, or (b) any payment, prepayment or conversion by the Borrower of a Eurodollar Loan, Quoted Rate Swingline Loan or a Competitive Loan required by any other provision of this Agreement or otherwise made or deemed made on a date other than the last day of the Interest Period, if any, applicable thereto. In the case of any such event, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to such Lender any amounts required to compensate such Lender for any reasonable loss, cost or expense which such Lender may incur as a result of such action or inaction by the Borrower, including without limitation any reasonable loss, cost or expense incurred by reason, of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Loan or proposed Loan. Each determination by a Lender under this Section 3.07 shall be in good faith and shall be rebuttably presumptive evidence thereof absent manifest error. SECTION 3.08. Mandatory Assignment; Commitment Termination. -------------------------------------------- In the event that any Lender delivers to the Administrative Agent or the Borrower, as appropriate, a certificate in accordance with Section 3.05(d) or a notice in accordance with Section 3.06 or in the event that any Lender fails to fulfill its Commitment to make any Revolving Loan, then, provided that no Default or Event of Default has occurred and is continuing at such time, the Borrower may, at its own expense (such expense to include any transfer fee payable to the Administrative Agent under Section 12.04(b)), and in its sole discretion (a) require such Lender to transfer and assign in whole or in part, without recourse (in accordance with and subject to the terms and conditions of Section 12.04(b)), all or part of its interests, rights and obligations under this Agreement to an Eligible Assignee which shall assume such assigned obligations (which Eligible Assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such assignment shall not relieve the Borrower from its obligations to pay such additional amounts that may be due in accordance with Section 3.05(b), (ii) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Body and (iii) the Borrower or such Eligible Assignee shall have paid to the assigning Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Loans made by it hereunder and all accrued Fees and other amounts owed to it hereunder or (b) terminate the Commitment of such Lender, prepay all outstanding Loans of such Lender and cash collateralize such Lender's Participation Interests in Swingline Loans and LOC Obligations then outstanding; provided that (i) such termination of the Commitment of such Lender shall not relieve the Borrower from its obligations to pay such additional amounts that may be due in accordance with Section 3.05(b), (ii) such termination of the Commitment of such Lender, prepayment of Loans and cash collateralization of such Participation Interests in Swingline Loans and LOC Obligations does not conflict with any law, rule or regulation or order of any court or other Governmental Body and (iii) the Borrower shall have paid to such Lender in immediately available funds the principal of and interest accrued to 53 the date of such payment on the Loans made by it hereunder and all other amounts owed to it hereunder and shall have cash collateralized such Lender's Participation Interests in outstanding Swingline Loans and LOC Obligations. ARTICLE IV. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; U.S. TAXES; EVIDENCE OF LOANS SECTION 4.01. Payments and Computations. ------------------------- Except as otherwise specifically provided herein, all payments hereunder shall be made to the Administrative Agent in dollars in immediately available funds, without offset, deduction or withholding of any kind, at its offices at NationsBank Corporate Center, Charlotte, North Carolina not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. The Administrative Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Administrative Agent (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Agreement, specify to the Administrative Agent the Loans, LOC Obligations, Fees or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Lenders (including without limitation the Swingline Lender and the Issuing Lender) in such manner as the Administrative Agent may determine to be appropriate in respect of obligations owing by the Borrower hereunder, subject to the terms of Sections 3.02 and 4.02). The Administrative Agent will thereafter cause to be distributed promptly on the same day like funds relating to the payment of principal or interest or Fees ratably to the Lenders entitled to receive such payments in accordance with the terms of this Agreement. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and Fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days. Interest shall accrue from and include the date of advance, but exclude the date of payment. SECTION 4.02. Pro Rata Treatment. ------------------ (i) Except to the extent otherwise provided herein, each Revolving Loan, each payment or prepayment of principal of any Revolving Loan, each payment of interest on the Revolving Loans, each payment of Unused Fees, each reduction of the Revolving Committed Amount and each conversion or extension of any Revolving Loan, shall be allocated pro rata among the Lenders in accordance with their respective Commitment Percentages (or if the Commitments 54 have expired or been terminated, in accordance with the respective principal amounts of outstanding Revolving Loans and Participation Interests of the Lenders). (ii) Each payment of unreimbursed drawings in respect of LOC Obligations shall be allocated to each Lender entitled thereto pro rata in accordance with the respective Commitment Percentages of the Lenders; provided -------- that, if any Lender shall have failed to pay its pro rata share of any drawing under any Letter of Credit, then any amount to which such Lender would otherwise be entitled pursuant to this clause (ii) shall instead be payable to the Issuing Lender; provided further, that in the event any amount paid to any Lender -------- ------- pursuant to this clause (ii) is rescinded or must otherwise be returned by the Issuing Lender, each Lender shall, upon the request of the Issuing Lender, repay to the Administrative Agent for the account of the Issuing Lender the amount so paid to such Lender, with interest for the period commencing on the date such payment is returned by the Issuing Lender until the date the Issuing Lender receives such repayment at a rate per annum equal to, during the period to but excluding the date two (2) Business Days after such request, the Federal Funds Effective Rate (computed on the basis of the actual number of days elapsed over a year of 360 days), and thereafter, the Base Rate plus two percent (2%) (computed on the basis of the actual number of days elapsed over a year of 360 days for each applicable day on which the Base Rate shall be determined on the basis of the Federal Funds Effective Rate and over a year of 365/66 days for each applicable day on which the Base Rate shall be determined on the basis of the Prime Rate). SECTION 4.03. Sharing of Payments. ------------------- The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan, unreimbursed drawing with respect to any LOC Obligation or other obligation owing to such Lender under this Agreement through the exercise of a right of set-off, banker's lien, counterclaim or otherwise in excess of its pro rata share as provided for in this Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans, LOC Obligations and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of set-off, banker's lien, counterclaim or otherwise as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including set-off, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan, LOC Obligation or other obligation in the amount of such participation. Except as otherwise expressly provided in this Agreement, if any Lender or the Administrative Agent shall fail to remit to the Administrative Agent or any other Lender an amount payable by such Lender or the Administrative Agent to the Administrative Agent or such other Lender pursuant to this Agreement on the date when such amount is due, such payments shall be made together with 55 interest thereon for each date from the date such amount is due until the date such amount is paid to the Administrative Agent or such other Lender at a rate per annum equal to the Federal Funds Effective Rate. SECTION 4.04. Net Payments. ------------ All payments made by the Borrower hereunder will be made without set-off or counterclaim. All payments by the Borrower hereunder shall be made free and clear of and without deduction or withholding for any Taxes (as hereinafter defined), except to the extent that such deduction or withholding is required by law. For purposes of this Section 4.04, "Taxes" shall mean any present or future license, registration or other fees, taxes or other amounts for or on account of levies, imposts, duties, deductions, withholdings or other charges of whatsoever nature, imposed, levied, collected, withheld or assessed by any governmental or taxing authority, excluding income and franchise taxes imposed on a Lender (i) by a jurisdiction under which such Lender is organized or operating in connection with this Agreement or any political subdivision thereof or (ii) as a result of a present or former connection between the jurisdiction of the governmental or taxing authority imposing such taxes and the Lender. If the Borrower shall be required to withhold or deduct Taxes (other than U.S. Taxes as defined in Section 4.05) from any sum payable hereunder, (i) the sum payable shall be increased as may be necessary so that the amount received is equal to the sum which would have been received had no withholdings or deductions been made, (ii) the Borrower shall make such necessary withholdings or deductions and (iii) the Borrower shall pay the full amount withheld or deducted to the relevant authority according to applicable law so that the Lenders shall not be required to make any deduction or payment of Taxes. SECTION 4.05. U.S. Taxes. ---------- (a) The Borrower agrees to pay to each Lender that is not a U.S. Person (a "Foreign Lender") such additional amounts as are necessary in order that the net payment of any amount due to such Foreign Lender hereunder after deduction for or withholding in respect of any U.S. Taxes imposed with respect to such payment (or in lieu thereof, payment of such U.S. Taxes by such Foreign Lender), will not be less than the amount stated herein to be then due and payable, provided that the foregoing obligation to pay such additional amounts shall not - -------- apply: (i) to any payment to any Foreign Lender hereunder unless such Foreign Lender (A) on the date hereof (or on the date it becomes a Lender as provided in Section 12.04(b)) and on the date of any change in the applicable lending office of such Foreign Lender, is entitled to submit either a Form 1001 (relating to such Foreign Lender and entitling it to a complete exemption from withholding on all interest to be received by it hereunder in respect of the Loans) or Form 4224 (relating to all interest to be received by such Foreign Lender hereunder in respect of the Loans) and (B) timely delivers such Form in duplicate to the Borrower, with a copy to the Administrative Agent at such time; (ii) to any payment to any Foreign Lender hereunder unless such Foreign Lender delivers to the Borrower an updated copy of a Form 1001 and a Form 56 4224 on or before the date of expiration or obsolescence of, or the date of the occurrence of any event requiring a change in, the most recent Form 1001 and/or Form 4224 previously delivered to the Borrower by such Foreign Lender pursuant to this Section 4.05 (and such extensions or renewals of such Forms as may reasonably be requested by the Borrower from time to time), unless an event has occurred prior to the date on which delivery of any such updated Form 1001 and/or Form 4224 would otherwise be required which has rendered such Form or Forms inapplicable to any payment to a Foreign Lender hereunder subsequent to such date; or (iii) to any U.S. Tax imposed solely by reason of the failure by such Foreign Lender to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity, or connections with the United States of America of such Foreign Lender if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such U.S. Taxes; and provided further that the Borrower shall not be required pursuant to this - -------- ------- Section 4.05 to pay additional amounts to any Foreign Lender to the extent that such additional amounts relate to any payment to such Foreign Lender required hereunder prior to the date that is 90 days after the date that the Borrower first receives notice from such Foreign Lender requesting payment of any such additional amounts. For the purposes of this Section 4.05(a), (w) "Form 1001" shall mean Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of the Treasury of the United States of America (or in relation to either such Form such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or resident of the United States of America, a corporation, partnership or other entity created or organized in or under any laws of the United States of America, or any estate or trust that is subject to Federal income taxation regardless of the source of its income and (z) "U.S. Taxes" shall mean any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof or therein. (b) Within thirty (30) days after paying any amount to the Administrative Agent or any Foreign Lender from which it is required by law to make any deduction or withholding, and within thirty (30) days after it is required by law to remit such deduction or withholding to any relevant taxing or other authority, the Borrower shall deliver to the Administrative Agent for delivery to such Foreign Lender evidence satisfactory to such Foreign Lender of such deduction, withholding or payment (as the case may be). (c) In the event that any Lender requests payment by the Borrower of any additional amounts pursuant to subsection (a) of this Section 4.05, then, provided that no Default or Event 57 of Default has occurred and is continuing at such time, the Borrower may, at its own expense (such expense to include any transfer fee payable to the Administrative Agent under Section 12.04(b)), and in its sole discretion (a) require such Lender to transfer and assign in whole or in part, without recourse (in accordance with and subject to the terms and conditions of Section 12.04(b)), all or part of its interests, rights and obligations under this Agreement to an Eligible Assignee which shall assume such assigned obligations (which Eligible Assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such assignment shall not relieve the Borrower from its obligations to pay such additional amounts that may be due in accordance with subsection (a) of this Section 4.05, (ii) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Body and (iii) the Borrower or such Eligible Assignee shall have paid to the assigning Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Loans made by it hereunder and all accrued Fees and other amounts owed to it hereunder or (b) terminate the Commitment of such Lender, prepay all outstanding Loans of such Lender and cash collateralize such Lender's Participation Interests in Swingline Loans and LOC Obligations then outstanding; provided that (i) such termination of the Commitment of such Lender shall not relieve the Borrower from its obligations to pay such additional amounts that may be due in accordance with subsection (a) of this Section 4.05, (ii) such termination of the Commitment of such Lender, prepayment of Loans and cash collateralization of such Participation Interests in Swingline Loans and LOC Obligations does not conflict with any law, rule or regulation or order of any court or other Governmental Body and (iii) the Borrower shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Loans made by it hereunder and all other amounts owed to it hereunder and shall have cash collateralized such Lender's Participation Interests in outstanding Swingline Loans and LOC Obligations. SECTION 4.06. Evidence of Loans. ----------------- (a) Each Lender shall maintain an account or accounts evidencing (i) each Loan made by such Lender to the Borrower from time to time, (ii) any amounts paid other than as Loans by such Lender to or for the account of the Swingline Lender pursuant to Section 2.02(b)(iii) from time to time and (iii) any amounts paid other than as Loans by such Lender to or for the account of the Issuing Lender pursuant to Section 2.03(c) from time to time, including in each case the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary. (b) The Administrative Agent shall maintain a register and a subaccount for each Lender, in which register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each Loan hereunder, (ii) the maximum amount available to be drawn under each outstanding Letter of Credit, (iii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder, (iv) the amount of any sum received by the Administrative Agent hereunder from or for the account of the Borrower and each Lender's share thereof and (v) the amount of each payment received by the Issuing Lender from the Borrower in reimbursement of any LOC Obligations. The Administrative Agent will 58 make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the accounts, register and subaccounts maintained pursuant to paragraphs (a) and (b) of this Section 4.06 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, -------- ------- that the failure of any Lender or the Administrative Agent to maintain any such account, such register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligations of the Borrower hereunder. ARTICLE V. CONDITIONS PRECEDENT SECTION 5.01. [INTENTIONALLY OMITTED]. SECTION 5.02. [INTENTIONALLY OMITTED]. SECTION 5.03. Each Extension of Credit. The obligations of each Lender (including the Swingline Lender and the Issuing Lender) to make any Extension of Credit or to convert or extend any Revolving Loan are subject to satisfaction of the following conditions in addition to satisfaction on the Restatement Date of the conditions set forth in Section 5.04: (a) (i) In the case of any Revolving Loan, the Administrative Agent shall have received an appropriate Notice of Borrowing or Notice of Extension/Conversion; (ii) in the case of any Swingline Loan, the Swingline Lender shall have received an appropriate notice of borrowing in accordance with the provisions of Section 2.02(b)(i); and (iii) in the case of any Letter of Credit the Issuing Lender shall have received an appropriate request for issuance of a Letter of Credit pursuant to Section 2.03(b); (b) The representations and warranties set forth in Article IX shall be true and correct in all material respects as of such date (except to the extent that any such representations and warranties expressly relate to an earlier date); (c) There shall not have been commenced against the Borrower an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Borrower or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded; 59 (d) No Default or Event of Default shall exist and be continuing either prior to or immediately after giving effect thereto; and (e) Immediately after giving effect to the making of such Loan (and the application of the proceeds thereof) or to the issuance of such Letter of Credit, as the case may be, (i)(A) the sum of Revolving Loans outstanding plus Swingline Loans outstanding plus LOC ---- ---- Obligations outstanding plus Competitive Loans outstanding, shall not ---- exceed (B) the Revolving Committed Amount; (ii) the Swingline Loans outstanding shall not exceed the Swingline Committed Amount; (iii) the LOC Obligations shall not exceed the LOC Committed Amount; and (iv) the Competitive Loans outstanding shall not exceed the Competitive Loan Maximum Amount. The delivery of each Notice of Borrowing, each Notice of Extension/Conversion, each request for a Swingline Loan pursuant to Section 2.02(b)(i) and each request for issuance of Letter of Credit pursuant to Section 2.03(b) and for a Competitive Bid pursuant to Section 2.04(b) shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b), (c), (d) and (e) above. SECTION 5.04. Conditions to Restatement Date. ------------------------------ The effectiveness of the amendments and modifications provided in this Amended and Restated Credit Agreement are subject to satisfaction of the following conditions, in addition to satisfaction of the conditions set forth in Section 5.03: (a) Receipt by the Administrative Agent of the following financial information. (i) Annual audited consolidated financial statements for the Borrower and its Subsidiaries for fiscal year 1996 (ending June 29, 1996), including a consolidated balance sheet, and related consolidated statements of operations, changes in stockholders' equity and cash flows, setting forth in each case such information in comparative form for the previous fiscal year and accompanied by an opinion of independent certified public accountants of recognized national standing as provided in Section 6.01(b) for annual audited financial statements; and (ii) Company-prepared quarterly consolidated financial statements for the Borrower and its Subsidiaries for the second fiscal quarter of 1997 (ending December 28, 1996), including a consolidated balance sheet, and related consolidated statements of operations, changes in stockholders' equity and cash flows, setting forth in each case such information in comparative form for such periods during the previous fiscal year as provided in Section 6.01(a) for company- prepared quarterly financial statements. (b) Receipt by the Administrative Agent of multiple counterparts of this Agreement and the Guaranty Agreement executed by each of the parties. 60 (c) Receipt by the Administrative Agent of certified copies of articles of incorporation, bylaws, resolutions and the like for the Borrower and each of the Guarantors. (d) Receipt by the Administrative Agent of legal opinions of counsel to the Borrower and the Restricted Subsidiaries on or before the Restatement Date in form and substance satisfactory to the Administrative Agent and the Lenders. (e) Payment to the Administrative Agent, the other Agents and the Lenders all fees payable in connection with this Amended and Restated Credit Agreement. ARTICLE VI. FINANCIAL STATEMENTS; INFORMATION SECTION 6.01. Reporting Requirements. ---------------------- The Borrower hereby covenants and agrees that, so long as this Agreement is in effect or any Letter of Credit or under any amounts payable hereunder or any of the other Credit Documents shall remain outstanding, and until all of the Commitments shall have been terminated, the Borrower will furnish, or cause to be furnished, to the Administrative Agent and each Lender: (a) Quarterly Statements. As soon as available and in any event -------------------- within 45 days after the end of each quarterly fiscal period in each fiscal year of the Borrower, (i) a consolidated balance sheet of the Borrower and its Restricted Subsidiaries as at the end of such quarterly fiscal period and the related consolidated statements of operations, changes in stockholders' equity and cash flows of the Borrower and its Restricted Subsidiaries for such quarterly fiscal period and (in the case of the second and third such quarterly fiscal period in each fiscal year) for the portion of the fiscal year ended with the last day of such quarterly fiscal period, setting forth in each case in comparative form the respective figures for the corresponding period of the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and certified by the principal financial officer of the Borrower as fairly presenting, in all material respects, the financial position of the companies being reported on and the results of their operations and cash flows except as to the absence of footnotes and subject to changes resulting from normal year-end audit adjustments and (ii) comparable consolidated financial statements of JPF and its Subsidiaries as at the end of and for such quarterly period, prepared in the same manner as such consolidated financial statements of the Borrower and its Restricted Subsidiaries and similarly certified by the principal financial officer of JPF; provided that, (A) delivery within the time period specified -------- above (or, if later, within five days of timely filing with the Commission) of copies of JPF's Quarterly Report on Form 10-Q for any quarterly fiscal period prepared in compliance with the requirements therefor and filed with the Commission shall be deemed to satisfy the requirements of subdivision (ii) of 61 this Section 4(a) for such period so long as such Quarterly Report contains the applicable information required by this Section 4(a), and (B) together with the consolidated financial statements of the Borrower and its Restricted Subsidiaries furnished pursuant to this Section 4(a) in respect of each quarterly fiscal period, the Borrower will also furnish comparable consolidated financial statements as of the end of and for such period, prepared and certified in the same manner, of the Borrower and all of its Subsidiaries; (b) Annual Statements. As soon as available and in any event ----------------- within 90 days after the end of each fiscal year of the Borrower, (i) a consolidated balance sheet of the Borrower and its Restricted Subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, changes in stockholders' equity and cash flows of the Borrower and its Restricted Subsidiaries for such fiscal year, setting forth in each case in comparative form the respective figures as of the end of and for the previous fiscal year, all in reasonable detail and accompanied by an opinion thereon of independent certified public accountants of recognized national standing selected by the Borrower and reasonably satisfactory to the Required Lenders, which opinion shall not be made in reliance upon the opinion of any other accountant (except for opinions of other independent certified public accountants in respect of financial statements of a Person which shall have become a Subsidiary or the assets of which shall have been acquired by the Borrower or a Subsidiary during such fiscal year), shall not contain any qualification as to scope, and shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported on and their results of operations and their cash flows in conformity with GAAP, that the audit of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and that such accountants believe such audit provides a reasonable basis for such opinion and (ii) comparable consolidated financial statements of JPF and its Subsidiaries as at the end of and for such fiscal year, prepared in the same manner as such consolidated financial statements of the Borrower and its Restricted Subsidiaries and accompanied by an opinion thereon of independent certified public accountants meeting the requirements therefor, mutatis mutandis, set forth in the foregoing ------- -------- subdivision (b)(i); provided that, (A) the delivery within the time -------- period specified above (or, if later, within five days of timely filing with the Commission) of JPF's Annual Report on Form 10-K (together with JPF's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) for any fiscal year prepared in compliance with the requirements therefor and filed with the Commission shall be deemed to satisfy the requirements of subdivision (ii) of this Section 4(b) for such year so long as such Annual Report contains the applicable opinions and other information required by this Section 4(b), and (B) together with the consolidated financial statements of the Borrower and its Restricted Subsidiaries furnished pursuant to this Section 4(b) in respect of each fiscal year, the Borrower will also furnish comparable consolidated financial statements as at the end of and for such year (which need not be accompanied by an opinion thereon of independent accountants), prepared in accordance with GAAP and certified by the principal financial officer of the Borrower as fairly presenting, in all material respects, the financial position of the companies being reported 62 on and the results of their operations and cash flows except as to the absence of footnotes, of the Borrower and all of its Subsidiaries; (c) Officers' Certificates. Concurrently with each delivery of ---------------------- financial statements of the Borrower and its Restricted Subsidiaries pursuant to subdivision (a) or (b) of this Section, an Officers' Certificate, addressed to the Administrative Agent and the Lenders: (i) stating that the signatories thereto have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and conditions of the Borrower and its Restricted Subsidiaries during the accounting period covered by such financial statements, and that such review has not disclosed the existence during or at the end of such accounting period, and that such signatories do not have knowledge of the existence as at the date of such Officers' Certificate, of any condition or event which constitutes a Default or an Event of Default, or, if to their knowledge any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Borrower has taken or is taking or proposes to take with respect thereto; (ii) setting forth (A) as of the date of the consolidated balance sheet included in such financial statements, the Fixed Charge Coverage Ratio and the Total Debt Ratio, and the respective amounts of Total Debt, Consolidated Net Worth, the Net Worth Minimum, Consolidated Net Tangible Assets, Priority Debt, Attributable Debt, and the aggregate principal amount outstanding of all Debt of Restricted Subsidiaries, (B) the respective amounts of Net Income Available for Fixed Charges, Consolidated Fixed Charges and Operating Cash Flow for the period of four consecutive fiscal quarters of the Borrower ended on such date, and (C) the amount available as at the conclusion of the accounting period ended on such date for the making of Restricted Payments and Restricted Investments in compliance with Section 8.05 and the aggregate unliquidated amount as of such date of all Investments of the Borrower and its Restricted Subsidiaries of the character described in subdivision (g) of the definition of "Restricted Investments" set forth in Section 1.01; and (iii) setting forth facts or computations in reasonable detail demonstrating compliance during and at the end of such accounting period with the covenants and restrictions contained in Section 8.01, Section 8.02, Section 8.03, Section 8.04, Section 8.05 and Section 8.07(f); (d) Accountant's Certificates. Concurrently with each delivery ------------------------- of annual financial statements pursuant to subdivision (b) of this Section, a written statement, addressed to the Administrative Agent and the Lenders from the independent certified public accountants referred to in said subdivision (b) who have reported on such financial statements, substantially to the following effects (with only such variations as reflect the 63 then current generally applicable policy of such accountants with respect to statements of the same or a similar import required pursuant to comparable financing documents and which do not materially alter the substantive import of such statement): (i) that their audit has included a reading of the terms of this Agreement sufficient to enable them to make the statement referred to in subdivision (d)(iii) of this Section (it being understood that no audit procedures, other than those required by generally accepted auditing standards, shall be required); (ii) that, in connection with their audit, except as set forth in such written statement, nothing came to their attention which caused them to believe that there exists at the date of such written statement any condition or event which constitutes an Event of Default or Default, insofar as related to accounting matters reflected in the financial statements that were subject to auditing procedures during the course of the audit required pursuant to subdivision (b) of this Section and, in the case of any such Event of Default or Default which shall have come to their attention, specifying, to the extent determined by such accountants in connection with such audit, the nature and period of existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Event of Default or Default or the period of existence thereof unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit); and (iii) that they have read the Officers' Certificate delivered by the Borrower in connection with such financial statements pursuant to subdivision (c) of this Section and that, in connection with their audit, except as set forth in such written statement, nothing came to their attention that caused them to believe that the matters set forth in such Officers' Certificate pursuant to clauses (ii) and (iii) of said subdivision (c), insofar as they relate to accounting matters reflected in the financial statements that were subject to auditing procedures during the course of the audit required pursuant to said subdivision (b), have not been properly stated in accordance with the terms of this Agreement; (e) Commission and Other Reports. Promptly (and in any event ---------------------------- within five Business Days) after they become available, copies of (i) all financial statements, reports, notices, proxy statements and other information sent or made available generally by JPF or the Borrower to any class of its security holders (other than, in the case of the Borrower, JPF) or by any Restricted Subsidiary of the Borrower to any class of its security holders (other than the Borrower or another such Subsidiary), (ii) all regular and periodic reports (including reports on Form 8-K) and all registration statements (other than those on Form S-8 or a successor form relating to the registration of securities pursuant to an employee benefit plan) and prospectuses filed by JPF, the Borrower or any Restricted Subsidiary of the Borrower with any securities exchange, the National 64 Association of Securities Dealers or with the Commission, and (iii) all press releases and other statements made available generally by JPF, the Borrower or any Restricted Subsidiary of the Borrower to the public concerning material developments in the business of JPF, the Borrower or any such Restricted Subsidiary; (f) Audit Reports. Promptly (and in any event within five ------------- Business Days) after receipt thereof, copies of all reports submitted to the Borrower or any of its Restricted Subsidiaries by independent certified public accountants in connection with any annual, interim or special audit of the Borrower or any Restricted Subsidiary made by such accountants, including, without limitation, any comment letter submitted by such accountants in connection with any such audit; (g) Defaults, etc. Promptly (and in any event within five ------------- Business Days) after any Responsible Officer of the Borrower obtains knowledge of any condition or event which constitutes a Default or an Event of Default, or that the Administrative Agent or any Lender has given any notice to the Borrower or any of its Restricted Subsidiaries or taken any other action with respect to a claimed default under or in respect of any Debt referred to in Section 10.01(e) or 10.01(f) or with respect to the occurrence or existence of any event or condition of the type referred to in Section 10.01(g) or 10.01(h), an Officers' Certificate specifying in reasonable detail the nature and period of existence of such actual or claimed Default, Event of Default, default, event or condition, and what action the Borrower has taken or is taking or proposes to take with respect thereto; (h) ERISA. Promptly (and in any event within five Business ----- Days) after any Borrower Group Member (i) knows of the occurrence of any Termination Event, (ii) receives with respect to any Multiemployer Plan notice as prescribed in ERISA of any withdrawal liability assessed against any Borrower Group Member or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA), (iii) knows that a prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) for which a statutory or administrative exemption is not available or a breach of fiduciary responsibility has occurred in connection with which any Borrower Group Member could reasonably be subject to any material liability under Section 406, 409, 502(i) or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which such Borrower Group Member has agreed or is required to indemnify any Person against any such liability or (iv) knows that there has been a material adverse change in the funding status of any Plan or Multiemployer Plan, a description of such event or a copy of such notice and a statement by the principal financial officer of the Borrower briefly setting forth the details regarding such event or condition and the action, if any, which has been or is being taken or is proposed to be taken by the Borrower or any Borrower Group Member with respect thereto; (i) Litigation, etc. Promptly (and in any event within five --------------- Business Days) after any Responsible Officer of the Borrower obtains knowledge of any litigation, administrative proceeding or judgment (i) relating to the Borrower or any of its Restricted 65 Subsidiaries (whether or not considered by the Borrower to be covered by insurance) which could, if adversely determined, have a Material Adverse Effect, or (ii) relating in any way to this Agreement or any of the other Credit Documents, an Officers' Certificate specifying in reasonable detail the facts and circumstances surrounding such litigation, proceeding or judgment; (j) Subsidiary Designation. Promptly (and in any event within ---------------------- five Business Days) after the designation by the Board of Directors of any Subsidiary as an Unrestricted Subsidiary, or any redesignation by the Board of Directors of a Restricted Subsidiary as an Unrestricted Subsidiary or of an Unrestricted Subsidiary as a Restricted Subsidiary, notice thereof accompanied by an Officers' Certificate stating that such designation or redesignation has been made in compliance with the definition of "Restricted Subsidiary" or "Unrestricted Subsidiary", whichever shall be applicable, set forth in Section 1.01, and, in the case of any designation or redesignation of a Subsidiary as an Unrestricted Subsidiary, setting forth the name of each other Subsidiary which has become an Unrestricted Subsidiary as a result thereof; (k) Modifications to Note Purchase Agreements or Notes. -------------------------------------------------- Promptly (and in any event within five Business Days) after the date on which any amendment or modification of any term or provision of any of the Note Purchase Agreements or any of the Notes, or any waiver of compliance with any such term or provision, has become effective, copies of the instruments pursuant to which such amendment, modification or waiver was effected; and (l) Requested Information. Promptly upon request therefor, such --------------------- other information as to the Business or Condition of the Borrower or its Restricted Subsidiaries as may from time to time be reasonably requested by the Administrative Agent or the Required Lenders. ARTICLE VII. INSPECTION OF PROPERTIES AND BOOKS SECTION 7.01. Inspection Rights of Administrative Agent and Lenders. ----------------------------------------------------- The Borrower hereby covenants and agrees that, so long as this Agreement is in effect or any Letter of Credit or any amounts payable hereunder or under any of the other Credit Documents shall remain outstanding, and until all of the Commitments shall have been terminated, officers or designated representatives of the Administrative Agent or any Lender may visit and inspect any of the properties of the Borrower and its Restricted Subsidiaries, including their respective books of account, records, reports and other papers, make copies and extracts therefrom, and discuss their affairs, finances and accounts with their respective officers and employees and, so long as a Responsible Officer is present, with their independent public accountants (and the Borrower hereby authorizes and directs each such officer, employee and 66 independent public accountant to engage in such discussions and hereby undertakes to cause a Responsible Officer to be present at all reasonable times for purposes of such discussions with said accountants), all at such reasonable times and as often as may be reasonably requested. All expenses incurred in connection with any such visit, inspection or other exercise of rights by officers or designated representatives of the Administrative Agent or any Lender, as applicable, pursuant to this Section shall be borne by the Borrower except that, if such visit, inspection or other exercise of rights is undertaken at a time when no Default or Event of Default shall be continuing, all such expenses incurred by the Administrative Agent or such Lender, as applicable, in connection therewith shall, subject to the terms of Section 11.09, be for the account of the Administrative Agent or such Lender, as applicable (it being understood and agreed that the fees of any attorney, accountant or other professional employed by the Borrower in connection with any such visit, inspection or other exercise shall in any event be for the Borrower's account). ARTICLE VIII. COVENANTS The Borrower hereby covenants and agrees that from and after the Restatement Date and so long as this Agreement is in effect or any Letter of Credit or any amounts payable hereunder or under any of the other Credit Documents shall remain outstanding, and until all of the Commitments shall have been terminated: SECTION 8.01. Maintenance of Certain Financial Conditions. ------------------------------------------- (a) Fixed Charge Coverage Ratio. The Borrower will not permit the --------------------------- Fixed Charge Coverage Ratio as of any Determination Date to be less than 1.75. (b) Consolidated Net Worth. The Borrower will not permit ---------------------- Consolidated Net Worth as of any date to be less than the Net Worth Minimum as of such date. (c) Total Debt Ratio. The Borrower will not permit the Total Debt ---------------- Ratio as of any Determination Date to exceed 3.75 (provided that unless and -------- until the Note Purchase Agreement relating to the $85,000,000 8.55% Senior Notes due 2004 is amended to require a Total Debt Ratio of 3.75, rather than 3.5, for fiscal periods after September 30, 1997, the required Total Debt Ratio for purposes of this Agreement shall continue to be 3.5 for fiscal periods after September 30, 1997). SECTION 8.02. Debt Incurrence; Restricted Subsidiary Debt. ------------------------------------------- (a) The Borrower will not, and will not permit any Restricted Subsidiary to, incur any Debt on any date if immediately after giving effect to such incurrence and the incurrence or retirement by the Borrower and its Restricted Subsidiaries of any other Debt on such date the Total Debt Ratio would exceed the amount applicable under Section 8.01(c) for the period during 67 which such date occurs, except that the Borrower or any Restricted Subsidiary may, on any date (other than a Determination Date) occurring in any period specified in the following table, incur and (subject to Section 8.01(c)) remain liable in respect of Debt for working capital purposes if (i) immediately after giving effect to such incurrence and the incurrence or retirement by the Borrower and its Restricted Subsidiaries of any other Debt on such date the Total Debt Ratio shall not exceed 3.75 (provided that unless and until the Note -------- Purchase Agreement relating to the $85,000,000 8.55% Senior Notes due 2004 is amended to require a Total Debt Ratio of 3.75, rather than 3.5, for fiscal periods after September 30, 1997, the required Total Debt Ratio for purposes of this Agreement shall continue to be 3.5 for fiscal periods after September 30, 1997)); and (ii) in the event such Debt is to be incurred by a Restricted Subsidiary, such Restricted Subsidiary shall be permitted to incur such Debt on such date pursuant to and in compliance with Section 8.02(b); provided that, -------- nothing contained in this Section 8.02(a) shall permit the incurrence by the Borrower or any Restricted Subsidiary of any Debt on a Determination Date if, after giving effect to such incurrence, the Borrower would not be in compliance with Section 8.01(c). (b) The Borrower will not permit any Restricted Subsidiary to incur any Debt, except that any Restricted Subsidiary may incur and (subject to Section 8.01(c)) remain liable in respect of Debt if, on and as of the date on which such Restricted Subsidiary proposes to incur such Debt and immediately after giving effect to such incurrence and the incurrence or retirement by the Borrower and its Restricted Subsidiaries of any other Debt on such date, and to the application of the proceeds of all such incurred Debt, the Priority Debt Amount shall not exceed 10% of Consolidated Net Tangible Assets (the amount of Consolidated Net Tangible Assets for purposes hereof being determined (i) as of such date, if an Officers' Certificate dated as of such date shall have been provided to the Administrative Agent and the Lenders providing facts or computations in reasonable detail demonstrating compliance with the terms of this Section 8.02(b) in connection with the proposed incurrence of Debt on such date, or (ii) if no such Officers' Certificate shall have been provided to the Administrative Agent and the Lenders in connection with the incurrence of such Debt, as of the most recent Determination Date prior to the date of incurrence of such Debt with respect to which the Borrower shall have delivered the Required Financial Information). (c) For purposes of the foregoing subdivisions (a) and (b) of this Section 8.02, (i) the term "incur", when used with respect to any Debt, shall mean to directly or indirectly create, incur, assume, agree to purchase or provide funds in respect of, or otherwise become liable (by way of Guaranty or otherwise) in respect of such Debt, and the term "incurrence" shall have a correlative meaning, (ii) in the event the Borrower or any Restricted Subsidiary shall extend, renew, refund or refinance any Debt, the Borrower or such Restricted Subsidiary shall be deemed to have incurred such Debt at the time of such extension, renewal, refunding or refinancing, and (iii) any Person designated, redesignated or otherwise becoming a Restricted Subsidiary at any time after the date of this Agreement shall be deemed to have incurred all of its outstanding Debt at such time. 68 SECTION 8.03. Liens. ----- The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any character of the Borrower or any of its Restricted Subsidiaries (whether held on the date hereof or hereafter acquired) or any interest therein or any income or profits therefrom except: (a) Liens (other than Liens created or imposed under ERISA) for taxes, assessments or governmental charges or levies either not yet due or the payment of which is not at the time required by Section 8.12; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Persons incurred in the ordinary course of business for sums either not yet due or the payment of which is not at the time required by Section 8.12; (c) Liens (other than Liens created or imposed under ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, bids, government contracts, performance and return-of-money bonds and other similar obligations (exclusive in any case of obligations incurred in connection with the borrowing of money or the obtaining of advances or credit); (d) Liens incidental to the conduct of business or to the ownership of property of a character which customarily exist on properties of corporations engaged in similar activities and similarly situated and which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not, individually or in the aggregate, interfere with the ordinary conduct of the business of the Borrower or any of its Restricted Subsidiaries or detract from the value or use of the properties subject to any such Liens; (e) any attachment, judgment or other similar Lien arising in connection with court proceedings, so long as (i) the execution or other enforcement of such Lien is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings diligently conducted and effective to prevent the forfeiture or sale of any property of the Borrower or any Restricted Subsidiary or any interference with the ordinary use thereof by the Borrower or any Restricted Subsidiary, and (ii) such reserve or other appropriate provision, if any, in the amount and of the type as shall be required by GAAP shall be maintained therefor; (f) Liens on assets of any Restricted Subsidiary securing Debt or other obligations of such Restricted Subsidiary owing to the Borrower or to a Predominantly Owned Restricted Subsidiary; 69 (g) Liens described on Schedule IX existing on the date of this ----------- Agreement and securing the Debt described thereon as being secured by such Liens; provided that (i) no such Lien shall at any time be extended to or -------- cover any property of the Borrower or any Restricted Subsidiary other than the property subject thereto on the date hereof and (ii) the principal amount of the Debt secured by such Liens shall not be extended, renewed, refunded or refinanced; (h) Liens securing IDB Debt, provided that no such Lien shall at any -------- time extend to or cover any property of the Borrower or any Restricted Subsidiary other than the equipment and facilities acquired or constructed with the proceeds of such IDB Debt, real property appurtenant to such facilities, and proceeds of such equipment, facilities and real property; (i) Liens (including Capital Leases) created solely to secure the deferred purchase price of fixed assets useful and intended to be used in carrying on the business of the Borrower and its Restricted Subsidiaries acquired or constructed by the Borrower or any Restricted Subsidiary after the date hereof, or any Lien (including a Capital Lease) created to secure Debt incurred solely for the purpose of financing the acquisition or construction, as the case may be, of any such asset (if such Debt is incurred at the time of or within 90 days after such acquisition or the completion of such construction) or any Lien existing on acquired assets at the time of acquisition thereof, or, in the case of any Person which hereafter becomes a Restricted Subsidiary, any Lien in respect of its assets existing at the time such Person becomes a Restricted Subsidiary, provided that: -------- (i) in the case of an acquisition of assets or a Person becoming a Restricted Subsidiary, such Lien was not created in contemplation of such event, (ii) no such Lien shall at any time extend to or cover any asset of the Borrower or any of its Restricted Subsidiaries other than the acquired assets on which it was originally imposed and improvements thereto and proceeds thereof, and (iii) at the time of and immediately after giving effect to the creation or incurrence of each such Lien, the aggregate principal amount of all Debt secured by all such Liens on any such asset shall not exceed an amount equal to the lesser of (x) the purchase price of such asset (including, for purposes of determining such purchase price, the principal amount of any pre-existing Debt secured by any such Liens, whether or not the Borrower or a Restricted Subsidiary has any personal liability with respect thereto) and (y) the fair market value of such asset (as determined by the Board of Directors) at such time; (j) Liens in favor of a Receivables Financing SPC or Receivables Financier created or deemed to exist in connection with a Permitted Receivables Financing 70 (including any related filings of any financing statements), but only to the extent that any such Lien relates to the applicable receivables and related property (or percentage interests therein) actually sold, contributed, financed or otherwise conveyed or pledged pursuant to such transaction; and (k) Liens in addition to those permitted by the foregoing provisions of this Section 8.03 securing Debt of the Borrower or a Restricted Subsidiary or satisfying cash collateral requirements hereunder; provided -------- that, immediately after giving effect to the creation, incurrence or assumption of each such additional Lien, the Priority Debt Amount shall not exceed 10% of Consolidated Net Tangible Assets (the amount of Consolidated Net Tangible Assets for purposes hereof being determined (i) as of the date of creation, incurrence or assumption of such Lien, if an Officers' Certificate dated as of such date shall have been provided to the Administrative Agent and the Lenders providing facts or computations in reasonable detail demonstrating compliance with the terms of this Section 8.03(j) in connection with the proposed creation, incurrence or assumption of such Lien on such date, or (ii) if no such Officers' Certificate shall have been provided to the Administrative Agent and the Lenders in connection with the creation, incurrence or assumption of such Lien, as of the most recent Determination Date prior to the date of creation, incurrence or assumption of such Lien with respect to which the Borrower shall have delivered the Required Financial Information). For all purposes of this Section 8.03, (A) Liens existing on or with respect to any property of any Person at the time it is designated or redesignated or otherwise becomes a Restricted Subsidiary shall be deemed to have been created at the time it becomes a Restricted Subsidiary, (B) any extension, renewal, refunding or refinancing of any Lien by the Borrower or any Restricted Subsidiary shall be deemed to be an incurrence of such Lien at the time of such extension, renewal, refunding or refinancing, and (C) any Lien existing on any property at the time it is acquired by the Borrower or any Restricted Subsidiary shall be deemed to have been created at the time of such acquisition. In the event that any property of the Borrower or any Restricted Subsidiary shall become or be subject to a Lien not permitted by the foregoing subdivisions (a) through (k) of this Section 8.03, the Borrower shall make or cause to be made effective provision satisfactory to the Lenders whereby the obligations of the Borrower and the Restricted Subsidiaries to the Lenders hereunder and under the other Credit Documents will be secured equally and ratably with all other obligations secured by such Lien, and in any event, such obligations of the Borrower and the Restricted Subsidiaries to the Lenders hereunder and under the other Credit Documents shall have the benefit, to the full extent that (and with such priority as) the Lenders may be entitled under applicable law, of an equitable Lien on such property; provided, however, that any violation of this -------- ------- Section shall constitute a Default whether or not the Borrower shall have made effective provision to secure the obligations of the Borrower and the Restricted Subsidiaries to the Lenders hereunder and under the other Credit Documents equally and ratably with any such other obligations or the Lenders shall be entitled to such equal and ratable security or any such equitable Lien. 71 SECTION 8.04. Sale Leasebacks. --------------- The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any Sale Leaseback unless (a) immediately after giving effect to such Sale Leaseback, the Priority Debt Amount shall not exceed 10% of Consolidated Net Tangible Assets (the amount of Consolidated Net Tangible Assets for purposes hereof being determined (i) as of the date of such Sale Leaseback, if an Officers' Certificate dated as of such date shall have been provided to the Administrative Agent and the Lenders providing facts or computations in reasonable detail demonstrating compliance with the terms of this Section 8.04(a) in connection with such Sale Leaseback, or (ii) if no such Officers' Certificate shall have been provided to the Administrative Agent and the Lenders in connection with such Sale Leaseback, as of the most recent Determination Date prior to the date of such Sale Leaseback with respect to which the Borrower shall have delivered the Required Financial Information), or (b) the Borrower shall (i) in compliance with Section 3.02(b)(ii), give an Excess Sale Notice with respect to such Sale Leaseback and thereafter pay, prepay or otherwise reduce the outstanding Loans and LOC Obligations in the manner and to the extent required by such Section 3.02(b)(ii), and (ii) to the extent that the Available Fund resulting from such Sale Leaseback shall exceed the amount of the payments, prepayments and other reductions of Loans and LOC Obligations required by such Section 3.02(b)(ii), (A) apply an amount equal to such excess, within 180 days after the consummation of such Sale Leaseback, to the retirement of an equivalent principal amount of Funded Debt (other than Subordinated Debt) of the Borrower and its Restricted Subsidiaries and (B) pending such application, cause an amount equal to such excess to be invested in Investments of the character described in subdivision (a) of the definition of "Restricted Investments" set forth in Section 1.01. SECTION 8.05. Restricted Payments; Restricted Investments. ------------------------------------------- The Borrower will not, directly or indirectly (through a Restricted Subsidiary or otherwise), declare, order, pay, distribute, make, or set apart any sum or property for any Restricted Payment, and the Borrower will not, and will not permit any Restricted Subsidiary to, make or become obligated to make any Restricted Investment, unless, both at the time of and immediately after effect has been given to any such proposed action: (a) no Default or Event of Default shall have occurred and be continuing and a Restricted Subsidiary shall be permitted to incur at least $1.00 of additional Debt pursuant to Section 8.02; and (b) the aggregate amount of 72 (i) all sums and property included in all Restricted Payments directly or indirectly declared, ordered, paid, distributed, made or set apart by the Borrower during the period (taken as one accounting period) from and including the Closing Date to and including the date of such proposed action (the "Computation Period"), plus ---- (ii) the aggregate amount (at original cost) of all Restricted Investments of the Borrower and all Restricted Subsidiaries made during the Computation Period and all commitments for such Restricted Investments made by the Borrower or any Restricted Subsidiary outstanding on such date, shall not exceed the sum of (A) $1,000,000, plus ---- (B) 50% (or, in the case of a net loss for the Computation Period taken as a whole, minus 100%) of Consolidated Net Income for ----- the Computation Period, plus (C) the aggregate amount of the net cash proceeds received by the Borrower during the Computation Period from the sale of capital stock of the Borrower, from contributions to the common equity capital of the Borrower, and as consideration for the issuance during the Computation Period of Debt of the Borrower convertible into its capital stock, but only to the extent that any such Debt has been converted into such capital stock during the Computation Period, plus ---- (D) to the extent not included in Consolidated Net Income for the Computation Period, the aggregate amount of the cash payments received by the Borrower and its Restricted Subsidiaries during the Computation Period representing net returns of capital on Restricted Investments made during the Computation Period. For all purposes of this Section 8.05, (1) the amount involved in any Restricted Payment directly or indirectly declared, ordered, paid, distributed, made or set apart in property, and the amount of any Restricted Investment made through the transfer of property, shall be deemed to be the greater of (x) the fair market value of such property (as determined by the Board of Directors) at the time of such action and (y) the net book value thereof on the books of the Borrower or any of its Restricted Subsidiaries (as determined in accordance with GAAP), in each case as determined on the date such Restricted Payment is declared, ordered, paid, distributed, made or set apart or the date such Restricted Investment is made or committed to be made, as the case may be, and (2) all Investments of any Person existing immediately after such Person becomes a Restricted Subsidiary which would be Restricted Investments if made by such Person while subject to the provisions of this Agreement shall be deemed to be Restricted Investments and to have been made at the time such Person becomes a Restricted Subsidiary. 73 The Borrower will not pay any dividend which it has not declared nor will it declare any dividend (other than dividends payable solely in shares of its common stock) on any shares of any class of its capital stock which is payable more than 60 days after the date of declaration thereof. SECTION 8.06. Subsidiary Stock and Debt. ------------------------- The Borrower will not, and will not permit any Restricted Subsidiary to, issue, sell, assign or otherwise dispose of or part with control of, any shares of stock, Debt or other securities (or warrants, rights or options to acquire stock or other securities), in each case of any Restricted Subsidiary, except to the Borrower or a Predominantly Owned Restricted Subsidiary and except that: (a) all shares of stock and all Debt and other securities of any Restricted Subsidiary at the time owned by or owed to the Borrower and all Restricted Subsidiaries may be sold as an entirety for a consideration which represents the fair market value (as determined by the Board of Directors) at the time of sale of the shares of stock and Debt and other Securities so sold; or (b) less than all shares of stock of any Restricted Subsidiary at the time owned by the Borrower and all Restricted Subsidiaries may be sold, or a Restricted Subsidiary may issue shares of its stock to a Person other than the Borrower or a Predominantly Owned Restricted Subsidiary, in either case for a consideration which represents the fair market value thereof (as determined by the Board of Directors) at the time of sale or issuance, as the case may be, of such shares, if, immediately after giving effect to such transaction, such Restricted Subsidiary shall be a Predominantly Owned Restricted Subsidiary, or (c) Debt of a Restricted Subsidiary at the time owed to the Borrower or a Restricted Subsidiary may be sold to a third Person in a transaction not described in subdivision (a) of this Section 8.06 for a consideration at least equal to the principal amount of such Debt plus interest accrued and payable thereon (to the extent such interest is not payable to the Borrower or a Restricted Subsidiary following such sale); provided, however, that it shall be a condition to the consummation by the - -------- ------- Borrower or any Restricted Subsidiary of any transaction described in the foregoing subdivisions (a), (b) and (c) of this Section 8.06 that (i) in the case of any sale or issuance of stock of a Restricted Subsidiary described in said subdivision (a) or (b), the assets of such Restricted Subsidiary represented by the equity interest to be so sold or issued are such that the sale of such assets would then be permitted by Section 8.07 (in which case such transaction shall be considered and deemed a disposition of assets for purposes of Section 8.07), and (ii) in the case of any such transaction described in said subdivision (a), (b) or (c), immediately after giving effect to such transaction (x) no Default or Event of Default shall have occurred and be continuing and (y) a Restricted 74 Subsidiary shall be permitted to incur at least $1.00 of additional Debt pursuant to Section 8.02(b). SECTION 8.07. Consolidation, Merger, Sale of Assets, etc. ------------------------------------------ The Borrower will not, and will not permit any of its Restricted Subsidiaries to, voluntarily liquidate or dissolve, or consolidate or merge with or into any other Person, or permit any other Person to consolidate with or merge with or into it, or participate in a share exchange with or sell, lease, transfer, contribute or otherwise dispose of any of its assets to any other Person, except that, subject in any event to compliance with the last paragraph of this Section 8.07: (a) the Borrower and/or any Restricted Subsidiary may sell or otherwise dispose of its assets (i) in the ordinary course of its business as such business is permitted to be conducted in compliance with Section 8.09 and (ii) in a Permitted Receivables Financing; or (b) (i) any Restricted Subsidiary may (A) consolidate with or merge into the Borrower or a Wholly Owned Restricted Subsidiary if the Borrower or such Wholly Owned Restricted Subsidiary shall be the continuing or surviving corporation or (B) consolidate or merge with any other corporation if such Restricted Subsidiary shall be the continuing or surviving corporation and (ii) any Wholly Owned Restricted Subsidiary may consolidate with or merge into any other Wholly Owned Restricted Subsidiary; or (c) any Restricted Subsidiary may sell, lease, transfer, contribute or otherwise dispose of its assets in whole or in part to the Borrower or a Wholly Owned Restricted Subsidiary or any other Restricted Subsidiary and may, following any such disposition in whole, liquidate and dissolve; or (d) the Borrower may consolidate or merge with any other Person if the Borrower shall be the continuing or surviving corporation; or (e) the Borrower may consolidate with or merge into, or sell, transfer or otherwise dispose of its assets as an entirety or substantially as an entirety, to any other Person (a "Successor"; any such consolidation, merger or disposition of assets being hereinafter referred to as a "Successor Transaction"), but only if such Successor (i) is a solvent corporation duly organized, validly existing and in good standing under the laws of the United States of America or a state thereof and (ii) expressly assumes, not later than the consummation of such Successor Transaction, pursuant to a written instrument satisfactory in form, scope and substance to the Lenders, the due and punctual payment of all principal, interest and Fees in accordance with the terms hereof and of the other Credit Documents to which the Borrower is a party, and the due and punctual performance and observance of all other obligations of the Borrower under this Agreement, an executed counterpart of which instrument shall have been furnished to each of the Lenders together with a favorable opinion of counsel satisfactory to each Lender covering such legal 75 matters relating to such Successor, the Successor Transaction, such assumption and such instrument as such holder may reasonably request; or (f) the Borrower or any Restricted Subsidiary, in addition to making any sale or other disposition permitted by the foregoing provisions of this Section, may sell any of its assets for a consideration at least equal to the fair market value thereof (as determined by the Board of Directors) at the time of such sale; provided that no such sale of any assets shall be -------- permitted under this subdivision (f) unless (i) the assets so sold, when taken together with all other assets of the Borrower and its Restricted Subsidiaries then being or theretofore so sold (including deemed dispositions pursuant to Section 8.06 but excluding (x) Excluded Sales and (y) Replaced Warehouse Sales) during the period of twelve consecutive months ending on the date of such sale ("Sale Date") shall not have an aggregate net book value (determined in the case of any such asset as of the date of sale thereof) which shall exceed 10% of Consolidated Net Tangible Assets (the amount of Consolidated Net Tangible Assets for purposes hereof being determined (1) as of such Sale Date, if an Officers' Certificate dated as of such date shall have been provided to the Administrative Agent and the Lenders providing facts or computations in reasonable detail demonstrating compliance with the terms of this Section 8.07(f)(i) in connection with such sale, or (2) if no such Officers' Certificate shall have been provided to the Administrative Agent and the Lenders in connection with such sale, as of the most recent Determination Date prior to the date of such Sale Date with respect to which the Borrower shall have delivered the Required Financial Information), or (ii) such sale shall not constitute a Replaced Warehouse Sale and shall not meet the requirements of, and shall not be permitted pursuant to, the immediately foregoing subdivision (f)(i) (any such sale, a "Substantial Sale") but (A) prior to consummating such Substantial Sale, the Borrower shall give notice to the Administrative Agent and each of the Lenders specifying the anticipated or actual Sale Date, briefly describing the assets sold or to be sold and setting forth the net book value of such assets and the aggregate consideration and the Net Sale Proceeds to be received for such assets in connection with such sale, (B) the Borrower shall (1) during the period of 150 days following the consummation of such sale (the "Application Period"), apply (or cause to be applied) an amount equal to such Net Sale Proceeds from such Substantial Sale to the purchase, acquisition or (in the case of real property) construction of Alternative Assets, or (2) if an amount equal to such Net Sale Proceeds shall not have been applied during the Application Period in accordance with the immediately foregoing clause (B)(1), then not later than the expiration of such Application Period, (aa) 76 furnish the Administrative Agent and each of the Lenders an Officers' Certificate specifying the portion of such Net Sale Proceeds that were so applied to the purchase, acquisition or construction of Alternatives Assets and specifying any additional portion of such Net Sale Proceeds (the "Additional Portion") that will be so applied to the purchase, acquisition or construction of Alternative Assets during the period (the "Further Period") of 30 days next following the expiration of the applicable Application Period and (bb) unless the sum of the amount so applied during the Application Period to the purchase, acquisition or construction of Alternative Assets plus the ---- Additional Portion, if any, specified in such Officers' Certificate shall be at least equal to the amount of such Net Sale Proceeds, give an Excess Sale Notice with respect to such Substantial Sale in compliance with Section 3.02(b)(2) and thereafter (x) pay, prepay or otherwise reduce the outstanding Loans and LOC Obligations in the manner and to the extent required by such Section 3.02(b)(ii), and (y) to the extent that the Available Fund resulting from such sale shall exceed the amount of the payments, prepayments and other reductions of Loans and LOC Obligations required by such Section 3.02(b)(ii), apply an amount equal to such excess to the retirement (no later than the forty-fifth day following the day fixed for such payments, prepayments and/or other reductions of Loans and LOC Obligations under Section 3.02(b)(ii)) of an equivalent principal amount of Funded Debt (other than Subordinated Debt) of the Borrower and its Restricted Subsidiaries, (C) if in the Officers' Certificate required to be furnished to the immediately foregoing clause (B) the Borrower shall have specified an Additional Portion of such Net Sale Proceeds to be applied to the purchase, acquisition or construction of Alternative Assets during the Further Period, the Borrower shall in fact so apply an amount equal to such Additional Portion during such Further Period, and (D) pending application of an amount equal to such Net Sale Proceeds to the purchase, acquisition or construction of Alternative Assets, to the payment, prepayment or other reduction of the Loans and LOC Obligations and/or the retirement of Debt in accordance with the immediately foregoing clauses (B) and (C), the Borrower shall cause an amount equal to Net Sale Proceeds (or so much thereof as shall not have been theretofore so applied) to be invested in Investments of the character described in subdivision (a) of the definition of "Restricted Investments" set forth in Section 1.01, or (iii) such sale shall constitute a Replaced Warehouse Sale; and provided further that, in the event the assets to be sold in any --- -------- ------- proposed sale referred to in this subdivision (f) may not be sold as an entirety pursuant to any one of the 77 foregoing clauses (i) through (iii) hereof, such assets may nevertheless be sold by the Borrower or a Restricted Subsidiary, as the case may be, if and to the extent that such sale could be effected pursuant to, and is in fact effected in compliance with, a combination of two or more of said clauses (i) through (iii). No consolidation, merger, sale, lease, transfer, contribution or other disposition referred to in subdivisions (b) through (f) of this Section shall be permitted unless (x) immediately after giving effect to such transaction, (1) no Default or Event of Default shall have occurred and be continuing and (2) a Restricted Subsidiary shall be permitted to incur at least $1.00 of additional Debt pursuant to Section 8.02 and (y) upon giving effect to any such transaction (to the extent required in the definition of "Operating Cash Flow" set forth in Section 1.01) as of the first day of the four consecutive fiscal quarters ended as of the most recent Determination Date occurring prior to the date of such proposed transaction with respect to which the Borrower shall have delivered the Required Financial Information, no Default or Event of Default would have occurred as the result of a violation of Section 8.01(c) on such Determination Date. Nothing contained in this Section shall permit (i) the disposition of assets consisting of Debt, stock or similar interests or other securities (or warrants, rights or options to acquire stock or other securities) of any Restricted Subsidiary unless such disposition, if subject to Section 8.06, is also permitted by Section 8.06, or (ii) the disposition of any Transferred Assets (or any interest therein) by the Borrower or any Restricted Subsidiary to any Unrestricted Subsidiary except in connection with a Permitted Receivables Financing. SECTION 8.08. Transactions with Affiliates; Tax Consolidation. ----------------------------------------------- (a) The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or be a party to any transaction or arrangement (including, without limitation, the contribution, transfer, purchase, sale or exchange of property, or the rendering of any service, or the payment of management or other service fees) with any Affiliate unless such transaction or arrangement is entered into upon terms that are fair and reasonable and no less favorable to the Borrower or such Restricted Subsidiary, as the case may be, than those which might be obtained at the time on an arm's- length basis from any Person which is not such an Affiliate; provided that, -------- subject to the terms of Section 9.13, the foregoing restrictions shall not apply to (i) any transaction between the Borrower and a Wholly Owned Restricted Subsidiary or between one Wholly Owned Restricted Subsidiary and another Wholly Owned Restricted Subsidiary or (ii) transactions effected pursuant to and in compliance with the terms of the agreements listed on Schedule X, in the case of ---------- each thereof, as the same shall be in effect on and as of the Closing Date (collectively, the "Existing Affiliate Agreements"). Nothing contained in this Section shall permit the disposition of any accounts receivable (or any interest therein) by the Borrower or any Restricted Subsidiary to any Unrestricted Subsidiary except in connection with a Permitted Receivables Financing. (b) The Borrower will not, and will not permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with JPF or any other Person (other than a Subsidiary of the Borrower) except that the Borrower or any such Subsidiary may file or consent to the filing of a consolidated United States federal income tax return with JPF if (but 78 only if) JPF shall have entered into a valid and binding agreement to reimburse to the Borrower, or to allow the Borrower to retain, a sum equal to the amount by which the income taxes of the consolidated group of corporations of which the Borrower is a part are reduced as a result of the inclusion of the Borrower in the consolidated return of such group; provided that, the Borrower may agree to -------- pay JPF an amount not to exceed the amount of income taxes which would have been payable by the Borrower if it had filed its income tax return on a basis not consolidated with JPF, subject to appropriate adjustment in the event that the amount of such income taxes is increased or reduced by reason of any audit by a taxing authority or any successful claim for a refund, any such payment or reimbursement to be computed in accordance with GAAP and applicable tax law, rules and regulations, and to be made at the time of payment or refund of any such income taxes. SECTION 8.09. Nature of Business. ------------------ The Borrower and its Restricted Subsidiaries will remain principally engaged in the business of broadline distribution of food and related products to restaurants and other food service establishments, and will not engage in any line of business in which they are not currently engaged to such an extent that the business of the Borrower and its Restricted Subsidiaries taken as a whole would be fundamentally different in nature from the business of the Borrower and its Restricted Subsidiaries on the date hereof. SECTION 8.10. Books and Records; Fiscal Year. ------------------------------ The Borrower will, and will cause each of its Subsidiaries to, (a) keep proper books of record and account in which full, true and correct entries will be made of all its material business dealings and transactions in accordance with GAAP applied on a consistent basis and (b) maintain a system of accounting established and administered in accordance with GAAP, and set aside on its books from its earnings for each fiscal period all proper reserves, accruals and provisions which, in accordance with GAAP, should be set aside from such earnings in connection with its business, including, without limitation, provisions for depreciation, obsolescence and/or amortization, and accruals for taxes for such period. The Borrower will give the Administrative Agent and each of the Lenders advance written notice of any change in the basis on which the fiscal year of the Borrower or any Restricted Subsidiary is determined, provided -------- that no such change shall result in the Borrower having a fiscal year longer than twelve (12) fiscal months. SECTION 8.11. Corporate Existence; Licenses. ----------------------------- The Borrower will, and will cause each of its Restricted Subsidiaries to, do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence (except as otherwise permitted by Section 8.07) and its rights (charter and statutory) and Licenses; except that, subject to compliance with Sections 8.06 and 8.07 and the next succeeding sentence of this Section, the rights and Licenses of the Borrower or any of its Restricted Subsidiaries may be abandoned, modified or terminated if in the judgment of the Board of Directors such abandonment, modification or termination is in the best interests of the Borrower 79 and its Restricted Subsidiaries and is not disadvantageous to the Lenders. The Borrower will, and will cause each of its Restricted Subsidiaries to, in any event maintain the validity of all Licenses necessary in any material respect for the conduct of the business of the Borrower and its Restricted Subsidiaries as now conducted and as proposed to be conducted. SECTION 8.12. Payment of Taxes, Claims for Labor and Materials, etc. ----------------------------------------------------- The Borrower will, and will cause each of its Restricted Subsidiaries to, promptly pay and discharge or cause to be promptly paid and discharged when due and before the same shall become delinquent (a) all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its franchises, Licenses, business or property, or upon any part thereof, and (b) all claims of landlords, carriers, warehousemen, mechanics, materialmen and other similar Persons for labor, materials, supplies and rentals which, if unpaid, might by law become a Lien or charge upon any of its property; provided, however, that the failure of the Borrower or any of its Restricted - -------- ------- Subsidiaries to pay any such tax, assessment, charge, levy or claim shall not constitute a Default hereunder if and for so long as the amount, applicability or validity thereof shall concurrently be contested in good faith by appropriate and timely actions or proceedings diligently pursued, and if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor and the consequences of such failure shall not have, either alone or taken together with the consequences of all other such failures, a Material Adverse Effect. SECTION 8.13. Maintenance of Properties. ------------------------- The Borrower will, and will cause each of its Restricted Subsidiaries to, maintain and keep, or cause to be maintained and kept, in good repair, working order and condition (ordinary wear and tear excepted) all properties (whether owned or leased) used or useful in the business of the Borrower and its Restricted Subsidiaries, and from time to time make or cause to be made all necessary and proper repairs, renewals, replacements and improvements thereof so that the business carried on in connection therewith may be properly and advantageously conducted consistent with past practices of the Borrower. SECTION 8.14. Insurance. --------- The Borrower will, and will cause each of its Restricted Subsidiaries to, keep adequately insured, by financially sound and reputable insurers, all of its property of a character customarily insured against by prudent corporations engaged in the same or a similar business and similarly situated against loss or damage of the kinds and in amounts customarily insured against by such corporations, and with deductibles or coinsurance no greater than is customary, and carry (or cause its suppliers to carry, under arrangements pursuant to which the Borrower or its applicable Restricted Subsidiary is named an additional insured), with such insurers in customary amounts, such other insurance, including public liability insurance and insurance against claims for any violation of applicable law, as is customarily carried by prudent corporations of established reputation engaged in the same or a similar business and similarly situated; provided, however, that the Borrower and its Restricted -------- ------- Subsidiaries may, consistently with their practices prior to 80 the date hereof, self-insure with respect to certain categories of insurance (including, but not limited to, property and workers' compensation claims) so long as (i) the respective amounts of such categories of self insurance for the Borrower and all Restricted Subsidiaries shall not exceed the amounts thereof from time to time recommended to the Borrower by an independent firm of risk management consultants of recognized standing and (ii) all reserves required in accordance with GAAP to be maintained by the Borrower and its Restricted Subsidiaries in respect of all such self insurance (including self insurance in effect resulting from co-insurance, deductibility or similar clauses) shall be maintained through a security arrangement as required by the respective insurer (which may include the procurement by the Borrower, as account party, of Letters of Credit issued hereunder), or other arrangements, not to include cash collateral, in compliance with Section 8.03. SECTION 8.15. Compliance with Laws. -------------------- The Borrower will, and will cause each of its Restricted Subsidiaries to, promptly comply in all material respects with all laws, statutes, rules, regulations and ordinances and all Orders of, and restrictions imposed by, any court, arbitrator or Governmental Body in respect of the conduct of its business and the ownership of its properties (including, without limitation, applicable laws, statutes, rules, regulations, ordinances and Orders relating to occupational health and safety standards, consumer protection and equal employment opportunities), except to the extent that the applicability or validity of any such law, statute, rule, regulation, ordinance or Order is being contested in good faith by appropriate and timely actions or proceedings diligently pursued, and for which such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made, so long as such actions or proceedings are effective to prevent the imposition of any material penalty on the Borrower or such Restricted Subsidiary and the consequences of the failure to comply with such contested law, statute, rule, regulation, ordinance or Order and of the conduct of such action or proceeding shall not have, either alone or taken together with the consequences of all other such failures, actions and proceedings, a Material Adverse Effect. SECTION 8.16. Environmental Matters. --------------------- (a) The Borrower will, and will cause each of its Restricted Subsidiaries to, (i) obtain and maintain in full force and effect all Environmental Permits that may be required from time to time under any Environmental Laws applicable to the Borrower or any Restricted Subsidiary and (ii) be and remain in compliance in all material respects with all terms and conditions of all such Environmental Permits and with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in all applicable Environmental Laws. (b) The Borrower will not, and will not permit any of its Restricted Subsidiaries to, (i) cause or allow (A) any Hazardous Substance to be present at any time on, in, under or above the Borrower Premises or any part thereof or (B) the Borrower Premises or any part thereof to be used at any time to manufacture, generate, refine, process, distribute, use, sell, treat, receive, store, dispose of, transport, arrange for transport of, handle, or be involved in any other activity involving, any Hazardous Substance, or (ii) conduct any such activities described in the 81 foregoing clause (i)(B) on the Borrower Premises or anywhere else, except, in each case referred to in the foregoing clauses (i) and (ii), in a manner that is in compliance in all material respects with all applicable Environmental Laws and Environmental Permits and to an extent that will not have a Material Adverse Effect; provided, however, that the existence of the circumstances described on -------- ------- Schedule XI with respect to the Everett Facility shall not be deemed to - ----------- constitute a default by the Borrower in the performance of its obligations under this Section 8.16(b) so long as neither such circumstances nor any claim or liability asserted against the Borrower in connection therewith nor any action required to be taken by the Borrower with respect thereto shall have had a Material Adverse Effect. SECTION 8.17. Maintenance of Office. --------------------- The Borrower will maintain its principal office at a location in the United States of America where notices, presentations and demands in respect of this Agreement may be made upon it, and will notify the Administrative Agent and each of the Lenders in writing of any change of location of such office reasonably promptly following the occurrence of such change. Such office shall first be maintained at the address of the Borrower set forth in Section 12.01. SECTION 8.18. Future Restricted Subsidiaries. ------------------------------ The Borrower will cause each Subsidiary (other than Squeri Cash & Carry, Inc. (which corporation shall be dissolved or liquidated and Nevada Baking Company, Inc., which shall execute a Guaranty Joinder Agreement, or whose assets and liabilities shall be acquired by the Borrower or a Restricted Subsidiary, in either case no later than June 30, 1997) and any Subsidiary created in connection with any Permitted Receivables Financing for the sole purpose of, and whose business activities are (and at all times remain) limited to, purchasing accounts receivable (or any interests therein) from the Borrower or any of its Restricted Subsidiaries and selling, transferring or otherwise conveying such accounts receivable (or any interests therein) to the Receivables Financier for such Permitted Receivables Financing) which at any time on or following the Closing Date shall be designated or redesignated in accordance with the terms of this Agreement as a Restricted Subsidiary, not later than the time of effectiveness of such designation or redesignation, to guarantee pursuant to the Guaranty Agreement the obligations of the Borrower under this Agreement and the other Credit Documents to which the Borrower is a party. In furtherance of the above, the Borrower shall notify the Administrative Agent and the Lenders in accordance with Section 6.01(j) upon any Subsidiary being designated or redesignated in accordance with the terms of this Agreement as a Restricted Subsidiary and shall cause such Subsidiary (i) to execute a Guarantor Joinder Agreement and (ii) to deliver such other documentation as the Administrative Agent may reasonably request in connection with the foregoing, including without limitation certified corporate resolutions and other corporate documents of such Subsidiary and favorable opinions of counsel to such Subsidiary (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to above), all in form, content and scope reasonably satisfactory to the Administrative Agent. 82 Notwithstanding any provision of this Agreement or the Guaranty Agreement to the contrary, in the event that any Guarantor shall cease to be a Restricted Subsidiary in accordance with the terms of this Agreement, then (1) such Guarantor, automatically and without further act on the part of the Administrative Agent or the Lenders, shall be released from its obligations under the Guaranty Agreement and (2) promptly upon the request of the Borrower, the Administrative Agent (on behalf of the Lenders) shall execute such documents and take such other action reasonably requested by the Borrower to cause such Guarantor to be released from its obligations arising under the Guaranty Agreement. ARTICLE IX. REPRESENTATIONS AND WARRANTIES OF THE BORROWER The Borrower hereby represents and warrants to each Lender that: SECTION 9.01. Organization and Authority of the Borrower, etc. ----------------------------------------------- The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite legal right, power and authority to own or hold under lease the property it purports to own or hold under lease, to carry on its business as now conducted and as proposed to be conducted, and to enter into and carry out the terms of this Agreement and the other Credit Documents to which it is a party. As of the Restatement Date, the Borrower has, by all necessary corporate action (including all action of its shareholders required in connection therewith), duly authorized the execution and delivery of, and the performance of its obligations under, this Agreement and the other Credit Documents to which it is a party. SECTION 9.02. Subsidiaries. ------------ Schedule VIII lists all existing Subsidiaries of the Borrower as of the ------------- Restatement Date and correctly sets forth, as to each Subsidiary (a) its name, (b) its jurisdiction of organization, (c) the percentage of its issued and outstanding shares of capital stock of each class owned by the Borrower or one of its Subsidiaries (specifying each such Subsidiary), and (d) the name of each Person, if any, other than the Borrower or one of its Subsidiaries owning outstanding shares of capital stock of any class of such Subsidiary and the percentage of each such class of stock owned by such Person. The Borrower does not, as of the date of this Agreement, and will not, as of the Restatement Date, have any Unrestricted Subsidiaries; and each Subsidiary listed on Schedule VIII ------------- is initially designated as a Restricted Subsidiary. Each such Restricted Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite legal right, power and authority to own or hold under lease the property it purports to own or hold under lease, to carry on its business as now conducted and as proposed to be conducted, and to enter into and carry out the terms of the Guaranty Agreement. Each such Restricted Subsidiary has, by all necessary corporate action (including all action of its shareholders required in connection therewith), duly authorized the 83 execution and delivery of, and the performance of its obligations under the Agreement. All of the outstanding shares of capital stock of each such Restricted Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable and all shares of capital stock indicated on Schedule -------- VIII as owned by the Borrower or any other such Restricted Subsidiary as of the - ---- Closing Date are owned beneficially and of record by the Borrower or such other Restricted Subsidiary, as the case may be; and immediately after giving effect to the transactions to be consummated on the Restatement Date such shares will be so owned, free and clear of any Lien. Except as otherwise permitted by Section 8.06, there are no outstanding rights, options, warrants, conversion rights or agreements for the purchase or acquisition from the Borrower or any of its Subsidiaries of any shares of capital stock or similar interests or other securities of any Subsidiary. SECTION 9.03. Qualification. ------------- The Borrower is, and each of its Restricted Subsidiaries is, duly qualified or licensed and in good standing as a foreign corporation duly authorized to do business in each jurisdiction (other than the jurisdiction of its organization) in which the nature of its activities or the character of the properties it owns or leases makes such qualification or licensing necessary and in which the failure to so qualify or be licensed would have a Material Adverse Effect. Schedule VIII sets forth as to the Borrower and each of its Restricted - ------------- Subsidiaries the jurisdictions (other than the jurisdiction of its organization) in which, as of the Restatement Date, it is qualified or licensed to do business or in which any substantial part of its tangible assets is located. SECTION 9.04. Financial Statement. ------------------- The financial statements referenced in Section 5.04(a) have been prepared in accordance with GAAP, are complete and correct in all material respects and present fairly the financial position and results of operations and cash flows of the entities for the periods specified, subject in the case of interim company-prepared statements to normal year-end adjustments and the absence of footnotes. SECTION 9.05. Changes, etc. ------------ Since the date of the balance sheet included in the most recent audited financial statements referred to in Section 5.04(a), (a) there have been no changes in the Business or Condition of the Borrower and its Subsidiaries which has been, either in any one case or in the aggregate, Materially Adverse, and (b) there has been no occurrence or development, whether or not insured against, which has had or could reasonably be expected to have a Material Adverse Effect. SECTION 9.06. Compliance with Laws, Other Instruments, etc. -------------------------------------------- (a) Neither the Borrower nor any of its Subsidiaries is in violation of any term of its corporate charter or by-laws. Neither the Borrower nor any of its Subsidiaries is in violation of any term of any agreement, indenture, mortgage or instrument to which it is a party or by which 84 it or any of its properties may be bound or affected or any existing statute, law, governmental rule, regulation or ordinance, or any Order of any court, arbitrator or Governmental Body applicable to it (including, without limitation, any statute, law, rule, regulation, ordinance or Order relating to occupational health and safety standards, consumer protection or equal employment practice requirements and applicable regulations of the Department of Agriculture, the Food and Drug Administration and state and local health departments), the consequences of which violation, either alone or taken together with the consequences of all other such violations, have had or could reasonably be expected to have a Material Adverse Effect. (b) Neither the execution and delivery of this Agreement or any of the other Credit Documents nor the performance of the terms and provisions hereof or thereof nor the consummation of the transactions contemplated hereby or thereby will result in any breach of or be in conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in a loss of any benefit to which the Borrower or any of its Subsidiaries is entitled under, or result in (or require) the creation of any Lien upon any property of the Borrower under, any term of, the corporate charter or by-laws of the Borrower or any of its Subsidiaries or any agreement, indenture, mortgage or instrument to which the Borrower or any of its Subsidiaries is a party or by which the Borrower, any such Subsidiary or any of their respective properties may be bound or affected, or any existing statute, law, rule, regulation or ordinance or any Order of any court, arbitrator or Governmental Body applicable to the Borrower, any such Subsidiary or any of their respective properties. SECTION 9.07. Consents and Approvals. ---------------------- No Approval by, from or with, and no other action in respect of, any Governmental Body or any other Person (including any trustee, or any holder of any indebtedness, securities or other obligations of the Borrower or any Restricted Subsidiary) is required (a) for or in connection with the valid execution and delivery by the Borrower or any Restricted Subsidiary of or the performance by the Borrower or any Restricted Subsidiary of its obligations under this Agreement or any of the other Credit Documents or the consummation by the Borrower or any Restricted Subsidiary of the transactions contemplated hereby and thereby, or (b) as a condition to the legality, validity or enforceability as against the Borrower or any Restricted Subsidiary of this Agreement or any of the other Credit Documents, in each case, other than (i) routine filings before and after the Restatement Date with the Commission and state Blue Sky authorities, and (ii) the Approvals described on Schedule XII, ------------ all of which have been duly obtained or made and are in full force and effect and true and correct copies of instruments evidencing which have been furnished to the Administrative Agent. SECTION 9.08. Debt, etc. --------- Schedule IX correctly lists all secured and unsecured Debt of the Borrower ----------- and each of its Subsidiaries outstanding on the date hereof (except as otherwise noted thereon) and shows, as to each item of Debt listed thereon, the obligor and obligee, the aggregate principal amount outstanding as of the Restatement Date. No default or event of default or basis for acceleration 85 exists (nor in the case of Permitted Receivables Financings, has any termination event occurred) or, immediately after giving effect to the initial borrowings hereunder on the Restatement Date and the other transactions to occur on the Restatement Date as contemplated hereby, will exist (or, but for the permanent waiver thereof, would exist) under any instrument or agreement evidencing, providing for the issuance or securing of, or otherwise relating to any such Debt due to (a) nonpayment of any obligations thereunder or (b) any failure to duly perform or observe any other covenant, provision, agreement or condition contained therein, the consequences of which failure, either alone or taken together with the consequences of all other such failures, have had or could reasonably be expected to have a Material Adverse Effect. As of the Closing Date, the Effective Date and the Restatement Date, neither the Borrower nor any Restricted Subsidiary is a party to or bound by any charter provision, by-law, agreement, indenture, mortgage, lease, instrument or License (other than this Agreement and the other Credit Documents) which contains any restriction on the incurrence by it of any Debt, except for the Note Purchase Agreements, a true and correct copy of each of which has been delivered to the Administrative Agent and pursuant to each of which the Borrower or such Restricted Subsidiary, as applicable, either is permitted to incur Debt hereunder and/or under the other Credit Documents to which it is a party or has duly obtained in writing and delivered to the Administrative Agent all such Approvals as are or will be necessary or appropriate to permit such incurrence. SECTION 9.09. Title to Property; Leases; Investments; Existing Affiliate ---------------------------------------------------------- Agreements. - ---------- (a) The Borrower and its Restricted Subsidiaries have good and marketable title to their real properties and good title to the other properties they purport to own, including those reflected in the balance sheet included in the most recent audited financial statements referred to in Section 9.04 or purported to have been acquired by the Borrower or any of its Restricted Subsidiaries after the date of such balance sheet (other than any such properties disposed of since such date in the ordinary course of business), subject in the case of all such property to no Liens other than Liens permitted by Section 8.03. The Borrower and its Restricted Subsidiaries enjoy peaceful and undisturbed possession under all leases of all personal and all real property necessary in any material respect to their respective operations, all such leases are valid and subsisting and in full force and effect, and neither the Borrower nor any such Subsidiary is in default in any material respect in the performance or observance of its obligations thereunder. Schedule VIII includes ------------- a general description of each Operating Lease existing as of the date hereof under which the Borrower or a Restricted Subsidiary is a lessee and under which the annual rental obligations exceed $100,000, and sets forth with respect to each such lease, (i) the name of the lessor thereunder, (ii) a general description of the property leased, and (iii) the annual rental obligations payable thereunder. (b) Schedule VIII correctly lists all Investments of the Borrower and its ------------- Restricted Subsidiaries of the character described in subdivision (a) of the definition of "Investment" set forth in Section 1.01 (other than Investments in Subsidiaries) which are existing on the date hereof. 86 (c) The Borrower has delivered to the Administrative Agent a true and correct copy of each of the Existing Affiliate Agreements, in the case of each thereof as the same shall have been amended and be in effect on and as of the Closing Date. SECTION 9.10. Litigation. ---------- There are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against the Borrower or any of its Restricted Subsidiaries or any of their respective properties (and no basis therefor is known to the Borrower) in any court or before any arbitrator of any kind or before or by any Governmental Body, which (a) question the validity or legality of this Agreement or any of the other Credit Documents or any action taken or to be taken pursuant hereto or thereto or (b) either alone or taken together with all other such actions, suits and proceedings, have had or could reasonably be expected to have a Material Adverse Effect. SECTION 9.11. Taxes. ----- The Borrower and its Restricted Subsidiaries have filed all tax returns which are required by law to have been filed by them in any jurisdiction (other than tax returns (i) which may be required to be filed with state or local taxing authorities which have not advised the Borrower or any Restricted Subsidiary of such requirement, and (ii) with respect to which, neither the failure to file the same nor the failure to pay any taxes, assessments or charges which might be shown to be owing thereon has had or could reasonably be expected to have a Material Adverse Effect) and have paid all taxes, assessments, fees and charges of each Governmental Body shown to be owing on such filed returns to the extent the same have become due and payable and before they have become delinquent other than those presently payable without penalty or interest and those being contested in good faith by appropriate and timely actions or proceedings diligently pursued and with respect to which reserves have been provided for in the Borrower's financial statements to the extent required by GAAP. The Borrower does not know of any additional assessment or proposed assessment for any fiscal year, and no material controversy in respect of additional federal or state income taxes is pending or to the knowledge of the Borrower is threatened except any with respect to which reserves have been provided for in the Borrower's financial statements to the extent required by GAAP. In the opinion of the Borrower, all tax liabilities (including taxes for all open years and for its current fiscal period) are adequately provided for on the books of the Borrower and its Restricted Subsidiaries in accordance with GAAP. SECTION 9.12. Compliance with ERISA. --------------------- (a) No Termination Event has occurred, and no event or condition has occurred or exists as a result of which any Termination Event could reasonably be expected to occur, with respect to any Plan. No accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, has occurred with respect to any Plan or, to the best of the Borrower's knowledge, any Multiemployer Plan. Except as set forth in the immediately succeeding sentence, the present value of all accrued benefits under each Plan (based on those assumptions used to fund such Plan, which assumptions are reasonable) did not, as of the most recent valuation date prior to the Closing Date, which for any such Plan or 87 Multiemployer Plan was not earlier than twelve months prior to the date as of which this representation is made, exceed the then current value of the assets of such Plan allocable to such benefits. The present value of the accrued benefits under the JP Foodservice - Monarch Des Moines, Iowa Warehouse and Transportation Employees' Pension Plan and the JP Foodservice - Monarch Fort Wayne, Indiana Warehouse and Transportation Employees' Pension Plan (based on those assumptions used to fund such Plans, which assumptions are reasonable) exceeded, as of July 1, 1993 (the most recent valuation date for which calculations are available), the then current value of the assets of such Plans allocable to such benefits by $291,415 and $293,627, respectively (and the Borrower is not aware of any event or circumstance which could cause such amounts to increase materially as of July 3, 1994). (b) No Borrower Group Member has incurred, or, to the best of the Borrower's knowledge, is reasonably expected to incur, any withdrawal liability to any Multiemployer Plan. No Borrower Group Member has received any notification that any Multiemployer Plan is in reorganization (as defined in Section 4241 of ERISA), is insolvent (as defined in Section 4245 of ERISA) or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is, to the best of the Borrower's knowledge, reasonably expected to be in reorganization, insolvent or to be terminated. (c) No prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred which has subjected or may subject any Borrower Group Member to any liability under Section 406, 409, 502(i) or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which such Borrower Group Member has agreed or is required to indemnify any Person against any such liability. No Borrower Group Member has incurred, or is reasonably expected to incur, any liability to the PBGC (other than for insurance premiums, which have been paid when due). (d) Full payment has been made on or before the due date (including extensions) thereof of all amounts which any Borrower Group Member is or was required under the terms of any Plan or any Multiemployer Plan to have paid as contributions to such Plan as of the date hereof. (e) No Lien imposed under the Code or ERISA on the assets of any Borrower Group Member exists or is reasonably likely to arise on account of any Plan or any Multiemployer Plan. (f) No welfare plan (as defined in Section 3(1) of ERISA) maintained by any Borrower Group Member provides medical or death benefits with respect to current or former employees beyond their termination of employment (other than coverage mandated by law). Each such plan to which Sections 601-609 of ERISA and Section 4980B of the Code apply has been administered in compliance in all material respects with such sections. SECTION 9.13. Use of Loan Proceeds; Margin Regulations. ---------------------------------------- The Borrower will apply the proceeds of the Loans for working capital and general corporate purposes, including without limitation acquisitions, of the Borrower and its Restricted 88 Subsidiaries. No part of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207, as amended), or for the purpose of purchasing or carrying or trading in any securities, under such circumstances as to involve the Borrower in a violation of Regulation X of said Board (12 CFR 224, as amended) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220, as amended). No Debt being reduced or retired out of the proceeds of the Loans was or will be incurred for the purpose of purchasing or carrying any margin stock within the meaning of such Regulation G or any "margin security" within the meaning of such Regulation T. As of the date hereof and as of the Restatement Date, such margin stock does not constitute more than 25% of the value of the consolidated assets of the Borrower and its Subsidiaries; and the Borrower does not have any present intention that such margin stock will constitute more than 25% of the value of such assets. None of the transactions contemplated by this Agreement (including, without limitation, the direct or indirect use of the proceeds of the Loans) will violate or result in a violation of Section 7 of the Exchange Act or any regulations issued pursuant thereto, including, without limitation, said Regulation G, Regulation T and Regulation X. SECTION 9.14. Licenses, Patents, Trademarks, Authorizations, etc. -------------------------------------------------- The Borrower and each of its Restricted Subsidiaries owns, possesses or has the right to use (without any known conflict with the rights of others) all permits, franchises, patents, trademarks, service marks, trade names, copyrights, licenses, permits and governmental or other authorizations or the like (collectively, "Licenses") which are necessary in any material respect to the conduct of its businesses as conducted on the date hereof and as proposed to be conducted. All such necessary Licenses or rights therein purported to be owned by the Borrower or any Restricted Subsidiary are so owned free and clear of any Liens, other than Liens permitted by subdivisions (a), (d) and (g) of Section 8.03. Each such necessary License is in full force and effect, and no default in the performance or observance by the Borrower or any such Subsidiary of its obligations thereunder has occurred, the consequences of which default, either alone or taken together with the consequences of all other such defaults, have had or could reasonably be expected to have a Material Adverse Effect. SECTION 9.15. Status Under Certain Statutes; Other Regulations. ------------------------------------------------ The Borrower is not an "investment company" or a Person directly or indirectly "controlled" by or "acting on behalf of" an "investment company" within the meaning of the Investment Borrower Act of 1940, as amended. The Borrower is not a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," as such terms are defined in the Public Utility Holding Borrower Act of 1935, as amended. The Borrower is not a "public utility," as such term is defined in the Federal Power Act, as amended. The Borrower is not subject to regulation under any federal or state law, statute, rule, regulation or ordinance which limits its ability to incur Debt. 89 SECTION 9.16. Labor Matters. ------------- There are no labor disputes between the Borrower or any of its Restricted Subsidiaries on the one hand and any of their respective employees or representatives of such employees on the other hand which in the aggregate have had or could reasonably be expected to have a Material Adverse Effect, and the Borrower and its Restricted Subsidiaries are in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment, tax withholding on behalf of employees and wages and hours, and are not engaged in any unfair labor practice which, either alone or taken together with all other such practices, have had or could reasonably be expected to have a Material Adverse Effect. SECTION 9.17. Full Disclosure. --------------- This Agreement, the Registration Statement and the other documents, certificates and instruments delivered to the Administrative Agent and/or the Lenders by or on behalf of the Borrower in connection with the transactions contemplated by this Agreement, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which the same were made (including without limitation, the respective dates on or as of which such statements were made), not misleading. There is no fact known to the Borrower which has had a Material Adverse Effect since July 3, 1994 or in the future may (so far as the Borrower can now reasonably foresee) have a Material Adverse Effect which has not been set forth or reflected in this Agreement, the Registration Statement or in the other documents, certificates and instruments referred to herein and delivered to the Administrative Agent and/or the Lenders by or on behalf of the Borrower on or prior to the date hereof in connection with the transactions contemplated by this Agreement. SECTION 9.18. Environmental Matters. --------------------- (a) The Borrower and its Restricted Subsidiaries currently hold and at all times heretofore the Borrower and its Restricted Subsidiaries held all Environmental Permits required under all Environmental Laws except to the extent failure to have any such Environmental Permit, either alone or considered together with all other such failures, has not had and can not reasonably be expected to have a Material Adverse Effect. (b) The Borrower and its Restricted Subsidiaries currently are, and at all times heretofore the Borrower and its Restricted Subsidiaries have been, in compliance with all terms and conditions of all such Environmental Permits and all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in all applicable Environmental Laws except to the extent failure to comply therewith, either alone or considered together with all other such failures, has not had and can not reasonably be expected to have a Material Adverse Effect. (c) Except as set forth in Schedule XI, neither the Borrower nor any of ----------- its Restricted Subsidiaries has ever received, and, so far as is known to the Borrower, no predecessor in interest 90 of the Borrower or any such Subsidiary in respect of any of the Borrower Premises has ever received, from any Governmental Body or other Person any notice of, and the Borrower has no knowledge of, any events, conditions or circumstances that could prevent continued compliance in all material respects with the Environmental Permits referred to in subdivision (b) of this Section or any scheduled renewals thereof or any applicable Environmental Laws currently in effect, or that could give rise to any liability on the part of the Borrower or any such Restricted Subsidiary or otherwise form the basis of any claim, action, demand, request, notice, suit, proceeding, hearing, study or investigation (collectively, "Environmental Claims") involving the Borrower or any of its Restricted Subsidiaries, based on or related to (i) a violation of any applicable Environmental Laws currently in effect or (ii) the manufacture, generation, refining, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport, arranging for transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Substance in violation of any applicable Environmental Laws currently in effect, other than any liability or Environmental Claim referred to in this subdivision (c) which, either alone or considered together with all other such liabilities and Environmental Claims, has not had and can not reasonably be expected to have a Material Adverse Effect. Neither the matters set forth in Schedule XI nor the resolution thereof nor any action required to be taken by - ----------- Borrower in connection therewith have had or, in the Borrower's good faith judgment, will have a Material Adverse Effect. SECTION 9.19. Solvency. -------- The Borrower and each Restricted Subsidiary is, and upon giving effect to the initial borrowings hereunder on the Restatement Date will be, a "solvent institution", as said term is used in Section 1405(c) of the New York Insurance Law, whose "obligations are not in default as to principal or interest", as said terms are used in said Section 1405(c). ARTICLE X. EVENTS OF DEFAULT SECTION 10.01. Events of Default. ----------------- Each of the following shall be an event of default (each an "Event of Default") hereunder: (a) default shall be made in the due and punctual payment of any principal of any of the Loans or LOC Obligations when and as the same shall become due and payable; or (b) default shall be made in the due and punctual payment of any interest on any of the Loans or LOC Obligations when and as such interest shall become due and payable, and such default shall have continued for a period of five Business Days; or 91 (c) default shall be made in the due performance or observance of any covenant, provision, agreement or condition contained in Section 8.01(c), Section 8.02, Section 8.03, Section 8.04, Section 8.05, Section 8.06, or Section 8.07, or the Borrower or a Restricted Subsidiary shall create, incur, assume or otherwise become liable in respect of any Debt the incurrence of which is not permitted by Section 8.02(a) or Section 8.02(b) or immediately after giving effect to the incurrence of which the Borrower would not be in compliance with Section 8.02(c); or (d) default shall be made in the due performance or observance of any other covenant, provision, agreement or condition contained in this Agreement (other than any default referred to in the foregoing subdivisions (a), (b) and (c) of this Section 10.01), including, without limitation, any covenant, provision, agreement or condition contained in Section 8.01(c) or Section 8.02, and such default shall have continued for a period of 30 days after the earlier of (x) the date on which any Responsible Officer of the Borrower first has knowledge of such default, through notice or otherwise and (y) the giving of notice to the Borrower of such default by the Administrative Agent or any of the Lenders; or (e) (i) default shall be made in the payment of any amount due, whether on an interest payment date or on a date fixed for prepayment, at stated maturity, by acceleration or declaration or otherwise, under or in respect of any Debt of the Borrower (including, without limitation, Debt evidenced by any of the Notes, but excluding (x) Debt arising hereunder or under any of the other Credit Documents and (y) so long as the Borrower shall hold PYA's Note and the Sara Lee Offset Agreement shall remain in full force and effect and shall be effective to permit the offset of principal and interest due under the Sara Lee Note against principal and interest due under PYA's Note (or to establish the Borrower's obligation in respect of the indebtedness evidenced by the Sara Lee Note from and after a prepayment in full of PYA's Note as the remaining principal balance of the Sara Lee Note after offset against amounts owing thereon of the principal of and accrued and unpaid interest to the date of prepayment on the PYA Note), Debt evidenced by the Sara Lee Note) or of any Restricted Subsidiary which is outstanding in a principal amount of more than $5,000,000, and such default shall continue beyond the period of grace, if any, provided with respect thereto; or (ii) default shall be made in the due performance or observance of any covenant, provision, agreement or condition contained in any document evidencing or providing for the issuance or securing of any such Debt (other than Debt excluded as aforesaid), if the effect of any such default referred to in this clause (ii) is to have caused such Debt to become due prior to its stated maturity or prior to its regularly scheduled dates of payment; or (f) default shall be made in the due performance or observance of any financial or negative covenant or agreement contained in any of the Note Purchase Agreements beyond the period of grace, if any, provided for such performance or observance in such Note Purchase Agreement (other than any default arising from or consisting of a condition or event which (x) also constitutes a default referred to in the foregoing subdivision (c) or (d) of this Section 10.01 or (y) shall have become an Event 92 of Default under subdivision (e) of this Section 10.01) and such default (a "Noteholder Default") shall have continued for a period of 30 consecutive days without having been cured, either by the Borrower or by virtue of a waiver granted under or an amendment or other modification of the provisions of the applicable Note Purchase Agreements; provided that, in determining whether a Noteholder Default shall have occurred or shall exist, and in determining the period during which any Noteholder Default shall have continued, no effect shall be given to any waiver in respect of any provision of the applicable Note Purchase Agreements or any consent to a departure by the Borrower or a Subsidiary from any such provision or to any amendment or modification of the terms of the applicable Note Purchase Agreements or to any agreement entered into following, or in contemplation of, the occurrence or coming into existence of any condition or event which upon notice or lapse of time or both would constitute a Noteholder Default, if such waiver, consent, amendment, modification or agreement is given or entered into directly or indirectly in exchange for (i) monetary or other consideration (other than the payment by the Borrower or a Subsidiary of (x) waiver, modification or similar fees to the holders of the Notes not exceeding, in the case of any such fee payable to any one such holder in respect of the waivers, consents, amendments, modifications or agreements given or entered into at any one time, $10,000 and (y) amounts in reimbursement of the out-of-pocket costs of any of the holders of the Notes, (ii) any increase in the rate of interest, premium or fees theretofore payable under the applicable Note Purchase Agreements or (iii) any decrease in the term to final maturity or the Weighted Average Life to Maturity of any Debt of the Borrower or a Restricted Subsidiary under the applicable Note Purchase Agreements; or (g) the Borrower or any Restricted Subsidiary shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) become insolvent or be generally unable to or shall generally fail or admit in writing its inability to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (v) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors' rights generally, (vi) acquiesce in writing to, or fail to controvert in a timely or appropriate manner, any petition filed against it in an involuntary case under such Bankruptcy Code, (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing, or (viii) take any corporate action in furtherance of any of the foregoing; or (h) a proceeding or case shall be commenced in respect of the Borrower or any Restricted Subsidiary, without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets, or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or 93 unstayed and in effect, for a period of 45 days, or an order for relief shall be entered in an involuntary case under the Federal Bankruptcy Code (as now or hereafter in effect) against the Borrower or any Restricted Subsidiary or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Borrower or any Restricted Subsidiary and shall continue undismissed, or unstayed and in effect, for a period of 45 days; or (i) a final judgment or decree for the payment of money shall be rendered by a court of competent jurisdiction against the Borrower or any Restricted Subsidiary which, either alone or together with other outstanding judgments or decrees against the Borrower or any one or more Restricted Subsidiaries, shall aggregate more than $5,000,000, and the Borrower or such Subsidiary, as the case may be, shall not discharge the same or provide for its discharge in accordance with its terms within 60 days from the date of entry thereof or within such longer period (including, without limitation, any period during which the Borrower shall be contesting a denial of coverage of its liability in respect of such judgment by a reputable insurance carrier) during which execution of such judgment shall have been stayed; or (j) any representation or warranty made by the Borrower or a Restricted Subsidiary in this Agreement or the Guaranty Agreement or in any certificate or other instrument delivered hereunder or thereunder or pursuant hereto or thereto or in connection with any provision hereof shall prove to have been false or incorrect or breached in any material respect on the date as of which made; or (k) (i) any Borrower Group Member shall fail to pay when due any amount which it shall have become liable to pay to the PBGC or to a Plan or Multiemployer Plan under Title IV of ERISA; (ii) any Borrower Group Member shall withdraw from a Multiple Employer Plan during a plan year in which it is a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or shall be treated as having so withdrawn under Section 4062(e) of ERISA, or any Multiple Employer Plan shall be terminated; (iii) notice of intent to terminate any Plan or Multiemployer Plan shall be filed under Title IV of ERISA by any Borrower Group Member, any plan administrator or any combination of the foregoing; (iv) the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Plan or Multiemployer Plan; (v) any Borrower Group Member shall withdraw from any Multiemployer Plan ; (vi) any Plan shall have an Unfunded Current Liability; or (vii) any prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject any Borrower Group Member to any liability under Section 406, 409, 502(i) or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which such Borrower Group Member has agreed or is required to indemnify any Person against any such liability; and there shall result from any such event or events referred to in the foregoing subdivisions (k)(i) through (k)(vii) a material risk of incurring a liability in excess of $5,000,000; or 94 (l) a Change of Control shall occur; or (m) the Guaranty given by any Restricted Subsidiary pursuant to the Guaranty Agreement shall cease to be in full force and effect other than by reason of the release of such Restricted Subsidiary pursuant to Section 8.18 from its obligations under the Guaranty Agreement, or any Restricted Subsidiary or any Person acting by or on behalf of such Restricted Subsidiary shall deny or disaffirm such Restricted Subsidiary's obligations under the Guaranty Agreement; or default shall be made by any Restricted Subsidiary in the performance or observance of any covenant, provision, agreement or condition contained in the Guaranty Agreement, and such default (i) shall have continued for a period of 30 days after the earlier of (x) the date on which any Responsible Officer of the Borrower first has knowledge of such default, through notice or otherwise, and (y) the giving of notice to the Borrower of such default by the Administrative Agent or any of the Lenders, and (ii) either alone or considered together with all such defaults, shall have or shall be reasonably likely to have a Material Adverse Effect; SECTION 10.02. Acceleration; Remedies. ---------------------- Upon the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived by the Lenders or cured to the satisfaction of the Lenders (pursuant to the voting procedures in Section 12.07), the Administrative Agent, upon the request of the Required Lenders, shall, by written notice to the Borrower, take any of the following actions without prejudice to the rights of the Administrative Agent or any Lender to enforce its claims against the Borrower, except as otherwise specifically provided for herein: (i) Termination of Commitments. Declare the Commitments terminated -------------------------- whereupon the Commitments shall be immediately terminated. (ii) Acceleration of Obligations. Declare the unpaid principal of --------------------------- and any accrued interest in respect of all Loans, any reimbursement obligations arising from drawings under Letters of Credit and any and all other indebtedness or obligations of any and every kind owing by the Borrower to any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. (iii) Cash Collateral. Contemporaneously with or subsequent to the --------------- exercise of its right under clause (ii) of this Section 10.02, direct the Borrower to pay (and the Borrower agree that upon receipt of such direction, or upon the occurrence of an Event of Default under Section 10.01(g) or (h), it will immediately pay) to the Administrative Agent additional cash, to be held by the Administrative Agent, for the benefit of the Lenders, in a cash collateral account as additional security for the LOC Obligations in respect of subsequent drawings under all then outstanding Letters of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding. 95 (iv) Enforcement of Rights. Enforce (A) any and all rights and --------------------- interests created and existing under the Credit Documents and (B) all rights of set-off to the extent available under, and to the extent exercised in accordance with, applicable law. Notwithstanding the foregoing, if an Event of Default specified in Section 10.01(g) or (h) shall occur, then the Commitments shall automatically terminate and all Loans, reimbursement obligations arising from drawings under Letters of Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and other indebtedness or obligations owing to the Lenders hereunder automatically shall immediately become due and payable without the giving of any notice or other action by the Administrative Agent. ARTICLE XI. ADMINISTRATIVE AGENT SECTION 11.01. Appointment and Authorization. ----------------------------- Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers under this Agreement and the other Credit Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. SECTION 11.02. General Immunity. ---------------- In performing its duties to the Lenders as Administrative Agent hereunder, the Administrative Agent will take the same care as it takes in connection with credit transactions in which it alone is interested. However, neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to the Lenders for any action taken or omitted to be taken by it or them hereunder or in connection herewith except for its own or their own gross negligence or willful misconduct. SECTION 11.03. Consultation with Professionals. ------------------------------- The Administrative Agent may consult with legal counsel and other professionals selected by it and shall not be liable to the Lenders for any action taken or suffered in good faith by it in accordance with the advice of such counsel and professionals in their respective areas of expertise. SECTION 11.04. Documents. --------- The Administrative Agent shall not be under any duty to examine or pass upon the effectiveness, genuineness or validity of this Agreement or any of the other Credit Documents or any other instrument or document furnished pursuant hereto or in connection herewith, and the 96 Administrative Agent shall be entitled to assume that the same are valid, effective and genuine and what they purport to be. SECTION 11.05. Rights as a Lender. ------------------ With respect to their respective Commitments, the Administrative Agent shall have the same rights and powers hereunder as any Lender and may exercise the same as though it were not the Administrative Agent, as the case may be, and the terms "Lender" and "Lenders" shall, as applicable and unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may accept deposits from, lend money to and generally engage in any kind of banking or trust business with the Borrower as if it were not the Administrative Agent as the case may be. SECTION 11.06. Responsibility of Administrative Agent. -------------------------------------- It is expressly understood and agreed that the obligations of the Administrative Agent hereunder to the Lenders are only those expressly set forth in this Agreement and the other Credit Documents and that the Administrative Agent shall be entitled to assume that no Default or Event of Default has occurred and is continuing unless the Administrative Agent has actual knowledge of such fact or has received notice from a Lender or the Borrower that such Lender or the Borrower considers that a Default or an Event of Default has occurred and is continuing and specifying the nature thereof. SECTION 11.07. Action by Administrative Agent. ------------------------------ So long as the Administrative Agent shall be entitled, pursuant to Section 11.06, to assume that no Default or Event of Default has occurred and is continuing, the Administrative Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights that may be vested in it by, or with respect to taking or refraining from taking any action or actions that it may be able to take under or in respect of, this Agreement or any of the other Credit Documents. The Administrative Agent shall incur no liability to the Lenders under or in respect of this Agreement or any of the other Credit Documents by acting upon any notice, consent, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything that it may do or refrain from doing in the reasonable exercise of its judgment, or that may seem to it to be necessary or desirable under the circumstances. Without limiting the generality of the foregoing provisions of this Section 11.07, the Administrative Agent shall be conclusively entitled to assume that the conditions precedent set forth in Section 5.03 have been satisfied unless it shall have acquired actual knowledge that any such condition precedent has not been satisfied. 97 SECTION 11.08. Notices of Event of Default, Etc.. --------------------------------- In the event that the Administrative Agent shall have acquired actual knowledge of any Default or Event of Default, the Administrative Agent shall promptly give notice thereof to the Lenders, and the Administrative Agent may take such action and assert such rights with respect to taking or refraining from taking any action or actions that it may be able to take under or in respect of, this Agreement or any of the other Credit Documents, as it deems to be advisable in its discretion for the protection of the interests of the Lenders, including, without limitation, the exercise of rights and remedies under Article X and under any of the other Credit Documents; provided that, as between the Administrative Agent and the Lenders only, after the occurrence of an Event of Default, the Administrative Agent (i) shall not exercise any rights or remedies granted to it hereunder, under any other of the Credit Documents, or otherwise available to it at law or in equity, without the approval of the Required Lenders (or all of the Lenders, if otherwise required by this Agreement) and (ii) upon the direction of the Required Lenders (or all of the Lenders, if otherwise required by this Agreement), shall exercise such rights and remedies as so directed; provided further that, notwithstanding the above, the Administrative Agent shall not be required to take any action which would expose the Administrative Agent to personal liability or which is contrary to law unless it shall be indemnified to its satisfaction against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Administrative Agent by reason of taking or continuing to take any such action. SECTION 11.09. Indemnification of Administrative Agent. --------------------------------------- The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower), ratably according to their respective Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any of the other Credit Documents or any action taken or omitted by the Administrative Agent under this Agreement or any of the other Credit Documents; provided that, no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Without limitation to the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement or any of the other Credit Documents, to the extent not reimbursed by the Borrower. SECTION 11.10. No Representations. ------------------ 98 Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent or any of its directors, employees, agents, attorneys- in-fact or affiliates hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Administrative Agent to such Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigations into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make Loans hereunder and to enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. The Administrative Agent agrees that (i) it shall promptly deliver to each Lender copies of all notices, reports and other documents expressly required to be furnished to the Administrative Agent by the Borrower or any Restricted Subsidiary pursuant to any of the Credit Documents and (ii) upon the reasonable request of any Lender, it shall promptly deliver to such Lender such other information as the Administrative Agent shall receive regarding the Borrower or any Restricted Subsidiary or the performance of the respective obligations of the Borrower and the Restricted Subsidiaries under the Credit Documents; otherwise, the Administrative Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. SECTION 11.11. Resignation; Removal. -------------------- Subject to the appointment and acceptance of a successor as provided below, the acting Administrative Agent may resign at any time by notifying the Lenders and the Borrower or may be removed by the Borrower in its sole discretion at any time by notifying the Administrative Agent and the other Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor acceptable to the Borrower, which successor shall be a Lender that is a bank having a combined capital and surplus of at least $500,000,000 or an affiliate of any such bank. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the delivery of notice of resignation by or removal of the existing Administrative Agent pursuant to the first sentence of this Section 11.11, then the existing Administrative Agent (in the case of resignation by the existing Administrative Agent) or the Borrower (in the case of removal by the Borrower of the existing Administrative Agent) may, on behalf of the Lenders, appoint a successor satisfying the requirements set forth above. Upon the acceptance of any appointment hereunder by a successor Lender, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed 99 Administrative Agent, and the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder. After an Administrative Agent's resignation or removal hereunder, the provisions of this Article and Section 12.06 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. SECTION 11.12. Syndication Agent, Documentation Agent, Co-Arranger and ------------------------------------------------------- Co-Agent. - -------- The Syndication Agent, Documentation Agent, Co-Arranger and Co-Agent, in their capacities as such, shall have no rights, powers, duties or obligations under this Agreement or any of the other Credit Documents. ARTICLE XII. MISCELLANEOUS SECTION 12.01. Notices. ------- Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telex, telecopy, graphic scanning or other telegraphic communications equipment of the sending party, as follows: (a) if to the Borrower, to it at 9830 Patuxent Woods Drive, Columbia, Maryland 21046, Attention of Vice President-Finance and Controller (Facsimile No. 410-309-6296); (b) if to the Administrative Agent to it at: (i) with respect to operational matters, 101 North Tryon Street, Independence Center, 15th Floor, NC1-001-15-02, Charlotte, North Carolina 28255, Attention of Kathy Mumpower, Agency Services (Facsimile No. 704-386- 9923); and (ii) in all other cases, 6610 Rockledge Drive, 6th Floor, MD2-600-06- 05, Bethesda, Maryland 20817-1876, Attention of Michael Heredia, Vice President (Facsimile No. 301-571-0719); (c) if to a Lender, to it at its address (or telecopy number) set forth in Schedule I or in the assignment agreement pursuant to which such Lender became a - ---------- party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telex, telecopy, graphic scanning or other telegraphic communications equipment of the sender, or on the date five (5) Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 12.01 or at such other address or 100 telex, telecopy or other number as shall be designated by such party in a notice to each other party complying with the terms of this Section 12.01. SECTION 12.02. Survival of Agreement. --------------------- All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making of Loans by the Lenders hereunder regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as any Loans or any amounts are outstanding under this Agreement or any of the other Credit Documents and so long as the Commitments have not been terminated. SECTION 12.03. Binding Effect. -------------- This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent, and when the Administrative Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and when the other conditions set out in Section 5.04 shall have been satisfied or waived, and thereafter this Agreement shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective successors and assigns. SECTION 12.04. Benefit of Agreement. -------------------- (a) Generally. This Agreement shall be binding upon and inure to the --------- benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that the Borrower may not assign or transfer any of its -------- interests without prior written consent of the Lenders; provided further that -------- ------- the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 12.04, provided, however, that nothing herein shall prevent or prohibit -------- ------- any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting assignments or participations in such Lender's Loans and/or Commitments hereunder to its parent company and/or to any affiliate of such Lender which is at least 50% owned by such Lender or its parent company. To the extent required in connection with a pledge of Loans by any Lender to a Federal Reserve Bank, the Borrower agrees that, upon request of any such Lender, it will promptly provide such Lender a promissory note evidencing the repayment obligations of the Borrower with respect to the principal of and interest on the Loans of such Lender arising under Section 2.01, such promissory note to be in a form reasonably satisfactory to the Borrower and the applicable Lender. (b) Assignments by Lenders. Each Lender may assign all or a portion of its ---------------------- rights and obligations hereunder pursuant to an assignment agreement substantially in the form of Schedule XIV to one or more Eligible Assignees, ------------ provided that any such assignment shall be in a minimum aggregate amount of - -------- $5,000,000 of the Commitments and in integral multiples of $1,000,000 above such amount, and that each such assignment shall be of a constant, and not a 101 varying, percentage of all of the assigning Lender's rights and obligations under this Agreement. Any assignment hereunder shall be effective upon delivery to the Administrative Agent of written notice of the assignment together with a transfer fee of $2,500 payable to the Administrative Agent for its own account. The assigning Lender will give prompt notice to the Administrative Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to the Borrower as provided herein), the assignee shall become a "Lender" for all purposes of this Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans, Participation Interests and Commitments being assigned. By executing and delivering an assignment agreement in accordance with this Section 12.04(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of the Borrower or any Restricted Subsidiary or the performance or observance by the Borrower or any Restricted Subsidiary of any of its obligations under this Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers under this Agreement or any other Credit Document as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement and the other Credit Documents are required to be performed by it as a Lender. (c) Participations. Each Lender may sell, transfer, grant or assign -------------- participations in all or any part of such Lender's interests and obligations hereunder; provided that (i) such selling Lender shall remain a "Lender" for all -------- purposes under this Agreement and the other Credit Documents (such selling Lender's obligations under this Agreement remaining unchanged) and the participant shall not constitute a Lender hereunder, (ii) no such participant shall have, or be granted, rights to approve any amendment or waiver relating to this Agreement or any of the other Credit Documents except with respect to any such amendment or waiver which would, under the terms of Section 12.07 (i), (ii) or (v), require the consent of all of the Lenders, (iii) sub- 102 participations by the participant (except to an affiliate, parent company or affiliate of a parent company of the participant) shall be prohibited and (iv) any such participations shall be in an integral multiple of $5,000,000 of the Commitments. In the case of any such participation, the participant shall not have any rights under this Agreement or under any of the other Credit Documents (the participant's rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with such Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided, however, that such participant shall be entitled to receive additional - -------- ------- amounts under Sections 3.05 and 3.07 on the same basis as if it were a Lender, except that all claims and petitions for payment and all payments made pursuant to such Sections shall be made through such selling Lender and except that a participant shall not be entitled to receive pursuant to such provisions an amount larger than its share of the amount of which the selling Lender would have been entitled. SECTION 12.05. No Waiver; Remedies Cumulative. ------------------------------ No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower and the Administrative Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand. SECTION 12.06. Payment of Expenses, Etc. ------------------------ The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and expenses (A) of the Administrative Agent in connection with the negotiation, preparation, execution and delivery and administration of this Agreement and the other Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Agreement and (B) of the Administrative Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein and/or collection of the obligations of any of the Borrower and the Restricted Subsidiaries pursuant to the Credit Documents (including, without limitation, in connection with any such enforcement or collection, the reasonable fees and disbursements of counsel for the Administrative Agent and each of the Lenders); (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission (other than to the extent 103 attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender (including the Issuing Lender), its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or reasonable out-of-pocket expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not any Lender is a party thereto) related to the entering into and/or performance of any Credit Document, to the use of proceeds of any Loans hereunder, to the use of or any drawings under any Letters of Credit issued hereunder, to the consummation of any other transactions contemplated in any Credit Document or to the Reorganization, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified). SECTION 12.07. Amendments, Waivers and Consents. -------------------------------- Neither this Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing signed by the Required Lenders, provided that no such amendment, change, waiver, -------- discharge or termination shall, without the consent of each Lender, (i) extend the scheduled maturities (including the final maturity and any mandatory prepayments) of any Revolving Loan or LOC Obligation, or any portion thereof, or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or fees hereunder or reduce the principal amount thereof, or increase the Commitment of any Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default shall not constitute a change in the terms of any Commitment of any Lender), (ii) except as otherwise permitted by Section 8.18, release any Guarantor from its obligations under the Guaranty Agreement, (iii) amend, modify or waive any provision of this Section or Section 3.05, 3.07, 4.02, 4.03, 4.04, 4.05, 10.01(a) or (b), (iv) reduce any percentage specified in, or otherwise modify, the definition of "Required Lenders" or (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Credit Documents. No provision of Section 2.02 may be amended, modified or waived without the consent of the Swingline Lender and no provision of Article XI may be amended without the consent of the Administrative Agent. SECTION 12.08. Counterparts. ------------ This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 104 SECTION 12.09. Headings. -------- The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. SECTION 12.10. Survival of Indemnification. --------------------------- All indemnities set forth herein, including, without limitation, in Section 3.05, 3.07, 4.05, 11.09 or 12.06 shall survive the execution and delivery of this Agreement, and the making of the Loans, the repayment of the Loans and other obligations and the termination of the Commitments hereunder. SECTION 12.11. Governing Law; Submission to Jurisdiction; Venue; ------------------------------------------------ Waiver of Jury Trial. - -------------------- (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND ALL AMENDMENTS, SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW RULES OTHER THAN SECTIONS 5-1401 OR 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK. (b) THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS MAY BE LITIGATED IN SUCH COURTS, AND THE BORROWER WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM ----- NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES - -------------- PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AS PROVIDED IN SECTION 12.01 AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR FIVE BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN MAILED TO THE BORROWER IN ACCORDANCE HEREWITH. NOTHING CONTAINED IN THIS SECTION SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR THE LENDERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY JURISDICTION AGAINST THE BORROWER OR TO ENFORCE A JUDGMENT OBTAINED IN THE COURTS OF ANY OTHER JURISDICTION. THE BORROWER ACKNOWLEDGES THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE FOR A BENCH TRIAL AND HEREBY WAIVES, TO THE 105 EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SECTION 12.12. Severability. ------------ If any provision of this Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. SECTION 12.13. Term. ---- The term of this Agreement shall be until no Loans, LOC Obligations or any other amounts payable hereunder shall remain outstanding and until all of the Commitments hereunder shall have terminated. SECTION 12.14. Entirety. -------- This Agreement and the other Credit Documents represent the entire agreement of the parties hereto and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence, relating to this Agreement or any of the other Credit Documents or the transactions contemplated herein and therein. [Remainder of page intentionally left blank.] 106 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officers as of the day and year first above written. JP FOODSERVICE DISTRIBUTORS, INC. By /s/ George T. Megas ---------------------------------- Title Vice President ------------------------------- NATIONSBANK, N.A., as Administrative Agent and a Lender By ---------------------------------- Title ------------------------------- THE CHASE MANHATTAN BANK, as Syndication Agent and a Lender By ---------------------------------- Title ------------------------------- THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and a Lender By ---------------------------------- Title ------------------------------- PNC BANK, NATIONAL ASSOCIATION, as Co-Agent and a Lender By ---------------------------------- Title ------------------------------- IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officers as of the day and year first above written. JP FOODSERVICE DISTRIBUTORS, INC. By ---------------------------------- Title ------------------------------- NATIONSBANK, N.A., as Administrative Agent and a Lender By /s/ Michael R. Heredia ---------------------------------- Title Senior Vice President ------------------------------- THE CHASE MANHATTAN BANK, as Syndication Agent and a Lender By ---------------------------------- Title ------------------------------- THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and a Lender By --------------------------------- Title ------------------------------- PNC BANK, NATIONAL ASSOCIATION, as Co-Agent and a Lender By ---------------------------------- Title ------------------------------- IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officers as of the day and year first above written. JP FOODSERVICE DISTRIBUTORS, INC. By ---------------------------------- Title ------------------------------- NATIONSBANK, N.A., as Administrative Agent and a Lender By ---------------------------------- Title ------------------------------- THE CHASE MANHATTAN BANK, as Syndication Agent and a Lender By /s/ Karen M. Sharf ---------------------------------- Title Vice President ------------------------------- THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and a Lender By ---------------------------------- Title ------------------------------- PNC BANK, NATIONAL ASSOCIATION, as Co-Agent and a Lender By ---------------------------------- Title ------------------------------- IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officers as of the day and year first above written. JP FOODSERVICE DISTRIBUTORS, INC. By ---------------------------------- Title ------------------------------- NATIONSBANK, N.A., as Administrative Agent and a Lender By ---------------------------------- Title ------------------------------- THE CHASE MANHATTAN BANK, as Syndication Agent and a Lender By ---------------------------------- Title ------------------------------- THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and a Lender By /s/ Amy L. Golz ---------------------------------- Title Vice President ------------------------------- PNC BANK, NATIONAL ASSOCIATION, as Co-Agent and a Lender By ---------------------------------- Title ------------------------------- IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officers as of the day and year first above written. JP FOODSERVICE DISTRIBUTORS, INC. By ---------------------------------- Title ------------------------------- NATIONSBANK, N.A., as Administrative Agent and a Lender By ---------------------------------- Title ------------------------------- THE CHASE MANHATTAN BANK, as Syndication Agent and a Lender By ---------------------------------- Title ------------------------------- THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and a Lender By ---------------------------------- Title ------------------------------- PNC BANK, NATIONAL ASSOCIATION, as Co-Agent and a Lender By [SIGNATURE APPEARS HERE] ---------------------------------- Title Vice President ------------------------------- BANK OF AMERICA, NT & SA By [SIGNATURE APPEARS HERE] ---------------------------------- Title ------------------------------- UNITED STATES NATIONAL BANK OF OREGON By ---------------------------------- Title ------------------------------- THE FUJI BANK, LIMITED, New York Branch By ---------------------------------- Title ------------------------------- BANK OF AMERICA, NT & SA By ---------------------------------- Title ------------------------------- UNITED STATES NATIONAL BANK OF OREGON By /s/ David Wynde ---------------------------------- Title SENIOR ViCE PRESIDENT ------------------------------- THE FUJI BANK, LIMITED, New York Branch By ---------------------------------- Title ------------------------------- BANK OF AMERICA, NT & SA By ---------------------------------- Title ------------------------------- UNITED STATES NATIONAL BANK OF OREGON By ---------------------------------- Title ------------------------------- THE FUJI BANK, LIMITED, New York Branch By /s/ Toshiaki Yakura ---------------------------------- Title Senior Vice President ------------------------------- EX-10.30 5 EXHIBIT 10.30 EXHIBIT 10.30 SECOND AMENDMENT TO TRANSFER AND ADMINISTRATION AGREEMENT This SECOND AMENDMENT TO TRANSFER AND ADMINISTRATION AGREEMENT (this "Amendment"), dated as of May 19, 1997 is among ENTERPRISE FUNDING CORPORATION, a Delaware corporation (the "Company"), JPFD FUNDING COMPANY, a Delaware corporation (the "Transferor"), JP Foodservice Distributors, Inc., a Delaware corporation (the "Collection Agent"), THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES THERETO (collectively, the "Bank Investors" and each a "Bank Investor"), and NATIONSBANK, N.A. as agent for the Company and the Bank Investors (in such capacity, the "Agent") and as a Bank Investor. PRELIMINARY STATEMENTS: 1. The Company, the Transferor, the Collection Agent, the Bank Investors, and the Agent have entered into a Transfer and Administration Agreement dated as of May 30, 1996, as amended on July 1, 1996, (as so amended, the "Transfer and Administration Agreement"; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Transfer and Administration Agreement). 2. The Transferor has requested certain amendments to the Transfer and Administration Agreement. 3. The Company is, on the terms and conditions stated below, willing to grant such requests of the Transferor. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Amendments to Transfer and Administration Agreement. Effective as --------------------------------------------------- of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, the Transfer and Administration Agreement is hereby amended as follows: (a) In Section 1.1 the definition of "Commitment Termination Date" shall be amended such that the reference to the date appearing in such definition shall be amended to read "November 24, 1997."; (b) The third and fourth lines of Section 6.2(c) shall be amended by inserting after the words "a firm of independent public accountants", the words ", the Business Credit Field Exam Group of NationsBank, N.A. or such other Person as may be approved by the Agent". (c) Section 7.1(r)(iii) shall be deleted in its entirety and replaced with the following: On any Determination Date occurring during any period specified in the following table, the Total Debt and Investment Ratio shall exceed 3.75 to 1.0; or; (d) In Annex 1 to the Transfer and Administration Agreement, the definition of "Net Worth Minimum" shall be deleted in its entirety and replaced with the following: "Net Worth Minimum" shall mean as of any date, the sum of (i) $78,000,000 plus, on the last date of each fiscal quarter occurring ---- after the date of this Amendment, (ii) the greater of (x) zero and (y) 50% of the net income of Distributors and its Restricted Subsidiaries for such preceding fiscal year, determined on a consolidated basis in accordance with GAAP after eliminating all intercompany items and deducting portions of income properly attributable to outside minority interests, if any, in Restricted Subsidiaries and after adding, to the extent deducted in determining such net income, the amount of any provision for the amortization of Effective Date intangibles. Section 2. Conditions to Effectiveness. This Amendment shall become effective --------------------------- when the Company has executed this Amendment and has received counterparts of this Amendment executed by the Transferor, the Collection Agent, the Bank Investors, and the Agent. Section 3. Representations and Warranties. ------------------------------ (a) Authority. The Transferor, the Collection Agent, the Bank --------- Investors, and the Agent each has the requisite corporate power and authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Transfer and Administration Agreement (as modified hereby) to which it is a party. The execution, delivery and performance by the Transferor, the Collection Agent, the Bank Investors, and the Agent of this Amendment and the performance of the Transfer and Administration Agreement as modified hereby) have been duly approved by all necessary corporate action and not other corporate proceedings are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and -------------- delivered by the Transferor, the Collection Agent, the Bank Investors, and the Agent. This Amendment (as modified hereby) is the legal, valid and binding obligation of the Transferor, the Collection Agent, the Bank Investors, and the Agent, enforceable against the Transferor, the Collection Agent, the Bank Investors, and the Agent in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and ------------------------------ warranties contained in the Transfer and Administration Agreement (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) No Termination Event. No event has occurred and is continuing that -------------------- constitutes a Termination Event. Section 4. Reference to and Effect on the Transfer and Administration ---------------------------------------------------------- Agreement. --------- (a) Except as specifically amended and modified above, the Transfer and Administration Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. (b) The execution, delivery and effectiveness of this Amendment shall not operate as waiver of any right, power or remedy of the Company under the Transfer and Administration Agreement, nor constitute a waiver of any provision of the Transfer and Administration Agreement. Section 5. Execution in Counterparts. This amendment may be executed in any ------------------------- number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart or a signature page to this Amendment by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment. Section 6. Successors and Assigns. ---------------------- This Amendment shall bind, and the benefits hereof shall inure to the parties hereof and their respective successors and permitted assigns; provided, however, -------- ------- the Transferor may not assign any of its rights or delegate any of its duties under this Amendment without the prior written consent of the Company. Section 7. Governing Law. ------------- THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE TRANSFEROR, THE COLLECTION AGENT, AND THE GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 8. Severability. ------------ Any provisions of this Amendment which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. ENTERPRISE FUNDING CORPORATION, as Company, a Delaware corporation By: /s/ Stewart L. Cutler ---------------------------------- Name: STEWART L. CUTLER Title: VICE PRESIDENT JPFD FUNDING COMPANY as Transferor, a Delaware corporation By: /s/ George T. Megas ---------------------------------- Name: George T. Megas Title: Vice President, Finance JP FOODSERVICE DISTRIBUTORS, INC. as Collection Agent, a Delaware corporation By: /s/ James L. Miller ---------------------------------- Name: James L. Miller Title: President & CEO NATIONSBANK, N.A. as Agent and Bank Investor By: /s/ Brian C. Blakely ---------------------------------- Name: Brian C. Blakely Title: Investment Banking Officer THE FIRST NATIONAL BANK OF CHICAGO as Bank Investor By: /s/ J. Gregory Micken ---------------------------------- Name: J. Gregory Micken Title: UNITED STATES NATIONAL BANK OF OREGON as Bank Investor By: /s/ Douglas A. Rich ---------------------------------- Name: Douglas A. Rich Title: Vice President EX-21 6 EXHIBIT 21 EXHIBIT 21 ---------- SUBSIDIARIES OF THE REGISTRANT ------------------------------
Name of Subsidiary Jurisdiction of Incorporation - ------------------ ----------------------------- JP Foodservice Distributors, Inc. (1) Delaware Sky Bros., Inc. (2) Pennsylvania Illinois Fruit & Produce Corp. (2) Illinois
- ---------------------------------------- (1) Conducts business in Maryland as JP Broadline Distributors, Inc. (2) Second-tier wholly-owned subsidiary of JP Foodservice Distributors, Inc. EX-23.1 7 EXHIBIT 23.1 EXHIBIT 23.1 ------------ CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-88140, 33-88142, 33-88144 and 33-81011) and Form S-3 (No. 333-27275) of JP Foodservice, Inc. of our report dated August 2, 1996, except as to Note 16, which is as of September 10, 1996 and except as to the pooling of interests with Valley Industries, Inc. and with Squeri Food Service, Inc., which is as of November 14, 1996, which appears on page F-2 of JP Foodservice, Inc.'s Annual Report on Form 10-K for the year ended June 28, 1997. /s/ PRICE WATERHOUSE LLP Baltimore, Maryland September 22, 1997 EX-23.2 8 EXHIBIT 23.2 EXHIBIT 23.2 ------------ CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-88140, 33-88142, 33-88144 and 33-81011) and Form S-3 (No. 333-27275) of JP Foodservice, Inc. of our report dated August 11, 1997 relating to the consolidated balance sheet of JP Foodservice, Inc. and Subsidiaries as of June 28, 1997 and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended and all related schedules, which report appears on page F-1 in this Annual Report on Form 10-K. /s/ KPMG Peat Marwick LLP Baltimore, Maryland September 22, 1997 EX-27 9 EXHIBIT 27
5 FDS FOR JP FOODSERVICE, INC. AS OF AND FOR THE YEAR ENDED JUNE 28, 1997 1000 YEAR YEAR JUN-29-1996 JUN-28-1997 JUL-02-1995 JUN-30-1996 JUN-29-1996 JUN-28-1997 12,224 11,139 0 0 156,952 142,284 2,547 3,530 84,138 110,030 260,323 271,869 167,365 227,938 63,107 86,214 448,279 524,148 139,457 118,445 0 0 0 0 0 0 189 225 127,960 228,721 448,279 524,148 1,449,303 1,691,913 1,449,303 1,691,913 1,198,797 1,396,223 205,291 235,353 16,704 21,922 2,048 2,253 15,187 16,522 28,511 38,415 11,598 16,167 16,913 22,248 0 0 0 0 0 0 16,913 22,248 0.90 1.02 0.90 1.02
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